News Corporation (NCRA) - SEC Form 10Q RNS Number : 8055Q News Corporation 09 November 2012 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) x Quarterly report pursuant to Section13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September30, 2012 or ¨ Transition report pursuant to Section13 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 (I.R.S. Employer of Incorporation or Organization) 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 Section13 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 xNo ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule405 of RegulationS-T during the preceding 12months (or for such shorter period that the registrant was required to submit and post such files).Yes xNo ¨ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨Non-accelerated filer ¨Smaller reporting company ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ¨No x As of October26, 2012, 1,546,011,394 shares of ClassA Common Stock, par value $0.01 per share, and 798,520,953 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 Item1. Financial Statements Unaudited Consolidated Statements of Operations for the three months ended September 30, 2012 and 2011 3 Unaudited Consolidated Statements of Comprehensive Income (Loss) for the three months ended September30, 2012 and 2011 4 Consolidated Balance Sheets at September 30, 2012 (unaudited) and June 30, 2012 (audited) 5 Unaudited Consolidated Statements of Cash Flows for the three months ended September 30, 2012 and 2011 6 Notes to the Unaudited Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Item2. Condition and Results of Operations 39 Quantitative and Qualitative Disclosures About Item3. Market Risk 54 Item4. Controls and Procedures 55 Part II. Other Information Item1. Legal Proceedings 56 Item1A. Risk Factors 60 Unregistered Sales of Equity Securities and Use of Item2. Proceeds 65 Item3. Defaults Upon Senior Securities 65 Item4. Mine Safety Disclosures 65 Item5. Other Information 65 Item6. Exhibits 66 Signature 67 2 Table of Contents NEWS CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Forthethreemonths ended September30, 2012 2011 Revenues $ 8,136 $ 7,959 Operating expenses (4,848 ) (4,753 ) Selling, general and administrative (1,610 ) (1,527 ) Depreciation and amortization (300 ) (294 ) Impairment and restructuring charges (152 ) (91 ) Equity earnings of affiliates 190 121 Interest expense, net (267 ) (258 ) Interest income 31 36 Other, net 1,375 (130 ) Income before income tax expense 2,555 1,063 Income tax expense (259 ) (277 ) Net income 2,296 786 Less: Net income attributable to noncontrolling interests (63 ) (48 ) Net income attributable to News Corporation stockholders $ 2,233 $ 738 Weighted average shares: Basic 2,366 2,607 Diluted 2,370 2,612 Net income attributable to News Corporation stockholders per share: Basic $ 0.94 $ 0.28 Diluted $ 0.94 $ 0.28 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Table of Contents NEWS CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (IN MILLIONS) Forthethreemonths endedSeptember30, 2012 2011 Net income $ 2,296 $ 786 Other comprehensive income (loss): Foreign currency translation adjustments 279 (1,216 ) Unrealized holding losses on securities (1 ) (122 ) Benefit plan adjustments 14 14 Other comprehensive income (loss) 292 (1,324 ) Comprehensive income (loss) 2,588 (538 ) Less: Net income attributable to noncontrolling interests (a) (63 ) (48 ) Less: Other comprehensive income attributable to noncontrolling interests (1 ) 9 Comprehensive income (loss) attributable to News Corporation stockholders $ 2,524 $ (577 ) (a) Net income attributable to noncontrolling interests includes $22 million and $7 million relating to redeemable noncontrolling interests for the three months ended September30, 2012 and 2011, respectively. The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 Table of Contents NEWS CORPORATION CONSOLIDATED BALANCE SHEETS (IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS) AsofSeptember30, AsofJune30, 2012 2012 (unaudited) (audited) Assets: Current assets: Cash and cash equivalents $ 12,007 $ 9,626 Receivables, net 6,634 6,608 Inventories, net 2,856 2,595 Other 770 619 Total current assets 22,267 19,448 Non-current assets: Receivables 464 387 Investments 4,725 4,968 Inventories, net 4,835 4,596 Property, plant and equipment, net 5,830 5,814 Intangible assets, net 7,128 7,133 Goodwill 13,190 13,174 Other non-current assets 1,237 1,143 Total assets $ 59,676 $ 56,663 Liabilities and Equity: Current liabilities: Borrowings $ 273 $ 273 Accounts payable, accrued expenses and other current liabilities 5,615 5,405 Participations, residuals and royalties payable 1,862 1,691 Program rights payable 1,292 1,368 Deferred revenue 1,003 880 Total current liabilities 10,045 9,617 Non-current liabilities: Borrowings 16,184 15,182 Other liabilities 3,693 3,650 Deferred income taxes 2,329 2,388 Redeemable noncontrolling interests 648 641 Commitments and contingencies Equity: ClassA