HCA Holdings 2011 Annual Report Download - page 130

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HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 7 — INVESTMENTS OF INSURANCE SUBSIDIARIES (Continued)
The cost of securities sold is based on the specific identification method. Sales of securities for the years
ended December 31 are summarized below (dollars in millions):
2011 2010 2009
Debt securities:
Cash proceeds ............................................... $— $329 $141
Gross realized gains .......................................... — 14 —
Gross realized losses .......................................... — 1 1
Equity securities:
Cash proceeds ............................................... $— $ — $ 3
Gross realized gains .......................................... — — 1
Gross realized losses .......................................... — — —
NOTE 8 — FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements
We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates.
These swap agreements involve the exchange of fixed and variable rate interest payments between two parties
based on common notional principal amounts and maturity dates. Pay-fixed interest rate swaps effectively
convert LIBOR indexed variable rate obligations to fixed interest rate obligations. The interest payments under
these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these
agreements, generally match the timing of the related liabilities, for the interest rate swap agreements which have
been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to
calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these
agreements is considered low because the swap agreements are with creditworthy financial institutions.
The following table sets forth our interest rate swap agreements, which have been designated as cash flow
hedges, at December 31, 2011 (dollars in millions):
Notional
Amount Maturity Date
Fair
Value
Pay-fixed interest rate swaps ........................... $ 500 December 2014 $ (7)
Pay-fixed interest rate swaps ........................... 3,000 December 2016 (339)
Pay-fixed interest rate swaps ........................... 1,000 December 2017 (53)
During the next 12 months, we estimate $110 million will be reclassified from other comprehensive income
(“OCI”) to interest expense.
Cross Currency Swaps
The Company and certain subsidiaries have incurred obligations and entered into various intercompany
transactions where such obligations are denominated in currencies, other than the functional currencies of the
parties executing the trade. In order to mitigate the currency exposure risks and better match the cash flows of
our obligations and intercompany transactions with cash flows from operations, we enter into various cross
currency swaps. Our credit risk related to these agreements is considered low because the swap agreements are
with creditworthy financial institutions.
F-25