DIRECTV 2012 Annual Report Download - page 119

DIRECTV
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS—(continued)
Total future cash payments under these agreements aggregate to $1,281 pre-tax charge in ‘‘General and administrative expenses’’ in the Consolidated
million, payable as follows: $286 million in 2013, $171 million in 2014, $116 Statements of Operations of approximately $160 million in the first quarter of
million in 2015, $50 million in 2016, $50 million in 2017 and $608 million 2013, related to the remeasurement of the bolivar denominated net monetary assets
thereafter. of our Venezuelan subsidiary as of the date of the devaluation. This devaluation did
not impact our results of operations, financial position or cash flows for the year
Contingencies ended December 31, 2012, but may affect the growth of our Venezuelan business.
There will also be ongoing impacts to our results of operations, primarily related to
Redeemable Noncontrolling Interest the translation of local financial statements at the new exchange rate. In the event
In connection with our acquisition of Sky Brasil in 2006, Globo was granted of an additional devaluation of the bolivar, we will recognize a charge to earnings
the right, until January 2014, to require us to purchase all, but not less than all, of based on the amount of bolivar denominated net monetary assets held at the time
its shares in Sky Brasil. Upon exercising this right, the fair value of Sky Brasil shares of such devaluation.
will be determined by mutual agreement or by an outside valuation expert, and we
have the option to elect to pay for the Sky Brasil shares in cash, shares of our Litigation
common stock or a combination of both. We estimated that Globo’s remaining 7% Litigation is subject to uncertainties and the outcome of individual litigated
equity interest in Sky Brasil had a fair value of approximately $400 million as of matters is not predictable with assurance. Various legal actions, claims and
December 31, 2012 and $265 million as of December 31, 2011. Adjustments to proceedings are pending against us arising in the ordinary course of business. We
the carrying amount of the redeemable noncontrolling interest are recorded to have established loss provisions for matters in which losses are probable and can be
additional paid-in-capital. We determined the fair values using significant reasonably estimated. Some of the matters may involve compensatory, punitive, or
unobservable inputs, which are Level 3 inputs under accounting guidance for treble damage claims, or demands that, if granted, could require us to pay damages
measuring fair value. or make other expenditures in amounts that could not be estimated at
December 31, 2012. After discussion with counsel representing us in those actions,
Venezuela Devaluation and Foreign Currency Exchange Controls it is the opinion of management that such litigation is not expected to have a
Companies operating in Venezuela are required to obtain Venezuelan material effect on our consolidated financial statements. We expense legal costs as
government approval to exchange Venezuelan bolivars into U.S. dollars at the incurred.
official exchange rate. Our ability to pay U.S. dollar denominated obligations and Pegasus Development Corporation and Personalized Media Communications L.L.C.
repatriate cash generated in Venezuela in excess of local operating requirements is In December, 2000, Pegasus Development Corporation and Personalized Media
limited, resulting in an increase in the cash balance at our Venezuelan subsidiary. At Communications L.L.C. filed suit in the United States District Court for the
such time that exchange controls are eased, accumulated cash balances may District of Delaware against DIRECTV, Inc., Hughes Electronics Corporation,
ultimately be repatriated at less than their currently reported value. As of Thomson Consumer Electronics, Inc., and Philips Electronics North America
December 31, 2012, our Venezuelan subsidiary had Venezuelan bolivar Corporation. The suit alleged infringement of certain claims of seven United States
denominated net monetary assets of $446 million, including cash of $563 million, patents and sought an injunction and a monetary award including damages for
based on the official 4.3 bolivars per U.S. dollar exchange rate at that time. infringement, interest, costs, and attorneys’ fees. Trial is presently scheduled for
In February 2013, the Venezuelan government announced a devaluation of the November 2013. The suit now involves claims of four of the seven patents
bolivar from the official exchange rate of 4.3 bolivars per U.S. dollar to an official
rate of 6.3 bolivars per U.S. dollar. As a result of the devaluation, we will record a
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