common stock (a) 15 15 Class B common stock (b) 8 8 Additional paid-in capital 16,016 16,140 Retained earnings and accumulated other comprehensive income 10,225 8,521 Total News Corporation stockholders' equity 26,264 24,684 Noncontrolling interests 513 501 Total equity 26,777 25,185 Total liabilities and equity $ 59,676 $ 56,663 (a) ClassA common stock , $0.01 par value per share, 6,000,000,000 shares authorized, 1,555,194,481 shares and 1,584,519,372 shares issued and outstanding, net of 1,775,950,044 and 1,775,983,637 treasury shares at par at September30, 2012 and June30, 2012, respectively. (b) Class B common stock , $0.01 par value per share, 3,000,000,000 shares authorized, 798,520,953 shares issued and outstanding, net of 313,721,702 treasury shares at par at September30, 2012 and June30, 2012. The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 Table of Contents NEWS CORPORATION UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN MILLIONS) Forthethreemonthsended September30, 2012 2011 Operating activities: Net income $ 2,296 $ 786 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 300 294 Amortization of cable distribution investments 21 24 Equity earnings of affiliates (190 ) (121 ) Cash distributions received from affiliates 18 64 Impairment charges 35 - Other, net (1,375 ) 130 Change in operating assets and liabilities, net of acquisitions: Receivables and other assets (164 ) (275 ) Inventories, net (465 ) (537 ) Accounts payable and other liabilities 234 59 Net cash provided by operating activities 710 424 Investing activities: Property, plant and equipment, net of acquisitions (176 ) (248 ) Acquisitions, net of cash acquired (227 ) (67 ) Investments in equity affiliates 69 (34 ) Other investments (30 ) (78 ) Proceeds from dispositions 1,825 334 Net cash provided by (used in) investing activities 1,461 (93 ) Financing activities: Borrowings 988 - Repayment of borrowings - (32 ) Issuance of shares 111 12 Repurchase of shares (877 ) (1,272 ) Dividends paid (52 ) (23 ) Other, net 9 - Net cash provided by (used in) financing activities 179 (1,315 ) Net increase (decrease) in cash and cash equivalents 2,350 (984 ) Cash and cash equivalents, beginning of year 9,626 12,680 Exchange movement on opening cash balance 31 (267 ) Cash and cash equivalents, end of year $ 12,007 $ 11,429 The accompanying notes are an integral part of these unaudited consolidated financial statements. 6 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 global media company, which manages and reports its businesses in six segments:Cable Network Programming, Filmed Entertainment, Television, Direct Broadcast Satellite Television, 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 June30, 2013. 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 June30, 2012 as filed with the Securities and Exchange Commission ("SEC") on August14, 2012 and as amended on October1, 2012 (the "2012 Form 10-K"). 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 designated as available-for-sale if readily determinable fair values are available.If an investment's fair value is not readily determinable, the Company accounts for its investment under the cost method. The Company has an investment in Sky Deutschland AG ("Sky Deutschland") which it considers a variable interest entity ("VIE"). The Company's aggregate risk of loss related to this investment was approximately $510 million and $515 million as of September30, 2012 and June30, 2012, respectively, which consisted of debt and equity securities and a loan. (See Note 6-Investments) The Company also has a consolidated investment in a VIE; however, the assets, liabilities, net income and cash flows attributable to this entity were not material to the Company in any of the periods presented. 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. The Company's fiscal year ends on the Sunday closest to June30. Fiscal 2013 and fiscal 2012 include 52 weeks. All references to September30, 2012 and September30, 2011 relate to the three months ended September30, 2012 and October2, 2011, respectively.For convenience purposes, the Company continues to date its financial statements as of September30. Certain fiscal 2012 amounts have been reclassified to conform to the fiscal 2013 presentation. Recently Adopted and Recently Issued Accounting Guidance Adopted In the first quarter of fiscal 2013, the Company adopted Accounting Standards Update ("ASU") 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income," ("ASU 2011-05") which requires an entity to present total comprehensive income, the components of net income and the components of other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The adoption of ASU 2011-05 resulted in two separate but consecutive statements. In the first quarter of fiscal 2013, the Company adopted ASU 2011-08, "Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment" ("ASU 2011-08"). Under ASU 2011-08 the Company has the option to make a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying value before applying the two-step goodwill impairment model that is currently in place. If it is determined through the qualitative assessment that a reporting unit's fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. 