Metro PCS 2009 Annual Report Download - page 129

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
F-15
4. Short-term Investments:
Short-term investments, with an original maturity of over 90 days, consisted of the following (in thousands):
As of December 31, 2009
Amortized
Cost
Unrealized
Gain in
Accumulated
OCI
Unrealized
Loss in
Accumulated
OCI
Aggregate
Fair
Value
Equity Securities.........................................................................
.
$ 7 $ — $ (5) $ 2
U.S. Treasury Securities .............................................................
.
224,790 140 — 224,930
Total short-term investments ......................................................
.
$ 224,797 $ 140 $ (5) $ 224,932
As of December 31, 2008
Amortized
Cost
Unrealized
Gain in
Accumulated
OCI
Unrealized
Gain in
Accumulated
OCI
Aggregate
Fair
Value
Equity Securities.........................................................................
.
$ 7 $ — $ (4) $ 3
Total short-term investments ......................................................
.
$ 7 $ — $ (4) $ 3
The cost and aggregate fair values of short-term investments by contractual maturity at December 31, 2009 were
as follows (in thousands):
Amortized
Cost
Aggregate
Fair
Value
Less than one year............................................................................................................... $ 224,790 $ 224,930
5. Derivative Instruments and Hedging Activities:
On November 21, 2006, Wireless entered into a three-year interest rate protection agreement to manage the
Company’s interest rate risk exposure and fulfill a requirement of Wireless’ Senior Secured Credit Facility. The
agreement covers a notional amount of $1.0 billion and effectively converts this portion of Wireless’ variable rate
debt to fixed-rate debt at an annual rate of 7.169%. The interest rate protection agreement expires on February 1,
2010. This financial instrument is reported in other current liabilities at fair market value of $4.1 million as of
December 31, 2009.
On April 30, 2008, Wireless entered into an additional two-year interest rate protection agreement to manage the
Company’s interest rate risk exposure. The agreement was effective on June 30, 2008 and covers an aggregate
notional amount of $500.0 million and effectively converts this portion of Wireless’ variable rate debt to fixed rate
debt at an annual rate of 5.464%. The monthly interest settlement periods began on June 30, 2008. This agreement
expires on June 30, 2010. This financial instrument is reported in other current liabilities at fair market value of
approximately $7.3 million as of December 31, 2009.
In March 2009, Wireless entered into three separate two-year interest rate protection agreements to manage the
Company’s interest rate risk exposure. These agreements are effective on February 1, 2010 and cover a notional
amount of $1.0 billion and effectively convert this portion of Wireless’ variable rate debt to fixed rate debt at a
weighted average annual rate of 4.381%. The monthly interest settlement periods will begin on February 1, 2010.
These agreements expire on February 1, 2012. These financial instruments are reported in other current liabilities
and other long-term liabilities at fair market value of approximately $12.8 million and $0.7 million, respectively, as
of December 31, 2009.
The primary risk managed by using derivative instruments is interest rate risk. Interest rate protection agreements
are entered into to manage interest rate risk associated with the Company’s variable-rate borrowings. The interest
rate protection agreements have been designated as cash flow hedges. If a derivative is designated as a cash flow
hedge and the hedging relationship qualifies for hedge accounting under the provisions of ASC 815 the effective
portion of the change in fair value of the derivative is recorded in accumulated other comprehensive income (loss)