Cablevision 2013 Annual Report Download - page 93

(87)
similar tax loss, or a tax credit carryforward exists. ASU No. 2013-11 eliminates the current diversity in
practice in the presentation of unrecognized tax benefits either where an entity may present unrecognized
tax benefits as a liability (unless the unrecognized tax benefit is directly associated with a tax position
taken in a tax year that results in, or that resulted in, the recognition of a net operating loss or tax credit
carryforward for that year and the net operating loss or tax credit carryforward has not been utilized) or by
presenting unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss or tax
credit carryforward in certain circumstances. We will adopt ASU No. 2013-11 prospectively for all
unrecognized tax benefits that exist after January 1, 2014. ASU No. 2013-11 will not have any impact on
the Company's consolidated financial statements upon adoption.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
All dollar amounts, except per customer, per unit and per share data, included in the following discussion
under this Item 7A are presented in thousands.
Equity Price Risk
We are exposed to market risks from changes in certain equity security prices. Our exposure to changes
in equity security prices stems primarily from the shares of Comcast Corporation common stock we hold.
We have entered into equity derivative contracts consisting of a collateralized loan and an equity collar to
hedge our equity price risk and to monetize the value of these securities. These contracts, at maturity, are
expected to offset declines in the fair value of these securities below the hedge price per share while
allowing us to retain upside appreciation from the hedge price per share to the relevant cap price. The
contracts' actual hedge prices per share vary depending on average stock prices in effect at the time the
contracts were executed. The contracts' actual cap prices vary depending on the maturity and terms of
each contract, among other factors. If any one of these contracts is terminated prior to its scheduled
maturity date due to the occurrence of an event specified in the contract, we would be obligated to repay
the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and
equity collar, calculated at the termination date. As of December 31, 2013, we did not have an early
termination shortfall relating to these contracts.
The underlying stock and the equity collars are carried at fair value on our consolidated balance sheets
and the collateralized indebtedness is carried at its accreted value. The carrying value of our
collateralized indebtedness amounted to $817,950 at December 31, 2013. At maturity, the contracts
provide for the option to deliver cash or shares of Comcast common stock, with a value determined by
reference to the applicable stock price at maturity.
As of December 31, 2013, the fair value and the carrying value of our holdings of Comcast common stock
aggregated $1,116,084. Assuming a 10% change in price, the potential change in the fair value of these
investments would be approximately $111,608. As of December 31, 2013, the net fair value and the
carrying value of the equity collar component of the equity derivative contracts entered into to partially
hedge the equity price risk of our holdings of Comcast common stock aggregated $143,562, a net liability
position. For the year ended December 31, 2013, we recorded a net loss on our outstanding equity
derivative contracts of $198,688 and recorded unrealized gains of $313,251 on our holdings of Comcast
common stock that we held during the period.
Fair Value of Equity Derivative Contracts
Fair value as of December 31, 2012, net liability position .................................................................
.
$(145,120)
Change in fair value, net ..................................................................................................................
.
(198,688)
Settlement of contracts ....................................................................................................................
.
200,246
Fair value as of December 31, 2013, net liability position .................................................................
.
$(143,562)