Cablevision 2013 Annual Report Download - page 60

(54)
Gain on investments, net for the years ended December 31, 2013 and 2012 of $313,167 and $294,235,
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 by the losses on the related equity derivative contracts, net
described below.
Loss on equity derivative contracts, net for the years ended December 31, 2013 and 2012 of $198,688 and
$211,335, respectively, consists of unrealized and realized gains 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 losses are offset by the gains on investment securities pledged as collateral, which are
included in gain on investments, net discussed above.
Loss on interest rate swap contracts, net amounted to $1,828 for the year ended December 31, 2012.
Through their maturity on June 30, 2012, 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. The losses on interest rate swap contracts were 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 $22,542 and
$66,213 for the years ended December 31, 2013 and 2012, respectively. The 2013 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 and the write-off of unamortized deferred financing costs and
discounts related to such repurchases, net of a gain recognized in connection with the repurchase of
Cablevision's senior notes due September 2022. Additionally, the 2013 amount includes the write-off of
deferred financing costs associated with the refinancing of the Restricted Group credit facility. The 2012
amount represents payments in excess of the aggregate principal amount to repurchase a portion of 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.
Income tax expense of $65,635 for the year ended December 31, 2013, reflected an effective tax rate of
34%. An increase in the valuation allowance relating to certain state net operating loss carry forwards
resulted in tax expense of $5,631. The Company recorded tax benefits of (i) $3,739 related to research
and development credits, (ii) $11,228 resulting from a change in the state apportionment rates used to
measure deferred taxes, and (iii) $3,851 resulting from a lower tax rate used to determine deferred tax on
unrealized investment gains. Absent these items, the effective tax rate for the year ended December 31,
2013 would have been 41%.
The Company recorded income tax expense of $51,994 for the year ended December 31, 2012, reflecting
an effective tax rate of 41%. 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 tax benefits of $2,659
related to uncertain tax positions and $3,935 resulting from re-measuring the deferred tax asset for certain
state net operating loss carry forwards. The exclusion of pretax income of an entity that is not
consolidated for income tax purposes resulted in tax benefit of $2,605. Absent these items, the effective
tax rate for the year ended December 31, 2012 would have been 44%.
For the year ended December 31, 2013, 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.
In January 2014, the IRS informed the Company that the consolidated federal income tax returns for 2009
and 2010 are no longer under examination. Accordingly, in the first quarter of 2014, the Company will