Twenty-First Century Fox 2006 Annual Report Download - page 93

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
BUCS
During 2003, News Corporation Finance Trust II (the “Trust”) issued an aggregate of $1.655 billion 0.75% BUCS represent-
ing interests in debentures issued by NAI and guaranteed on asenior basis by the Company and certain of its subsidiaries.
The netproceeds from the BUCS issuance were usedto purchase approximately 85% of the Company’s outstanding TOPrS.
The BUCS are exchangeable at the holders’ option into BSkyB ordinary shares based on an exchange ratio of 77.09 BSkyB
ordinary shares per $1,000 original liquidation amountofBUCS. The trust may pay the exchange marketvalue of each
BUCS in cash, by delivering ordinary shares of BSkyB or a combination of cash and ordinary shares of BSkyB.
The holders alsohave the right totender the BUCS for redemption on March 15, 2010, March 15, 2013 or March 15,
2018 for payment of the adjustedliquidation preference plus accrued and unpaid distributions and any final period dis-
tribution in,atthe Company’s election, cash, BSkyB ordinary shares, the Company’s Class ACommon Stock or any
combination thereof.
The Company may redeem the BUCS for cash, BSkyB ordinary shares or a combination thereof in whole or in part, at
any time on or after March 20, 2010, at the adjustedliquidation preference of the BUCS plus any accrued and unpaid dis-
tributions and any final period distribution thereon.
The total net proceeds from the issuance of the BUCS were allocated between the fair value of the obligation and the
fair value of the exchange feature. The fair values of the obligation andtheexchange feature were determined by pricing
the issuance with and without the exchange feature. The fair values of the obligation has been recorded in non-current
borrowings and in accordance with SFAS No. 133, the call option feature of the exchangeable debentures is reported at fair
value and in non-current other liabilities. The fair value of the obligation is being accreted to its maturity value through the
effective interest method. (See Note 17 Other, net) Asignificant variance in the price of the underlying stock could have a
material impact on the operating results of the Company.
As of June 30, 2006, $1,444 million and$235 million of the BUCS were included in borrowings and non-current
liabilities, respectively, on the consolidated balance sheet. As of June 30, 2005, $1,389 million and $152 million of the
BUCS were included in borrowings and non-current liabilities, respectively, on the consolidated balance sheet.
NOTE 11. FILM PRODUCTION FINANCING
Considering the competitive environment and costs associated with film production, film studios, including the
Company, constantly evaluate the risks and rewardsof film production. Various strategies are used to balance risk with
capital needs, including, among other methods, co-production, contingent profit participations, acquisition of distribution
rights only and insurance.
NOTE 12. STOCKHOLDERS’ EQUITY
Preferred Stock and Common Stock
Under the News Corporation Restated Certificate of Incorporation, the Company’s Board of Directors (the “Board”) is
authorized to issue sharesof preferred stock or common stock at any time, without stockholder approval, and to determine
all the terms of those shares, including the following:
(i) the voting rights, if any, except that the issuance of preferred stock or series common stock which entitles hold-
ers thereof to more than one vote per sharerequires the affirmative vote of the holders of amajority of the combined
voting power of the then outstanding shares of the Company’s capital stock entitled to vote generally in the election of
directors;
(ii) the dividend rate and preferences, if any, which that preferred stock or common stock will have comparedto
any other class; and
(iii) the redemption andliquidation rights and preferences, if any, which that preferred stock or common stock
will have comparedto any other class.
Any decision by the Board to issue preferred stock or common stock must, however, be taken in accordance with the
Board’s fiduciary duty to act in the best interest of the Company’s stockholders. The Company is authorized to issue
100,000,000 shares of preferred stock, par value $0.01, of which 9,000,000 preferred shares have been designated as Series A
Junior Participating Preferred Stock, par value $0.01 per share. As of June 30, 2006, there were no shares of preferred stock,
including Series AJunior Participating Preferred Stock, issued and outstanding. The Board has the authority, without any
further vote or action by the stockholders, to issue preferred stock in oneormore series and to fix the numberof shares,
designations, relative rights (including voting rights), preferences, qualifications and limitations of such series to the full
extent permitted by Delaware law.
The Company has two classes of common stock that are authorizedandoutstanding, non-voting Class ACommon
Stock and voting Class BCommon Stock. Class ACommon Stock carry the right todividends in the amount equal to 120%
of the aggregate of all dividends declared on a share of Class BCommon Stock. Class ACommon Stock retain this right
through fiscal year 2007. Subsequent to the final fiscal 2007 dividend payment, shares of Class ACommon Stock will cease
to carry any rights to agreater dividend than shares of Class BCommon Stock.
ANNUAL REPORT 93