DIRECTV 2004 Annual Report Download - page 111

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (concluded)
relating to withholding taxes assessed on revenues derived from broadcasters inside and outside of India who broadcast from or
into India. These claims would be subject to the indemnification provided by us. The Indian government has assessed
approximately $7.3 million against one of the PanAmSat subsidiaries for the Indian tax year ended March 31, 1997. This
assessment is being appealed to the Income Tax Appeals Tribunal. For the Indian tax years ended March 31, 1996 through
2001, the Indian government has assessed approximately $36.0 million in the aggregate against PanAmSat, including interest.
This assessment has been appealed to the Commissioner of Income Tax (Appeals). PanAmSat is contesting the imposition of
such taxes. If unsuccessful in its contest, PanAmSat could be subject to comparable claims for subsequent years, which would
include additional years covered by the indemnification agreement.
While the outcome of these and other tax issues cannot be predicted with certainty, we believe that the ultimate outcome will
not have a material impact on our consolidated results of operations or financial position.
Satellites
We use in-orbit and launch insurance to mitigate the potential financial impact of satellite fleet launch and in-orbit failures
unless the premium costs are considered uneconomic relative to the risk of satellite failure. The insurance generally covers the
unamortized book value of covered satellites. We do not insure against lost revenues in the event of a total or partial loss of the
capacity of a satellite. We generally rely on in-orbit spare satellites and excess transponder capacity at key orbital slots to
mitigate the impact a satellite failure could have on our ability to provide service. At December 31, 2004, the net book value of
uninsured satellites amounted to $381.7 million.
Other
We are contingently liable under standby letters of credit and bonds in the aggregate amount of $36.1 million which were
undrawn at December 31, 2004.
At December 31, 2004, minimum future commitments under noncancelable operating leases having lease terms in excess of one
year were primarily for real property and satellite transponder leases and aggregated $663.5 million, payable as follows: $89.3
million in 2005, $85.9 million in 2006, $86.7 million in 2007, $79.0 million in 2008, $65.5 million in 2009 and $257.1 million
thereafter. Certain of these leases contain escalation clauses and renewal or purchase options. Rental expenses under operating
leases, net of sublease income, were $67.3 million in 2004, $62.0 million in 2003 and $55.2 million in 2002.
We have minimum commitments under noncancelable satellite construction and launch contracts, programming agreements,
manufacturer subsidies agreements, TT&C services agreements, billing system agreements, customer call center maintenance
agreements and other vendor obligations. As of December 31, 2004, minimum payments over the terms of applicable contracts
are anticipated to be approximately $7,820.2 million, payable as follows: $1,221.4 million in 2005, $1,211.0 million in 2006,
$1,327.9 million in 2007, $1,332.7 million in 2008, $1,288.2 million in 2009 and $1,439.0 million thereafter. Excluded from the
minimum payments above is DIRECTV U.S.’ remaining commitment to purchase in excess of $500.0 million of set-top
receivers from Thomson during the first three years of the Contract Term based on current set-top receiver prices.
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