DIRECTV 2011 Annual Report Download - page 74

DIRECTV
the adjustment of net bolivars fuerte denominated monetary assets to the new Income taxes. During 2010, we entered into an agreement with a former
official exchange rate. We began reporting the operating results of our Venezuelan owner to settle certain tax contingencies. As a result of this settlement we recorded
subsidiary in the first quarter of 2010 using the devalued rate of 4.3 bolivars fuerte a benefit of $39 million in ‘‘Income tax expense’’ in the Consolidated Statements of
per U.S. dollar. In December 2010, the Venezuelan government announced the Operations during the year ended December 31, 2010. We engage in continuous
elimination of the dual exchange rate system, eliminating the 2.6 bolivars fuerte per discussions and negotiations with federal, state, and foreign taxing authorities and
U.S. dollar preferential rate which was available for certain activities. reevaluate our uncertain tax positions, and, while it is often difficult to predict the
final outcome or the timing of resolution of any particular tax matter or tax
Companies operating in Venezuela are required to obtain Venezuelan position, we believe that it is reasonably possible that our unrecognized tax benefits
government approval to exchange Venezuelan bolivars fuerte into U.S. dollars at the could decrease by up to approximately $180 million during the next twelve months.
official rate. We have not been able to consistently exchange Venezuelan bolivars
fuerte into U.S. dollars at the official rate and as a result, we have relied on a Globo. As discussed in Note 20 of the Notes to the Consolidated Financial
parallel exchange process to settle U.S. dollar obligations and to repatriate Statements in Part II, Item 8 of this Annual Report, Globo has the right to
accumulated cash balances prior to its close. The rates implied by transactions in exchange its remaining Sky Brazil shares for cash or our common shares. If Globo
the parallel market, which was closed in May 2010, were significantly higher than exercises this right, we have the option to elect to pay the consideration in cash,
the official rate (6 to 7 bolivars fuerte per U.S. dollar). As a result, we recorded a shares of our common stock, or a combination of both.
$22 million charge in 2010, and a $213 million charge in 2009 in ‘‘General and
Other. Several factors may affect our ability to fund our operations and
administrative expenses’’ in the Consolidated Statements of Operations in
commitments that we discuss in ‘‘Contractual Obligations’’, ‘‘Off-Balance Sheet
connection with the exchange of accumulated Venezuelan cash balances to U.S.
Arrangements’’ and ‘‘Contingencies’’ below. In addition, our future cash flows may
dollars using the parallel exchange process.
be reduced if we experience, among other things, significantly higher subscriber
As a result of the closing of the parallel exchange process in May 2010, we additions than planned, increased subscriber churn or upgrade and retention costs,
have been unable to repatriate excess cash balances and as a result, we have realized higher than planned capital expenditures for satellites and broadcast equipment, or
no charges for the repatriation of cash in 2011. Our ability to pay U.S. dollar satellite anomalies or signal theft. Additionally, DIRECTV U.S.’ ability to borrow
denominated obligations and repatriate cash generated in Venezuela in excess of under its revolving credit facility is contingent upon DIRECTV U.S. meeting a
local operating requirements is limited, resulting in an increase in the cash balance financial and other covenants associated with its facility as more fully described
at our Venezuelan subsidiary. At such time that exchange controls are eased, above.
accumulated cash balances may ultimately be repatriated at less than their currently
reported value, as the official exchange rate has not changed despite continuing CONTRACTUAL OBLIGATIONS
high inflation in Venezuela. In addition, in the event of a significant devaluation of
The following table sets forth our contractual obligations as of December 31,
the bolivar fuerte, we may recognize a charge to earnings based on the amount of
2011, including the future periods in which payments are expected. Additional
bolivar fuerte denominated net monetary assets (monetary assets net of monetary
details regarding these obligations are provided in the Notes to the Consolidated
liabilities) held at the time of such devaluation. These conditions are also expected
Financial Statements in Part II, Item 8 referenced in the table. The contractual
to affect growth in our Venezuelan business which is dependent on our ability to
obligations below do not include payments that could be made related to our net
purchase set-top boxes and other components using U.S. dollars.
unrecognized tax benefits liability, which amounted to $394 million as of
Using the official 4.3 bolivars fuerte per U.S. dollar exchange rate as of December 31, 2011. The timing and amount of any future payments is not
December 31, 2011, our Venezuelan subsidiary had net Venezuelan bolivar fuerte reasonably estimable, as such payments are dependent on the completion and
denominated monetary assets of $285 million, including cash of $401 million as of
December 31, 2011.
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