Charter 2006 Annual Report Download - page 70

CHARTER COMMUNICATIONS, INC. 2006 FORM 10-K
designated and assessed the effectiveness of transactions that other comprehensive loss and minority interest. The amounts
receive hedge accounting. For the years ended December 31, are subsequently reclassified into interest expense as a yield
2006, 2005, and 2004, other income, net includes gains of adjustment in the same period in which the related interest on
$2 million, $3 million, and $4 million, respectively, which the floating-rate debt obligations affects earnings (losses).
represent cash flow hedge ineffectiveness on interest rate hedge Certain interest rate derivative instruments are not desig-
agreements arising from differences between the critical terms of nated as hedges as they do not meet the effectiveness criteria
the agreements and the related hedged obligations. Changes in specified by SFAS No. 133. However, management believes such
the fair value of interest rate agreements designated as hedging instruments are closely correlated with the respective debt, thus
instruments of the variability of cash flows associated with managing associated risk. Interest rate derivative instruments not
floating-rate debt obligations that meet the effectiveness criteria designated as hedges are marked to fair value, with the impact
of SFAS No. 133 are reported in accumulated other comprehen- recorded as other income, net, in our statements of operations.
sive loss. For the years ended December 31, 2006, 2005, and For the years ended December 31, 2006, 2005, and 2004, other
2004, a loss of $1 million and gains of $16 million and income, net includes gains of $4 million, $47 million, and
$42 million, respectively, related to derivative instruments $65 million, respectively, for interest rate derivative instruments
designated as cash flow hedges, were recorded in accumulated not designated as hedges.
The table set forth below summarizes the fair values and contract terms of financial instruments subject to interest rate risk
maintained by us as of December 31, 2006 (dollars in millions):
Fair Value at
December 31,
2007 2008 2009 2010 2011 Thereafter Total 2006
Debt
Fixed Rate $ 105 $—$ 828 $ 2,251 $ 303 $9,532 $13,019 $13,254
Average Interest Rate 8.25% — 7.67% 10.26% 11.21% 10.13% 10.01%
Variable Rate $25 $ 50 $ 50 $ 995 $ 50 $4,775 $ 5,945 $ 5,979
Average Interest Rate 7.78% 7.44% 7.44% 8.53% 7.60% 7.72% 7.85%
Interest Rate Instruments
Variable to Fixed Swaps $ 875 $—$—$ 500 $ 300 $ —$ 1,675 $ —
Average Pay Rate 7.55% — — 7.46% 7.63% —7.54%
Average Receive Rate 7.92% — — 7.58% 7.59% —7.75%
The notional amounts of interest rate instruments do not
represent amounts exchanged by the parties and, thus, are not a
measure of our exposure to credit loss. The amounts exchanged
are determined by reference to the notional amount and the other
terms of the contracts. The estimated fair value approximates the
costs (proceeds) to settle the outstanding contracts. Interest rates
on variable debt are estimated using the average implied forward
London Interbank Offering Rate (LIBOR) rates for the year of
maturity based on the yield curve in effect at December 31, 2006.
At December 31, 2006 and 2005, we had outstanding
$1.7 billion and $1.8 billion and $0 and $20 million, respectively,
in notional amounts of interest rate swaps and collars, respec-
tively. The notional amounts of interest rate instruments do not
represent amounts exchanged by the parties and, thus, are not a
measure of exposure to credit loss. The amounts exchanged are
determined by reference to the notional amount and the other
terms of the contracts.
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