SEC Info  
    Home      Search      My Interests      Help      Sign In      Please Sign In

Twenty-First Century Fox, Inc. – ‘10-Q’ for 12/31/07

On:  Wednesday, 2/6/08, at 2:41pm ET   ·   For:  12/31/07   ·   Accession #:  1193125-8-21537   ·   File #:  1-32352

Previous ‘10-Q’:  ‘10-Q’ on 11/8/07 for 9/30/07   ·   Next:  ‘10-Q’ on 5/8/08 for 3/31/08   ·   Latest:  ‘10-Q’ on 2/6/19 for 12/31/18

  in   Show  &   Hints

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 2/06/08  Twenty-First Century Fox, Inc.    10-Q       12/31/07    7:1.2M                                   RR Donnelley/FA

Quarterly Report   —   Form 10-Q
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML    937K 
 2: EX-4.1      Registration Rights Agreement                       HTML    111K 
 3: EX-4.2      Form of 6.65% Senior Note                           HTML    100K 
 4: EX-12.1     Ratio of Earnings to Fixed Charges                  HTML     17K 
 5: EX-31.1     Chairman and Chief Executive Officer Certification  HTML     15K 
 6: EX-31.2     Chief Financial Officer Certification               HTML     14K 
 7: EX-32.1     Certification of Chairman and CEO and CFO Pursuant  HTML      8K 
                          to 18 U.S.C. Section 1350                              


10-Q   —   Quarterly Report
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
"Table of Contents
"Unaudited Consolidated Statements of Operations for the three and six months ended December 31, 2007 and 2006
"Consolidated Balance Sheets at December 31, 2007 (unaudited) and June 30, 2007 (audited)
"Unaudited Consolidated Statements of Cash Flows for the six months ended December 31, 2007 and 2006
"Notes to the Unaudited Consolidated Financial Statements
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures About Market Risk
"Controls and Procedures
"Legal Proceedings
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Defaults Upon Senior Securities
"Submission of Matters to a Vote of Security Holders
"Other Information
"Exhibits
"Signature

This is an HTML Document rendered as filed.  [ Alternative Formats ]



  Quarterly Report  
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 2007

or

 

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from            to            

Commission file number 001-32352

 

 

NEWS CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Delaware   26-0075658

(State or Other Jurisdiction

of Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1211 Avenue of the Americas, New York, New York   10036
(Address of Principal Executive Offices)   (Zip Code)

Registrant’s telephone number, including area code (212) 852-7000

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  x   Accelerated filer  ¨   Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes  ¨    No  x

As of February 1, 2008, 2,140,726,442 shares of Class A Common Stock, par value $0.01 per share, and 986,520,953 shares of Class B Common Stock, par value $0.01 per share, were outstanding.

 

 

 


Table of Contents

NEWS CORPORATION

FORM 10-Q

TABLE OF CONTENTS

 

            Page
Part I.   Financial Information  
  Item 1.  

Financial Statements

 
   

Unaudited Consolidated Statements of Operations for the three and six months ended December 31, 2007 and 2006

  3
   

Consolidated Balance Sheets at December 31, 2007 (unaudited) and June 30, 2007 (audited)

  4
   

Unaudited Consolidated Statements of Cash Flows for the six months ended December 31, 2007 and 2006

  5
   

Notes to the Unaudited Consolidated Financial Statements

  6
  Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  41
  Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

  60
  Item 4.  

Controls and Procedures

  61
Part II.   Other Information  
  Item 1.   Legal Proceedings   61
  Item 1A.   Risk Factors   61
  Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   64
  Item 3.   Defaults Upon Senior Securities   64
  Item 4.   Submission of Matters to a Vote of Security Holders   64
  Item 5.   Other Information   65
  Item 6.  

Exhibits

  66
 

Signature

  67

 

2


Table of Contents

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts)

 

     For the three months
ended December 31,
    For the six months
ended December 31,
 
         2007             2006             2007             2006      

Revenues

   $ 8,590     $ 7,844     $ 15,657     $ 13,758  

Expenses:

        

Operating

     5,443       5,341       9,851       9,095  

Selling, general and administrative

     1,442       1,153       2,732       2,255  

Depreciation and amortization

     287       206       609       413  
                                

Operating income

     1,418       1,144       2,465       1,995  

Other income (expense):

        

Equity (losses) earnings of affiliates

     (50 )     249       196       492  

Interest expense, net

     (245 )     (212 )     (458 )     (412 )

Interest income

     78       72       178       147  

Other, net

     187       18       187       446  
                                

Income before income tax expense and minority interest in subsidiaries

     1,388       1,271       2,568       2,668  

Income tax expense

     (520 )     (431 )     (934 )     (969 )

Minority interest in subsidiaries, net of tax

     (36 )     (18 )     (70 )     (34 )
                                

Net income

   $ 832     $ 822     $ 1,564     $ 1,665  
                                

Per share amounts:

        

Basic earnings

   $ 0.27       $ 0.50    

Class A

     $ 0.27       $ 0.56  

Class B

     $ 0.23       $ 0.46  

Diluted earnings

   $ 0.27       $ 0.50    

Class A

     $ 0.27       $ 0.55  

Class B

     $ 0.23       $ 0.46  

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

3


Table of Contents

NEWS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share amounts)

 

     At
December 31,
2007
   At
June 30,
2007
     (unaudited)    (audited)

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 3,495    $ 7,654

Receivables, net

     7,489      5,842

Inventories, net

     2,719      2,039

Other

     625      371
             

Total current assets

     14,328      15,906
             

Non-current assets:

     

Receivables

     509      437

Investments

     10,959      11,413

Inventories, net

     2,823      2,626

Property, plant and equipment, net

     6,585      5,617

Intangible assets, net

     13,998      11,703

Goodwill

     18,294      13,819

Other non-current assets

     1,420      822
             

Total assets

   $ 68,916    $ 62,343
             

Liabilities and Stockholders’ Equity

     

Current liabilities:

     

Borrowings

   $ 836    $ 355

Accounts payable, accrued expenses and other current liabilities

     5,567      4,545

Participations, residuals and royalties payable

     1,403      1,185

Program rights payable

     916      940

Deferred revenue

     856      469
             

Total current liabilities

     9,578      7,494
             

Non-current liabilities:

     

Borrowings

     13,213      12,147

Other liabilities

     4,831      3,319

Deferred income taxes

     5,503      5,899

Minority interest in subsidiaries

     1,039      562

Commitments and contingencies

     

Stockholders’ Equity:

     

Class A common stock(1)

     21      21

Class B common stock(2)

     10      10

Additional paid-in capital

     27,400      27,333

Retained earnings and accumulated other comprehensive income

     7,321      5,558
             

Total stockholders’ equity

     34,752      32,922
             

Total liabilities and stockholders’ equity

   $ 68,916    $ 62,343
             

 

(1)

Class A common stock, par value $0.01 per share, 6,000,000,000 shares authorized, 2,140,324,444 shares and 2,139,585,571 shares issued and outstanding, net of 1,777,514,167 and 1,777,593,698 treasury shares at par at December 31, 2007 and June 30, 2007, respectively.

 

(2)

Class B common stock, par value $0.01 per share, 3,000,000,000 shares authorized, 986,520,953 shares issued and outstanding, net of 313,721,702 treasury shares at par at December 31, 2007 and June 30, 2007.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

4


Table of Contents

NEWS CORPORATION

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

 

     For the six months
ended December 31,
 
     2007     2006  

Operating activities:

    

Net income

   $ 1,564     $ 1,665  

Adjustments to reconcile net income to cash provided by operating activities:

    

Depreciation and amortization

     609       413  

Amortization of cable distribution investments

     35       39  

Equity earnings of affiliates

     (196 )     (492 )

Cash distributions received from affiliates

     158       121  

Other, net

     (187 )     (446 )

Minority interest in subsidiaries, net of tax

     70       34  

Change in operating assets and liabilities, net of acquisitions:

    

Receivables and other assets

     (1,441 )     (1,014 )

Inventories, net

     (667 )     (586 )

Accounts payable and other liabilities

     794       971  
                

Net cash provided by operating activities

     739       705  
                

Investing activities:

    

Property, plant and equipment, net of acquisitions

     (699 )     (608 )

Acquisitions, net of cash acquired

     (5,368 )     (292 )

Investments in equity affiliates

     (21 )     (181 )

Other investments

     (40 )     (297 )

Proceeds from sale of investments and other non-current assets

     299       358  
                

Net cash used in investing activities

     (5,829 )     (1,020 )
                

Financing activities:

    

Borrowings

     1,262       160  

Repayment of borrowings

     (132 )     (190 )

Issuance of shares

     66       173  

Repurchase of shares

     (122 )     (59 )

Dividends paid

     (186 )     (185 )

Other, net

     22       —    
                

Net cash provided by (used in) financing activities

     910       (101 )
                

Net decrease in cash and cash equivalents

     (4,180 )     (416 )

Cash and cash equivalents, beginning of period

     7,654       5,783  

Exchange movement on opening cash balance

     21       71  
                

Cash and cash equivalents, end of period

   $ 3,495     $ 5,438  
                

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

5


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Presentation

News Corporation, a Delaware corporation, with its subsidiaries (together “News Corporation” or the “Company”), is a diversified entertainment company, which manages and reports its businesses in eight segments: Filmed Entertainment, Television, Cable Network Programming, Direct Broadcast Satellite Television (“DBS”), Magazines and Inserts, Newspapers and Information Services, Book Publishing and Other.

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair presentation have been reflected in these unaudited consolidated financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2008.

These interim unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 as filed with the Securities and Exchange Commission (“SEC”) on August 23, 2007.

The consolidated financial statements include the accounts of News Corporation and its subsidiaries. Intercompany transactions and balances have been eliminated. Equity investments in which the Company exercises significant influence but does not exercise control and is not the primary beneficiary are accounted for using the equity method. Investments in which the Company is not able to exercise significant influence over the investee are accounted for under the cost method.

The preparation of consolidated financial statements in conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates.

Certain fiscal 2007 amounts have been reclassified to conform to the fiscal 2008 presentation.

The Company maintains a 52-53 week fiscal year ending on the Sunday nearest to each reporting date. As such, all references to December 31, 2007 and December 31, 2006 relate to the three and six month periods ended December 30, 2007 and December 31, 2006, respectively. For convenience purposes, the Company continues to date its financial statements as of December 31.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 130, “Reporting Comprehensive Income,” total comprehensive income for the Company consists of the following:

 

     For the three months
ended December 31,
   For the six months
ended December 31,
         2007            2006            2007             2006    
     (in millions)

Net income, as reported

   $ 832    $ 822    $ 1,564     $ 1,665

Other comprehensive income:

          

Foreign currency translation adjustments

     78      240      407       316

Unrealized holding gains (losses) on securities, net of tax

     54      9      (28 )     84
                            

Total comprehensive income

   $ 964    $ 1,071    $ 1,943     $ 2,065
                            

 

6


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Recent Accounting Pronouncements

On July 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FAS 109, Accounting for Income Taxes” (“FIN 48”), which did not have a material impact to the Company’s liability for unrecognized tax benefits. Total unrecognized tax benefits at the date of adoption of FIN 48 were $2.2 billion, of which $2.0 billion would affect the Company’s effective income tax rate, if and when recognized in future fiscal years. The increase in the accrued balance during the six months ended December 31, 2007 was $210 million. The six month movement includes $27 million of acquired unrecognized tax benefits from the acquisition of Dow Jones & Company Inc. (“Dow Jones”). The Company does not presently anticipate such uncertain income tax positions will significantly increase or decrease in the next 12 months; however, actual developments in this area could differ from those currently expected. The implementation impact includes an increase in Other Liabilities of approximately $1.2 billion offset by a similar reduction in deferred income taxes as of July 1, 2007.

The Company recognizes interest and penalty charges related to unrecognized tax benefits as income tax expense, which is consistent with the recognition in prior reporting periods. Through July 1, 2007, the Company had recorded liabilities for accrued interest of $258 million. The increase in the accrual for interest for the six months ended December 31, 2007 was $66 million, which includes $6 million of acquired interest from Dow Jones.

The Internal Revenue Service recently concluded its examination of the Company’s U.S. federal income tax returns through 2002, and has commenced examining the Company’s returns for the years subsequent to 2002. Additionally, the Company’s income tax returns for the years 2000 through 2006 are under examination in various foreign jurisdictions.

In December 2007, FASB issued SFAS No. 141(revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R significantly changes the accounting for business combinations in a number of areas, including the treatment of contingent consideration, preacquisition contingencies, transaction costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in an acquired entity’s deferred tax assets and uncertain tax positions after the measurement period will impact income tax expense. SFAS No. 141R is effective for fiscal years beginning after December 15, 2008The Company will adopt SFAS No. 141R beginning in the first quarter of fiscal 2010. This standard will change the Company’s accounting treatment for business combinations on a prospective basis.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 changes the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. This new consolidation method significantly changes the accounting for transactions with minority interest holders. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008The Company will adopt SFAS No. 160 beginning in the first quarter of fiscal 2010. The Company is currently evaluating what effects, if any, the adoption of SFAS No. 160 will have on the Company’s future results of operations and financial condition.

 

7


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2—Acquisitions, Disposals and Other Transactions

Fiscal 2008 Transactions

Acquisitions

In July 2007, the Company acquired Photobucket, a web-based provider of photo- and video-sharing services, for initial consideration of approximately $237 million in cash. Additional consideration of up to $50 million may be payable contingent upon the achievement of certain performance objectives.

On December 13, 2007, the Company completed the acquisition of Dow Jones pursuant to the Agreement and Plan of Merger, dated as of July 31, 2007, by and among the Company, Ruby Newco LLC, a wholly-owned subsidiary of the Company (“Ruby Newco”), Dow Jones and Diamond Merger Sub Corporation, as amended (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, each share of Dow Jones common stock was converted into the right to receive, at the election of the holder, either (x) $60.00 in cash or (y) 2.8681 Class B common units of Ruby Newco. Each Class B common unit of Ruby Newco is convertible after a period of time into a share of News Corporation Class A common stock. The consideration for the acquisition was approximately $5,700 million which consists of: $5,100 million in cash, assumed net debt of approximately $330 million, approximately $200 million in equity instruments and the Company anticipates making additional acquisition related cash payments of $100 million during the remainder of fiscal 2008. The results of Dow Jones have been included in the Company’s unaudited consolidated statement of operations from December 13, 2007, the date of acquisition.

As part of the Dow Jones acquisition, the Company assumed total debt of $378 million which consisted of: 3.875% notes due 2008 in the amount of $225 million, $131 million in commercial paper, and a $22 million variable interest note. In December, the Company retired all of the commercial paper outstanding.

In addition, in December 2007, the Company issued approximately 8 million Class B common units of Ruby Newco, approximately 7 million stock options and approximately 500,000 restricted share units over the Company’s Class A common stock, par value $0.01 per share (“Class A Common Stock”). The total fair value of these instruments was approximately $200 million.

News Corporation believes that this acquisition will position it as a leader in the financial news and information market and will enhance its ability to adapt to future challenges and opportunities within News Corporation’s Newspapers and Information Services segment and across the Company’s other related business segments.

The following Unaudited Pro Forma Consolidated Statements of Operations give effect to the Company’s acquisition of Dow Jones, as if the acquisition had occurred on July 1, 2006.

 

     For the three months
ended December 31,
   For the six months
ended December 31,
       2007        2006(1)      2007    2006(1)  
     (in millions, except per share amounts)

Revenue

   $ 9,159    $ 8,322    $ 16,712    $ 14,642

Net income

     835      809      1,536      1,606

Per share amounts:

           

Basic earnings

   $ 0.27       $ 0.49   

Class A

      $ 0.27       $ 0.54

Class B

      $ 0.22       $ 0.45

Diluted earnings

   $ 0.27       $ 0.49   

Class A

      $ 0.27       $ 0.53

Class B

      $ 0.22       $ 0.44

 

(1)

Excludes discontinued operations

 

8


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The unaudited pro forma data is provided for informational purposes only. The pro forma information is not necessarily indicative of the results that would have been obtained had the acquisition been completed at the dates indicated. In addition, the unaudited pro forma data does not purport to project the future financial position or operating results of the Company and Dow Jones.

Under the purchase method of accounting, the total purchase price is allocated to Dow Jones net tangible and intangible assets based upon Dow Jones’ estimated fair value as of the date of completion of the acquisition. Based upon the purchase price and the valuation performed, the preliminary purchase price allocation, which is subject to change based on the Company’s final analysis, is as follows:

 

     As of December 31,
2007
     (in millions)

Assets acquired:

  

Current assets

   $ 444

Property, plant and equipment

     634

Other assets

     448

Intangible assets

     2,093

Goodwill

     3,934
      

Total assets acquired

   $ 7,553
      

Liabilities assumed:

  

Current liabilities

   $ 491

Deferred income taxes

     744

Deferred revenue

     218

Other liabilities

     425

Borrowings

     378
      

Total liabilities assumed

     2,256

Minority interest in subsidiaries

     165
      

Net assets acquired

   $ 5,132
      

The Company has not finalized the detailed valuation studies necessary to arrive at the required estimates of the fair market value of the Dow Jones assets acquired and the liabilities assumed and the related allocations of purchase price. The Company allocated, on a preliminary basis, approximately $600 million to amortizable intangible assets primarily consisting of subscriber relationship intangible assets with a weighted-average useful life of 25 years. The Company also allocated, on a preliminary basis, approximately $1,500 million to trade names, which will not be amortized as they have an indefinite remaining useful life based primarily on their market position and the Company’s plans for continued indefinite use. Further, approximately $4,000 million was preliminarily allocated to goodwill, which represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The goodwill is not being amortized in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” (“SFAS No. 142”) and is not deductible for tax purposes. The preliminary allocation of Goodwill is included in the Other segment, until the final valuation is complete. The amount of goodwill assumed will change depending on the fair values allocated to the tangible and intangible assets and liabilities acquired. For every $25 million reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets, Depreciation and amortization expense would increase by approximately $1 million per fiscal year, representing amortization expense assuming an average useful life of 25 years.

 

9


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Actual allocations may differ from these once the Company has completed the valuation studies necessary to finalize the required purchase price allocations and identified any necessary conforming accounting changes for Dow Jones. There can be no assurance that this finalization will not result in material changes to the purchase price allocation above.

As a result of the Dow Jones acquisition, the Company established and approved plans to integrate the acquired operations into the Company’s Newspapers and Information Services segment, for which the Company preliminarily recorded approximately $150 million in accrued liabilities in December 2007. These purchase accounting adjustments consist of separation payments for certain Dow Jones executives under the change in control plan Dow Jones had previously established, non-cancelable lease commitments and lease termination charges for leased facilities that will be exited and other contract termination costs associated with the restructuring activities. The finalization of certain of these actions could result in changes in the accrual amount.

Disposals

In November 2007, Dow Jones announced that it would explore strategic alternatives for the Ottaway Community Newspapers (the “Ottaway Newspapers”), which the Company acquired as part of the Dow Jones transaction. The strategic options include, but are not limited to, the possible sale of some or all of the Ottaway Newspapers’ publications and related properties. No agreement has yet been entered into with respect to any transaction involving the Ottaway Newspapers. At December 31, 2007, the assets and liabilities of the Ottaway Newspapers are classified as assets held for sale. Assets held for sale of $25 million and $423 million are included in Other current assets and Other non-current assets, respectively, and liabilities related to assets held for sale of $23 million are included in other current liabilities in the Company’s consolidated balance sheet at December 31, 2007.

