Metro PCS 2009 Annual Report Download - page 130

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
F-16
and reclassified to interest expense in the period in which the hedged transaction affects earnings. The ineffective
portion of the change in fair value of a derivative qualifying for hedge accounting is recognized in earnings in the
period of the change. For the year ended December 31, 2009, the change in fair value did not result in
ineffectiveness.
At the inception of the cash flow hedges and quarterly thereafter, the Company performs an assessment to
determine whether changes in the fair values or cash flows of the derivatives are deemed highly effective in
offsetting changes in the fair values or cash flows of the hedged transaction. If at any time subsequent to the
inception of the cash flow hedges, the assessment indicates that the derivative is no longer highly effective as a
hedge, the Company will discontinue hedge accounting and recognize all subsequent derivative gains and losses in
results of operations. The Company estimates that approximately $24.2 million of net losses that are reported in
accumulated other comprehensive loss at December 31, 2009 are expected to be reclassified into earnings within the
next 12 months.
Cross-default Provisions
The Company’s interest rate protection agreements contain cross-default provisions to the Company’s Senior
Secured Credit Facility. The Company’s Senior Secured Credit Facility allows interest rate protection agreements to
become secured if the counterparty to the agreement is a current lender under the facility. If the Company were to
default on the Senior Secured Credit Facility, it would trigger these provisions, and the counterparties to the interest
rate protection agreements could request immediate payment on interest rate protection agreements in net liability
positions, similar to their existing rights as a lender. There are no collateral requirements in the interest rate
protection agreements. The aggregate fair value of interest rate protection agreements with cross-default provisions
that are in a net liability position on December 31, 2009 is $24.9 million.
Fair Values of Derivative Instruments
(in thousands) Liability Derivatives
As of December 31, 2009 As of December 31, 2008
Balance Sheet Location Fair Value Balance Sheet Location Fair Value
Derivatives designated as hedging
instruments under ASC 815
Interest rate protection agreements Other current liabilities $ (24,157) Other current liabilities $ —
Interest rate protection agreements Other long-term liabilities (702) Other long-term liabilities (54,963)
Total derivatives designated as
hedging instruments under ASC
815
$ (24,859)
$ (54,963)
The Effect of Derivative Instruments on the Consolidated Statement of Income and Comprehensive Income
For the Years Ended December 31,
Amount of Gain (Loss) Recognized in
OCI on Derivative (Effective Portion)
Amount of Gain (Loss) Reclassified from
Accumulated OCI into Income (Effective
Portion)
Derivatives in ASC 815 Cash
Flow Hedging Relationships 2009 2008 2007
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
(Effective Portion) 2009 2008 2007
Interest rate protection agreements $ (24,230) $ (50,866) $ (22,055) Interest expense $ (54,334) $ (19,406) $ 3,312