Cablevision 2012 Annual Report Download - page 62

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Gain on investments, net for the years ended December 31, 2012 and 2011 of $294,235 and $37,384,
respectively, consists primarily of the increase in the fair value of Comcast common stock owned by the
Company. The effects of these gains are offset, in whole or in part, by the losses on the related equity
derivative contracts, net described below.
Gain (loss) on equity derivative contracts, net for the years ended December 31, 2012 and 2011 of
$(211,335) and $1,454, respectively, consists of unrealized and realized gains and losses due to the
change in fair value of the Company's equity derivative contracts relating to the Comcast common stock
owned by the Company. The effects of these gains and losses are offset, in whole or in part, by the losses
or gains on investment securities pledged as collateral, which are included in gain (loss) on investments,
net discussed above.
Loss on interest rate swap contracts, net amounted to $1,828 and $7,973 for the years ended
December 31, 2012 and 2011, respectively. During the first half of 2012 and the year ended
December 31, 2011, CSC Holdings was party to several interest rate swap contracts with an aggregate
notional amount of $2,600,000 that effectively fixed borrowing rates on a portion of the Company's
floating rate debt. These contracts were not designated as hedges for accounting purposes and matured in
June 2012. The losses on interest rate swap contracts are a result of a shift in the yield curve over the life
of the swap contracts.
Loss on extinguishment of debt and write-off of deferred financing costs amounted to $66,213 and
$92,692 for the years ended December 31, 2012 and 2011, respectively. The 2012 amount represents
payments in excess of the aggregate principal amount to repurchase CSC Holdings senior notes due April
2014 and June 2015 and related fees associated with the tender offer and the write-off of unamortized
deferred financing costs and discounts related to such repurchases. Additionally, the 2012 amount
includes the write-off of deferred financing costs associated with the refinancing of the Newsday credit
facility. The 2011 amount represents amounts paid in excess of the aggregate principal amount to
repurchase CSC Holdings senior notes due April 2012, April 2014 and June 2015 and related fees
associated with the tender offers and the write-off of unamortized deferred financing costs and discounts
related to such repurchases.
Income tax expense of $23,821 for the year ended December 31, 2012, reflected an effective tax rate of
42%. An increase in the valuation allowance relating to certain state net operating loss carry forwards
resulted in tax expense of $5,480. The Company recorded a tax benefit of $2,659 related to uncertain tax
positions. The exclusion of pretax income of an entity that is not consolidated for income tax purposes
resulted in tax benefit of $2,605. The Company recorded tax benefit of $3,935 resulting from re-
measuring the deferred tax asset for certain state net operating loss carry forwards. Nondeductible
expense resulted in tax expense of $3,940.
The Company recorded income tax expense of $184,436 for the year ended December 31, 2011,
reflecting an effective tax rate of 44%. The Company recorded a tax benefit of $1,015 due to the impact
of a change in the state rate used to measure deferred taxes. An increase in the valuation allowance
relating to certain state net operating loss carry forwards resulted in tax expense of $1,822. The Company
recorded tax expense of $1,699 related to uncertain tax positions. In addition, the exclusion of the pretax
loss of an entity that is not consolidated for income tax purposes resulted in additional tax expense of
$2,509.
For the year ended December 31, 2012, the Company has fully offset federal taxable income with a net
operating loss carry forward. However, the Company is subject to the federal alternative minimum tax
and certain state and local income taxes that are payable quarterly.