In December 2007, Fox Television Stations, Inc., a Delaware corporation and a wholly owned subsidiary of the Company and FoxCo Acquisition Sub, LLC, a Delaware limited liability company and an indirect, wholly owned subsidiary of Oak Hill Capital Partners III, L.P. (“Oak Hill Capital”), entered into a Stock and Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell eight of its owned-and-operated FOX network affiliated television stations (the “Stations”) to Oak Hill Capital for approximately $1.1 billion in cash. The Stations include: WJW in Cleveland, OH; KDVR in Denver, CO; KTVI in St. Louis, MO; WDAF in Kansas City, MO; WITI in Milwaukee, WI; KSTU in Salt Lake City, UT; WBRC in Birmingham, AL; and WGHP in Greensboro, NC. The transaction is subject to customary closing conditions, including, among other things, (a) regulatory approvals, (b) the receipt of the consent of the Federal Communications Commission (the “FCC”) relating to the assignment or transfer of control of the television broadcasting licenses issued by the FCC for the Stations and (c) with regard to two of the Stations only, certain other actions by the FCC in connection with the digital television facilities for the two Stations. In the event the closing condition described in (c) above is not satisfied or waived by Oak Hill Capital, the transaction shall be effected as a sale of six of the Stations, excluding the Stations described in (c) above, at an adjusted price. The transaction is expected to be completed in the third calendar quarter of 2008.

Fiscal 2007 Transactions

Acquisitions

In November 2006, the Company, together with a local Turkish partner, acquired TGRT (now called “FOX TV”), a national general interest free-to-air broadcast television station in Turkey. The Company acquired its interest for approximately $103 million in cash plus acquisition related costs.

 

10


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

In December 2006, NDS Group plc (“NDS”), an indirect majority owned subsidiary of the Company, acquired Jungo Limited (“Jungo”), a developer and supplier of software for use in residential gateway devices, for approximately $91 million.

In January 2007, the Company and VeriSign, Inc. (“VeriSign”) formed a joint venture to provide entertainment content for mobile devices. The Company paid approximately $190 million for a controlling interest in VeriSign’s wholly-owned subsidiary, Jamba, which was combined with certain of the Company’s FOX Mobile Entertainment assets. The results of the joint venture have been included in the Company’s consolidated results of operations since January 2007. The Company and VeriSign have various put and call rights related to VeriSign’s ownership interests, including VeriSign’s right to put its interest in the joint venture to the Company for $150 million and $350 million, in fiscal 2010 and fiscal 2012, respectively. The Company accounts for the VeriSign put rights in accordance with Emerging Issues Task Force (“EITF”) Topic No. D-98, “Classification and Measurement of Redeemable Securities” (“EITF D-98”) because their exercise is outside the control of the Company and, accordingly, as of December 31, 2007, has reflected the accreted value of the put right in minority interest in subsidiaries in its unaudited consolidated balance sheet. The accreted value of VeriSign’s put right was determined by using the interest method and accreting the minority interest balance up to the fixed price put amount in fiscal 2010 and fiscal 2012. At December 31, 2007, the accreted value of VeriSign’s put right was determined using an annual interest rate of 12%.

In March 2007, the Company acquired Strategic Data Corporation (“SDC”), a developer of technology that allows websites to target advertisements to specific audiences. The Company acquired SDC for a total purchase price of $50 million, of which $40 million was in cash and $10 million in deferred consideration. The Company may be required to pay up to an additional $310 million through fiscal 2010 contingent upon SDC achieving specified advertising rate growth in future periods.

In April 2007, the Company completed its acquisition of Federal Publishing Company’s (“FPC”) magazines, newspapers and online properties in Australia from F Hannan Pty Limited for approximately $393 million.

In accordance with SFAS No. 142 the excess purchase price that has been allocated or has been preliminarily allocated to goodwill is not being amortized for all of the acquisitions noted above. Where the allocation of the excess purchase price is not final, the amount allocated to goodwill is subject to changes upon completion of final valuations of certain assets and liabilities. A future reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets could reduce future earnings as a result of additional amortization. For every $10 million reduction in goodwill for additional value to be assigned to identifiable finite-lived intangible assets or tangible assets, Depreciation and amortization expense would increase by approximately $1 million per fiscal year, representing amortization expense assuming an average useful life of ten years.

The aforementioned acquisitions were all accounted for in accordance with SFAS No. 141, “Business Combinations.”

Share Exchange Agreement

On December 22, 2006, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Liberty Media Corporation (“Liberty”). Under the terms of the Share Exchange Agreement, Liberty will exchange its entire interest in the Company’s common stock (approximately 325 million shares of Class A Common Stock and 188 million shares of Class B common stock, par value $0.01 per share (“Class B Common Stock”)) for 100% of a News Corporation subsidiary (“Splitco”), whose holdings will consist of an

 

11


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

approximately 41% interest (approximately 470 million shares) in The DIRECTV Group, Inc. (“DIRECTV”) constituting the Company’s entire interest in DIRECTV, three of the Company’s Regional Sports Networks (“RSNs”) (FSN Northwest, FSN Pittsburgh and FSN Rocky Mountain (the “Three RSNs”)) and $588 million in cash, subject to adjustment. The transaction contemplated by the Share Exchange Agreement was approved by the Company’s Class B common stockholders on April 3, 2007, but remains subject to customary closing conditions, including, among other things, regulatory approvals and the absence of a material adverse effect on Splitco. If these conditions are satisfied, the transaction is expected to be completed no later than the first quarter of calendar 2008. The Company will enter into a non-competition agreement with DIRECTV and non-competition agreements with each of the Three RSNs, in each case, restricting its right to compete for a period of four years with DIRECTV and the Three RSNs in the respective regions in which such entities are operating on the date the Share Exchange Agreement is consummated.

Other Transactions

In fiscal 2007, the Company restructured the ownership interest in one of its majority-owned RSNs. The minority shareholder has a put right related to its ownership interest that is currently exercisable and is outside of the control of the CompanyThe Company accounts for this put arrangement in accordance with EITF D-98, and, as of December 31, 2007, has included the value of the put right in minority interest in subsidiaries in the consolidated balance sheet. The fair value of the minority shareholder’s put right was determined by using a discounted earnings (losses) before interest, taxes, depreciation, and amortization valuation model, assuming a 10% compounded annual growth rate and a 9% discount rate.

Note 3—Receivables, net

Receivables, net are presented net of an allowance for returns and doubtful accounts, which is an estimate of amounts that may not be collectible. In determining the allowance for returns, management analyzes historical returns, current economic trends and changes in customer demand and acceptance of the Company’s products. Based on this information, management reserves a percentage of each dollar of product sales that provide the customer with the right of return. The allowance for doubtful accounts is estimated based on historical experience, receivable aging, current economic trends, and specific identification of certain receivables that are at risk of not being paid. Receivables, net consist of:

 

     At December 31,
2007
    At June 30,
2007
 
     (in millions)  

Total Receivables

   $ 7,998     $ 6,279  

Less: Current receivables, net

    
           Current receivables      8,792       6,944  
           Allowances for returns and doubtful accounts      (1,303 )     (1,102 )
                

Current receivables, net

     7,489       5,842  

Total non-current receivables

   $ 509     $ 437  
                

Note 4—United Kingdom Redundancy Program

In fiscal 2005, the Company announced its intention to invest in new printing plants in the United Kingdom to take advantage of technological and market changes. As the new automated technology comes on line, the Company expects lower production costs and improved newspaper quality, including expanded color.

 

12


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

In conjunction with this project, during the second quarter of 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 a redundancy 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 come on line. As a result of this Program, the Company expects to reduce its production workforce by approximately 65%, and as of December 31, 2007, over 700 employees in the United Kingdom had already accepted severance agreements and are expected to leave the Company during fiscal 2008.

In accordance with SFAS No. 88, “Employers’ Accounting for Settlements & Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” the Company recorded a redundancy provision in connection with the Program. Changes in the program liabilities are as follows:

 

     For the three months
ended December 31,
    For the six months
ended December 31,
 
         2007             2006             2007             2006      
     (in millions)     (in millions)  

Beginning of period

   $ 99     $ 112     $ 127     $ 109  

Additions (included in Operating expenses)

     6       6       15       10  

Payments

     (16 )     (1 )     (55 )     (2 )

Foreign exchange movements

     (3 )     6       (1 )     6  
                                

End of period

   $ 86     $ 123     $ 86     $ 123  
                                

At December 31, 2007, all program liabilities were included in other current liabilities in the unaudited consolidated balance sheet. The Company expects to record an additional provision of approximately $3 million during the remainder of 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 during the remainder of fiscal 2008.

 

13


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 5—Inventories, net

The Company’s inventories were comprised of the following:

 

     At
December 31,
2007
    At
June 30,
2007
 
     (in millions)  

Programming rights

   $ 3,069     $ 2,390  

Books, DVDs, paper and other merchandise

     543       497  

Filmed entertainment costs:

    

Films:

    

Released (including acquired film libraries)

     468       557  

Completed, not released

     13       —    

In production

     544       450  

In development or preproduction

     122       82  
                
     1,147       1,089  
                

Television productions:

    

Released (including acquired libraries)

     516       487  

Completed, not released

     —         13  

In production

     262       185  

In development or preproduction

     5       4  
                
     783       689  
                

Total filmed entertainment costs, less accumulated amortization(a)

     1,930       1,778  
                

Total inventories, net

     5,542       4,665  

Less: current portion of inventories, net(b)

     (2,719 )     (2,039 )
                

Total non-current inventories, net

   $ 2,823     $ 2,626  
                

 

(a)

Does not include $537 million and $553 million of net intangible film library costs as of December 31, 2007 and June 30, 2007, respectively, which are included in intangible assets subject to amortization in the consolidated balance sheets.

 

(b)

Current inventory as of December 31, 2007 and June 30, 2007 was comprised of programming rights ($2,211 million and $1,578 million, respectively), books, DVDs, paper and other merchandise.

 

14


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 6—Investments

The Company’s investments were comprised of the following:

 

        Ownership
Percentage
  At
December 31,
2007
  At
June 30,
2007
Equity investments:           (in millions)

The DIRECTV Group, Inc.(1)

  DBS operator principally in the U.S.   41%(2)   $ 7,451   $ 7,224

Gemstar-TV Guide International, Inc.(1)

  U.S. print and electronic guidance company   41%     769     717

British Sky Broadcasting Group plc(1)

  U.K. DBS operator   39%     1,068     1,193

China Network Systems(3)

  Taiwan cable TV operator   various     14     242

Sky Network Television Ltd.

  New Zealand media company   44%     331     314

National Geographic Channel (US)(4)

  U.S. cable channel   67%     —       316

Other equity method investments

    various     719     771

Other investments

    various     607     636
               
      $ 10,959   $ 11,413
               

 

(1)

The market values of the Company’s investments in DIRECTV, Gemstar-TV Guide International Inc. (“Gemstar-TV Guide”) and British Sky Broadcasting Group plc (“BSkyB”) were $11,008 million, $841 million and $8,572 million, respectively, at December 31, 2007.

 

(2)

The Company’s ownership in DIRECTV increased from approximately 39% at June 30, 2007 to approximately 41% at December 31, 2007 due to DIRECTV’s share buyback program.

 

(3)

In July 2007, the Company and its joint venture partner sold a majority of the cable systems in Taiwan, in which the Company maintains a minority interest ownership, to a third party. (See Fiscal Year 2008 Disposals and Other Transactions below for further discussion)

 

(4)

Effective September 30, 2007, National Geographic Television agreed to give the Company control over National Geographic Channel (US) (“NGC US”) in which the Company has a 67% equity interest. Prior to September 30, 2007 the Company had 67% ownership but did not control this entity as it did not hold a majority on its board of directors, was unable to dictate operating decision making and it was not a variable interest entity. (See Fiscal Year 2008 Disposals and Other Transactions below for further discussion)

Fiscal Year 2008 Disposals and Other Transactions

In July 2007, the Company and its joint venture partner sold a majority of the cable systems in Taiwan, in which the Company maintains a minority interest ownership, to a third party. The Company recognized total consideration of $315 million of which $288 million was paid in cash and $27 million is receivable subject to final closing adjustments. The Company recognized a pre-tax gain of approximately $102 million on the sale included in Other, net in the unaudited consolidated statement of operations for the six months ended December 31, 2007The Company and its joint venture partner intend to sell the remaining Taiwan cable systems in fiscal 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 were included in the Company’s unaudited consolidated results of operations beginning October 1, 2007.

During the six months ended December 31, 2007, the Company effectively acquired an additional 27% stake in NGC Network (UK) Limited (“NGC UK”) in exchange for a 23% interest 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

 

15


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

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 in the six months ended December 31, 2007.

In December 2007, Macrovision Corporation agreed to acquire Gemstar-TV Guide in a cash and stock transaction. The closing of this transaction is subject to customary closing conditions, including the approval of the shareholders of both Macrovision Corporation and Gemstar-TV Guide.

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 unaudited consolidated statement of operations for the six months ended December 31, 2006. 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.”

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, which was included in Other, net in the consolidated statement of operations for the fiscal year ended June 30, 2007. The Company deferred the remaining $165 million of its total gain due to its indirect retained interest through the Company’s ownership of DIRECTV. The Company will recognize the deferred portion of the gain on SKY Brasil upon disposition of its investment in DIRECTV or DIRECTV’s disposition of its investment in SKY Brasil. 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 transaction, 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 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 grant the Company operating 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.

Summarized financial information for significant equity affiliates, determined in accordance with Regulation S-X, accounted for under the equity method is as follows:

 

     For the three months
ended December 31,
   For the six months
ended December 31,
         2007             2006            2007            2006    
     (in millions)    (in millions)

Revenues

   $ 7,476     $ 6,379    $ 14,198    $ 12,053

Operating income

     928       1,005      1,783      1,970

Income (loss) from continuing operations

     (49 )     604      439      1,191

Net income (loss)

     (49 )     604      439      1,191

 

16


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 7—Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, the Company’s intangible assets and related accumulated amortization are as follows:

 

    Weighted average
useful lives
  As of
December 31,

2007
  As of
June 30,
2007
        (in millions)

FCC licenses

  Indefinite-lived   $ 6,910   $ 6,910

Distribution networks

  Indefinite-lived     754     750

Publishing rights & imprints

  Indefinite-lived     506     506

Newspaper mastheads(1)

  Indefinite-lived     2,437     918

Other(1)

  Indefinite-lived     1,428     1,355
             

Intangible assets not subject to amortization

      12,035     10,439

Film library, net of accumulated amortization of $86 million and $70 million as of December 31, 2007 and June 30, 2007, respectively

  20 years     537     553

Other intangible assets, net of accumulated amortization of $297 million and $222 million as of December 31, 2007 and June 30, 2007, respectively(1)

  3 – 25 years     1,426     711
             

Total intangibles, net

    $ 13,998   $ 11,703
             

 

(1)

Intangible balances increased primarily due to the acquisition of Dow Jones. (See Note 2—Acquisitions, Disposals and Other Transactions for further discussion of the purchase price allocation)

The changes in carrying value of goodwill, by segment, are as follows:

 

     Balance as of
June 30, 2007
   Additions    Adjustments     Balance as of
December 31,
2007
     (in millions)

Filmed Entertainment

   $ 1,071    $ —      $ —       $ 1,071

Television

     3,284      —        —         3,284

Cable Network Programming

     4,915      391      (44 )     5,262

Direct Broadcast Satellite Television

     592      —        52       644

Magazines & Inserts

     257      —        —         257

Newspapers and Information Services

     1,395      —        40       1,435

Book Publishing

     2      —        —         2

Other

     2,303      4,156      (120 )     6,339
                            

Total goodwill

   $ 13,819    $ 4,547    $ (72 )   $ 18,294
                            

Goodwill balances increased $4,475 million during the six months ended December 31, 2007, primarily as a result of new acquisitions. The increased goodwill balance at the Other segment arose from the acquisitions of Dow Jones and Photobucket (See Note 2—Acquisitions, Disposals and Other Transactions.) The consolidation of NGC US beginning October 1, 2007 led to an increase in goodwill at the Cable segment (See Note 6—Investments.) Adjustments primarily relate to the finalization of purchase price allocations for previously announced acquisitions and foreign currency translation adjustments.

 

17


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 8—Borrowings

Bank Loans

The Company previously entered into two loan agreements with the European Bank for Reconstruction and Development (the “EBRD”) and had an outstanding balance of $154 million under these loans at June 30, 2006. In August 2006, the Company entered into a loan agreement with Raiffeisen Zentralbank Österreich AG (“RZB”) for $300 million and repaid all amounts outstanding under the Company’s loan agreements with the EBRD. As of December 31, 2007, $106 million remains available for future use under the RZB loan. The RZB loan bears interest at LIBOR for a period equal to each one, three or six month interest period, plus a margin of up to 2.85% per annum dependent upon certain financial metrics. Principal amounts under the RZB loan are to be repaid in equal amounts every six months starting on the second anniversary of the date of the agreement until the fifth anniversary of the date of the agreement. The remaining available amount under the RZB loan may be drawn prior to the second anniversary of the date of the agreement. The loans are secured by certain guarantees, bank accounts and share pledges of the Company’s Russian operating subsidiaries.

Notes due 2037

In November 2007, the Company issued $1,250 million of 6.65% Senior Notes due 2037. The net proceeds of approximately $1,248 million will be used for general corporate purposes. These notes were issued under the Amended and Restated Indenture, dated as of March 24, 1993, as supplemented, among News America Incorporated, the guarantor named therein and The Bank of New York Mellon Corporation, as Trustee.

Note 9—Stockholders’ Equity

Rights of Holders of Common Stock

On August 8, 2006, the Company announced that, in accordance with the terms of the settlement of a lawsuit regarding the Company’s stockholder rights plan, the Company’s Board of Directors (the “Board”) had approved the adoption of an Amended and Restated Rights Plan (the “Rights Plan”), extending the term of the Company’s original stockholder rights plan from November 7, 2007 to October 20, 2008. The Board has the right to extend the term for an additional year if the situation with Liberty has not, in the Board’s judgment, been resolved. The terms of the Rights Plan remain the same as the Company’s original stockholder rights plan in all other material respects. Pursuant to the terms of the settlement, on October 20, 2006, the Rights Plan was presented for a vote of the Company’s Class B stockholders at the Company’s 2006 annual meeting of stockholders and the stockholders voted in favor of its approval. On January 3, 2007, the Rights Plan was amended to allow for the grant of an irrevocable proxy to Liberty in connection with the Share Exchange Agreement. The Company has announced that it intends to redeem the rights issued under the Rights Plan if the transactions contemplated under the Share Exchange Agreement are consummated. (See Note 2—Acquisitions, Disposals and Other Transactions for further discussion of the Share Exchange Agreement)

Dividends

The Company declared a dividend of $0.06 per share of Class A Common Stock and $0.05 per share of Class B Common Stock in the three months ended September 30, 2007, which was paid in October 2007 to stockholders of record on September 12, 2007. The total aggregate dividend paid to stockholders in October 2007 was approximately $179 million.

 

18


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Repurchase Program

In June 2005, the Company announced a stock repurchase program under which the Company was authorized to acquire from time to time up to an aggregate of $3 billion in Class A Common Stock and Class B Common Stock. In May 2006, the Company announced that the Board had authorized increasing the total amount of the stock repurchase program to $6 billion. The remaining authorized amount under the Company’s stock repurchase program at December 31, 2007, excluding commissions, was approximately $2 billion.

Note 10—Equity Based Compensation

The following table summarizes the Company’s equity-based compensation transactions:

 

     For the three months
ended December 31,
   For the six months
ended December 31,
         2007            2006            2007            2006    
     (in millions)    (in millions)

Equity-based compensation

   $ 34    $ 37    $ 72    $ 66
                           

Cash received from exercise of equity-based compensation

   $ 27    $ 100    $ 56    $ 159
                           

Total intrinsic value of options exercised

   $ 18    $ 48    $ 42    $ 79
                           

At December 31, 2007, the Company’s total compensation cost related to non-vested stock options, restricted stock units (“RSUs”) and stock appreciation rights not yet recognized for all plans was approximately $292 million, the majority of which is expected to be recognized over the next three fiscal years. Compensation expense on all equity-based awards is recognized on a straight-line basis over the vesting period of the entire award.