7 Table of Contents NEWS CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Issued In July 2012, the Financial Accounting Standards Board ("FASB") issued ASU 2012-02, "Intangibles-Goodwill and Other (Topic 350):Testing Indefinite-Lived Intangible Assets for Impairment" ("ASU 2012-02"), which permits an entity to make a qualitative assessment of whether it is more likely than not that the fair value of a reporting unit's indefinite-lived intangible asset is less than the asset's carrying value before applying the two-step goodwill impairment model that is currently in place.If it is determined through the qualitative assessment that the fair value of a reporting unit's indefinite-lived intangible asset is more likely than not greater than the asset's carrying value, the remaining impairment steps would be unnecessary.The qualitative assessment is optional, allowing companies to go directly to the quantitative assessment.ASU 2012-02 is effective for the Company for annual and interim indefinite-lived intangible asset impairment tests performed beginning July1, 2013, however, early adoption is permitted.The Company is currently evaluating the impact ASU 2012-02 will have on its consolidated financial statements. In October 2012, the FASB issued ASU 2012-07, "Accounting for Fair Value Information That Arises after the Measurement Date and Its Inclusion in the Impairment Analysis of Unamortized Film Costs" ("ASU 2012-07"), which would have the effect of incorporating into the fair value measurement used for the impairment analysis of unamortized film costs only information that is known or knowable as of the measurement date, consistent with how information is incorporated into other fair value measurements. ASU 2012-07 is effective for the Company for impairment assessments performed on or after December15, 2012. The Company is currently evaluating the impact ASU 2012-07 will have on its consolidated financial statements. NOTE 2. ACQUISITIONS, DISPOSALS AND OTHER TRANSACTIONS Fiscal 2013 Acquisitions In July 2012, the Company acquired Thomas Nelson, Inc. ("Thomas Nelson"), one of the leading Christian book publishers in the United States, for approximately $200 million in cash. In accordance with Accounting Standards Codification ("ASC") 350, "Intangibles-Goodwill and Other," the purchase price has been preliminarily allocated to intangibles. The amount allocated to intangibles is subject to change pending the completion of final valuations of certain assets and liabilities. A change in the purchase price allocation and any estimates of useful lives could result in a change in the value allocated to the intangible assets that could impact future amortization expense. In August 2012, the Company entered into an agreement to acquire a 51% equity interest in Eredivisie Media& Marketing CV ("EMM"). EMM is a media company based in the Netherlands which holds the Dutch Premier League soccer rights and operates several channels in the Netherlands.EMM is owned by the 18 Dutch Premier League soccer clubs and the global TV production company Endemol. The acquisition is subject to regulatory clearances and other customary closing conditions. In November 2012, the Company acquired the remaining 50% interest in ESPN STAR Sports ("ESS") it did not already own for approximately $335 million in cash.ESS is the leading sports broadcaster in Asia and the Company now, through its wholly owned subsidiaries, owns 100% of ESS. Accordingly, the results of ESS will be included in the Company's consolidated results of operations in November 2012. Other In July 2011, the Company announced that it would close its publication, The News of the World , after allegations of phone hacking and payments to public officials. As a result of management's approval of the shutdown of The News of the World , the Company has reorganized portions of the U.K. newspaper business and has recorded restructuring charges in fiscal 2013 and 2012 primarily for termination benefits and certain organizational restructuring at the U.K. newspapers. (See Note 4-Restructuring Programs) The Company is subject to several ongoing investigations by U.K. and U.S. regulators and governmental authorities, including investigations into whether similar conduct may have occurred at the Company's subsidiaries outside of the U.K. The Company is cooperating with these investigations. In addition, the Company has admitted liability in a number of civil cases related to the phone hacking allegations and has settled a number of cases. The Company created an independently-chaired Management& Standards Committee (the "MSC"), which operates independently from NI Group Limited ("News International") and has full authority to ensure cooperation with all