Cablevision 2014 Annual Report Download - page 74

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All of our monetization transactions are obligations of our wholly-owned subsidiaries that are not part of the Restricted Group;
however, CSC Holdings provides guarantees of the subsidiaries' ongoing contract payment expense obligations and potential
payments that could be due as a result of an early termination event (as defined in the agreements). The guarantee exposure
approximates the net sum of the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock
and the equity collar. All of our equity derivative contracts are carried at their current fair value on our consolidated balance sheets
with changes in value reflected in our consolidated statements of income, and all of the counterparties to such transactions currently
carry investment grade credit ratings.
Recently Issued But Not Yet Adopted Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-12,
Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide
That a Performance Target Could Be Achieved after the Requisite Service Period. ASU No. 2014-12 requires that a performance
target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. Entities
may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or
(b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period
presented in the financial statements and to all new or modified awards thereafter. ASU No. 2014-12 becomes effective for us on
January 1, 2016 with early adoption permitted. We do not expect that ASU No. 2014-12 will have any impact on our consolidated
financial statements upon adoption.
In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and
Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The
amendments in ASU No. 2014-08 change the criteria for reporting discontinued operations while enhancing certain disclosures.
Under ASU No. 2014-08, only disposals representing a strategic shift that has (or will have) a major effect on an entity's operations
and financial results should be presented as discontinued operations. In addition, ASU No. 2014-08 requires expanded disclosures
about discontinued operations and disposals of individually significant components that do not qualify as discontinued operations.
ASU No. 2014-08 was adopted by the Company on January 1, 2015.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
All dollar amounts, except 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 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, 2014, we did not have an early termination shortfall relating to any of 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 principal value. The carrying value of our collateralized indebtedness amounted to $986,183 at
December 31, 2014. 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, 2014, the fair value and the carrying value of our holdings of Comcast common stock aggregated $1,245,916.
Assuming a 10% change in price, the potential change in the fair value of these investments would be approximately $124,592.
As of December 31, 2014, 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 $94,900, a net liability
position. For the year ended December 31, 2014, we recorded a net loss of $45,055 related to our outstanding equity derivative
contracts and recorded an unrealized gain of $129,832 related to the Comcast common stock that we held during the period.