Comcast 2007 Annual Report Download - page 60

We sometimes enter into rate locks to hedge the risk that the cash
flows related to the interest payments on an anticipated issuance
or assumption of fixed-rate debt may be adversely affected by
interest-rate fluctuations. Upon the issuance or assumption of
fixed-rate debt, the value of the rate locks is recognized as an
adjustment to interest expense, similar to a deferred financing
cost, over the same period in which the related interest costs on
the debt are recognized in earnings (currently approximately 10
years remaining, unless the debt is retired earlier).
In 2007 and 2006, the effect of our interest rate derivative financial
instruments was an increase to our interest expense of approx-
imately $43 million and $39 million, respectively. In 2005, the
effect was a decrease to our interest expense of approximately
$16 million.
Estimated Fair Value
As of December 31, 2007 and 2006, our debt had estimated fair
values of $32.565 billion and $28.923 billion, respectively. The
estimated fair value of our publicly traded debt is based on quoted
market values for the debt. Interest rates that are currently avail-
able to us for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt issues for which
quoted market prices are not available.
Debt Covenants
Some of our loan agreements require that we maintain financial
ratios based on debt and operating income before depreciation
and amortization, as defined in the agreements. We were in com-
pliance with all financial covenants for all periods presented.
Guarantee Structures
See Note 17 for a discussion of our subsidiary guarantee structures.
Note 9: Pension, Postretirement and Other
Employee Benefit Plans
Pension Benefits
We sponsor two pension plans that together provide benefits to
substantially all former employees of a previously acquired company.
Future benefits for both plans have been frozen. Total pension
expense recognized for the years ended December 31, 2007, 2006
and 2005 was $4 million, $8 million and $8 million, respectively.
Postretirement Benefits
Our postretirement medical benefits cover substantially all of our
employees who meet certain age and service requirements. The
majority of eligible employees participate in the Comcast Post-
retirement Healthcare Stipend Program (the “Stipend Plan”), and a
small number of eligible employees participate in legacy plans of
acquired companies. The Stipend Plan provides an annual stipend
for reimbursement of healthcare costs to each eligible employee
based on years of service. Based on the benefit design of the
Stipend Plan, we are not exposed to the cost of increasing health-
care, since the amounts under the Stipend Plan are fixed at a pre-
determined amount. Postretirement expense recognized for the
years ended December 31, 2007, 2006 and 2005 was $34 million,
$29 million and $25 million, respectively.
The following table provides condensed information relating to our pension benefits and postretirement benefits for the periods presented:
2007 2006
Year ended December 31 (in millions)
Pension
Benefits
Postretirement
Benefits
Pension
Benefits
Postretirement
Benefits
Benefit obligation $ 179 $ 280 $ 184 $ 280
Fair value of plan assets $ 157 $ — $ 122 $ —
Plan funded status and recorded benefit obligation $ (22) $ (280) $ (62) $ (280)
Portion of benefit obligation not yet recognized as a component of net periodic
benefit cost $ 1 $ (39) $12 $ (4)
Discount rate 6.25% 6.65% 5.75% 6.00%
Expected return on plan assets 8.00% N/A 7.00% N/A
Comcast 2007 Annual Report on Form 10-K 58