relevant investigations and inquiries into The News of the World matters and all other related 8 Table of Contents NEWS CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS issues across News International. The MSC conducts its own internal investigation where appropriate. The MSC has an independent Chairman, Lord Grabiner QC, and reports directly to Gerson Zweifach, Senior Executive Vice President and Group General Counsel of the Company. Mr.Zweifach reports to the independent members of the Board of Directors (the "Board") through their representative Viet Dinh, an independent director and Chairman of the Company's Nominating and Corporate Governance Committee. The independent directors of the Board have retained independent outside counsel and are actively engaged in these matters. The MSC conducted an internal investigation of the three other titles at News International and engaged independent outside counsel to advise it on these investigations and all other matters it handles. News International has instituted governance reforms and issued certain enhanced policies to its employees. The Company has also engaged independent outside counsel to assist it in responding to U.S. governmental inquiries. (See Note 13-Commitments and Contingencies for a summary of the costs of The News of the World Investigations and Litigation.) In May 2012, the Company renewed its existing FOX affiliation agreement with a major FOX affiliate group ("Network Affiliate").As part of the transaction, the Company received a one-time payment of $25 million and an option to buy Network Affiliate's stations in any three of four markets or, if such option is not exercised, receive an additional $25 million cash payment.Further, Network Affiliate has an option to buy the Company's Baltimore station. Both options may be exercised at any time through March30, 2013.Network Affiliate has exercised its option to purchase the Baltimore station. In June 2012, the Company announced that it intends to pursue the separation of its publishing and its media and entertainment businesses into two distinct publicly traded companies. The global publishing company that would be created through the proposed transaction would consist of the Company's publishing businesses, its education division and other Australian assets. The global media and entertainment company would consist of the Company's cable and television assets, filmed entertainment, and direct satellite broadcasting businesses. Following the separation, each company would maintain two classes of common stock: ClassA Common and Class B Common Voting Shares. The separation is expected to be completed in approximately one year from the date of announcement. In addition to final approval from the Board and stockholder approval, the completion of the separation will be subject to receipt of regulatory approvals, opinions from tax counsel and favorable rulings from certain tax jurisdictions regarding the tax-free nature of the transaction to the Company and to its stockholders, further due diligence as appropriate, and the filing and effectiveness of appropriate filings with the SEC. At the end of fiscal 2012, the Company identified certain businesses as held for sale and reclassified the net assets to other current assets.In the three months ended September30, 2012, as a result of revised projections, the Company recorded a $35 million non-cash impairment charge related to its assets held for sale to reduce the carrying value of these assets to fair value less cost to sell.The assets, liabilities and cash flows attributable to these businesses were not material to the Company in any of the periods presented and, accordingly, have not been presented separately. Fiscal 2012 Acquisitions In December 2011, the Company acquired the 67% equity interest it did not already own in Fox Pan American Sports LLC ("FPAS") for approximately $400 million. FPAS, an international sports programming and production entity, which owns and operates Fox Sports Latin America network, a Spanish and Portuguese-language sports network distributed to subscribers in certain Caribbean and Central and South American nations, and partially through its ownership in FPAS, a 53% interest in Fox Deportes, a Spanish-language sports programming service distributed in the United States. As a result of this transaction, the Company now owns 100% of FPAS and Fox Deportes. Accordingly, the results of FPAS are included in the Company's consolidated results of operations beginning in December 2011. The FPAS acquisition was accounted for in accordance with ASC 805, "Business Combinations," which requires an acquirer to remeasure its previously held equity interest in an acquiree at its acquisition date fair value and recognize the resulting gain or loss in earnings. The carrying amount of the Company's previously held equity interest in FPAS was revalued to fair value at the acquisition date, resulting in a non-taxable gain of approximately $158 million which was included in Other, net in the consolidated statements of operations for the fiscal year ended June30, 2012. In accordance with ASC 350 the excess purchase price preliminarily allocated to goodwill will not be amortized for the FPAS acquisition. The amount allocated to goodwill is subject to change pending the 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. 