Charter 2010 Annual Report Download - page 108

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                                         
F- F-PB
CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2010, 2009, AND 2008
(dollars in millions, except share or per share data or where indicated)
includes treasury stock as a component of total Charter shareholders’
equity. e Company currently does not have or intend to initiate a
share repurchase program.

e Company reports changes in the fair value of interest rate
swap agreements designated as hedging the variability of cash flows
associated with floating-rate debt obligations, that meet effectiveness
criteria in accumulated other comprehensive income (loss).
Consolidated comprehensive loss for the years ended December 31,
2010 (Successor) and 2008 (Predecessor) was $294 million and $2.6
billion, respectively. Consolidated comprehensive income for the one
month ended December 31, 2009 (Successor) and eleven months
ended November 30, 2009 (Predecessor) was $2 million and $10.2
billion, respectively. Consolidated comprehensive income (loss) for
the year ended December 31, 2010 (Successor), eleven months ended
November 30, 2009 (Predecessor) and the year ended December
31, 2008 (Predecessor), includes a $57 million, $9 million and
$180 million loss, respectively, on the fair value of interest rate swap
agreements designated as cash flow hedges. For the eleven months
ended November 30, 2009, consolidated comprehensive income
also included a $61 million gain related to the amortization of the
accumulated other comprehensive loss related to terminated interest
rate swap agreements in connection with the bankruptcy.


e Company uses interest rate swap agreements to manage its
interest costs and reduce the Company’s exposure to increases
in floating interest rates. e Company manages its exposure
to fluctuations in interest rates by maintaining a mix of fixed
and variable rate debt. Using interest rate swap agreements, the
Company agrees to exchange, at specified intervals through 2015, the
difference between fixed and variable interest amounts calculated by
reference to agreed-upon notional principal amounts.
e Company does not hold or issue derivative instruments for
speculative trading purposes. e Company has certain interest rate
derivative instruments that have been designated as cash flow hedging
instruments. Such instruments effectively convert variable interest
payments on certain debt instruments into fixed payments. For
qualifying hedges, realized derivative gains and losses offset related
results on hedged items in the consolidated statements of operations.
e Company formally documents, designates and assesses the
effectiveness of transactions that receive hedge accounting.
Interest rate swap agreements are included in other long-term
liabilities at fair value of $57 million as of December 31, 2010
(Successor). Changes in the fair value of interest rate agreements
that are designated as hedging instruments of the variability of
cash flows associated with floating-rate debt obligations, and
that meet effectiveness criteria are reported in accumulated other
comprehensive income (loss). e amounts are subsequently
reclassified as an increase or decrease to interest expense in the
same periods in which the related interest on the floating-rate debt
obligations affected earnings (losses).
In 2009 and 2008, certain interest rate derivative instruments did not
meet effectiveness criteria. Management believed such instruments
were closely correlated with the respective debt, thus managing
associated risk. Interest rate derivative instruments not designated as
hedges were marked to fair value, with the impact recorded as other
income (expenses), net in the Company’s consolidated statements of
operations.
As of December 31, 2010 (Successor), the Company had $2.0 billion
in notional amounts of interest rate swap agreements outstanding.
e 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. e amounts exchanged were determined
by reference to the notional amount and the other terms of the
contracts.
e effect of derivative instruments on the Company’s consolidated
statements of operations is presented in the table below.