Twenty-First Century Fox 2008 Annual Report Download - page 102

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Notes to the Consolidated Financial Statements (continued)
In August 2006, the Company completed the sale of its investment in SKY Brasil, a Brazilian DTH platform, to DIRECTV for approximately
$300 million in cash which was received in fiscal 2005, resulting in a total pre-tax gain of $426 million on the sale. Of this total gain, the Company
recognized a pre-tax gain of approximately $261 million in the fiscal year ended June 30, 2007. The Company deferred $165 million of its total gain,
through a reduction in the DTV basis, due to its indirect interest through the Company’s ownership of DIRECTV. As a result of the closing of the
transactions contemplated by Share Exchange Agreement in February 2008, 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), and the Company
recognized the previously deferred gain in the fiscal year ended June 30, 2008. The total gain of $426 million was greater than the total
consideration received due to the recognition of losses in excess of the carrying amount of the investment as the Company was committed to
provide further financial support to SKY Brasil. As a result of the sale of its investment in SKY Brasil, the Company was released from its SKY Brasil
transponder lease guarantee and was released from its SKY Brasil credit agreement guarantee in January 2007.
In October 2006, the Company acquired a 7.3% share in Fairfax, an Australian newspaper publisher, for approximately $299 million. The
Company sold its investment in Fairfax in May 2007. A loss of approximately $9 million on this sale was included in Other, net in the consolidated
statements of operations for the fiscal year ended June 30, 2007.
In December 2006, the Company acquired 25% stakes in each of NGC International and NGC UK joint ventures for a combined total of
approximately $154 million. These two joint ventures produce and distribute the National Geographic Channel in various international markets.
The transaction increased the Company’s interest in NGC International to 75% with National Geographic Television holding the remaining interest.
In January 2007, National Geographic Television agreed to certain governance changes related to the operations of NGC International and NGC Latin
America which gave the Company operating decision-making authority and control over these entities. Accordingly, the results of NGC
International and NGC Latin America have been included in the Company’s consolidated results of operations since January 2007.
Fiscal Year 2006 Disposals
In July 2005, the Company sold its entire cost investment in China Netcom Group Corporation (“China Netcom”). The Company’s 1% investment in
China Netcom was sold for total consideration of approximately $112 million. The Company recognized a gain of approximately $52 million on this
sale included in Other, net in the consolidated statements of operations for the fiscal year ended June 30, 2006.
In February 2006, the Company completed its sale of its investment in Innova, a Mexican DTH platform, to DIRECTV for $285 million,
resulting in a total pre-tax gain of $312 million on the sale. Of this total gain, the Company recognized a pre-tax gain of approximately $206 million
in the fiscal year ended June 30, 2006. The Company deferred $106 million of its total gain, through a reduction in the DTV basis, due to its indirect
interest in DIRECTV. As a result of the closing of the transactions contemplated by the Share Exchange Agreement in February 2008, 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), and the Company recognized the previously deferred gain in the fiscal year ended June 30, 2008. The total gain of
$312 million was greater than the total consideration received due to the recognition of losses in excess of the carrying amount of the investment
as the Company was committed to provide further financial support to Innova. Upon the closing of the Innova transaction, the Company was
released from both its Innova transponder lease guarantee and its guarantee under Innova’s credit agreement.
Impairments of cost method investments
The Company regularly reviews cost method investment for impairments based on criteria that include the extent to which the investment’s
carrying value exceeds its related market value, the duration of the market decline, the Company’s ability to hold its investment until recovery and
the investment’s financial strength and specific prospects. In the fiscal years ended June 30, 2008, 2007 and 2006, the Company wrote down
certain cost method investment by approximately $125 million, $2 million and $14 million, respectively. The write down in the fiscal year ended
June 30, 2008 included a $114 million impairment related to an investment in an Asian premium movie channel that is reflected in Other, net in the
consolidated statements of operations. The Company wrote down this investment due to a permanent impairment resulting from sustained
losses and limited prospects for recovery.
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