Time Warner Cable 2012 Annual Report Download - page 104

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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
10. 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, 2012 and 2011 were as follows (in millions):
Assets Liabilities
December 31, December 31,
2012 2011 2012 2011
Interest rate swaps(a) .....................................$ 295 $ 297 $ 1 $ —
Cross-currency swaps(b) .................................. 112——67
Equity award reimbursement obligation(c) .................... — — 19 22
Total .................................................
$ 407 $ 297 $ 20 $ 89
(a) The fair values of the assets and liabilities associated with interest rate swaps are classified as current or noncurrent in the consolidated balance sheet
based on the maturity date of the interest rate swap contract. Of the total interest rate swaps asset recorded as of December 31, 2012 and 2011, $16
million and $14 million, respectively, is recorded in other current assets in the consolidated balance sheet. The total interest rate swaps liability recorded
as of December 31, 2012, is recorded in other liabilities in the consolidated balance sheet.
(b) The fair values of the assets and liabilities associated with cross-currency swaps are recorded in other assets and other liabilities, respectively, in the
consolidated balance sheet.
(c) The fair value of the equity award reimbursement obligation is recorded in other current liabilities in the consolidated balance sheet.
Fair Value Hedges
The Company uses interest rate swaps to manage interest rate risk by effectively converting fixed-rate debt into
variable-rate debt. Under such contracts, the Company is entitled to receive semi-annual interest payments at fixed rates and
is required to make semi-annual interest payments at variable rates, without exchange of the underlying principal amount.
Such contracts are designated as fair value hedges. The Company recognizes no gain or loss related to its interest rate swaps
because the changes in the fair values of such instruments are completely offset by the changes in the fair values of the
hedged fixed-rate debt. The following table summarizes the terms of the Company’s existing fixed to variable interest rate
swaps as of December 31, 2012 and 2011:
December 31,
2012 2011
Maturities ..................................................................... 2013-2018 2012-2017
Notional amount (in millions) ......................................................$ 7,750 $ 7,850
Average pay rate (variable based on LIBOR plus variable margins) ........................ 4.35% 4.34%
Average receive rate (fixed) ....................................................... 6.43% 6.34%
Estimated fair value of interest rate swap assets, net (in millions) ..........................$ 294 $ 297
The notional amounts of interest rate instruments, as presented in the above table, are used to measure interest to be paid
or received and do not represent the amount of exposure to credit loss.
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