Charter 2012 Annual Report Download - page 98

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CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012, 2011 AND 2010
(dollars in millions, except share or per share data or where indicated)
F- 23
The effect of derivative instruments on the Company’s consolidated balance sheets is presented in the table below:
December 31, 2012 December 31, 2011
Other long-term liabilities:
Fair value of interest rate derivatives designated as hedges $ 67 $ 65
Accrued interest:
Fair value of interest rate derivatives designated as hedges $ 8 $ —
Accumulated other comprehensive loss:
Fair value of interest rate derivatives designated as hedges $ (75) $ (65)
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
loss. The 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).
The effects of derivative instruments on the Company’s consolidated statements of comprehensive loss and consolidated statements
of operations is presented in the table below.
Year Ended December 31,
2012 2011 2010
Other comprehensive loss:
Loss on interest rate derivatives
designated as hedges (effective portion) $ (10) $ (8) $ (57)
Net loss:
Amount of loss reclassified from
accumulated other comprehensive loss
into interest expense $ (36) $ (39) $ (27)
As of December 31, 2012 and 2011, the Company had $3.1 billion and $2.0 billion in notional amounts of interest rate swap
agreements outstanding. 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 were determined by reference to the notional
amount and the other terms of the contracts.
During the second quarter of 2012, the Company entered into $1.1 billion in delayed start interest rate swaps that become effective
in March 2013 through March 2015. In any future quarter in which a portion of these delayed start hedges first becomes effective,
an equal or greater notional amount of the currently effective swaps are scheduled to mature. Therefore, the $2.0 billion notional
amount of currently effective interest rate swaps will gradually step down over time as current swaps mature and an equal or lesser
amount of delayed start swaps become effective.
12. Fair Value Measurements
Financial Assets and Liabilities
The Company has estimated the fair value of its financial instruments as of December 31, 2012 and 2011 using available market
information or other appropriate valuation methodologies. Considerable judgment, however, is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates presented in the accompanying consolidated financial
statements are not necessarily indicative of the amounts the Company would realize in a current market exchange.