Comcast 2006 Annual Report Download - page 54

Notes to Consolidated Financial Statements Comcast 2006 Annual Report 52
Fair Value Method
We hold unrestricted equity investments in publicly traded com-
panies that we account for as AFS or trading securities. The net
unrealized pretax gains on investments accounted for as AFS
securities as of December 31, 2006 and 2005, of $254 million and
$56 million, respectively, have been reported in our consolidated
balance sheet principally as a component of accumulated other
comprehensive income (loss), net of related deferred income taxes
of $89 million and $19 million, respectively.
The cost, fair value and unrealized gains and losses related to our
AFS securities are as follows:
Year Ended December 31 (in millions) 2006 2005
Cost $ 936 $ 1,104
Unrealized gains 254 62
Unrealized losses — (6)
Fair value $ 1,190 $ 1,160
Proceeds from the sales of AFS securities for the years ended
December 31, 2006, 2005 and 2004 were $209 million, $490 mil-
lion and $67 million, respectively. Gross realized gains on these
sales for the years ended December 31, 2006, 2005 and 2004
were $59 million, $18 million and $10 million, respectively. Sales of
AFS securities for the years ended December 31, 2006 and 2005
consisted principally of sales of Time Warner common stock.
As of December 31, 2006 and 2005, approximately $1.879 billion
and $1.496 billion, respectively, of our fair value method securities
support our obligations under our exchangeable notes or prepaid
forward contracts.
Cablevision Systems Corporation
In June 2005, we, through a majority-owned partnership, entered
into a prepaid forward sale that terminates in 2013 of approxi-
mately 5.1 million shares of Cablevision Systems Corporation
(“Cablevision”) Class A common stock for cash proceeds of $114
million. We have designated the derivative component of the pre-
paid forward as a fair value hedge of the related Cablevision shares.
Accordingly, the mark to market adjustment on 2.9 million of the
Cablevision shares held by us and classified as AFS securities will
be recorded to investment income (loss), net over the term of the
prepaid forward.
Discovery Holding Company
In July 2005, we received 10 million shares of Discovery Hold-
ing Company (“Discovery”) Series A common stock in connection
with the spin-off by Liberty Media of Discovery. All of these shares
collateralize a portion of our Liberty Media prepaid forward sales
obligation that terminates in 2014.
Embarq Corporation
In May 2006, we received approximately 1.3 million shares of
Embarq Corporation (“Embarq”) common stock in connection with
the spin-off by Sprint Nextel of Embarq, its local communications
business. In the spin-off, each share of Sprint Nextel Corporation
common stock received 0.05 shares of the new Embarq common
stock. Of these shares, 100,000 shares collateralize our Sprint
Nextel prepaid forward sales obligation that terminates in 2011.
Liberty Capital and Liberty Interactive
In May 2006, we received 25 million shares of Liberty Media Inter-
active (“Liberty Interactive”) Series A common stock and 5 million
shares of Liberty Media Capital (“Liberty Capital”) Series A com-
mon stock in connection with Liberty Media’s restructuring. In the
restructuring, each share of Liberty Media Series A common stock
received 0.25 shares of the new Liberty Interactive Series A com-
mon stock and 0.05 shares of Liberty Capital Series A common
stock in exchange for each share of Liberty Media Series A com-
mon stock. All of these shares collateralize a portion of our Liberty
Media prepaid forward sales obligation that terminates in 2014.
Liberty Global
In June 2004, we received approximately 11 million shares of Liberty
Global, Inc. (“Liberty Global”) Series A common stock in connec-
tion with its spin-off by Liberty Media. In the spin-off, each share
of Liberty Media Series A common stock received 0.05 shares of
the new Liberty Global Series A common stock. Approximately 5
million of these shares collateralize a portion of our Liberty Media
prepaid forward sales obligation that terminates in 2014.
In December 2004, we sold 3 million shares of Liberty Global Series
A common stock to Liberty Media in a private transaction for cash
proceeds of $128 million.
In February 2005, we entered into a prepaid forward sale that
terminates in 2015 of approximately 2.7 million shares of Liberty
Global Series A common stock for cash proceeds of $99 million.
In September 2005, we received approximately 7.7 million shares
of Liberty Global Series C common stock in connection with Liberty
Global’s special stock dividend. All of these shares collateralize a
portion of our Liberty Media prepaid forward sales obligation that
terminates in 2014 and a portion of our Liberty Global prepaid for-
ward sales obligation that terminates in 2015.
Sprint Nextel
In March 2006, we received cash proceeds of $62 million in con-
nection with Sprint Nextel’s redemption of all of its outstanding
Seventh Series B Convertible Preferred Stock (“Sprint Preferred
Stock”), including all 61,726 shares of Sprint Preferred Stock held
by us. In connection with the redemption transaction, we recog-
nized investment income of $8 million.