9 Table of Contents NEWS CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS In May 2012, the Company acquired an approximate 23% interest in Latin America Pay Television ("LAPTV"), a partnership that distributes premium and basic television channels in Latin America, for approximately $64 million in cash. As a result of this transaction, the Company increased its interest in LAPTV to approximately 78% from the 55% it owned at June30, 2011. Disposals In July 2011, the Company sold its majority interest in its outdoor advertising businesses in Russia and Romania ("News Outdoor Russia") for cash consideration of approximately $360 million. In connection with the sale, the Company repaid $32 million of News Outdoor Russia debt. (See Note 9-Borrowings) The Company recorded a gain related to the sale of this business, which was included in Other, net in the unaudited consolidated statements of operations for the three months ended September30, 2011. The gain on the sale and the net income, assets, liabilities and cash flow attributable to the News Outdoor Russia operations were not material to the Company in any of the periods presented and, accordingly, have not been presented separately. In May 2012, the Company sold its former U.K. newspaper division headquarters located in East London,which it relocated from in August 2010, for consideration of approximately £150million, of which £25million was received on closing of the sale. The remaining £125million is in the form of a secured note and the Company will receive £25million on May31, 2013, and annually thereafter until May31, 2017. The Company recorded a loss of approximately $22 million on this transaction, which was included in Other, net in the consolidated statements of operations for the fiscal year ended June30, 2012. Other In fiscal 2012, the Company entered into an asset acquisition agreement with a third party in exchange for a noncontrolling ownership interest in one of the Company's majority-owned Regional Sports Networks ("RSN"). The noncontrolling shareholder has a put option related to its ownership interest that is exercisable beginning in fiscal 2015. Since redemption of the noncontrolling interest is outside of the control of the Company, the Company has accounted for this put option in accordance with ASC 480-10-S99-3A, "Distinguishing Liabilities from Equity" ("ASC 480-10-S99-3A"), and has recorded the put option at its fair value as a redeemable noncontrolling interest in the consolidated balance sheets. NOTE 3. RECEIVABLES, NET Receivables 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. The Company has receivables with original maturities greater than one year in duration principally related to the Company's sale of program rights in the television syndication markets within the Filmed Entertainment segment. Allowances for credit losses are established against these non-current receivables as necessary. As of September30, 2012 and June30, 2012, these allowances were not material. Receivables, net consisted of: At At September30, June30, 2012 2012 (in millions) Total receivables $ 8,072 $ 7,981 Allowances for returns and doubtful accounts (974 ) (986 ) Total receivables, net 7,098 6,995 Less: current receivables, net (6,634 ) (6,608 ) Non-current receivables, net $ 464 $ 387 10 Table of Contents NEWS CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 4. RESTRUCTURING PROGRAMS Fiscal 2013 During the three months ended September30, 2012, the Company recorded restructuring charges of $117 million, of which $112 million related to the newspaper businesses. The restructuring charges primarily relate to the reorganization of the Australian newspaper businesses which was announced at the end of fiscal 2012 and the continued reorganization of the U.K. newspaper business. The restructuring charges recorded in the first quarter of fiscal 2013 are primarily for termination benefits in Australia and contract termination payments in the U.K. Fiscal 2012 During the three months ended September30, 2011, the Company recorded restructuring charges of $91 million, of which $88 million related to the newspaper businesses. The Company reorganized portions of the U.K. newspaper business and recorded restructuring charges in the first quarter of fiscal 2012 primarily for termination benefits as a result of the shutdown of The News of the World and certain organizational restructurings at other newspapers. Changes in the program liabilities were as follows: For the three months ended September30, 2012 2011 One time Facility One time Facility termination related Other termination related