Stock options exercised during the six months ended December 31, 2007 and 2006 resulted in the Company’s issuance of approximately 4 million and 11 million shares of Class A Common Stock, respectively. The Company recognized a tax benefit on stock options exercised of $9 million and $26 million for the six months ended December 31, 2007 and 2006, respectively.

During the six months ended December 31, 2007, the Company issued 5.6 million RSUs. These RSUs will be settled in shares of Class A Common Stock upon vesting, except for approximately 1 million RSUs that will be settled in cash. RSUs granted to executive directors are settled in cash and certain awards granted to employees in certain foreign locations are settled in cash. At December 31, 2007 and June 30, 2007, the liability for cash-settled RSUs was $33 million and $47 million, respectively.

During the six months ended December 31, 2007 and 2006, approximately 5.3 million and 4.0 million RSUs vested, respectively, of which approximately 4.6 million and 3.4 million, respectively, were settled in Class A Common Stock, before statutory tax withholdings, and the remaining RSUs were settled in cash. The Company recognized a tax benefit on vested RSUs of $5 million and $7 million for the six months ended December 31, 2007 and 2006, respectively.

Note 11—Commitments and Guarantees

Commitments

In July 2007, the Company entered into a contract with the Big Ten Conference for rights to telecast certain Big Ten Conference sporting events through fiscal 2032. The Company will pay approximately $2.8 billion over the term of the contract for these rights.

 

19


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

In November 2007, the Company entered into a long-term supply contract pursuant to which the Company will purchase paper for its newspaper printing facilities in the United Kingdom from a third party. The contract requires the Company to purchase a minimum of $590 million of paper from this third party through fiscal 2015.

In December 2007, as part of the Dow Jones acquisition, the Company assumed approximately $994 million of commitments previously entered into by Dow Jones which included $247 million of indebtedness at December 31, 2007.

Other than previously disclosed in the notes to these unaudited consolidated financial statements, the Company’s commitments have not changed significantly from disclosures included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed with the SEC on August 23, 2007.

Guarantees

Other than previously disclosed in the notes to these unaudited consolidated financial statements, the Company’s guarantees have not changed significantly from disclosures included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed with the SEC on August 23, 2007.

Note 12—Contingencies

NDS

Echostar Litigation

On June 6, 2003, Echostar Communications Corporation, Echostar Satellite Corporation, Echostar Technologies Corporation and Nagrastar L.L.C. (collectively, “Echostar”) filed an action against NDS in the United States District Court for the Central District of California. Echostar filed an amended complaint on October 8, 2003, which purported to allege claims for violation of the Digital Millennium Copyright Act (“DMCA”), the Communications Act of 1934 (“CA”), the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, California’s Unfair Competition statute and the federal Racketeer Influenced and Corrupt Organizations (“RICO”) statute. The complaint also purported to allege claims for civil conspiracy, misappropriation of trade secrets and interference with prospective business advantage. The complaint sought injunctive relief, unspecified compensatory and exemplary damages and restitution. On December 22, 2003, all of the claims were dismissed by the court, except for the DMCA, CA and unfair competition claims, and the court limited these claims to acts allegedly occurring within three years of the filing of Echostar’s original complaint.

After Echostar filed a second amended complaint, NDS filed a motion to dismiss this complaint on March 31, 2004. On July 21, 2004, the court issued an order directing Echostar to, among other things, file a third amended complaint within ten days correcting various deficiencies noted in the second amended complaint. Echostar filed its third amended complaint on August 4, 2004. On August 6, 2004, the court ruled that NDS was free to file a motion to dismiss the third amended complaint, which NDS did on September 20, 2004. The hearing occurred on January 3, 2005. On February 28, 2005, the court issued an order treating NDS’s motion to dismiss as a motion for a more definite statement, granting the motion and giving Echostar until March 30, 2005 to file a fourth amended complaint correcting various deficiencies noted in the third amended complaint. On March 30, 2005, Echostar filed a fourth amended complaint, which NDS moved to dismiss. On July 27, 2005, the court granted in part and denied in part NDS’s motion to dismiss, and again limited Echostar’s surviving claims to acts allegedly occurring within three years of the filing of Echostar’s original complaint. NDS’s management believes these surviving claims are without merit and intends to vigorously defend against them.

 

20


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

On October 24, 2005, NDS filed its Amended Answer with Counterclaims, alleging that Echostar misappropriated NDS’s trade secrets, violated the Computer Fraud and Abuse Act and engaged in unfair competition. On November 8, 2005, Echostar moved to dismiss NDS’s counterclaims for conversion and claim and delivery, arguing that these claims were preempted and time-barred. Echostar also moved for a more definite statement of NDS’s trade secret misappropriation claim. On December 8, 2005, the court granted in part and denied in part Echostar’s motion to dismiss and for a more definite statement, but granted NDS leave to file amended counterclaims. On December 13, 2005, NDS filed a Second Amended Answer with Counterclaims, which Echostar answered on December 27, 2005. NDS filed motions for summary judgment dismissing EchoStar’s claims and EchoStar filed a motion for summary judgment dismissing NDS’ counterclaims on October 29, 2007. Those motions were heard on January 7, 2008. On January 16, 2008, the court granted the motions in part and denied them in part. The court has set this case to go to trial in April 2008.

Sogecable Litigation

On July 25, 2003, Sogecable, S.A. and its subsidiary Canalsatellite Digital, S.L., Spanish satellite broadcasters and customers of Canal+ Technologies SA (together, “Sogecable”), filed an action against NDS in the United States District Court for the Central District of California. Sogecable filed an amended complaint on October 9, 2003, which purported to allege claims for violation of the DMCA and the federal RICO statute. The amended complaint also purported to allege claims for interference with contract and prospective business advantage. The complaint sought injunctive relief, unspecified compensatory and exemplary damages and restitution. On December 22, 2003, all of the claims were dismissed by the court. Sogecable filed a second amended complaint. NDS filed a motion to dismiss the second amended complaint on March 31, 2004. On August 4, 2004, the court issued an order dismissing the second amended complaint in its entirety. Sogecable had until October 4, 2004 to file a third amended complaint. On October 1, 2004, Sogecable notified the court that it would not be filing a third amended complaint, but would appeal the court’s entry of final judgment dismissing the suit to the United States Ninth Circuit Court of Appeals. On December 14, 2006, the appellate court issued a memorandum decision reversing the district court’s dismissal. On January 26, 2007, NDS filed its petition for rehearing by an en banc panel of the United States Ninth Circuit Court of Appeals. On February 21, 2007, the petition was denied. On June 11, 2007, NDS filed a petition for a Writ of Certiorari in the United States Supreme Court seeking reversal of the Ninth Circuit Court of Appeals’ decision. On August 27, 2007, NDS renewed its motion to dismiss the second amended complaint on grounds not previously decided. On October 1, 2007, the petition for a Writ of Certiorari was denied. On January 25, 2008, the court issued an order granting-in-part and denying-in-part the Company’s renewed motion to dismiss Sogecable’s second amended complaint. The court dismissed Sogecable’s claim for tortious interference with prospective economic advantage, but allowed Sogecable to proceed on its RICO and DMCA claims, as well as its claim for tortious interference with contract. The court has set June 2, 2009 as the trial date. NDS believes that Sogecable’s claims are without merit and will continue to vigorously defend itself in this matter.

Intermix

FIM Transaction

On August 26, 2005 and August 30, 2005, two purported class action lawsuits captioned, respectively, Ron Sheppard v. Richard Rosenblatt et. al., and John Friedmann v. Intermix Media, Inc. et al., were filed in the California Superior Court, County of Los Angeles. Both lawsuits named as defendants all of the then incumbent members of the Intermix Board, including Mr. Rosenblatt, Intermix’s former Chief Executive Officer, and certain entities affiliated with VantagePoint Venture Partners (“VantagePoint”), a former major Intermix stockholder. The complaints alleged that, in pursuing the transaction whereby Intermix was to be acquired by FIM (the “FIM Transaction”) and approving the related merger agreement, the director defendants breached their

 

21


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

fiduciary duties to Intermix stockholders by, among other things, engaging in self-dealing and failing to obtain the highest price reasonably available for Intermix and its stockholders. The complaints further alleged that the merger agreement resulted from a flawed process and that the defendants tailored the terms of the merger to advance their own interests. The FIM Transaction was consummated on September 30, 2005. The Friedmann and Sheppard lawsuits were subsequently consolidated and, on January 17, 2006, a consolidated amended complaint was filed (the “Intermix Media Shareholder Litigation”). The plaintiffs in the consolidated action sought various forms of declaratory relief, damages, disgorgement and fees and costs. On March 20, 2006, the court ordered that substantially identical claims asserted in a separate state action filed by Brad Greenspan, captioned Greenspan v. Intermix Media, Inc., et al., be severed and related to the Intermix Media Shareholder Litigation. The defendants filed demurrers seeking dismissal of all claims in the Intermix Media Shareholder Litigation and the severed Greenspan claims, which were heard by the court on July 6, 2006. On October 6, 2006, the court sustained the demurrers without leave to amend. On December 13, 2006, the court dismissed the complaints and entered judgment for the defendants. Greenspan and plaintiffs in the Intermix Media Shareholder Litigation filed notices of appeal, and subsequently filed respective opening briefs on appeal in October 2007. Defendants intend to file opposing briefs on appeal. The Court of Appeal has not yet heard argument in the matter.

In November 2005, plaintiff in a derivative action captioned LeBoyer v. Greenspan et al. pending against various former Intermix directors and officers in the United States District Court for the Central District of California, filed a First Amended Class and Derivative Complaint (the “Amended Complaint”). The original derivative action was filed in May 2003 and arose out of Intermix’s restatement of quarterly financial results for its fiscal year ended March 31, 2003. Until the filing of the Amended Complaint, the action had been stayed by mutual agreement of the parties since its inception. A substantially similar derivative action filed in Los Angeles Superior Court was dismissed based on inability of the plaintiffs to adequately plead demand futility. Plaintiff LeBoyer’s November 2005 Amended Complaint added various allegations and purported class claims arising out of the FIM Transaction which are substantially similar to those asserted in the Intermix Media Shareholder Litigation. The Amended Complaint also added as defendants the individuals and entities named in the Intermix Media Shareholder Litigation that were not already defendants in the matter. On July 14, 2006, the parties filed their briefing on defendants’ motion to dismiss and stay the matter. On October 16, 2006, the court dismissed the fourth through seventh claims for relief, which related to the 2003 restatement, finding that the plaintiff is precluded from relitigating demand futility. At the same time, the court asked for further briefing regarding plaintiffs’ standing to assert derivative claims based on the FIM Transaction, including for alleged violation of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the effect of the state judge’s dismissal of the claims in the Greenspan case and the Intermix Media Shareholder Litigation on the remaining direct class action claims alleging breaches of fiduciary duty and other common law claims leading up to the FIM Transaction. The parties filed the requested additional briefing in which the defendants requested that the court stay the direct LeBoyer claims pending the resolution of any appeal in the Greenspan case and the Intermix Media Shareholder Litigation. The court took the matter under submission. By order dated May 22, 2007, the court granted defendants’ motion to dismiss the derivative claims arising out of the FIM Transaction, and denied the defendants’ request to stay the two remaining direct claims. As explained in more detail in the next paragraph, the court subsequently consolidated this case with the Brown v. Brewer action also pending before the court. On July 11, 2007, plaintiffs filed the consolidated first amended complaint. Pursuant to the stipulated briefing schedule ordered by the court, the parties’ joint brief on defendants’ motion to dismiss the consolidated complaint was filed on October 11, 2007 and taken under submission. By order dated January 17, 2008, the court granted in part defendants’ motion to dismiss, with leave to amend, as explained in greater detail under the discussion of the consolidated case, Brown v. Brewer, below.

On June 14, 2006, a purported class action lawsuit, captioned Jim Brown v. Brett C. Brewer, et al., was filed against certain former Intermix directors and officers in the United States District Court for the Central District of

 

22


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

California. The plaintiff asserted claims for alleged violations of Section 14a of the Exchange Act and SEC Rule 14a-9, as well as control person liability under Section 20a. The plaintiff alleged that certain defendants disseminated false and misleading definitive proxy statements on two occasions: one on December 30, 2003 in connection with the shareholder vote on January 29, 2004 on the election of directors and ratification of financing transactions with certain entities of VantagePoint, and another on August 25, 2005 in connection with the shareholder vote on the FIM Transaction. The complaint named as defendants certain VantagePoint related entities and the members of the Intermix Board who were incumbent on the dates of the respective proxy statements. Intermix was not named as a defendant, but has certain indemnity obligations to the former officer and director defendants in connection with these claims and allegations. Intermix believes that the claims are without merit and expects that the individual defendants will vigorously defend themselves in the matter. On August 25, 2006, plaintiff amended his complaint to add certain investment banks (the “Investment Banks”) as defendants. Intermix has certain indemnity obligations to the Investment Banks as well. Plaintiff amended his complaint again on September 27, 2006. On October 19, 2006, defendants filed motions to dismiss all claims in the Second Amended Complaint. These motions were scheduled to be heard on February 12, 2007. On February 9, 2007, the case was transferred from Judge Walter to Judge George H. King, the judge assigned to the LeBoyer action on the grounds that it raises substantially related questions of law and fact as LeBoyer, and would entail substantial duplication of labor if heard by different judges. Judge King took the February 26, 2007 hearing date for the motions to dismiss off-calendar. On June 11, 2007, Judge King ordered the Brown case be consolidated with the LeBoyer action, ordered plaintiffs’ counsel to file a consolidated first amended complaint, and further ordered the parties to file a joint brief on defendants’ contemplated motion to dismiss the consolidated first amended complaint. On July 11, 2007, plaintiffs filed the consolidated first amended complaint. Pursuant to the stipulated briefing schedule ordered by the court, the parties’ joint brief on defendants’ motion to dismiss was filed on October 11, 2007 and was taken under submission without a hearing. By order dated January 17, 2008, Judge King granted defendants’ motion to dismiss the 2003 proxy claims (concerning VantagePoint transactions) and the 2005 proxy claims (concerning the FIM Transaction), as well as a claim against the VantagePoint entities alleging unjust enrichment. The court found it unnecessary to rule on dismissal of the remaining claims, which are related to the 2005 FIM Transaction, because the dismissal disposed of those claims. The court granted plaintiffs until February 8, 2008 to file an amended complaint. Intermix believes that the claims are without merit and expects that the defendants will continue to vigorously defend themselves in the matter.

Greenspan Litigation

On February 10, 2005, Brad Greenspan, Intermix’s former Chairman and Chief Executive Officer who was asked to resign as CEO and was removed as Chairman in the fall of 2003, filed a derivative complaint in Los Angeles Superior Court against Intermix, various of its former directors and officers, VantagePoint and certain of VantagePoint’s principals and affiliates. The complaint alleged claims of libel and fraud against Intermix and various of its then current and former officers and directors, claims of intentional interference with contract and prospective economic advantage, unfair competition and fraud against VantagePoint and certain of its affiliates and principals and claims alleging that Intermix’s forecasts of profitability leading up to its January 2004 annual stockholder meeting and associated proxy contest waged by Mr. Greenspan were false and misleading. These claims generally related to Intermix’s decision to consummate its Series C Preferred Stock financing with VantagePoint in October 2003, Mr. Greenspan’s contemporaneous separation from Intermix and matters arising during the proxy contest. The complaint also alleged that Intermix’s acquisition of the assets of a company known as Supernation LLC (“Supernation”) in July 2004 involved breaches of fiduciary duty. Mr. Greenspan sought remittance of compensation received by the various then current and former Intermix director and officer defendants, unspecified damages, removal of various Intermix directors, disgorgement of unspecified profits, reformation of the Supernation purchase, punitive damages, fees and costs, injunctive relief and other remedies. Intermix and the other defendants filed motions challenging the validity of the action and Mr. Greenspan’s ability to pursue it. Mr. Greenspan voluntarily dismissed this action in October 2005.

 

23


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Prior to dismissing his derivative lawsuit, in August 2005, Mr. Greenspan filed another complaint in Los Angeles Superior Court against the same defendants. The complaint, for breach of fiduciary duty, included substantially the same allegations made by Mr. Greenspan in the above-referenced lawsuit. Mr. Greenspan further alleged that defendants’ actions have, with the FIM Transaction, culminated in the loss of Mr. Greenspan’s interest in Intermix for a cash payment allegedly below its value. On October 31, 2005, the defendants filed motions seeking dismissal of the lawsuit on the grounds that the complaint failed to state any cause of action. Instead of responding to these motions, Mr. Greenspan filed an amended complaint on February 21, 2006, in which Mr. Greenspan omitted certain previously named defendants and added two other former directors as defendants. In this amended complaint, Mr. Greenspan asserted seven causes of action. The first two causes of action, for intentional interference with prospective economic advantage and violation of California’s Business Professions Code section 17200, generally related to Intermix’s decision to consummate its Series C Preferred Stock financing with VantagePoint in October 2003 and allege that Mr. Greenspan was “forced” to resign. The third through sixth causes of action asserted various claims for breach of fiduciary duty related to the FIM Transaction and substantially mirrored the allegations in the Intermix Media Shareholder Litigation. By Order of March 20, 2006, the court ordered that Mr. Greenspan’s claims based on the FIM Transaction be severed from the rest of his complaint and coordinated with the claims asserted in the Intermix Media Shareholder Litigation. Mr. Greenspan asserted a seventh cause of action against Intermix for indemnification. In his amended complaint, Mr. Greenspan sought compensatory and consequential damages, punitive damages, fees and costs, injunctive relief and other remedies. Motions to dismiss the first six causes of action were filed and, on October 6, 2006, granted without leave to amend. On November 21, 2006, Mr. Greenspan dismissed with prejudice the seventh cause of action for indemnity, which was the only remaining claim and his sole cause of action against Intermix. On January 24, 2007, Mr. Greenspan filed a notice of appeal of the court’s October 6, 2006 ruling. Mr. Greenspan’s opening brief in the Court of Appeal was filed on October 23, 2007.

Other

Other than previously disclosed in the notes to these unaudited consolidated financial statements, the Company is party to several other purchase and sale arrangements which become exercisable over the next ten years by the Company or the counter-party to the agreement. In the next twelve months, none of these arrangements that become exercisable are material. Purchase arrangements that are exercisable by the counter-party to the agreement, and that are outside the sole control of the Company are accounted for in accordance with EITF D-98. Accordingly, the fair values of such purchase arrangements are classified in Minority interest liabilities.

The Company experiences routine litigation in the normal course of its business. The Company believes that none of its pending litigation will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

The Company’s operations are subject to tax in various domestic and international jurisdictions and as a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

Note 13—Pension Plans and Other Postretirement Benefits

The Company sponsors non-contributory pension plans and retiree health and life insurance benefit plans covering specific groups of employees. The benefits payable for the non-contributory pension plans are based

 

24


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

primarily on a formula factoring both an employee’s years of service and pay near retirement. Participant employees are vested in the plans after five years of service. The Company’s policy for all pension plans is to fund amounts, at a minimum, in accordance with statutory requirements. During the six months ended December 31, 2007 and 2006, the Company made discretionary contributions of $12 million and $18 million, respectively, to its pension plans. Plan assets consist principally of common stocks, marketable bonds and government securities. The retiree health and life insurance benefit plans offer medical and/or life insurance to certain full-time employees and eligible dependents that retire after fulfilling age and service requirements.

