Time Warner Cable 2010 Annual Report Download - page 104

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described above, (ii) if TW NY Cable is not the surviving entity or is no longer a limited liability company, the then
holders of the TW NY Cable Preferred Membership Units have the right to receive from the surviving entity securities
with terms at least as favorable as the TW NY Cable Preferred Membership Units and (iii) if TW NY Cable is the
surviving entity, the tax characterization of the TW NY Cable Preferred Membership Units would not be affected by the
merger or consolidation. Any securities received from a surviving entity as a result of a merger or consolidation or the
conversion into a corporation, partnership or other entity must rank senior to any other securities of the surviving entity
with respect to dividends and distributions or rights upon a liquidation.
11. DERIVATIVE FINANCIAL INSTRUMENTS
The fair values of the assets and liabilities associated with the Company’s derivative financial instruments recorded
in the consolidated balance sheet as of December 31, 2010 and 2009 were as follows (in millions):
Balance Sheet
Location 2010 2009
December 31,
Assets:
Derivatives designated as hedging instruments:
Interest rate swap contracts ........................... Other assets $ 176 $ 25
Foreign currency forward contracts . . . .................. Other current assets 1 1
Total assets ...................................... $ 177 $ 26
Liabilities:
Derivatives designated as hedging instruments:
Interest rate swap contracts ........................... Other liabilities $ — $ 37
Foreign currency forward contracts . . . .................. Other current liabilities — 1
Derivatives not designated as hedging instruments:
Equity award reimbursement obligation .................. Other current liabilities 20 35
Total liabilities . . .................................. $ 20 $ 73
Interest Rate Swap Contracts
Interest rate swap contracts are used to change the nature of outstanding debt (e.g., convert fixed-rate debt into
variable-rate debt or convert variable-rate debt into fixed-rate debt). As of December 31, 2010, the Company had interest
rate swap contracts outstanding that effectively convert $6.250 billion of fixed-rate debt instruments, with maturities
extending through May 2017, to variable-rate debt. Such contracts are designated as fair value hedges. Under its interest
rate swap contracts, the Company is entitled to receive semi-annual fixed rates of interest ranging from 3.500% to
10.150% and is required to make semi-annual interest payments at variable rates based on LIBOR plus margins ranging
from 0.755% to 8.442%. During the years ended December 31, 2010 and 2009, the Company recognized no gain or loss
related to its interest rate swap contracts because the changes in the fair values of such instruments were completely offset
by the changes in the fair values of the hedged fixed-rate debt.
Foreign Currency Forward Contracts
Foreign currency forward contracts are used to mitigate the risk to the Company from changes in foreign currency
exchange rates. As of December 31, 2010, the Company had outstanding foreign currency forward contracts to buy
Philipine pesos for $11 million. Such contracts, which extend through May 2011, are designated as cash flow hedges and
specifically relate to forecasted payments denominated in the Philippine peso made to vendors who provide customer care
support services. For the years ended December 31, 2010 and 2009, the effects of foreign currency forward contracts on
earnings were immaterial. The Company expects insignificant net gains (losses) to be reclassified out of accumulated
other comprehensive loss, net, and into earnings within the next 12 months.
92
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)