Twenty-First Century Fox 2008 Annual Report Download - page 101

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Notes to the Consolidated Financial Statements (continued)
Equity Earnings of Affiliates
The Company’s share of the income of its equity affiliates is as follows:
2008 2007 2006
For the years ended June 30, (in millions)
DBS equity affiliates $138 $ 844 $ 723
Cable channel equity affiliates 98 98 68
Other equity affiliates 91 77 97
Total equity earnings of affiliates (a) $327 $1,019 $888
(a) The Company’s investment in several of its affiliates exceeded its equity in the underlying net assets at their acquisition by approximately $1.3
billion and $5.9 billion as of June 30, 2008 and 2007, respectively.
At June 30, 2008, the $1.3 billion 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 subscriber lists with a weighted average useful life of 8 years.
At June 30, 2007, the excess cost related to the Company’s investment in DIRECTV was $4.1 billion which represented the excess of fair value
over the Company’s proportionate share of DIRECTV’s underlying net assets as adjusted to record such net assets at fair value, most notably
the adjustment to the carrying value of DIRECTV’s SPACEWAY, PanAmSat, Hughes Software Systems and Hughes Network Systems, Inc.
businesses and its deferred subscriber acquisition costs. In February 2008, the Company closed the transactions contemplated by the Share
Exchange Agreement in which the Company exchanged 100% of the stock of a wholly-owned subsidiary that held the Company’s approximate
41% interest in DIRECTV and other assets for Liberty’s entire interest in the Company’s common stock. (See Note 3—Acquisitions, Disposals
and Other Transactions for further discussion of the Share Exchange Agreement)
In accordance with SFAS No. 142, the Company amortized $75 million and $96 million in fiscal 2008 and 2007, respectively, related to
amounts allocated to finite-lived intangible assets. Such amortization is reflected in equity earnings of affiliates.
Fiscal Year 2008 Acquisitions, Disposals and Other Transactions
In March 2008, the Company and its joint venture partner completed a series of transactions and sold its entire interest in the cable systems in
Taiwan, in which the Company maintained a minority interest ownership, to third parties for aggregate cash consideration of approximately $360
million. The Company recognized pre-tax gains totaling approximately $133 million on the sales included in Other, net in the consolidated
statements of operations for the fiscal year ended June 30, 2008.
Effective September 30, 2007, National Geographic Television agreed to give the Company control over NGC US in which the Company has a
67% equity interest. Accordingly, the results of NGC US are included in the Company’s consolidated results of operations beginning October 1,
2007.
During fiscal 2008, the Company effectively acquired an additional 27% stake in NGC Network (UK) Limited (“NGC UK”) in exchange for a 23%
interest in NGC Network International LLC (“NGC International”) and a 14% interest in NGC Network Latin America LLC (“NGC Latin America”). As a
result of this transaction, the Company owns 52% of NGC International, NGC Latin America and NGC UK. In January 2007, the Company obtained
operating control over NGC International and NGC Latin America and has included their results in the Company’s consolidated results of operations
since January 2007. The Company has included the operating results of NGC UK in the Company’s consolidated results for the fiscal year ended
June 30, 2008.
In April 2008, the Company sold its interest in FOX Sports Net Bay Area for approximately $245 million. The Company recorded a gain of
approximately $208 million on the disposal which is included in Other, net in the consolidated statements of operations.
During fiscal 2008, the Company, through a series of transactions, acquired a 25% ownership interest in Premiere for cash consideration of
approximately $666 million. As of April 2008, the Company had acquired an interest in Premiere of greater than 20% and exercised significant
influence over Premiere, accordingly the Company accounts for its investment in Premiere under the equity method of accounting.
In May 2008, the Company disposed of its entire interest (approximately 41%) in Gemstar’s common stock in exchange for a cash payment of
approximately $637 million and approximately 19 million shares of Macrovision Solutions Corporation (“Macrovision”) common stock. The
Company sold its shares of Macrovision common stock in June 2008. The Company recorded a net gain of approximately $112 million on the
disposals which is included in Other, net in the consolidated statements of operations.
Fiscal Year 2007 Acquisitions and Disposals
In August 2006, the Company sold a portion of its equity investment in Phoenix Satellite Television Holdings Limited (“Phoenix”), representing a
19.9% stake, for approximately $164 million. The Company recognized a pre-tax gain of approximately $136 million on the sale included in Other,
net in the consolidated statements of operations for the fiscal year ended June 30, 2007. The Company retained a 17.6% stake in Phoenix, which is
accounted for under the cost method of accounting and, accordingly, the carrying value is adjusted to market value each reporting period as
required under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”
100 NEWSCORP 2008 Annual Report