The components of net periodic benefit costs were as follows:

 

     Pension Benefits     Postretirement Benefits  
     For the three months ended December 31,  
     2007     2006     2007     2006  
     (in millions)  

Service cost benefits earned during the period

   $ 21     $ 17     $ 1     $ 1  

Interest costs on projected benefit obligation

     35       30       2       2  

Expected return on plan assets

     (40 )     (33 )     —         —    

Amortization of deferred losses

     4       4       —         —    

Other

     —         —         (1 )     (1 )
                                

Net periodic costs

   $ 20     $ 18     $ 2     $ 2  
                                
     For the six months ended December 31,  
     2007     2006     2007     2006  
     (in millions)  

Service cost benefits earned during the period

   $ 42     $ 34     $ 2     $ 2  

Interest costs on projected benefit obligation

     70       60       4       4  

Expected return on plan assets

     (80 )     (66 )     —         —    

Amortization of deferred losses

     8       9       1       1  

Other

     —         —         (3 )     (3 )
                                

Net periodic costs

   $ 40     $ 37     $ 4     $ 4  
                                

Note 14—Segment Information

The Company is a diversified entertainment company, which manages and reports its businesses in eight segments:

 

   

Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide.

 

   

Television, which principally consists of the operation of 35 full power broadcast television stations, including nine duopolies, in the United States (of these stations, 25 are affiliated with the FOX network and ten are affiliated with the MyNetworkTV network), the broadcasting of network programming in the United States and the development, production and broadcasting of television programming in Asia.

 

   

Cable Network Programming, which principally consists of the production and licensing of programming distributed through cable television systems and direct broadcast satellite operators primarily in the United States.

 

25


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

   

Direct Broadcast Satellite Television, which principally consists of the distribution of premium programming services via satellite and broadband directly to subscribers in Italy.

 

   

Magazines and Inserts, which principally consists of the publication of free-standing inserts, which are promotional booklets containing consumer offers distributed through insertion in local Sunday newspapers in the United States, and the provision of in-store marketing products and services, primarily to consumer packaged goods manufacturers in the United States and Canada.

 

   

Newspapers and Information Services, which principally consists of the publication of four national newspapers in the United Kingdom, the publication of approximately 145 newspapers in Australia, the publication of a metropolitan newspaper and a national newspaper (with international editions) in the United States and the provision of information services.

 

   

Book Publishing, which principally consists of the publication of English language books throughout the world.

 

   

Other, which includes NDS, a company engaged in the business of supplying open end-to-end digital technology and services to digital pay-television platform operators and content providers; News Outdoor Group, an advertising business which offers display advertising in outdoor locations primarily throughout Russia and Eastern Europe; and Fox Interactive Media (“FIM”), which operates the Company’s Internet activities.

The Company’s operating segments have been determined in accordance with the Company’s internal management structure, which is organized based on operating activities. The Company evaluates performance based upon several factors, of which the primary financial measures are segment Operating income (loss) and Operating income (loss) before depreciation and amortization.

Operating income (loss) before depreciation and amortization, defined as operating income (loss) plus depreciation and amortization and the amortization of cable distribution investments, eliminates the variable effect across all business segments of non-cash depreciation and amortization. Depreciation and amortization expense includes the depreciation of property and equipment, as well as amortization of finite-lived intangible assets. Amortization of cable distribution investments represents a reduction against revenues over the term of a carriage arrangement and, as such, it is excluded from Operating income (loss) before depreciation and amortization. Operating income (loss) before depreciation and amortization is a non-GAAP measure and it should be considered in addition to, not as a substitute for, operating income (loss), net income (loss), cash flow and other measures of financial performance reported in accordance with GAAP. Operating income (loss) before depreciation and amortization does not reflect cash available to fund requirements, and the items excluded from Operating income (loss) before depreciation and amortization, such as depreciation and amortization, are significant components in assessing the Company’s financial performance.

 

26


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Management believes that Operating income (loss) before depreciation and amortization is an appropriate measure for evaluating the operating performance of the Company’s business segments. Operating income (loss) before depreciation and amortization provides management, investors and equity analysts a measure to analyze operating performance of each business segment and enterprise value against historical and competitors’ data, although historical results, including Operating income (loss) before depreciation and amortization, may not be indicative of future results (as operating performance is highly contingent on many factors, including customer tastes and preferences).

 

     For the three months
ended December 31,
    For the six months
ended December 31,
 
         2007             2006             2007           2006      
     (in millions)     (in millions)  

Revenues:

        

Filmed Entertainment

   $ 1,976     $ 2,265     $ 3,558     $ 3,478  

Television

     1,530       1,600       2,675       2,703  

Cable Network Programming

     1,236       920       2,338       1,809  

Direct Broadcast Satellite Television

     955       764       1,702       1,386  

Magazines and Inserts

     273       266       537       541  

Newspapers and Information Services

     1,416       1,118       2,660       2,167  

Book Publishing

     406       393       736       761  

Other

     798       518       1,451       913  
                                

Total revenues

   $ 8,590     $ 7,844     $ 15,657     $ 13,758  
                                

Operating income (loss):

        

Filmed Entertainment

   $ 403     $ 470     $ 765     $ 709  

Television

     245       112       428       304  

Cable Network Programming

     337       275       626       524  

Direct Broadcast Satellite Television

     62       (12 )     110       (25 )

Magazines and Inserts

     85       74       164       152  

Newspapers and Information Services

     196       170       289       294  

Book Publishing

     67       54       103       109  

Other

     23       1       (20 )     (72 )
                                

Total operating income

   $ 1,418     $ 1,144     $ 2,465     $ 1,995  
                                

Equity (losses) earnings of affiliates

     (50 )     249       196       492  

Interest expense, net

     (245 )     (212 )     (458 )     (412 )

Interest income

     78       72       178       147  

Other, net

     187       18       187       446  
                                

Income before income tax expense and minority interest in subsidiaries

     1,388       1,271       2,568       2,668  

Income tax expense

     (520 )     (431 )     (934 )     (969 )

Minority interest in subsidiaries, net of tax

     (36 )     (18 )     (70 )     (34 )
                                

Net income

   $ 832     $ 822     $ 1,564     $ 1,665  
                                

Equity (losses) earnings of affiliates, Interest expense, net, Interest income, Other, net, Income tax expense and Minority interest in subsidiaries are not allocated to segments as they are not under the control of segment management.

 

27


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Intersegment revenues, generated primarily by the Filmed Entertainment segment, of approximately $253 million and $239 million for the three months ended December 31, 2007 and 2006, respectively, and of approximately $425 million and $436 million for the six months ended December 31, 2007 and 2006, respectively, have been eliminated within the Filmed Entertainment segment. Intersegment operating profit generated primarily by the Filmed Entertainment segment of approximately $12 million and $24 million for the three months ended December 31, 2007 and 2006, respectively and of approximately $41 million and $36 million for the six months ended December 31, 2007 and 2006, respectively, have been eliminated within the Filmed Entertainment segment.

 

     For the three months ended December 31, 2007
     Operating
income
    Depreciation
and amortization
   Amortization
of cable
distribution
investments
   Operating
income before
depreciation and
amortization
     (in millions)

Filmed Entertainment

   $ 403     $ 21    $ —      $ 424

Television

     245       25      —        270

Cable Network Programming

     337       19      23      379

Direct Broadcast Satellite Television

     62       54      —        116

Magazines and Inserts

     85       2      —        87

Newspapers and Information Services

     196       105      —        301

Book Publishing

     67       2      —        69

Other

     23       59      —        82
                            

Total

   $ 1,418     $ 287    $ 23    $ 1,728
                            
     For the three months ended December 31, 2006
     Operating
income
(loss)
    Depreciation
and amortization
   Amortization
of cable
distribution
investments
   Operating
income before
depreciation and
amortization
     (in millions)

Filmed Entertainment

   $ 470     $ 20    $ —      $ 490

Television

     112       23      —        135

Cable Network Programming

     275       14      16      305

Direct Broadcast Satellite Television

     (12 )     43      —        31

Magazines and Inserts

     74       2      —        76

Newspapers and Information Services

     170       67      —        237

Book Publishing

     54       2      —        56

Other

     1       35      —        36
                            

Total

   $ 1,144     $ 206    $ 16    $ 1,366
                            

 

28


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

     For the six months ended December 31, 2007  
     Operating
income
(loss)
    Depreciation
and amortization
   Amortization
of cable
distribution
investments
   Operating
income before
depreciation
and amortization
 
     (in millions)  

Filmed Entertainment

   $ 765     $ 42    $ —      $ 807  

Television

     428       49      —        477  

Cable Network Programming

     626       39      35      700  

Direct Broadcast Satellite Television

     110       104      —        214  

Magazines and Inserts

     164       4      —        168  

Newspapers and Information Services

     289       244      —        533  

Book Publishing

     103       4      —        107  

Other

     (20 )     123      —        103  
                              

Total

   $ 2,465     $ 609    $ 35    $ 3,109  
                              
     For the six months ended December 31, 2006  
     Operating
income
(loss)
    Depreciation
and amortization
   Amortization
of cable
distribution
investments
   Operating
income (loss)
before
depreciation
and amortization
 
     (in millions)  

Filmed Entertainment

   $ 709     $ 40    $ —      $ 749  

Television

     304       45      —        349  

Cable Network Programming

     524       27      39      590  

Direct Broadcast Satellite Television

     (25 )     91      —        66  

Magazines and Inserts

     152       4      —        156  

Newspapers and Information Services

     294       135      —        429  

Book Publishing

     109       4      —        113  

Other

     (72 )     67      —        (5 )
                              

Total

   $ 1,995     $ 413    $ 39    $ 2,447  
                              

 

29


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

     At
December 31,
2007
   At
June 30,
2007
     (in millions)

Total assets:

     

Filmed Entertainment

   $ 7,645    $ 6,738

Television

     13,543      12,974

Cable Network Programming

     9,595      8,523

Direct Broadcast Satellite Television

     2,367      2,030

Magazines and Inserts

     1,284      1,278

Newspapers and Information Services(1)

     8,169      5,343

Book Publishing

     1,737      1,566

Other(1)

     13,617      12,478

Investments

     10,959      11,413
             

Total assets

   $ 68,916    $ 62,343
             

Goodwill and Intangible assets, net:

     

Filmed Entertainment

   $ 1,963    $ 1,979

Television

     10,195      10,195

Cable Network Programming

     5,950      5,517

Direct Broadcast Satellite Television

     646      595

Magazines and Inserts

     1,011      1,009

Newspapers and Information Services(1)

     3,980      2,422

Book Publishing

     508      508

Other(1)

     8,039      3,297
             

Total goodwill and intangibles, net

   $ 32,292    $ 25,522
             

 

(1)

See Note 2—Acquisitions, Disposals and Other Transactions

Note 15—Earnings Per Share

Prior to fiscal 2008, earnings per share (“EPS”) was computed individually for the Class A Common Stock and Class B Common Stock and net income was apportioned to both Class A stockholders and Class B stockholders on a ratio of 1.2 to 1, respectively, in accordance with the rights of the stockholders as described in the Company’s Restated Certificate of Incorporation. In order to give effect to this apportionment when determining EPS, the weighted average Class A Common Stock was increased by 20% (the “Adjusted Class”) and was then compared to the sum of the weighted average Class B Common Stock and the weighted average Adjusted Class. The resulting percentage was then applied to the Net income to determine the apportionment for the Class A stockholders, with the balance attributable to the Class B stockholders. Subsequent to the final fiscal 2007 dividend, shares of Class A Common Stock no longer carry the right to a greater dividend than shares of Class B Common Stock and, therefore, Net income is allocated equally to Class A and Class B stockholders. Accordingly, since the apportionment of earnings has been eliminated as required by the Company’s Restated Certificate of Incorporation, the Company has presented the earnings of Class A Common Stock and Class B Common Stock as a single class for fiscal 2008.

 

30


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

The following tables set forth the computation of basic and diluted EPS under SFAS No. 128, “Earnings per Share”:

 

     For the three
months ended
December 31,
2007
    For the six
months ended
December 31,
2007
 
     (in millions, except per share data)  

Net income available to stockholders—basic

   $ 832     $ 1,564  

Other

     —         (1 )
                

Net income available to stockholders—diluted

   $ 832     $ 1,563  
                

Weighted average shares—basic

     3,126       3,126  

Shares issuable under equity based compensation plans and other

     13       13  
                

Weighted average shares—diluted

     3,139       3,139  

Earnings per share:

    

Net income—basic

   $ 0.27     $ 0.50  

Net income—diluted

   $ 0.27     $ 0.50  
     For the three
months ended
December 31,
2006
    For the six
months ended
December 31,
2006
 
     (in millions)  

Net income available to stockholders—basic

   $ 822     $ 1,665  

Other

     (2 )     (2 )
                

Net income available to stockholders—diluted

   $ 820     $ 1,663  
                

 

     For the three months ended
December 31, 2006
   For the six months ended
December 31, 2006
     Class A    Class B    Total    Class A    Class B    Total
     (in millions, except per share data)

Allocation of income—basic:

                 

Net income available to stockholders

   $ 597    $ 225    $ 822    $ 1,208    $ 457    $ 1,665

Weighted average shares used in income allocation

     2,614      987      3,601      2,610      987      3,597

Allocation of income—diluted:

                 

Net income available to stockholders

   $ 597    $ 223    $ 820    $ 1,210    $ 453    $ 1,663

Weighted average shares used in income allocation

     2,640      987      3,627      2,634      987      3,621

Weighted average shares—basic

     2,178      987      3,165      2,175      987      3,162

Shares issuable under equity based compensation plans

     22      —        22      20      —        20
                                         

Weighted average shares—diluted

     2,200      987      3,187      2,195      987      3,182

Earnings per share:

                 

Net income—basic

   $ 0.27    $ 0.23       $ 0.56    $ 0.46   

Net income—diluted

   $ 0.27    $ 0.23       $ 0.55    $ 0.46   

 

31


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 16—Additional Financial Information

Supplemental Cash Flows Information

 

 

     For the six months ended
December 31,
 
         2007             2006      
     (in millions)  

Supplemental cash flow information:

    

Cash paid for income taxes

   $ (1,001 )   $ (545 )

Cash paid for interest

     (412 )     (369 )

Sale of other investments

     8       61  

Purchase of other investments

     (48 )     (358 )

Supplemental information on businesses acquired:

    

Fair value of assets acquired

     8,204       307  

Cash acquired

     94       14  

Less: Liabilities assumed

     (2,427 )     (40 )

Minority interest acquired

     (213 )     25  

Cash paid

     (5,462 )     (306 )
                

Fair value of equity instruments

     31       —    

Issuance of subsidiary common units

     165       —    
                

Fair value of equity instruments

   $ 196     $ —    
                

Other, net consisted of the following:

 

     For the three months ended
December 31,
    For the six months ended
December 31,
 
         2007             2006             2007             2006      
     (in millions)     (in millions)  

Gain on the sale of China Netcom(a)

   $ —       $ —       $ 102     $ —    

Gain on the sale of SKY Brasil(a)

     —         —         —         261  

Gain on the sale of Phoenix(a)

     —         —         —         136  

Change in fair value of exchangeable securities(b)

     189       30       102       68  

Other

     (2 )     (12 )     (17 )     (19 )
                                

Total Other, net

   $ 187     $ 18     $ 187     $ 446  
                                

 

(a)

See Note 6—Investments

 

(b)

The Company has certain outstanding exchangeable debt securities which contain embedded derivatives. Pursuant to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” these embedded derivatives require separate accounting and, as such, changes in their fair value are recognized in Other, net. A significant variance in the price of underlying stock could have a material impact on the operating results of the Company.

Note 17—Subsequent Events

In January 2008, the Company acquired a 14.6% stake in Premiere AG, the leading German pay-TV operator, for cash consideration of $422 million.

In January 2008, the Company retired its $350 million 6.625% Senior Notes due 2008.

 

32


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

A dividend of $0.06 per share of Class A Common Stock and Class B Common Stock has been declared and is payable on April 16, 2008. The record date for determining dividend entitlements is March 12, 2008.

Note 18—Supplemental Guarantor Information

In May 2007, News America Incorporated (“NAI”), a subsidiary of the Company, terminated its existing $1.75 billion Revolving Credit Agreement and entered into a new credit agreement (the “New Credit Agreement”), among NAI as Borrower, the Company as Parent Guarantor, the lenders named therein (the “Lenders”), Citibank, N.A. as Administrative Agent and JPMorgan Chase Bank, N.A. as Syndication Agent. The New Credit Agreement provides a $2.25 billion unsecured revolving credit facility with a sub-limit of $600 million available for the issuance of letters of credit. NAI may request an increase in the amount of the credit facility up to a maximum amount of $2.5 billion. Borrowings are in U.S. dollars only, while letters of credit are issuable in U.S. dollars or Euros. The significant terms of the agreement include the requirement that the Company maintain specific leveraging ratios and limitations on secured indebtedness. The Company pays a facility fee of 0.08% regardless of facility usage. The Company pays interest for borrowings and letters of credit at LIBOR plus 0.27%. The Company pays an additional fee of 0.05% if borrowings under the facility exceed 50% of the committed facility. The interest and fees are based on the Company’s current debt rating. The maturity date is in May 2012, however, NAI may request that the Lenders’ commitments be renewed for up to two additional one year periods.

The Parent Guarantor presently guarantees the senior public indebtedness of NAI and the guarantee is full and unconditional. The supplemental condensed consolidating financial information of the Parent Guarantor should be read in conjunction with the consolidated financial statements included herein.

In accordance with rules and regulations of the SEC the Company uses the equity method to account for the results of all of the non-guarantor subsidiaries, representing substantially all of the Company’s consolidated results of operations, excluding certain intercompany eliminations.

The following condensed consolidating financial statements present the results of operations, financial position and cash flows of NAI, News Corporation and the subsidiaries of News Corporation and the eliminations and reclassifications necessary to arrive at the information for the Company on a consolidated basis.

