Twenty-First Century Fox 2011 Annual Report Download - page 56

Notes to the Consolidated Financial Statements (continued)
The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below:
2011 2010
As of June 30, (in millions)
Cost basis of available-for-sale investments $269 $ 37
Accumulated gross unrealized gain 383 189
Accumulated gross unrealized loss — (1)
Fair value of available-for-sale investments $652 $225
Deferred tax liability(a) $132 $ 66
(a) The deferred tax liability includes $113 million and $66 million related to unrealized gains recorded in comprehensive income as of June 30, 2011 and 2010, respectively.
The Company reclassified gains of nil, $3 million and nil from accumulated other comprehensive income to the consolidated statements of
operations, based on the specific identification method, during the fiscal year ended June 30, 2011, 2010 and 2009, respectively.
Equity Earnings (Losses) of Affiliates
The Company’s share of the earnings (losses) of its equity affiliates was as follows:
2011 2010 2009
For the years ended June 30, (in millions)
DBS equity affiliates $305 $341 $(374)
Cable channel equity affiliates 42 66 59
Other equity affiliates 115 41 6
Total equity earnings (losses) of affiliates(a) $462 $448 $(309)
(a) The Company’s investment in several of its affiliates exceeded its equity in the underlying net assets by approximately $1.8 billion as of June 30, 2011 and $1.6 billion as of June 30, 2010,
which represented the excess cost over the Company’s proportionate share of its investments’ underlying net assets. This has been allocated between intangibles with finite lives, indefinite-
lived intangibles and goodwill. The finite-lived intangibles primarily represent trade names and subscriber lists with a weighted average useful life as of June 30, 2011 and 2010 of 14 and 16
years, respectively.
In accordance with ASC 350, the Company amortized $14 million and $7 million in fiscal 2011 and 2010, respectively, related to amounts allocated to finite-lived intangible assets. Such
amortization is reflected in equity earnings (losses) of affiliates.
Fiscal 2011 Transactions
In fiscal 2011, the Company agreed to backstop €400 million (approximately $525 million), of financing measures that were being initiated by
Sky Deutschland of which approximately €342 million (approximately $450 million) has been completed. As part of these financing measures, the
Company acquired 108 million additional shares of Sky Deutschland, increasing its ownership from approximately 45% to 49.9%. The aggregate
cost of the shares acquired by the Company was approximately €115 million (approximately $150 million) and the shares were newly registered
shares issued pursuant to the total capital increase.
In addition, in accordance with the backstop, the Company agreed with Sky Deutschland to subscribe to a bond issuance that is convertible
for up to 53.9 million underlying Sky Deutschland shares. The convertible bond was issued to the Company in January 2011 for approximately
€165 million (approximately $225 million). The Company currently has the right to convert the bond into equity, subject to certain black-out
periods. If not converted, the Company will have the option to redeem the bond for cash upon its maturity in four years. The convertible bond
was separated into its host and derivative financial instrument components, both of which are recorded at their estimated fair value in Investments
in the consolidated balance sheets. The change in estimated fair value of the derivative financial instrument of approximately $46 million was
recorded in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2011. The change in estimated fair value of
the host was not material for the fiscal year ended June 30, 2011.
The remaining amount under the backstop of approximately €58 million (approximately $75 million), must be funded prior to December
2011 and will be provided as a loan to the extent Sky Deutschland does not generate other proceeds through capital increases or convertible bond
issuances. The Company has also agreed to loan Sky Deutschland approximately $70 million to support the launch of a sports news channel. The
Company expects to fund these amounts in fiscal 2012.
In August 2010, the Company increased its investment in Tata Sky Ltd. (“Tata Sky”) for approximately $88 million in cash. As a result of this
transaction, the Company increased its interest in Tata Sky to approximately 30% from the 20% it owned at June 30, 2010.
In June 2010, the Company announced that it had proposed to the board of directors of British Sky Broadcasting Group plc (“BSkyB”), in
which the Company currently has an approximate 39% interest, to make a cash offer of 700 pence per share for the BSkyB shares that the
Company does not already own. Following the allegations regarding News of the World, on July 13, 2011, the Company announced that it no
longer intended to make an offer for the BSkyB shares that the Company does not already own. As a result of the July 2011 announcement, the
Company paid BSkyB a breakup fee of approximately $63 million in accordance with a cooperation agreement between the parties.
54 News Corporation