Facebook 2012 Annual Report Download - page 71

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Interest Rate Sensitivity
Our exposure to changes in interest rates relates primarily to interest earned and market value on our cash
and cash equivalents and marketable securities and interest paid on our long-term debt.
Our cash and cash equivalents and marketable securities consist of cash, certificates of deposit, time
deposits, money market funds and U.S. government and U.S. government agency securities. Our investment
policy and strategy are focused on preservation of capital and supporting our liquidity requirements. Changes in
U.S. interest rates affect the interest earned on our cash and cash equivalents and marketable securities and the
market value of those securities. A hypothetical 100 basis point increase in interest rates would result in a
decrease of approximately $55 million and $15 million in the market value of our available-for-sale debt
securities as of December 31, 2012 and December 31, 2011, respectively. Any realized gains or losses resulting
from such interest rate changes would only occur if we sold the investments prior to maturity.
Our long-term debt consists of the $1.5 billion draw down on our three-year unsecured term loan facility
that bears variable interest at 1-month LIBOR plus 1.0%. As our risk management objective is to mitigate the
risk of changes in cash flows attributable to changes in the designated 1-month LIBOR for the loan, we have
entered into an interest rate swap agreement for the exact notional amount of $1.5 billion and a fixed interest rate
of 1.46% at the same time the term loan was drawn down to hedge this exposure. Both the term loan and interest
rate swap have a maturity date of October 25, 2015. Changes in the cash flows of the interest rate swap are
expected to exactly offset the changes in cash flows attributable to fluctuations in the 1-month LIBOR based
interest payments on the long-term debt. The net effect of this swap agreement is to convert the variable interest
rate to a fixed rate of 1.46%.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition, or results of
operations.
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