 

33


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Supplemental Condensed Consolidating Statement of Operations

For the six months ended December 31, 2007

(in millions)

 

     News America
Incorporated
    News
Corporation
    Non-Guarantor     Reclassifications
and Eliminations
     News
Corporation
and Subsidiaries
 

Revenues

   $ 4     $ —       $ 15,653     $ —        $ 15,657  

Expenses

     150       —         13,042       —          13,192  
                                         

Operating income (loss)

     (146 )     —         2,611       —          2,465  
                                         

Other Income (Expense):

           

Equity earnings of affiliates

     2       —         194       —          196  

Interest expense, net

     (1,286 )     (214 )     (338 )     1,380        (458 )

Interest income

     516       —         1,042       (1,380 )      178  

Earnings (losses) from subsidiary entities

     845       1,832       —         (2,677 )      —    

Other, net

     127       (54 )     114       —          187  
                                         

Income (loss) before income tax expense and minority interest in subsidiaries

     58       1,564       3,623       (2,677 )      2,568  

Income tax (expense) benefit

     (21 )     —         (1,317 )     404        (934 )

Minority interest in subsidiaries, net of tax

     —         —         (70 )     —          (70 )
                                         

Net income (loss)

   $ 37     $ 1,564     $ 2,236     $ (2,273 )    $ 1,564  
                                         

See notes to supplemental guarantor information

 

34


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Supplemental Condensed Consolidating Statement of Operations

For the six months ended December 31, 2006

(in millions)

 

     News America
Incorporated
    News
Corporation
    Non-Guarantor     Reclassifications
and Eliminations
     News
Corporation
and Subsidiaries
 

Revenues

   $ 3     $ —       $ 13,755     $ —        $ 13,758  

Expenses

     135       —         11,628       —          11,763  
                                         

Operating income (loss)

     (132 )     —         2,127       —          1,995  
                                         

Other Income (Expense):

           

Equity earnings of affiliates

     2       —         490       —          492  

Interest expense, net

     (1,043 )     (148 )     (38 )     817        (412 )

Interest income

     108       —         856       (817 )      147  

Earnings (losses) from subsidiary entities

     746       1,859       2,364       (4,969 )      —    

Other, net

     61       (46 )     431       —          446  
                                         

Income (loss) before income tax expense and minority interest in subsidiaries

     (258 )     1,665       6,230       (4,969 )      2,668  

Income tax (expense) benefit

     94       —         (2,262 )     1,199        (969 )

Minority interest in subsidiaries, net of tax

     —         —         (34 )     —          (34 )
                                         

Net income (loss)

   $ (164 )   $ 1,665     $ 3,934     $ (3,770 )    $ 1,665  
                                         

See notes to supplemental guarantor information

 

35


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Supplemental Condensed Consolidating Balance Sheet

At December 31, 2007

(in millions)

 

    News
America
Incorporated
  News
Corporation
  Non-Guarantor     Reclassifications
and Eliminations
    News
Corporation
and

Subsidiaries

Assets:

         

Current assets:

         

Cash and cash equivalents

  $ 1,294   $ —     $ 2,201     $ —       $ 3,495

Receivables, net

    41     —       7,448       —         7,489

Inventories, net

    —       —       2,719       —         2,719

Other

    12     —       613       —         625
                                 

Total current assets

    1,347     —       12,981       —         14,328
                                 

Non-current assets:

         

Receivables

    1     —       508       —         509

Inventories, net

    —       —       2,823       —         2,823

Property, plant and equipment, net

    83     —       6,502       —         6,585

Intangible assets, net

    —       —       13,998       —         13,998

Goodwill

    —       —       18,294       —         18,294

Other

    137     —       1,283       —         1,420

Investments

         

Investments in associated companies and other investments

    90     46     10,823       —         10,959

Intragroup investments

    39,902     45,299     —         (85,201 )     —  
                                 

Total investments

    39,992     45,345     10,823       (85,201 )     10,959
                                 

TOTAL ASSETS

  $ 41,560   $ 45,345   $ 67,212     $ (85,201 )   $ 68,916
                                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current liabilities:

         

Borrowings

  $ 550   $ —     $ 286     $ —       $ 836

Other current liabilities

    3     —       8,739       —         8,742
                                 

Total current liabilities

    553     —       9,025       —         9,578

Non-current liabilities:

         

Borrowings

    13,047     —       166       —         13,213

Other non-current liabilities

    480     1     9,853       —         10,334

Intercompany

    10,600     10,592     (21,192 )     —         —  

Minority interest in subsidiaries

    —       —       1,039       —         1,039

Stockholders’ Equity

    16,880     34,752     68,321       (85,201 )     34,752
                                 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $ 41,560   $ 45,345   $ 67,212     $ (85,201 )   $ 68,916
                                 

See notes to supplemental guarantor information

 

36


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Supplemental Condensed Consolidating Balance Sheet

At June 30, 2007

(in millions)

 

    News America
Incorporated
  News
Corporation
  Non-Guarantor     Reclassifications
and Eliminations
    News
Corporation
and
Subsidiaries

Assets:

         

Current assets:

         

Cash and cash equivalents

  $ 5,450   $ —     $ 2,204     $ —       $ 7,654

Receivables, net

    24     —       5,818       —         5,842

Inventories, net

    —       —       2,039       —         2,039

Other

    9     —       362       —         371
                                 

Total current assets

    5,483     —       10,423       —         15,906
                                 

Non-current assets:

         

Receivables

    1     —       436       —         437

Inventories, net

    —       —       2,626       —         2,626

Property, plant and equipment, net

    82     —       5,535       —         5,617

Intangible assets, net

    —       —       11,703       —         11,703

Goodwill

    —       —       13,819       —         13,819

Other

    131     1     690       —         822

Investments

         

Investments in associated companies and other investments

    108     5     11,300       —         11,413

Intragroup investments

    39,028     38,045     —         (77,073 )     —  
                                 

Total investments

    39,136     38,050     11,300       (77,073 )     11,413
                                 
            —  

TOTAL ASSETS

  $ 44,833   $ 38,051   $ 56,532     $ (77,073 )   $ 62,343
                                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current liabilities:

         

Borrowings

  $ 350   $ —     $ 5     $ —       $ 355

Other current liabilities

    1     —       7,138       —         7,139
                                 

Total current liabilities

    351     —       7,143       —         7,494

Non-current liabilities:

         

Borrowings

    11,960     —       187       —         12,147

Other non-current liabilities

    519     2     8,697       —         9,218

Intercompany

    14,608     5,127     (19,735 )     —         —  

Minority interest in subsidiaries

    —       —       562       —         562

Stockholders’ Equity

    17,395     32,922     59,678       (77,073 )     32,922
                                 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

  $ 44,833   $ 38,051   $ 56,532     $ (77,073 )   $ 62,343
                                 

See notes to supplemental guarantor information

 

37


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

For the six months ended December 31, 2007

(in millions)

 

    News America
Incorporated
    News
Corporation
    Non-Guarantor     Reclassifications
and Eliminations
  News
Corporation
and

Subsidiaries
 

Operating activities:

         

Net cash provided by (used in) operating activities

  $ (5,397 )   $ 241     $ 5,895     $ —     $ 739  
                                     

Investing and other activities:

         

Property, plant and equipment

    (7 )     —         (692 )     —       (699 )

Investments

    —         —         (5,429 )     —       (5,429 )

Proceeds from sale of investments and non-current assets

    —         —         299       —       299  
                                     

Net cash used in investing activities

    (7 )     —         (5,822 )     —       (5,829 )
                                     

Financing activities:

         

Borrowings

    1,248       —         14       —       1,262  

Repayment of borrowings

    —         —         (132 )     —       (132 )

Issuance of shares

    —         59       7       —       66  

Repurchase of shares

    —         (122 )     —         —       (122 )

Dividends paid

    —         (178 )     (8 )     —       (186 )

Other, net

    —         —         22       —       22  
                                     

Net cash provided by (used in) financing activities

    1,248       (241 )     (97 )     —       910  
                                     

Net decrease in cash and cash equivalents

    (4,156 )     —         (24 )     —       (4,180 )

Cash and cash equivalents, beginning of period

    5,450       —         2,204       —       7,654  

Exchange movement on opening cash balance

    —         —         21       —       21  
                                     

Cash and cash equivalents, end of period

  $ 1,294     $ —       $ 2,201     $ —     $ 3,495  
                                     

See notes to supplemental guarantor information

 

38


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Condensed Consolidating Statement of Cash Flows

For the six months ended December 31, 2006

(in millions)

 

    News America
Incorporated
    News
Corporation
    Non-Guarantor     Reclassifications
and Eliminations
  News
Corporation
and

Subsidiaries
 

Operating activities:

         

Net cash provided by (used in) operating activities

  $ (384 )   $ 68     $ 1,021     $ —     $ 705  
                                     

Investing and other activities:

         

Property, plant and equipment

    (2 )     —         (606 )     —       (608 )

Investments

    (14 )     —         (756 )     —       (770 )

Proceeds from sale of investments and non-current assets

    5       —         353       —       358  
                                     

Net cash used in investing activities

    (11 )     —         (1,009 )     —       (1,020 )
                                     

Financing activities:

         

Borrowings

    —         —         160       —       160  

Repayment of borrowings

    —         —         (190 )     —       (190 )

Issuance of shares

    —         154       19       —       173  

Repurchase of shares

    —         (59 )     —         —       (59 )

Dividends paid

    —         (180 )     (5 )     —       (185 )
                                     

Net cash used in financing activities

    —         (85 )     (16 )     —       (101 )
                                     

Net decrease in cash and cash equivalents

    (395 )     (17 )     (4 )     —       (416 )

Cash and cash equivalents, beginning of period

    4,094       17       1,672       —       5,783  

Exchange movement on opening cash balance

    —         —         71       —       71  
                                     

Cash and cash equivalents, end of period

  $ 3,699     $ —       $ 1,739     $ —     $ 5,438  
                                     

See notes to supplemental guarantor information

 

39


Table of Contents

NEWS CORPORATION

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Notes to Supplemental Guarantor Information

(1) Investments in the Company’s subsidiaries, for purposes of the supplemental consolidating presentation, are accounted for by their parent companies under the equity method of accounting whereby earnings of subsidiaries are reflected in the parent company’s investment account and earnings.

(2) The guarantees of NAI’s senior public indebtedness constitute senior indebtedness of the Company, and rank pari passu with all present and future senior indebtedness of the Company. Because the factual basis underlying the obligations created pursuant to the various facilities and other obligations constituting senior indebtedness of the Company differ, it is not possible to predict how a court in bankruptcy would accord priorities among the obligations of the Company.

 

40


Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This document contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words “expect,” “estimate,” “anticipate,” “predict,” “believe” and similar expressions and variations thereof are intended to identify forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief or current expectations of News Corporation, its directors or its officers with respect to, among other things, trends affecting News Corporation’s financial condition or results of operations. The readers of this document are cautioned that any forward-looking statements are not guarantees of future performance and involve risks and uncertainties. More information regarding these risks, uncertainties and other factors is set forth under the Item 1A “Risk Factors,” in this report. News Corporation does not ordinarily make projections of its future operating results and undertakes no obligation (and expressly disclaims any obligation) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Readers should carefully review other documents filed by News Corporation with the Securities and Exchange Commission (“SEC”). This section should be read together with the unaudited consolidated financial statements of News Corporation and related notes set forth elsewhere herein.

INTRODUCTION

Management’s discussion and analysis of financial condition and results of operations is intended to help provide an understanding of News Corporation and its subsidiaries’ (together “News Corporation” or the “Company”) financial condition, changes in financial condition and results of operations. This discussion is organized as follows:

 

   

Overview of the Company’s Business—This section provides a general description of the Company’s businesses, as well as recent developments that have occurred to date during fiscal 2008 that the Company believes are important in understanding the results of operations and financial condition or to disclose known trends.

 

   

Results of Operations—This section provides an analysis of the Company’s results of operations for the three and six months ended December 31, 2007 and 2006. This analysis is presented on both a consolidated and a segment basis. In addition, a brief description is provided of significant transactions and events that have an impact on the comparability of the results being analyzed.

 

   

Liquidity and Capital Resources—This section provides an analysis of the Company’s cash flows for six months ended December 31, 2007 and 2006. Included in the discussion of outstanding debt is a discussion of the amount of financial capacity available to fund the Company’s future commitments and obligations, as well as a discussion of other financing arrangements.

OVERVIEW OF THE COMPANY’S BUSINESS

The Company is a diversified entertainment company, which manages and reports its businesses in eight segments:

 

   

Filmed Entertainment, which principally consists of the production and acquisition of live-action and animated motion pictures for distribution and licensing in all formats in all entertainment media worldwide, and the production and licensing of television programming worldwide.

 

   

Television, which principally consists of the operation of 35 full power broadcast television stations, including nine duopolies, in the United States (of these stations, 25 are affiliated with the FOX network and ten are affiliated with the MyNetworkTV network), the broadcasting of network programming in the United States and the development, production and broadcasting of television programming in Asia.

 

41


Table of Contents
   

Cable Network Programming, which principally consists of the licensing and production of programming distributed through cable television systems and direct broadcast satellite (“DBS”) operators primarily in the United States.

 

   

Direct Broadcast Satellite Television, which principally consists of the distribution of premium programming services via satellite and broadband directly to subscribers in Italy.

 

   

Magazines and Inserts, which principally consists of the publication of free-standing inserts, which are promotional booklets containing consumer offers distributed through insertion in local Sunday newspapers in the United States, and the provision of in-store marketing products and services, primarily to consumer packaged goods manufacturers, in the United States and Canada.

 

   

Newspapers and Information Services, which principally consists of the publication of four national newspapers in the United Kingdom, the publication of approximately 145 newspapers in Australia, the publication of a metropolitan newspaper and a national newspaper (with international editions) in the United States and the provision of information services.

 

   

Book Publishing, which principally consists of the publication of English language books throughout the world.

 

   

Other, which includes NDS Group Plc (“NDS”), a company engaged in the business of supplying open end-to-end digital technology and services to digital pay-television platform operators and content providers; News Outdoor Group (“News Outdoor”), an advertising business which offers display advertising primarily in outdoor locations throughout Russia and Eastern Europe; and Fox Interactive Media (“FIM”), which operates the Company’s Internet activities.

Filmed Entertainment

The Filmed Entertainment segment derives revenue from the production and distribution of feature motion pictures and television series. In general, motion pictures produced or acquired for distribution by the Company are exhibited in U.S. and foreign theaters, followed by DVDs, pay-per-view television, premium subscription television, network television and basic cable and syndicated television exploitation. Television series initially produced for the networks and first-run syndication are generally licensed to domestic and international markets concurrently and subsequently released in seasonal DVD box sets. More successful series are later syndicated in domestic markets. The length of the revenue cycle for television series will vary depending on the number of seasons a series remains in active production and, therefore, may cause fluctuations in operating results. License fees received for television exhibition (including international and U.S. premium television and basic cable television) are recorded as revenue in the period that licensed films or programs are available for such exhibition, which may cause substantial fluctuations in operating results.

The revenues and operating results of the Filmed Entertainment segment are significantly affected by the timing of the Company’s theatrical and home entertainment releases, the number of its original and returning television series that are aired by television networks and the number of its television series in off-network syndication. Theatrical and home entertainment release dates are determined by several factors, including timing of vacation and holiday periods and competition in the marketplace. The distribution windows for the release of motion pictures theatrically and in various home entertainment formats have been compressing and may continue to change in the future. A reduction in timing between theatrical and home entertainment releases could adversely affect the revenues and operating results of this segment.

The Company enters into arrangements with third parties to co-produce many of its theatrical productions. These arrangements, which are referred to as co-financing arrangements, take various forms. The parties to these arrangements include studio and non-studio entities, both domestic and foreign. In several of these agreements, other parties control certain distribution rights. The Filmed Entertainment segment records the amounts received for the sale of an economic interest as a reduction of the cost of the film, as the investor assumes full risk for that portion of the film asset acquired in these transactions. The substance of these arrangements is that the third-party

 

42


Table of Contents

investors own an interest in the film and, therefore, receive a participation based on the respective third-party investor’s interest in the profits or losses incurred on the film. Consistent with the requirements of Statement of Position 00-2, “Accounting by Producers or Distributors of Films,” the estimate of a third-party investor’s interest in profits or losses incurred on the film is determined by reference to the ratio of actual revenue earned to date in relation to total estimated ultimate revenues.

Operating costs incurred by the Filmed Entertainment segment include: exploitation costs, primarily theatrical prints and advertising and home entertainment marketing and manufacturing costs; amortization of capitalized production, overhead and interest costs; and participations and talent residuals. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.

The Company competes with other major studios, such as Disney, Paramount, Sony, Universal, Warner Bros., and independent film producers in the production and distribution of motion pictures and DVDs. As a producer and distributor of television programming, the Company competes with studios, television production groups and independent producers and syndicators, such as Disney, Sony, NBC Universal, Warner Bros. and Paramount Television, to sell programming both domestically and internationally. The Company also competes to obtain creative talent and story properties which are essential to the success of the Company’s filmed entertainment businesses.

Television and Cable Network Programming

The Company’s U.S. television operations primarily consist of the FOX Broadcasting Company (“FOX”), MyNetworkTV, Inc. (“MyNetworkTV”) and the 35 television stations owned by the Company. The Company’s international television operations consist primarily of STAR Group Limited (“STAR”).

The U.S. television broadcast environment is highly competitive and the primary methods of competition are the development and acquisition of popular programming. Program success is measured by ratings, which are an indication of market acceptance, with the top rated programs commanding the highest advertising prices. FOX and MyNetworkTV compete for audience, advertising revenues and programming with other broadcast networks, such as CBS, ABC, NBC and The CW, independent television stations, cable program services, as well as other media, including DBS services, DVDs, video games, print and the Internet. In addition, FOX and MyNetworkTV compete with the other broadcast networks to secure affiliations with independently owned television stations in markets across the country.

The television stations owned by the Company compete for programming, audiences and advertising revenues with other television stations and cable networks in their respective coverage areas and, in some cases, with respect to programming, with other station groups, and in the case of advertising revenues, with other local and national media. The competitive position of the television stations owned by the Company is largely influenced by the strength of FOX and MyNetworkTV, and, in particular, the prime-time viewership of the respective network, as well as the quality of the syndicated programs and local news programs in time periods not programmed by FOX and MyNetworkTV.

In Asia, STAR’s channels are primarily distributed to local cable operators or other pay-television platform operators for distribution to their subscribers. STAR derives its revenue from the sale of advertising time and affiliate fees from these pay-television platform operators.

The Company’s U.S. cable network operations primarily consist of the Fox News Channel (“Fox News”), the FX Network (“FX”) and the Regional Sports Networks (“RSNs”). The Company’s international cable networks consist of the Fox International Channels (“FIC”) with operations primarily in Latin America and Europe.

 

43


Table of Contents

Generally, the Company’s cable networks, which target various demographics, derive a majority of their revenues from monthly affiliate fees received from cable television systems and DBS operators based on the number of its subscribers. Affiliate fee revenues are net of the amortization of cable distribution investments (capitalized fees paid to a cable operator or DBS operator to facilitate the launch of a cable network). The Company defers the cable distribution investments and amortizes the amounts on a straight-line basis over the contract period. Cable television and DBS are currently the predominant means of distribution of the Company’s program services in the United States. Internationally, distribution technology varies region by region.

The Company’s cable networks compete for carriage on cable television systems, DBS systems and other distribution systems with other program services, as well as other uses of bandwidth, such as retransmission of free over-the-air broadcast networks, telephony and data transmission. A primary focus of competition is for distribution of the Company’s cable network channels that are not already distributed by particular cable television or DBS systems. For such program services, distributors make decisions on the use of bandwidth based on various considerations, including amounts paid by programmers for launches, subscription fees payable by distributors and appeal to the distributors’ subscribers.

The most significant operating expenses of the Television segment and the Cable Network Programming segment are the acquisition and production expenses related to programming and the production and technical expenses related to operating the technical facilities of the broadcaster or cable network. Other expenses include promotional expenses related to improving the market visibility and awareness of the broadcaster or cable network and its programming. Additional expenses include sales commissions paid to the in-house advertising sales force, as well as salaries, employee benefits, rent and other routine overhead expenses.

The Company has several multi-year sports rights agreements, including contracts with the National Football League (“NFL”) through fiscal 2012, contracts with the National Association of Stock Car Auto Racing (“NASCAR”) for certain races and exclusive rights for certain ancillary content through calendar year 2014, a contract with Major League Baseball (“MLB”) through calendar year 2013 and a contract for the Bowl Championship Series (“BCS”) through fiscal year 2010. These contracts provide the Company with the broadcast rights to certain national sporting events during their respective terms. The costs of these sports contracts are charged to expense based on the ratio of each period’s operating profit to estimated total operating profit for the remaining term of the contract.

The profitability of these long-term national sports contracts is based on the Company’s best estimates at December 31, 2007 of directly attributable revenues and costs; such estimates may change in the future and such changes may be significant. Should revenues decline from estimates applied at December 31, 2007, a loss may be recorded. Should revenues improve as compared to estimated revenues, the Company may have an improved operating profit related to the contract, which may be recognized over the estimated remaining contract term.

While the Company seeks to ensure compliance with federal indecency laws and related Federal Communications Commission (“FCC”) regulations, the definition of “indecency” is subject to interpretation and there can be no assurance that the Company will not broadcast programming that is ultimately determined by the FCC to violate the prohibition against indecency. Such programming could subject the Company to regulatory review or investigation, fines, adverse publicity or other sanctions, including the loss of station licenses.

Direct Broadcast Satellite Television

The DBS segment’s operations consist of SKY Italia, which provides basic and premium programming services via satellite and broadband directly to subscribers in Italy. SKY Italia derives revenues principally from subscriber fees. The Company believes that the quality and variety of video, audio and interactive programming, quality of picture, access to service, customer service and price are the key elements for gaining and maintaining market share. SKY Italia’s competition includes companies that offer video, audio, interactive programming, telephony, data and other information and entertainment services, including broadband Internet providers, digital terrestrial transmission (“DTT”) services, wireless companies and companies that are developing new media technologies.

 

44


Table of Contents

In fiscal 2005, competitive DTT services in Italy expanded to include pay-per-view offering of soccer games previously available exclusively on the SKY Italia platform. The Company is currently prohibited from providing a pay DTT service under regulations of the European Commission. In addition, the Italian government previously offered a subsidy on the purchase of DTT decoders.

