DIRECTV 2010 Annual Report Download - page 72

Download and view the complete annual report

Please find page 72 of the 2010 DIRECTV annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 142

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142

DIRECTV
parallel exchange process to settle U.S. dollar obligations and to repatriate has not changed despite continuing high inflation in Venezuela. These conditions
accumulated cash balances prior to its close. The rates implied by transactions in are also expected to affect growth in our Venezuelan business which is dependent
the parallel market, which was closed in May 2010, were significantly higher than on our ability to purchase set-top boxes and other components using U.S. dollars.
the official rate (6 to 7 bolivars fuerte per U.S. dollar). As a result, we recorded a Using the official 4.3 bolivars fuerte per U.S. dollar exchange rate as of
$22 million charge in 2010, a $213 million charge in 2009 and a $29 million December 31, 2010, our Venezuelan subsidiary had net Venezuelan bolivar fuerte
charge in 2008 in ‘‘General and administrative expenses’’ in the Consolidated denominated monetary assets of $85 million in excess of Venezuelan bolivar fuerte
Statements of Operations in connection with the exchange of accumulated denominated monetary liabilities, including cash of $169 million as of
Venezuelan cash balances to U.S. dollars using the parallel exchange process. December 31, 2010.
As a result of the closing of the parallel exchange process in May 2010, we Income taxes. During 2010, we entered into an agreement with a former
have been unable to repatriate excess cash balances and as a result, we have realized owner to settle certain tax contingencies. As a result of this settlement we recorded
lower charges for the repatriation of cash in 2010 and our Venezuelan subsidiary a benefit of $39 million in ‘‘Income tax expense’’ in the Consolidated Statements of
had accumulated Venezuelan bolivars fuerte denominated cash of $169 million at Operations during the year ended December 31, 2010.
December 31, 2010, as compared to $33 million at December 31, 2009 using the
official exchange rate. Globo. As discussed in Note 19 of the Notes to the Consolidated Financial
Statements in Part II, Item 8 of this Annual Report, Globo has the right to
In June 2010, the Venezuelan government established the SITME, an
exchange its remaining Sky Brazil shares for cash or our common shares. If Globo
alternative to the official process for exchanging foreign currency. Venezuelan
exercises this right, we have the option to elect to pay the consideration in cash,
entities can purchase U.S. dollar denominated securities through the SITME;
shares of our common stock, or a combination of both.
however, trading volume is limited to $50,000 per day with a maximum equivalent
of $350,000 in a calendar month, subject to certain limitations. The SITME has Other. Several factors may affect our ability to fund our operations and
established a weighted average implicit exchange rate of approximately 5.3 bolivars commitments that we discuss in ‘‘Contractual Obligations’’, ‘‘Off-Balance Sheet
fuerte per U.S. dollar. Arrangements’’ and ‘‘Contingencies’’ below. In addition, our future cash flows may
As a result of these recent developments, our ability to pay U.S. dollar be reduced if we experience, among other things, significantly higher subscriber
denominated obligations and repatriate cash generated in Venezuela in excess of additions than planned, increased subscriber churn or upgrade and retention costs,
local operating requirements is limited, resulting in an increase in the cash balance higher than planned capital expenditures for satellites and broadcast equipment, or
at our Venezuelan subsidiary. We expect to continue our practice of repatriating satellite anomalies or signal theft. Additionally, DIRECTV U.S.’ ability to borrow
cash generated in Venezuela in excess of local operating requirements. At such time under its revolving credit facility is contingent upon DIRECTV U.S. meeting a
that exchange controls are eased, accumulated cash balances may ultimately be financial and other covenants associated with its facility as more fully described
repatriated at less than their currently reported value, as the official exchange rate above.
50