Clearwire 2008 Annual Report Download - page 84

F
oreign Currenc
y
Exc
h
ange Rate
s
We are expose
d
to
f
ore
i
gn currency exc
h
ange rate r
i
s
k
as
i
tre
l
ates to our
i
nternat
i
ona
l
operat
i
ons. We current
ly
d
o not
h
e
dg
e our currenc
y
exc
h
an
g
e rate r
i
s
k
an
d
, as suc
h
, we are expose
d
to
fl
uctuat
i
ons
i
nt
h
eva
l
ue o
f
t
h
eUn
i
te
d
S
tates dollar a
g
ainst other currencies. Our international subsidiaries and equit
y
investees
g
enerall
y
use the currenc
y
o
f
t
h
e
j
ur
i
s
di
ct
i
on
i
nw
hi
c
h
t
h
ey res
id
e, or
l
oca
l
currency, as t
h
e
i
r
f
unct
i
ona
l
currency. Assets an
dli
a
bili
t
i
es ar
e
t
rans
l
ate
d
at exc
h
an
g
e rates
i
ne
ff
ect as o
f
t
h
e
b
a
l
ance s
h
eet
d
ate an
d
t
h
e resu
l
t
i
n
g
trans
l
at
i
on a
dj
ustments ar
e
r
ecorded within accumulated other com
p
rehensive income (loss). Income and ex
p
ense accounts are translated at the
average mont
hl
yexc
h
ange rates
d
ur
i
ng t
h
e report
i
ng per
i
o
d
.T
h
ee
ff
ects o
f
c
h
anges
i
nexc
h
ange rates
b
etween t
h
e
d
es
ig
nate
df
unct
i
ona
l
currenc
y
an
d
t
h
e currenc
yi
nw
hi
c
h
a transact
i
on
i
s
d
enom
i
nate
d
are recor
d
e
d
as
f
ore
ig
n
c
urrenc
y
transaction
g
ains (losses) and recorded in the consolidated statement of operations. We believe that th
e
fl
uctuat
i
on o
ff
ore
i
gn currency exc
h
ange rates
did
not
h
ave a mater
i
a
li
mpact on our conso
lid
ate
dfi
nanc
i
a
l
s
tatements.
I
nvestment Risk
At December 31, 2008, we held available-for-sale short-term and long-term investments with a fair value o
f
$
1.92 billion and a cost of
$
1.92 billion
,
of which investments with a fair value and cost of
$
19.0 million were
auction rate securities and investments with a fair value and a cost of
$
1.90 billion were U.S.
g
overnment an
d
a
g
enc
y
issues. We re
g
ularl
y
review the carr
y
in
g
value of our short-term and lon
g
-term investments and identif
y
an
d
r
ecord losses when events and circumstances indicate that declines in the fair value of such assets below ou
r
account
i
ng
b
as
i
s are ot
h
er-t
h
an-temporary. T
h
e est
i
mate
df
a
i
rva
l
ues o
f
our
i
nvestments are su
bj
ect to s
i
gn
ifi
cant
fluctuations due to volatilit
y
of the credit markets in
g
eneral, compan
y
-specific circumstances, chan
g
es in
g
eneral
e
conomic conditions and use of mana
g
ement
j
ud
g
ment when observable market prices and parameters are not full
y
a
v
a
il
a
bl
e
.
Auct
i
on rate secur
i
t
i
es are var
i
a
bl
e rate
d
e
b
t
i
nstruments w
h
ose
i
nterest rates are norma
ll
y reset approx
i
mate
ly
e
ver
y
30 or 90
d
a
y
st
h
rou
gh
an auct
i
on process. Our
i
nvestments
i
n auct
i
on rate secur
i
t
i
es represent
i
nterests
i
n
c
ollateralized debt obli
g
ations, which we refer to as CDOs, supported b
y
preferred equit
y
securities of insuranc
e
c
ompan
i
es an
dfi
nanc
i
a
li
nst
i
tut
i
ons w
i
t
h
state
dfi
na
l
matur
i
ty
d
ates
i
n 2033 an
d
2034. T
h
e tota
lf
a
i
rva
l
ue an
d
cost
of our security interests in CDOs as of December 31, 2008 was
$
12.9 million. We also own auction rate securities
t
hat are Auction Market Preferred securities issued b
y
a monoline insurance compan
y
and these securities ar
e
p
erpetua
l
an
dd
o not
h
ave a
fi
na
l
state
d
matur
i
ty. T
h
e tota
lf
a
i
rva
l
ue an
d
cost o
f
our Auct
i
on Mar
k
et Pre
f
erre
d
s
ecurities as of December 31, 2008 was
$
6.1 million. These securities were rated BBB or Ba1 by Standard & Poor’s
or Mood
y
’s ratin
g
services, respectivel
y
, at December 31, 2008. Current market conditions are such that we are
unable to estimate when the auctions will resume. As a result, our auction rate securities are classified as long-term
i
n
v
estments.
D
er
i
vat
i
ve Instruments
As part of the closin
g
of the Transactions, we assumed two interest rate swap contracts that were entered int
o
b
y
Old Clearwire. In accordance with SFAS No. 133, we did not desi
g
nate these swap a
g
reements as cash flow
h
e
d
ges as o
f
Decem
b
er 31, 2008. We are not
h
o
ldi
ng t
h
ese
d
er
i
vat
i
ve contracts
f
or tra
di
ng or specu
l
at
i
ve purpose
s
and continue to hold these derivatives to offset our ex
p
osure to interest rate risk.
Th
e
f
o
ll
ow
i
n
g
ta
bl
e sets
f
ort
hi
n
f
ormat
i
on re
g
ar
di
n
g
our
i
nterest rate
d
er
i
vat
i
ve contracts as o
f
Decem
b
er 31
,
2008 (in thousands)
:
T
yp
eo
f
Derivativ
e
N
ot
i
onal
A
mount
Matur
i
t
y
Date
R
eceive
I
ndex Rate
P
a
y
Fixed Rate
Fai
rM
a
rk
et
V
alu
e
Swap
$
300,000 3/5/2010 3-month LIBOR 3.50%
$
(7,847
)
Swap
$
300,000 3/5/2011 3-month LIBOR 3.62%
$
(13,744
)
I
na
ddi
t
i
on, we are expose
d
to certa
i
n
l
osses
i
nt
h
e event o
f
non-per
f
ormance
by
t
h
e counterpart
i
es un
d
er t
h
e
i
nterest rate
d
er
i
vat
i
ve contracts. We expect t
h
e counterpart
i
es, w
hi
c
h
are ma
j
or
fi
nanc
i
a
li
nst
i
tut
i
ons, to per
f
orm
fully under these contracts. However, if the counterparties were to default on their obligations under the interest rate
7
2