Other benefits costs costs Total benefits costs costs Total (in millions) Balance, beginning of period $ 64 $ 185 $ - $ 249 $ 27 $ 207 $ - $ 234 Additions 64 2 51 117 74 3 14 91 Payments (77 ) (8 ) (49 ) (134 ) (22 ) (10 ) (10 ) (42 ) Other - - (1 ) (1 ) (5 ) 1 (3 ) (7 ) Balance, end of period $ 51 $ 179 $ 1 $ 231 $ 74 $ 201 $ 1 $ 276 The Company expects to record an additional $65 million of restructuring charges, principally related to accretion on facility termination obligations through fiscal 2021 and additional termination benefits related to the newspaper businesses. At September30, 2012, restructuring liabilities of approximately $82 million and $149 million were included in the consolidated balance sheets in other current liabilities and other liabilities, respectively. Amounts included in other liabilities primarily relate to facility termination obligations, which are expected to be paid through fiscal 2021. 11 Table of Contents NEWS CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS NOTE 5. INVENTORIES The Company's inventories were comprised of the following: At At September30, June30, 2012 2012 (in millions) Programming rights $ 4,527 $ 4,285 Books, DVDs, Blu-rays, paper and other merchandise 404 348 Filmed entertainment costs: Films: Released (including acquired film libraries) 755 846 Completed, not released 14 135 In production 756 502 In development or preproduction 141 140 1,666 1,623 Television productions: Released (including acquired libraries) 582 561 In production 506 370 In development or preproduction 6 4 1,094 935 Total filmed entertainment costs, less accumulated amortization (a) 2,760 2,558 Total inventories, net 7,691 7,191 Less: current portion of inventory, net (b) (2,856 ) (2,595 ) Total noncurrent inventories, net $ 4,835 $ 4,596 (a) Does not include $389 million and $397 million of net intangible film library costs as of September30, 2012 and June30, 2012, respectively, which are included in intangible assets subject to amortization in the consolidated balance sheets. (b) Current inventory as of September30, 2012 and June30, 2012 is comprised of programming rights ($2,484 million and $2,279 million, respectively), books, DVDs, Blu-rays, paper and other merchandise. NOTE 6. INVESTMENTS The Company's investments were comprised of the following: At At Ownership September30, June30, Percentage 2012 2012 (in millions) Equity method investments: British Sky Broadcasting Group plc (a) U.K. DBS operator 39 % $ 1,896 $ 1,710 Sky Network Television Ltd. (a) NewZealandmediacompany 44 % 399 390 Sky Deutschland (a) German pay-TV operator 49.9 % 223 231 NDS Group Limited Digital technology (b) company - % - 492 Other equity method investments various 954 904 Fair value of available-for-sale investments (c) various 572 561 Other investments various 681 680 Total Investments $ 4,725 $ 4,968 (a) The market value of the Company's investment in British Sky Broadcasting Group plc ("BSkyB"), Sky Deutschland and Sky Network Television Ltd., of $7,783 million, $1,559 million and $719 million at September30, 2012, respectively, were valued using quoted market prices. 12 Table of Contents NEWS CORPORATION NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (b) In July 2012, the Company sold its 49% investment in NDS Group Limited ("NDS") and the investment basis in NDS did not change significantly from June 30, 2012. See Other section below for more information on this transaction. (c) Includes investments in publicly traded common stock, which were valued using quoted market prices, and the convertible bond issued by Sky Deutschland, which consists of the host and derivative financial instrument components. The convertible bond components were measured using the discounted cash flows and Black-Scholes valuation methods. Inputs to these valuation measures include observable market data such as stock prices and interest rates. The cost basis, unrealized gains, unrealized losses and fair market value of available-for-sale investments are set forth below: At At September30, June30, 2012 2012 (in millions) Cost basis of available-for-sale investments $ 278 $ 278 Accumulated gross unrealized gain 304 305 Accumulated gross unrealized loss (10 ) (22 ) Fair value of available-for-sale investments $ 572 $ 561 Net deferred tax liability (a) $ 111 $ 108 (a) The net deferred tax liability includes $107 million related to unrealized gains recorded in comprehensive income as of September30, 2012 and June30, 2012. BSkyB During fiscal 2010, the Company announced that it had proposed to the board of directors of BSkyB, in which the Company currently has an approximate 39% interest, to make a cash offer for the BSkyB shares that the Company does not already own. On July13, 2011, the Company announced that it no longer intended to make an offer for the BSkyB shares that the Company does not alrea The story has been truncated, [TRUNCATED]
News Corporation NCRA SEC Form 10Q
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