Virgin Media 2011 Annual Report Download - page 144

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 15—Shareholders’ Equity (continued)
Series A Warrants
On January 10, 2003, we issued Series A warrants to some of our former creditors and stockholders. The
Series A warrants were initially exercisable for a total of 8,750,496 shares of common stock at an exercise price
of $309.88 per share. After adjustment to account for the rights offering and the reverse acquisition of Telewest
in accordance with anti-dilution adjustment provisions, the Series A warrants were exercisable for a total of
25,769,060 shares of our common stock at an exercise price of $105.17 per share. The Series A warrants expired
on January 10, 2011.
Note 16—Commitments and Contingent Liabilities
At December 31, 2011, we were committed to pay £1,416.5 million for equipment and services, exclusive of
capital and operating leases. This amount includes £643.2 million for operations and maintenance contracts and
other commitments from January 1, 2013 to 2025. The aggregate amount of the fixed and determinable portions
of these obligations for the succeeding five fiscal years and thereafter is as follows (in millions):
Year ending December 31:
2012 ............................................. £ 626.7
2013 ............................................. 287.3
2014 ............................................. 157.7
2015 ............................................. 115.9
2016 ............................................. 78.6
Thereafter ........................................ 150.3
£1,416.5
This table excludes £642.6 million of accounts payable and accrued liabilities as at December 31, 2011
which will be paid in 2012.
We are involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property,
commercial, employee and employee benefits which arise in the ordinary course of our business. In accordance
with the Contingencies Topic of the FASB ASC, we recognize a provision for a liability when management
believes that it is both probable that a liability has been incurred and the amount of the loss can be reasonably
estimated. We believe we have adequate provisions for any such matters. We review these provisions at least
quarterly and adjust these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal
counsel and other information and events pertaining to a particular case. Additionally, when we believe it is at
least reasonably possible that a liability has been incurred in excess of any recorded liabilities we provide an
estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. While litigation
is inherently unpredictable, we believe that we have valid defenses with respect to legal matters pending against
us.
Our revenue generating activities are subject to Value Added Tax, or VAT. During the second quarter of
2011, we reached an agreement with the U.K. tax authorities regarding our VAT treatment of certain of these
activities. The U.K. tax authorities provided us with a refund of £81.5 million, which was collected during the
second quarter of 2011, and £77.6 million of which is included in interest income and other, net in the
consolidated statement of operations for the year ended December 31, 2011.
Our VAT treatment of certain other revenue generating activities remains subject to challenge by the U.K.
tax authorities. As a result, we have estimated contingent losses totaling £27.4 million as of December 31, 2011
that are not accrued for, as we deem them to be reasonably possible, but not probable, of resulting in a liability.
We currently expect an initial hearing on these matters to take place in 2012.
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