SKY Italia’s most significant operating expenses are those related to the acquisition of entertainment, movie and sports programming and subscribers and the production and technical expenses related to operating the technical facilities. Operating expenses related to sports programming are generally recognized over the course of the related sport season, which may cause fluctuations in the operating results of this segment.

Magazines and Inserts

The Magazine and Inserts segment derives revenues from the sale of advertising space in free-standing inserts, in-store marketing products and services, promotional advertising, subscriptions and production fees. Adverse changes in general market conditions for advertising may affect revenues. Operating expenses for the Magazine and Inserts segment include paper costs, promotional, printing, retail commissions, distribution and production costs. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.

Newspapers and Information Services

The Newspapers and Information Services segment derives revenues primarily from the sale of advertising space and the sale of published newspapers. Adverse changes in general market conditions for advertising may affect revenues. Circulation revenues can be greatly affected by changes in competitors’ cover prices and by promotional activities.

Operating expenses for the Newspapers and Information Services segment include costs related to newsprint, ink, printing costs and editorial content. Selling, general and administrative expenses include salaries, employee benefits, rent and other routine overhead.

The Newspapers and Information Services segment’s advertising volume, circulation and the price of newsprint are the key uncertainties whose fluctuations can have a material effect on the Company’s operating results and cash flow. The Company has to anticipate the level of advertising volume, circulation and newsprint prices in managing its businesses to maximize operating profit during expanding and contracting economic cycles. Newsprint is a basic commodity and its price is sensitive to the balance of supply and demand. The Company’s costs and expenses are affected by the cyclical increases and decreases in the price of newsprint. The newspapers published by the Company compete for readership and advertising with local and national newspapers and also compete with television, radio, Internet and other media alternatives in their respective locales. Competition for newspaper circulation is based on the news and editorial content of the newspaper, service, cover price and, from time to time, various promotions. The success of the newspapers published by the Company in competing with other newspapers and media for advertising depends upon advertisers’ judgments as to the most effective use of their advertising budgets. Competition for advertising among newspapers is based upon circulation levels, readership levels, reader demographics, advertising rates and advertiser results. Such judgments are based on factors such as cost, availability of alternative media, circulation and quality of readership demographics. In recent years, the newspaper industry has experienced difficulty increasing circulation volume and revenues. This is due to, among other factors, increased competition from new media formats and sources, and shifting preferences among some consumers to receive all or a portion of their news from sources other than a newspaper.

The Newspapers and Information Services segment also derives revenue from the provision of subscriber-based information services and the licensing of products and content to third-parties. Losses in the number of subscribers for these information services may affect revenues. The information services provided by the

 

45


Table of Contents

Company also compete with other media sources (free and subscription-based) and new media formats. Licensing revenues depend on new and renewed customer contracts, and may be affected if the Company is unable to generate new licensing business or if existing customers renew for lesser amounts, terminate early or forego renewal.

The Company believes that competition from new media formats and sources and shifting consumer preferences will continue to pose challenges within the Newspapers and Information Services industries.

Book Publishing

The Book Publishing segment derives revenues from the sale of general and children’s books in the United States and internationally. The revenues and operating results of the Book Publishing segment are significantly affected by the timing of the Company’s releases and the number of its books in the marketplace. The book publishing marketplace is subject to increased periods of demand in the summer months and during the end-of-year holiday season. Each book is a separate and distinct product, and its financial success depends upon many factors, including public acceptance.

Major new title releases represent a significant portion of the Company’s sales throughout the fiscal year. Consumer books are generally sold on a fully returnable basis, resulting in the return of unsold books. In the domestic and international markets, the Company is subject to global trends and local economic conditions.

Operating expenses for the Book Publishing segment include costs related to paper, printing, authors’ royalties, editorial, art and design expenses. Selling, general and administrative expenses include promotional expenses, salaries, employee benefits, rent and other routine overhead.

The book publishing business operates in a highly competitive market and has been affected by consolidation trends. This market continues to change in response to technological innovations and other factors. Recent years have brought a number of significant mergers among the leading book publishers. There have also been a number of mergers completed in the distribution channel. The Company must compete with other publishers such as Random House, Penguin Group, Simon & Schuster and Hachette Livre, for the rights to works by well-known authors and public personalities. Although the Company currently has strong positions in each of its book publishing markets, further consolidation in the industry could place the Company at a competitive disadvantage with respect to scale and resources.

Other

NDS

NDS supplies open end-to-end digital technology and services to digital pay-television platform operators and content providers. NDS technologies include conditional access and microprocessor security, broadcast stream management, set-top box and residential gateway middleware, electronic program guides, digital video recording technologies and interactive infrastructure and applications. NDS provides technologies and services supporting standard definition and high definition televisions and a variety of industry, Internet and Internet protocol standards, as well as technology for mobile devices. NDS’ software systems, consultancy and systems integration services are focused on providing platform operators and content providers with technology to help them profit from the secure distribution of digital information and entertainment to consumer devices which incorporate various technologies supplied by NDS.

News Outdoor

The Company sells, through its News Outdoor businesses, outdoor advertising space on various media, primarily in Russia and Eastern Europe. In June 2007, the Company announced that it intends to explore strategic options for News Outdoor in connection with News Outdoor’s continued development plans. The strategic

 

46


Table of Contents

options include, but are not limited to, exploring the opportunity to expand News Outdoor’s existing shareholder group through new strategic and private equity partners. No agreement has yet been entered into with respect to any transaction.

FIM

The Company sells, through its FIM division, advertising, sponsorships and subscription services on the Company’s various Internet properties. The Company’s Internet properties include the social networking site MySpace.com, IGN.com, AmericanIdol.com, Scout.com and FOXsports.com. The Company also has a distribution agreement with Microsoft’s MSN for FOXsports.com.

Other Business Developments

In November 2007, Dow Jones announced that it would explore strategic alternatives for the Ottaway Community Newspapers (the “Ottaway Newspapers”), which the Company acquired as part of the Dow Jones transaction. The strategic options include, but are not limited to, the possible sale of some or all of the Ottaway Newspapers’ publications and related properties. No agreement has yet been entered into with respect to any transaction involving the Ottaway Newspapers.

On December 13, 2007, the Company completed the acquisition of Dow Jones pursuant to the Agreement and Plan of Merger, dated as of July 31, 2007, by and among the Company, Ruby Newco LLC, a wholly-owned subsidiary of the Company (“Ruby Newco”), Dow Jones and Diamond Merger Sub Corporation, as amended (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, each share of Dow Jones common stock was converted into the right to receive, at the election of the holder, either (x) $60.00 in cash or (y) 2.8681 Class B common units of Ruby Newco. Each Class B common unit of Ruby Newco is convertible after a period of time into a share of News Corporation Class A common stock. The consideration for the acquisition was approximately $5,700 million which consists of: $5,100 million in cash, assumed net debt of approximately $330 million, approximately $200 million in equity instruments and the Company anticipates making additional acquisition related cash payments of $100 million during the remainder of fiscal 2008. The results of Dow Jones have been included in the Company’s unaudited consolidated statement of operations from December 13, 2007, the date of acquisition.

The Company believes that the Dow Jones acquisition will position it as a leader in the financial news and information market and will enhance its ability to adapt to future challenges and opportunities within the Company’s Newspapers and Information Services segment and across the Company’s other related business segments.

In December 2007, Fox Television Stations, Inc., a Delaware corporation and a wholly owned subsidiary of the Company and FoxCo Acquisition Sub, LLC, a Delaware limited liability company and an indirect, wholly owned subsidiary of Oak Hill Capital Partners III, L.P. (“Oak Hill Capital”), entered into a Stock and Asset Purchase Agreement (the “Purchase Agreement”), pursuant to which the Company agreed to sell eight of its owned-and-operated FOX network affiliated television stations (the “Stations”) to Oak Hill Capital for approximately $1.1 billion in cash. The Stations include: WJW in Cleveland, OH; KDVR in Denver, CO; KTVI in St. Louis, MO; WDAF in Kansas City, MO; WITI in Milwaukee, WI; KSTU in Salt Lake City, UT; WBRC in Birmingham, AL; and WGHP in Greensboro, NC. The transaction is subject to customary closing conditions, including, among other things, (a) regulatory approvals, (b) the receipt of the consent of the Federal Communications Commission (the “FCC”) relating to the assignment or transfer of control of the television broadcasting licenses issued by the FCC for the Stations and (c) with regard to two of the Stations only, certain other actions by the FCC in connection with the digital television facilities for the two Stations. In the event the closing condition described in (c) above is not satisfied or waived by Oak Hill Capital, the transaction shall be effected as a sale of six of the Stations, excluding the Stations described in (c) above, at an adjusted price. The transaction is expected to be completed in the third calendar quarter of 2008.

 

47


Table of Contents

In December 2007, Macrovision Corporation agreed to acquire Gemstar-TV Guide in a cash and stock transaction. The closing of this transaction is subject to customary closing conditions including the approval of the shareholders of both Macrovision Corporation and Gemstar-TV Guide.

In January 2008, the Company acquired a 14.6% stake in Premiere AG, the leading German pay-TV operator, for cash consideration of $422 million.

RESULTS OF OPERATIONS

Results of Operations—For the three and six months ended December 31, 2007 versus the three and six months ended December 31, 2006.

The following table sets forth the Company’s operating results for the three and six months ended December 31, 2007, as compared to the three and six months ended December 31, 2006.

 

     For the three months ended
December 31,
    For the six months ended
December 31,
 
     2007     2006     % Change     2007      2006      % Change  
     (in millions, except % and per share amounts)  

Revenues

   $ 8,590     $ 7,844     10 %   $ 15,657      $ 13,758      14 %

Expenses:

              

Operating

     5,443       5,341     2 %     9,851        9,095      8 %

Selling, general and administrative

     1,442       1,153     25 %     2,732        2,255      21 %

Depreciation and amortization

     287       206     39 %     609        413      47 %
                                              

Total operating income

     1,418       1,144     24 %     2,465        1,995      24 %
                                              

Equity (losses) earnings of affiliates

     (50 )     249     * *     196        492      (60 )%

Interest expense, net

     (245 )     (212 )   16 %     (458 )      (412 )    11 %

Interest income

     78       72     8 %     178        147      21 %

Other, net

     187       18     * *     187        446      (58 )%
                                              

Income before income tax expense and minority interest in subsidiaries

     1,388       1,271     9 %     2,568        2,668      (4 )%

Income tax expense

     (520 )     (431 )   21 %     (934 )      (969 )    (4 )%

Minority interest in subsidiaries, net of tax

     (36 )     (18 )   * *     (70 )      (34 )    * *
                                              

Net income

   $ 832     $ 822     1 %   $ 1,564      $ 1,665      (6 )%
                                              

Diluted earnings per share(1)

   $ 0.27     $ 0.26     4 %   $ 0.50      $ 0.52      (4 )%

 

** not meaningful

 

(1)

Represents earnings per share based on the total weighted average shares outstanding (Class A Common Stock and Class B common stock, par value $0.01 per share (“Class B Common Stock”) combined) for the three and six months ended December 31, 2007 and 2006. During fiscal 2007, Class A Common Stock carried rights to a greater dividend than Class B Common Stock. Subsequent to the final fiscal 2007 dividend, shares of Class A Common Stock cease to carry any rights to a greater dividend than shares of Class B Common Stock. See Note 15—Earnings Per Share to the Unaudited Consolidated Financial Statements of News Corporation.

OverviewThe Company’s revenues increased 10% and 14% for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007. The increases for three and six months ended December 31, 2007 were primarily due to revenue increases at the Cable Network Programming, Newspapers and Information Services, DBS, and Other segments.

 

48


Table of Contents

Operating expenses for the three and six months ended December 31, 2007 increased approximately 2% and 8%, respectively, from the corresponding periods of fiscal 2007. The increases were primarily due to an increase in the amortization of production expenses and increased participation costs at the Filmed Entertainment segment, unfavorable foreign exchange movements at the DBS and Newspapers and Information Services segments and incremental expenses related to acquisitions. Partially offsetting these increases were lower sports programming costs at the Television segment.

Selling, General and Administrative expenses for the three and six months ended December 31, 2007 increased approximately 25% and 21%, respectively, as compared to the corresponding periods of fiscal 2007. These increases were primarily due to incremental expenses related to acquisitions, increased employee costs and Internet initiatives.

Depreciation and Amortization increased 39% and 47% for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007. The increases in depreciation and amortization were primarily due to accelerated depreciation at the Newspapers and Information Services segment and an increase in the amortization of finite lived intangible assets in conjunction with acquisitions made in fiscal 2007. Also contributing to the increases were additional property, plant and equipment placed into service.

During both the three and six months ended December 31, 2007, Operating income increased 24% from the corresponding periods of fiscal 2007. The increases in the three and six months ended December 31, 2007 were primarily due to increased Operating income at the Television, DBS, Cable Network Programming and Other Segments.

Equity (losses) earnings of affiliates—Net earnings from equity affiliates decreased $299 million and $296 million for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007. The decreases were primarily a result of lower contributions from British Sky Broadcasting Group plc (“BSkyB”) due to the write-down of its ITV plc investment in the three months ended December 31, 2007. The Company’s portion of the ITV plc write-down was $273 million.

 

     For the three months ended
December 31,
    For the six months ended
December 31,
 
     2007     2006    % Change     2007    2006    % Change  
     (in millions, except %)  

DBS equity affiliates

     (74 )     202    * *     99      409    (76 )%

Cable channel equity affiliates

     14       23    (39 )%     37      44    (16 )%

Other equity affiliates

     10       24    (58 )%     60      39    54 %
                                         

Total equity (losses) earnings of affiliates

   $ (50 )   $ 249    * *   $ 196    $ 492    (60 )%
                                         
               

 

** not meaningful

Interest expense, net—Interest expense, net increased $33 million and $46 million for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007, primarily due to the issuance of $1 billion 6.15% Senior Notes due 2037 in March 2007 and $1.25 billion 6.65% Senior Notes due 2037 in November 2007.

Interest income—Interest income increased $6 million and $31 million for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007, primarily as a result of higher average cash balances.

 

49


Table of Contents

Other, netOther, net consisted of the following:

 

     For the three months
ended December 31,
     For the six months
ended December 31,
 
     2007      2006      2007      2006  
     (in millions)      (in millions)  

Gain on the sale of China Netcom(a)

   $ —        $ —        $ 102      $ —    

Gain on the sale of SKY Brasil(a)

     —          —          —          261  

Gain on the sale of Phoenix(a)

     —          —          —          136  

Change in fair value of exchangeable securities(b)

     189        30        102        68  

Other

     (2 )      (12 )      (17 )      (19 )
                                   

Total Other, net

   $ 187      $ 18      $ 187      $ 446  
                                   

 

(a)

See Note 6—Investments to the Unaudited Consolidated Financial Statements of News Corporation.

 

(b)

The Company has certain outstanding exchangeable debt securities which contain embedded derivatives. Pursuant to SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), these embedded derivatives require separate accounting and, as such, changes in their fair value are recognized in Other, net. A significant variance in the price of underlying stock could have a material impact on the operating results of the Company.

Income tax expenseThe Company’s effective tax rate for the three and six months ended December 31, 2007 was 37% and 36%, respectively. The effective tax rate for the second quarter of fiscal 2008 was higher than the corresponding prior year period as the second quarter of fiscal 2007 effective tax rate was impacted by the resolution of foreign tax audits and the utilization of certain income tax credits. The effective rate for the six months ended December 31, 2007 of 36% was consistent with the effective rate for the six months ended December 31, 2006. The effective tax rate for the three and six months ended December 31, 2007 was higher than the U.S. statutory rate primarily due to foreign and state income taxes.

Minority interest in subsidiaries, net of tax—Minority interest expense increased $18 million and $36 million for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007. These increases were primarily due to the additional minority interest allocated to minority shareholders of National Geographic Channel (US) (“NGC US”) and the international National Geographic entities that were not consolidated in the corresponding periods of the prior fiscal year.

Net income—Net income increased $10 million and decreased $101 million for the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007. The increase in Net income for the three months ended December 31, 2007 was primarily due to the increase in Operating income noted above and an increase in Other, net, partially offset by the decrease in earnings from equity affiliates noted above. The decrease in Net income for the six months ended December 31, 2007 was primarily due to the decrease in earnings from equity affiliates noted above and a decrease in Other, net due to the absence of gains on the sale of SKY Brasil and Phoenix Satellite Television Holdings Limited included in the corresponding period of fiscal 2007. The decrease in Net income for the six months ended December 31, 2007 was partially offset by the increase in Operating income noted above.

 

50


Table of Contents

Segment Analysis:

The following table sets forth the Company’s revenues and operating income by segment for the three and six months ended December 31, 2007, as compared to the three and six months ended December 31, 2006.

 

     For the three months ended
December 31,
    For the six months ended
December 31,
 
     2007    2006     % Change     2007      2006      % Change  
     (in millions, except %)  

Revenues:

               

Filmed Entertainment

   $ 1,976    $ 2,265     (13 )%   $ 3,558      $ 3,478      2 %

Television

     1,530      1,600     (4 )%     2,675        2,703      (1 )%

Cable Network Programming

     1,236      920     34 %     2,338        1,809      29 %

Direct Broadcast Satellite Television

     955      764     25 %     1,702        1,386      23 %

Magazines and Inserts

     273      266     3 %     537        541      (1 )%

Newspapers and Information Services

     1,416      1,118     27 %     2,660        2,167      23 %

Book Publishing

     406      393     3 %     736        761      (3 )%

Other

     798      518     54 %     1,451        913      59 %
                                             

Total revenues

   $ 8,590    $ 7,844     10 %   $ 15,657      $ 13,758      14 %
                                             

Operating income (loss):

               

Filmed Entertainment

   $ 403    $ 470     (14 )%   $ 765      $ 709      8 %

Television

     245      112     * *     428        304      41 %

Cable Network Programming

     337      275     23 %     626        524      19 %

Direct Broadcast Satellite Television

     62      (12 )   * *     110        (25 )    * *

Magazines and Inserts

     85      74     15 %     164        152      8 %

Newspapers and Information Services

     196      170     15 %     289        294      (2 )%

Book Publishing

     67      54     24 %     103        109      (6 )%

Other

     23      1     * *     (20 )      (72 )    (72 )%
                                             

Total operating income

   $ 1,418    $ 1,144     24 %   $ 2,465      $ 1,995      24 %
                                             

 

** not meaningful

Filmed Entertainment (23% and 25% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three months ended December 31, 2007, revenues and Operating income at the Filmed Entertainment segment decreased $289 million, or 13%, and $67 million, or 14%, respectively, as compared to the corresponding period of fiscal 2007. The revenue decrease was primarily due to a decrease in worldwide theatrical and home entertainment revenues partially offset by higher syndication revenues from Twentieth Century Fox Television. The three months ended December 31, 2006 included the successful theatrical performances of The Devil Wears Prada, Night at the Museum and Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan and the successful home entertainment performances of Ice Age: The Meltdown, X-Men: The Last Stand and The Devil Wears Prada. The three months ended December 31, 2007 included the successful theatrical releases and initial releasing costs of Alvin and the Chipmunks and Juno and the home entertainment performance of The Simpsons Movie, Live Free or Die Hard and Fantastic Four: Rise of the Silver Surfer. The decrease in Operating income was primarily due to the revenue decreases noted above, partially offset by a $226 million decrease in operating expenses. The decrease in operating expenses was due to lower releasing costs and lower amortization of production and participation expenses.

 

51


Table of Contents

For the six months ended December 31, 2007, revenues and Operating income at the Filmed Entertainment segment increased $80 million, or 2%, and $56 million, or 8%, respectively, as compared to the corresponding period of fiscal 2007. The revenue increase was primarily due to an increase in worldwide theatrical and pay television revenues, as well as higher syndication revenues from Twentieth Century Fox Television, partially offset by lower home entertainment revenues. The increase in worldwide theatrical revenues for the six months ended December 31, 2007 was primarily due to the worldwide success of The Simpsons Movie, Alvin and the Chipmunks and Live Free or Die Hard. Syndication revenues increased primarily due to the worldwide availability of Family Guy and higher international revenues from Prison Break and The Simpsons. The increase in worldwide pay television revenues for motion picture product was primarily due to a stronger film lineup in fiscal 2008. Worldwide home entertainment revenues decreased primarily due to the successful performance of Ice Age: The Meltdown in the corresponding period of fiscal 2007. The increase in Operating income was primarily due to the revenue increases noted above, partially offset by an increase in amortization of production and participation expenses.

Television (17% and 20% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three and six months ended December 31, 2007, Television segment revenues decreased $70 million, or 4%, and $28 million, or 1%, respectively, as compared to the corresponding periods of fiscal 2007. The Television segment reported an increase in Operating income for the three and six months ended December 31, 2007 of $133 million and $124 million, respectively, as compared to the corresponding periods of fiscal 2007.

Revenues for the three and six months ended December 31, 2007 at the Company’s U.S. television operations decreased 6% and 3%, respectively, as compared to the corresponding periods of fiscal 2007. The decreases were primarily due to the absence of the MLB Divisional Series in fiscal 2008 and a decrease in political advertising revenue at the Company’s television stations. These revenue decreases were partially offset by higher advertising revenue due to increased pricing and higher network ratings for NFL and entertainment programming and from the Emmy Awards, which was broadcast in the six months ended December 31, 2007. Operating income for the three and six months ended December 31, 2007 at the Company’s U.S. television operations increased as compared to the corresponding periods of fiscal 2007. The increases in Operating income were a result of the higher revenue increases noted above and a decrease in sports programming costs due to the absence of the MLB Divisional Series. Also contributing to the increases in Operating income were improved operating results at MyNetworkTV due to lower programming costs.

Revenues for the three and six months ended December 31, 2007 at the Company’s international television operations increased as compared to the corresponding periods of fiscal 2007. The increases were primarily due to higher advertising revenues in India and higher subscription revenues. Operating income at the Company’s international television operations increased for the three and six months ended December 31, 2007 as compared to the corresponding periods of fiscal 2007, primarily due to the revenue increases noted above which were partially offset by increased programming costs.

Cable Network Programming (15% and 13% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three and six months ended December 31, 2007, revenues for the Cable Network Programming segment increased $316 million, or 34%, and $529 million, or 29%, respectively, as compared to the corresponding periods of fiscal 2007. These increases were driven by higher net affiliate and advertising revenues at Fox News, the RSNs, FX, and the Company’s international cable channels. Also contributing to the revenue growth was incremental revenues of $125 million and $181 million for the three and six months ended December 31, 2007, respectively, due to the consolidation of the National Geographic channels.

 

52


Table of Contents

For the three and six months ended December 31, 2007, Fox News’ revenues increased 26% and 30%, respectively, as compared to the corresponding periods of fiscal 2007, primarily due to an increase in net affiliate and advertising revenues. Net affiliate revenues increased 62% and 79% for the three and six months ended December 31, 2007, respectively, primarily due to higher average rates per subscriber and lower cable distribution amortization as compared to the corresponding periods of fiscal 2007. Advertising revenues for both the three and six months ended December 31, 2007 increased 10% as compared to the corresponding periods of fiscal 2007 due to higher volume and higher pricing. As of December 31, 2007, Fox News reached approximately 95 million Nielsen households.

The RSNs’ revenues increased 10% for both the three and six months ended December 31, 2007 as compared to the corresponding periods of fiscal 2007, primarily due to increases in net affiliate revenues. During the three and six months ended December 31, 2007, net affiliate revenues increased 13% and 12%, respectively, as compared to the corresponding periods of fiscal 2007, primarily due to higher affiliate rates and a higher number of subscribers. Advertising revenue increased approximately 5% during the six months ended December 31, 2007, primarily due to additional revenues from the increased number of MLB and National Basketball Association (“NBA”) games broadcasted and higher advertising rates.

FX’s revenues increased 6% for both the three and six months ended December 31, 2007 as compared to the corresponding periods of fiscal 2007, driven by net affiliate revenue and ancillary revenue increases. Net affiliate revenues increased for the three and six months ended December 31, 2007 as a result of an increase in average rate per subscriber and the number of subscribers. As of December 31, 2007, FX reached approximately 95 million Nielsen households.

The Company’s international cable channels’ revenues increased for the three and six months ended December 31, 2007 as compared to the corresponding periods of fiscal 2007, primarily due to the consolidation of NGC Network International LLC (“NGC International”), NGC Network Latin America LLC (“NGC Latin America”) and NGC Network Europe LLC (“NGC Europe”) which were not consolidated in the corresponding periods of the prior fiscal year. Also contributing to these increases were improved advertising sales and subscriber growth at the other FIC channels.

For the three and six months ended December 31, 2007, Operating income at the Cable Network Programming segment increased $62 million, or 23%, and $102 million, or 19%, respectively, as compared to the corresponding periods of fiscal 2007, primarily due to the increases in revenues noted above. The revenue increases were partially offset by $169 million and $288 million increases in operating expenses during the three and six months ended December 31, 2007, respectively, as compared to the corresponding periods of fiscal 2007. The increases in operating expenses were primarily due to increased programming costs resulting from an increase in the number of MLB and NBA games broadcasted, higher entertainment programming costs of movies and new shows, the launch of the Big Ten Network in August 2007, the consolidation of the international National Geographic channels and the October 2007 launch of Fox Business Network. The launches of the Big Ten Network and Fox Business Network resulted in approximately $50 million and $85 million in operating losses for the three and six months ended December 31, 2007, respectively. The consolidation of the National Geographic channels resulted in incremental Operating income of approximately $38 million and $56 million for the three and six months ended December 31, 2007, respectively. Also contributing to the increased expenses were higher Selling, General, and Administrative expenses during the three and six months ended December 31, 2007, primarily due to the launch of the new channels.

Direct Broadcast Satellite Television (11% and 10% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three and six months ended December 31, 2007, SKY Italia revenues increased $191 million, or 25%, and $316 million, or 23%, as compared to the corresponding periods of fiscal 2007. This revenue growth was primarily driven by an increase of approximately 400,000 subscribers over the corresponding period of fiscal 2007 and the weakening of the U.S. dollar which resulted in 12% and 10% of the increase in revenues for the three and six months ended December 31, 2007, respectively. During the second quarter of fiscal 2008, SKY

 

53


Table of Contents

Italia added approximately 189,000 net subscribers, which increased SKY Italia’s total subscriber base to 4.4 million at December 31, 2007. The total churn for the three months ended December 31, 2007 was approximately 80,000 subscribers on an average subscriber base of 4.3 million, as compared to churn of approximately 102,000 subscribers on an average subscriber base of 3.9 million in the corresponding period of fiscal 2007. The total churn for the six months ended December 31, 2007 was approximately 230,000 subscribers on an average subscriber base of 4.3 million, as compared to churn of approximately 249,000 subscribers on an average subscriber base of 3.9 million in the corresponding period of fiscal 2007. Subscriber churn for the period represents the number of SKY Italia subscribers whose service was disconnected during the period.

Average revenue per subscriber (“ARPU”) for the three and six months ended December 31, 2007 was approximately €45 and €42, respectively, which were consistent with the ARPU for the corresponding periods of fiscal 2007. SKY Italia calculates ARPU by dividing total subscriber-related revenues for the period by the average subscribers for the period and dividing that amount by the number of months in the period. Subscriber-related revenues are comprised of total subscription revenue, pay-per-view revenue and equipment rental revenue for the period. Average subscribers are calculated for the respective periods by adding the beginning and ending subscribers for the period and dividing by two.

Subscriber acquisition costs per subscriber (“SAC”) of approximately €270 in the second quarter of fiscal 2008 increased over the second quarter of fiscal 2007, primarily due to increased marketing costs both in the aggregate and on a per gross addition basis due to a lower number of gross SKY Italia subscribers added during the second quarter of fiscal 2008 as compared to the corresponding prior year period. SAC is calculated by dividing total subscriber acquisition costs for a period by the number of gross SKY Italia subscribers added during the period. Subscriber acquisition costs include the cost of the commissions paid to retailers and other distributors, the cost of equipment sold directly by SKY Italia to subscribers and the costs related to installation and acquisition advertising, net of any upfront activation fee. SKY Italia excludes the value of equipment capitalized under SKY Italia’s equipment lease program, as well as payments and the value of returned equipment related to disconnected lease program subscribers from subscriber acquisition costs.

For the three and six months ended December 31, 2007, SKY Italia’s operating results improved by $74 million and $135 million, respectively, as compared to the corresponding periods of fiscal 2007. The increases were primarily due to the revenue increases noted above, partially offset by an increase in operating expenses. The increase in operating expenses was due to higher fees paid for programming costs as a result of an increase in the number of subscribers and the additions of new channels. For the three and six months ended December 31, 2007, the weakening of the U.S. dollar represented 12% and 10%, respectively, of the total improvement in operating results.

Magazines and Inserts (3% and 4% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three months ended December 31, 2007, revenues at the Magazines and Inserts segment increased $7 million, or 3%, as compared to the corresponding period of fiscal 2007, primarily due to an increase in volume and rates of in-store marketing products, partially offset by lower rates and volume for free-standing insert products. For the six months ended December 31, 2007, revenues at the Magazines and Inserts segment decreased $4 million, or 1%, as compared to the corresponding period of fiscal 2007, primarily due to lower volume and rates on the Company’s free-standing insert products. These decreases were partially offset by higher rates and volume for in-store marketing products.

For the three and six months ended December 31, 2007, Operating income at the Magazines and Inserts segment increased $11 million, or 15%, and $12 million, or 8%, respectively, as compared to the corresponding periods of fiscal 2007. The increases were primarily due to lower printing and paper rates for free-standing insert products. The increase for the six months ended December 31, 2007 was partially offset by the decrease in revenues noted above.

 

54


Table of Contents

Newspapers and Information Services (17% and 16% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three and six months ended December 31, 2007, revenues at the Newspapers and Information Services segment increased $298 million, or 27%, and $493 million, or 23%, as compared to the corresponding periods of fiscal 2007. Revenues in Australia, the United States and the United Kingdom were all higher in the three and six months ended December 31, 2007. The increase in the U.S. revenue was due to the acquisition of Dow Jones on December 13, 2007. The Dow Jones results have been included in the Newspapers and Information Services segment since December 14, 2007. Operating income for the three months ended December 31, 2007 increased $26 million, or 15%, and decreased $5 million, or 2%, for the six months ended December 31, 2007, as compared to the corresponding periods of fiscal 2007, primarily related to the Australian and U.K. operating results as Dow Jones did not have a material impact on Operating income. During the three and six months ended December 31, 2007, the weakening of the U.S. dollar resulted in increases of approximately 9% in revenue and approximately 15% in operating income as compared to the corresponding periods of fiscal 2007.

For the three and six months ended December 31, 2007, the Australian newspapers’ revenues increased 33% and 31%, respectively, primarily due to higher advertising revenues, incremental revenues from the acquisition of the Federal Publishing Company’s group of companies in April 2007 and favorable foreign exchange movements. Operating income for the three and six months ended December 31, 2007 increased 32% and 30%, respectively, as compared to the corresponding periods of fiscal 2007, primarily due to the revenue increases noted above which were partially offset by an increase in employee related costs.

For both the three months and six months ended December 31, 2007, the UK newspapers’ revenues increased 9%, as compared to the corresponding periods of fiscal 2007, primarily due to higher Internet revenues, as well as favorable foreign exchange movements. Internet revenues increased primarily due to the incremental revenues from acquisitions made in fiscal 2007 and higher Internet advertising revenues. Operating income decreased for the three and six months ended December 31, 2007 as compared to the corresponding periods of fiscal 2007, primarily due to incremental accelerated depreciation of $24 million and $86 million, respectively, recorded for the U.K. printing presses and printing facilities that are being replaced earlier than originally anticipated. The Company’s upgrade to new printing plants and presses is expected to be completed in the fourth quarter of fiscal 2008.

Book Publishing (5% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three months ended December 31, 2007, revenues at the Book Publishing segment increased $13 million, or 3%, as compared to the corresponding period of fiscal 2007. Notable sales performances during the three months ended December 31, 2007, included The Daring Book For Girls by Andrea J. Buchanan and Miriam Peskowitz, The Dangerous Book For Boys by Conn and Hal Iggulden and Deceptively Delicious by Jessica Seinfeld. This increase was partially offset by a reduction in sales of the successful children’s Lemony Snicket’s Series of Unfortunate Events titles as compared to the corresponding period of fiscal 2007. During the three months ended December 31, 2007, HarperCollins had 40 titles on The New York Times Bestseller List with five titles reaching the number one position. For the six months ended December 31, 2007, revenues at Book Publishing segment decreased $25 million, or 3%, from the corresponding period of fiscal 2007, primarily due to lower revenue on Lemony Snicket’s Series of Unfortunate Events titles. This decrease was partially offset by higher distribution revenues earned on the final release of the Harry Potter series book published by Scholastic and the addition of a new distribution client during the six months ended December 31, 2007. During the six months ended December 31, 2007, HarperCollins had 81 titles on The New York Times Bestseller List with ten titles reaching the number one position.

Operating income for the three months ended December 31, 2007 increased $13 million, or 24%, as compared to the corresponding period of fiscal 2007, primarily due to the revenue increases noted above. Also contributing to the increases during the three months was a lower provision for bad debt as the prior fiscal year

 

55


Table of Contents

included a provision for the bankruptcy filing of a major distributor. Operating income for the six months ended December 31, 2007 decreased $6 million, or 6%, as compared to the corresponding period of fiscal 2007, primarily due to the revenue decreases noted above.

Other (9% and 7% of the Company’s consolidated revenues in the first six months of fiscal 2008 and 2007, respectively)

For the three and six months ended December 31, 2007, revenues at the Other operating segment increased $280 million, or 54%, and $538 million, or 59%, respectively, as compared to the corresponding periods of fiscal 2007, primarily due to incremental revenues received from the search technology and services agreement with Google and increased advertising revenues from FIM’s Internet sites. The revenue increases were also driven by incremental revenues from Jamba which was acquired in January 2007.

Operating results for the three and six months ended December 31, 2007 increased $22 million and $52 million, respectively, as compared to the corresponding periods of fiscal 2007. The increases were primarily due to approximately $59 million and $74 million increases in operating results at FIM for the three and six months ended December 31, 2007, respectively, which were due to the FIM revenue increases noted above. The improved operating results were partially offset by start up losses in conjunction with the Company’s Eastern European broadcasting initiatives.

Liquidity and Capital Resources

Current Financial Condition

The Company’s principal source of liquidity is internally generated funds; however, the Company has access to the worldwide capital markets, a $2.25 billion revolving credit facility and various film co-production alternatives to supplement its cash flows. Also, as of December 31, 2007, the Company had consolidated cash and cash equivalents of approximately $3.5 billion. The Company believes that cash flows from operations will be adequate for the Company to conduct its operations. The Company’s internally generated funds are highly dependent upon the state of the advertising market and public acceptance of film and television products. Any significant decline in the advertising market or the performance of the Company’s films could adversely impact its cash flows from operations which could require the Company to seek other sources of funds including proceeds from the sale of certain assets or other alternative sources.

The principal uses of cash that affect the Company’s liquidity position include the following: investments in the production and distribution of new feature films and television programs; the acquisition of and payments under programming rights for entertainment and sports programming; paper purchases; operational expenditures including employee costs; capital expenditures; interest expense; income tax payments; investments in associated entities; dividends; acquisitions; and stock repurchases.

Sources and uses of cash

Net cash provided by operating activities for the six months ended December 31, 2007 and 2006 was as follows (in millions):

 

     For the six months ended
December 31,
         2007            2006    

Net cash provided by operating activities

   $ 739    $ 705
             

The increase in net cash provided by operating activities during the six months ended December 31, 2007 as compared to the corresponding period of fiscal 2007 reflects higher home entertainment receipts at the Filmed Entertainment segment which was partially offset by higher income tax payments.

 

56


Table of Contents

Net cash used in investing activities for the six months ended December 31, 2007 and 2006 was as follows (in millions):

 

     For the six months ended
December 31,
 
         2007             2006      

Net cash used in investing activities

   $ (5,829 )   $ (1,020 )
                

Net cash used in investing activities during the six months ended December 31, 2007 increased as compared to the corresponding period of fiscal 2007. This increase was primarily due to Company’s acquisition of Dow Jones in December 2007 and Photobucket in July 2007.

Net cash provided by (used in) financing activities for the six months ended December 31, 2007 and 2006 was as follows (in millions):

 

     For the six months ended
December 31,
 
         2007            2006      

Net cash provided by (used in) financing activities

   $ 910    $ (101 )
               

Cash provided by financing activities was primarily due to net proceeds of $1,248 from the issuance of $1,250 million 6.65% Senior Notes due 2037 in November 2007. Cash provided by financing activities was partially offset by dividends paid, repayments of borrowings and stock repurchases. During the six months ended December 31, 2007, the Company repurchased approximately 6.0 million shares for $122 million under the Company’s stock repurchase program as compared to repurchases of 3.2 million shares for $59 million during the six months ended December 31, 2006.

Debt Instruments

 

     For the six months ended
December 31,
 
         2007             2006      
     (in millions)  

Borrowings

    

Notes Due 2037

   $ 1,248     $ —    

RZB loan

     7       160  

All other

     7       —    
                

Total borrowings

   $ 1,262     $ 160  
                

Repayments of borrowings

    

EBRD loan

     —       $ (154 )

All other

     (132 )     (36 )
                

Total repayments of borrowings

   $ (132 )   $ (190 )
                

Other

The Company’s 6.625% Senior Notes due 2008 in the amount of $350 million are due within the next twelve months and are classified as current borrowings as of December 31, 2007. In January 2008, the Company retired its $350 million 6.625% Senior Notes.

The Company’s 7.375% Senior Notes due 2008 in the amount of $200 million are due within the next twelve months and are classified as current borrowings as of December 31, 2007.

 

57


Table of Contents

As part of the Dow Jones acquisition, the Company assumed total debt of $378 million which consisted of: 3.875% notes due 2008 in the amount of $225 million, $131 million in commercial paper and a $22 million variable interest note. In December 2007, the Company retired all of the commercial paper outstanding and in February 2008, the Company will retire its $225 million 3.875% notes. (See Note 2 to the Unaudited Consolidated Financial Statements of News Corporation for further discussion of the Dow Jones acquisition.)

Stock Repurchase Program

On June 13, 2005, the Company announced that its Board of Directors (the “Board”) approved a stock repurchase program, under which the Company was authorized to acquire up to an aggregate of $3.0 billion in Class A Common Stock and Class B Common Stock. In May 2006, the Company announced that the Board authorized increasing the total amount of the stock repurchase program to $6.0 billion. The remaining authorized amount under the Company’s stock repurchase program at December 31, 2007, excluding commissions, was approximately $2 billion.

Ratings of the Public Debt

The table below summarizes the Company’s current credit ratings.

 

     

Senior Debt

  

Outlook

Rating Agency

     

Moody’s

   Baa 2    Stable

S&P

   BBB+    Stable

Revolving Credit Agreement

On May 23, 2007, News America Incorporated (“NAI”), a subsidiary of the Company, terminated its existing $1.75 billion Revolving Credit Agreement (the “Prior Credit Agreement”) and entered into a new Credit Agreement (the “New Credit Agreement”), among NAI as Borrower, the Company as Parent Guarantor, the lenders named therein (the “Lenders”), Citibank, N.A. as Administrative Agent and JPMorgan Chase Bank, N.A. as Syndication Agent. The New Credit Agreement consists of a $2.25 billion five-year unsecured revolving credit facility with a sublimit of $600 million available for the issuance of letters of credit. Borrowings are in U.S. dollars only, while letters of credit are issuable in U.S. Dollars or Euros. The significant terms of the New Credit Agreement include, among others, the requirement that the Company maintain specific leverage ratios and limitations on secured indebtedness. The Company will pay a facility fee of 0.08% regardless of facility usage. The Company will pay interest of a margin over LIBOR for borrowings and a letter of credit fee of 0.27%. The Company is subject to additional fees of 0.05% if borrowings under the facility exceed 50% of the committed facility. The interest and fees are based on the Company’s current debt rating. Under the New Credit Agreement, NAI may request an increase in the amount of the credit facility up to a maximum amount of $2.5 billion. The New Credit Agreement is available for the general corporate purposes of NAI, the Company and its subsidiaries. The maturity date is in May 2012, however, NAI may request that the Lenders’ commitments be renewed for up to two additional one year periods. At December 31, 2007, no amounts were outstanding under the New Credit Agreement.

Commitments

In July 2007, the Company entered into a contract with the Big Ten Conference for rights to telecast certain Big Ten Conference sporting events through fiscal 2032. The Company will pay approximately $2.8 billion over the term of the contract for these rights.

In November 2007, the Company entered into a long-term supply contract pursuant to which the Company will purchase paper for its newspaper printing facilities in the United Kingdom from a third party. The contract requires the Company to purchase a minimum of $590 million of paper from this third party through fiscal 2015.

 

58


Table of Contents

In December 2007, as part of the Dow Jones acquisition, the Company assumed approximately $994 million of commitments previously entered into by Dow Jones which included $247 million of indebtedness at December 31, 2007.

Other than previously disclosed in the notes to these unaudited consolidated financial statements, the Company’s commitments have not changed significantly from disclosures included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed with the SEC on August 23, 2007.

Guarantees

Other than previously disclosed in the notes to these unaudited consolidated financial statements, the Company’s guarantees have not changed significantly from disclosures included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed with the SEC on August 23, 2007.

Contingencies

Other than previously disclosed in the notes to the Company’s unaudited consolidated financial statements, the Company is party to several other purchase and sale arrangements which become exercisable over the next ten years by the Company or the counter-party to the agreement. In the next twelve months, none of these arrangements that become exercisable are material. Purchase arrangements that are exercisable by the counter-party to the agreement, and that are outside the sole control of the Company are accounted for in accordance with Emerging Issues Task Force Topic No. D-98 “Classification and Measurement of Redeemable Securities.” Accordingly, the fair values of such purchase arrangements are classified in Minority interest liabilities.

The Company experiences routine litigation in the normal course of its business. The Company believes that none of its pending litigation will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

The Company’s operations are subject to tax in various domestic and international jurisdictions and as a matter of course, the Company is regularly audited by federal, state and foreign tax authorities. The Company believes it has appropriately accrued for the expected outcome of all pending tax matters and does not currently anticipate that the ultimate resolution of pending tax matters will have a material adverse effect on its consolidated financial condition, future results of operations or liquidity.

Recent Accounting Pronouncements

See Note 1—Basis of Presentation to the Unaudited Consolidated Financial Statements of News Corporation for discussion of recent accounting pronouncements.

 

59


Table of Contents
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has exposure to several types of market risk: changes in foreign currency exchange rates, interest rates and stock prices. The Company neither holds nor issues financial instruments for trading purposes.

The following sections provide quantitative information on the Company’s exposure to foreign currency exchange rate risk, interest rate risk and stock price risk. It makes use of sensitivity analyses that are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.

Foreign Currency Exchange Rates

The Company conducts operations in four principal currencies: the U.S. dollar, the British pound sterling, the Euro and the Australian dollar. These currencies operate as the functional currency for the Company’s U.S., European (including the United Kingdom) and Australian operations, respectively. Cash is managed centrally within each of the three regions with net earnings reinvested locally and working capital requirements met from existing liquid funds. To the extent such funds are not sufficient to meet working capital requirements, drawdowns in the appropriate local currency are available from intercompany borrowings. Since earnings of the Company’s Australian and European (including the United Kingdom) operations are expected to be reinvested in those businesses indefinitely, the Company does not hedge its investment in the net assets of those foreign operations.

At December 31, 2007, the Company’s outstanding financial instruments with foreign currency exchange rate risk exposure had an aggregate fair value of $188 million (including the Company’s non-U.S. dollar-denominated fixed rate debt). The potential increase in the fair values of these instruments resulting from a 10% adverse change in quoted foreign currency exchange rates would be approximately $19 million at December 31, 2007.

Interest Rates

The Company’s current financing arrangements and facilities include $14.0 billion of outstanding debt with fixed interest and the New Credit Agreement, which carries variable interest. Fixed and variable rate debts are impacted differently by changes in interest rates. A change in the interest rate or yield of fixed rate debt will only impact the fair market value of such debt, while a change in the interest rate of variable debt will impact interest expense, as well as the amount of cash required to service such debt. As of December 31, 2007, substantially all of the Company’s financial instruments with exposure to interest rate risk were denominated in U.S. dollars and had an aggregate fair market value of $14.9 billion. The potential change in fair value for these financial instruments from an adverse 10% change in quoted interest rates across all maturities, often referred to as a parallel shift in the yield curve, would be approximately $725 million at December 31, 2007.

Stock Prices

The Company has common stock investments in several publicly traded companies that are subject to market price volatility. These investments principally represent the Company’s equity affiliates and had an aggregate fair value of approximately $21,542 million as of December 31, 2007. A hypothetical decrease in the market price of these investments of 10% would result in a fair value of approximately $19,388 million. Such a hypothetical decrease would result in a before tax decrease in comprehensive income of approximately $20 million, as any changes in fair value of the Company’s equity affiliates are not recognized unless deemed other-than-temporary, as these investments are accounted for under the equity method.

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” the Company has recorded the conversion feature embedded in its exchangeable debentures in other liabilities. At December 31, 2007, the fair value of this conversion feature was $255 million and this conversion feature is sensitive to movements in the share price of one of the Company’s publicly traded equity affiliates. A significant variance in the price of the underlying stock could have a material impact on the operating results of the Company. A 10% increase in the price of the underlying shares, holding other factors constant, would increase the fair value of the call option by approximately $98 million.

 

60


Table of Contents

PART I

 

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chairman and Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on such evaluation, the Company’s Chairman and Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chairman and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) during the Company’s second quarter of fiscal 2008 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

 

ITEM 1. LEGAL PROCEEDINGS

See Note 12—Contingencies to the unaudited consolidated financial statements, which is incorporated herein by reference.

 

ITEM 1A. RISK FACTORS

Prospective investors should consider carefully the risk factors set forth below before making an investment in the Company’s securities.

A Decline in Advertising Expenditures Could Cause the Company’s Revenues and Operating Results to Decline Significantly in any Given Period or in Specific Markets.

The Company derives substantial revenues from the sale of advertising on or in its television stations, broadcast and cable networks, newspapers and inserts, websites and DBS services. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions, as well as budgeting and buying patterns. A decline in the economic prospects of advertisers or the economy in general could alter current or prospective advertisers’ spending priorities. Demand for the Company’s products is also a factor in determining advertising rates. For example, ratings points for the Company’s television stations, broadcast and cable networks and circulation levels for the Company’s newspapers are factors that are weighed when determining advertising rates, and with respect to the Company’s television stations and broadcast and television networks, when determining the affiliate rates received by the Company. In addition, newer technologies, including new video formats, streaming and downloading capabilities via the Internet, video-on-demand, personal video recorders and other devices and technologies are increasing the number of media and entertainment choices available to audiences. Some of these devices and technologies allow users to view television or motion pictures from a remote location or on a time- delayed basis and provide users the ability for users to fast-forward, rewind, pause and skip programming. These

 

61


Table of Contents

technological developments are increasing the number of media and entertainment choices available to audiences and may cause changes in consumer behavior that could affect the attractiveness of the Company’s offerings to viewers, advertisers and/or distributors. A decrease in advertising expenditures or reduced demand for the Company’s offerings can lead to a reduction in pricing and advertising spending, which could have an adverse effect on the Company’s businesses.

Acceptance of the Company’s Film and Television Programming by the Public is Difficult to Predict, Which Could Lead to Fluctuations in Revenues.

Feature film and television production and distribution are speculative businesses since the revenues derived from the production and distribution of a feature film or television series depend primarily upon its acceptance by the public, which is difficult to predict. The commercial success of a feature film or television series also depends upon the quality and acceptance of other competing films and television series released into the marketplace at or near the same time, the availability of a growing number of alternative forms of entertainment and leisure time activities, general economic conditions and other tangible and intangible factors, all of which can change and cannot be predicted with certainty. Further, the theatrical success of a feature film and the audience ratings for a television series are generally key factors in generating revenues from other distribution channels, such as home entertainment and premium pay television, with respect to feature films, and syndication, with respect to television series.

The Loss of Carriage Agreements Could Cause the Company’s Revenue and Operating Results to Decline Significantly in any Given Period or in Specific Markets.

The Company is dependent upon the maintenance of affiliation agreements with third-party owned television stations, and there can be no assurance that these affiliation agreements will be renewed in the future on terms acceptable to the Company. The loss of a significant number of these affiliation arrangements could reduce the distribution of FOX and MyNetworkTV and adversely affect the Company’s ability to sell national advertising time. Similarly, the Company’s cable networks maintain affiliation and carriage arrangements that enable them to reach a large percentage of cable and direct broadcast satellite households across the United States. The loss of a significant number of these arrangements or the loss of carriage on basic programming tiers could reduce the distribution of the Company’s cable networks, which may adversely affect those networks’ revenues from subscriber fees and their ability to sell national and local advertising time.

The Inability to Renew Sports Programming Rights Could Cause the Company’s Advertising Revenue to Decline Significantly in any Given Period or in Specific Markets.

The sports rights contracts between the Company, on the one hand, and various professional sports leagues and teams, on the other, have varying duration and renewal terms. As these contracts expire, renewals on favorable terms may be sought; however, third parties may outbid the current rights holders for the rights contracts. In addition, professional sports leagues or teams may create their own networks or the renewal costs could substantially exceed the original contract cost. The loss of rights could impact the extent of the sports coverage offered by the Company and its affiliates, as it relates to FOX, and could adversely affect the Company’s advertising and affiliate revenues. Upon renewal, the Company’s results could be adversely affected if escalations in sports programming rights costs are unmatched by increases in advertising rates and, in the case of cable networks, subscriber fees.

Technological Developments May Increase the Threat of Content Piracy and Signal Theft and Limit the Company’s Ability to Protect Its Intellectual Property Rights.

The Company seeks to limit the threat of content piracy and DBS programming signal theft; however, policing unauthorized use of the Company’s products and services and related intellectual property is often difficult and the steps taken by the Company may not in every case prevent the infringement by unauthorized third parties.

 

62


Table of Contents

Developments in technology, including digital copying, file compressing and the growing penetration of high-bandwidth Internet connections, increase the threat of content piracy by making it easier to duplicate and widely distribute pirated material. In addition, developments in software or devices that circumvent encryption technology increase the threat of unauthorized use and distribution of DBS programming signals. The Company has taken, and will continue to take, a variety of actions to combat piracy and signal theft, both individually and, in some instances, together with industry associations. There can be no assurance that the Company’s efforts to enforce its rights and protect its products, services and intellectual property will be successful in preventing content piracy or signal theft. Content piracy and signal theft present a threat to the Company’s revenues from products and services, including, but not limited to, films, television shows, books and DBS programming.

Labor Disputes May Have an Adverse Effect on the Company’s Business.

In a variety of the Company’s business, the Company and its partners engage the services of writers, directors, actors and other talent, trade employees and others who are subject to collective bargaining agreements, including employees of the Company’s film and television studio operations and newspapers. If the Company or its partners are unable to renew expiring collective bargaining agreements, certain of which have or are expiring within the next year or so, it is possible that the affected unions could take action in the form of strikes or work stoppages. Such actions, as well as higher costs in connection with these collective bargaining agreements or a significant labor dispute could have an adverse effect on the Company’s business by causing delays in production or by reducing profit margins. On November 5, 2007, the Writers Guild of America (East and West) (the “WGA”) commenced a strike against film and television studios following the expiration of its collective bargaining agreement on October 31, 2007. The Company’s Filmed Entertainment and Television segments and certain of its suppliers retain the services of writers who are members of the WGA. The WGA strike, depending on its duration, may cause delays in the production and/or release dates of the Company’s television programs and feature films, and may result in higher costs due to the strike itself or less favorable terms for the Company of a future agreement with the WGA. The Company is currently unable to estimate the impact of the WGA strike on the Company’s revenues and operating income, if any.

Changes in U.S. or Foreign Communications Laws and Other Regulations May Have an Adverse Effect on the Company’s Business.

In general, the television broadcasting and multichannel video programming and distribution industries in the United States are highly regulated by federal laws and regulations issued and administered by various federal agencies, including the FCC. The FCC generally regulates, among other things, the ownership of media, broadcast and multichannel video programming and technical operations of broadcast and satellite licensees. Further, the United States Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters, including technological changes, which could, directly or indirectly, affect the operations and ownership of the Company’s U.S. media properties. Similarly, changes in regulations imposed by governments in other jurisdictions in which the Company, or entities in which the Company has an interest, operate could adversely affect its business and results of operations.

Provisions in the Company’s Corporate Documents, Delaware Law and the Ownership of the Company’s Class B Common Stock by Certain Principal Stockholders Could Delay or Prevent a Change of Control of News Corporation, Even if That Change Would be Beneficial to the Company’s Stockholders.

The existence of some provisions in the Company’s corporate documents could delay or prevent a change of control of News Corporation, even if that change would be beneficial to the Company’s stockholders. The Company’s Restated Certificate of Incorporation and Amended and Restated By-laws, contain provisions that may make acquiring control of News Corporation difficult, including:

 

   

provisions relating to the classification, nomination and removal of directors;

 

   

a provision prohibiting stockholder action by written consent;

 

63


Table of Contents
   

provisions regulating the ability of the Company’s stockholders to bring matters for action before annual and special meetings of the Company’s stockholders; and

 

   

the authorization given to the Company’s Board of Directors (the “Board”) to issue and set the terms of preferred stock.

In addition, the Company currently has in place a stockholder rights plan, which would cause extreme dilution to any person or group that attempts to acquire a significant interest in the Company without advance approval of the Board. Further, as a result of Mr. K. Rupert Murdoch’s ability to appoint certain members of the board of directors of the corporate trustee of the Murdoch Family Trust, which beneficially owns 0.8% of the Company’s Class A Common Stock and 30.1% of the Class B Common Stock, Mr. K. Rupert Murdoch may be deemed to be a beneficial owner of the shares beneficially owned by the Murdoch Family Trust. Mr. K. Rupert Murdoch, however, disclaims any beneficial ownership of those shares. Also, Mr. K. Rupert Murdoch beneficially owns an additional 1.1% of the Class A Common Stock and 1.1% of the Class B Common Stock. Thus, Mr. K. Rupert Murdoch may be deemed to beneficially own in the aggregate 1.9% of the Class A Common Stock and 31.2% of the Class B Common Stock. If the Share Exchange Agreement is consummated, the Company intends to redeem the rights issued under the stockholder rights plan at that time and to take the necessary steps to declassify its classified board structure. Further, if the Share Exchange Agreement is consummated, the aggregate voting power represented by the shares of Class B Common Stock held by Mr. K. Rupert Murdoch and the Murdoch Family Trust would increase to approximately 38.6% of the Company’s aggregate voting power, subject to further increase to approximately 40.0% if the Company completes its previously announced stock repurchase program.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its Annual Meeting of Stockholders (the “Annual Meeting”) on October 19, 2007. A brief description of the matters voted upon at the Annual Meeting and the results of the voting on such matters is set forth below.

Proposal 1: The following individuals were elected as Class I Directors:

 

Name

   For    Withheld

K. Rupert Murdoch

   835,005,276    2,298,509

Peter L. Barnes

   836,455,569    2,190,170

Kenneth E. Cowley

   832,929,601    4,890,700

David F. DeVoe

   826,958,107    9,087,771

Viet Dinh

   834,562,322    4,092,127

Proposal 2: A proposal to ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2008 was voted upon as follows:

 

For:

   834,420,201

Against:

   3,172,372

Abstain:

   939,089

 

64


Table of Contents

Proposal 3: A stockholder proposal on the annual election of directors was voted upon as follows:

 

For:

   139,626,577

Against:

   666,560,172

Abstain:

   8,524,483

Proposal 4: A stockholder proposal on the elimination of the Company’s dual class capital structure was voted upon as follows:

 

For:

   184,952,845

Against:

   620,955,265

Abstain:

   8,550,721

 

ITEM 5. OTHER INFORMATION

Not applicable.

 

65


Table of Contents
ITEM 6. EXHIBITS

 

(a)    Exhibits.
  4.1    Registration Rights Agreement, dated November 14, 2007, by and among News America Incorporated, News Corporation and J.P. Morgan Securities Inc. as Initial Purchaser.*
  4.2    Form of Notes representing $1.25 billion principal amount of 6.65% Senior Notes due 2037 and Officers’ Certificate of News Corporation relating thereto, dated November 14, 2007, pursuant to Section 301 of the Amended and Restated Indenture, dated as of March 24, 1993, as supplemented, among News America Incorporated, the Guarantor named therein and The Bank of New York Mellon Corporation, as Trustee.*
12.1    Ratio of Earnings to Fixed Charges.*
31.1    Chairman and Chief Executive Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.*
31.2    Chief Financial Officer Certification required by Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.*
32.1    Certification of Chairman and Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes Oxley Act of 2002.*

 

* Filed herewith.

 

66


Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

NEWS CORPORATION
(Registrant)

By:

 

/s/    DAVID F. DEVOE        

  David F. DeVoe
 

Senior Executive Vice President and

Chief Financial Officer

Date: February 6, 2008

 

67


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
6/2/09
12/15/08
10/20/08
6/30/0810-K,  8-K
4/16/0825-NSE,  4,  8-K
3/12/08
2/8/08
Filed on:2/6/08
2/1/08
1/25/08
1/17/08
1/16/08
1/7/088-K
For Period End:12/31/0711-K
12/30/07
12/14/07
12/13/073,  8-K
11/14/074,  8-K
11/7/0710-Q,  8-K
11/5/07
10/31/07
10/29/07
10/23/07
10/19/07DEF 14A
10/11/07
10/1/074
9/30/0710-Q
9/12/074
8/27/07
8/23/0710-K
7/31/078-K
7/11/07SC 13D/A
7/1/074
6/30/0710-K
6/11/07
5/23/078-K
5/22/078-K
4/3/074,  DEF 14A
2/26/078-K
2/21/074,  8-K
2/12/078-K
2/9/074,  8-K
1/26/07
1/24/07
1/3/074,  8-K
12/31/0610-Q,  11-K
12/22/068-K
12/14/063,  4,  8-K,  SC 13G/A
12/13/06
11/21/06
10/20/06DEF 14A,  PRE 14A
10/19/064
10/16/06
10/6/064
9/27/06
8/25/06
8/8/068-K
7/14/06
7/6/063,  4
7/1/064
6/30/0610-K,  8-K
6/14/06
3/20/068-K
2/21/068-K
1/17/06
12/27/05
12/13/054,  8-K
12/8/058-K
11/8/05
10/31/05
10/24/054,  8-K
9/30/0510-Q,  4,  8-K
8/30/05
8/26/058-K
8/25/05
7/27/05
6/13/058-K
3/30/054
2/28/05
2/10/05SC 13G
1/3/05
10/4/04
10/1/04
9/20/04
8/6/04
8/4/04
7/21/04
3/31/04
1/29/04
12/30/03
12/22/03
10/9/03
10/8/03
7/25/03
6/6/03
3/31/03
3/24/93
 List all Filings 
Top
Filing Submission 0001193125-08-021537   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2019 Fran Finnegan & Company.  All Rights Reserved.
AboutPrivacyRedactionsHelp — Fri., Apr. 26, 6:27:21.1am ET