Virgin Media 2007 Annual Report Download - page 119

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Derivative Financial Instruments and Hedging Activities (Continued)
The principal obligations under the $550 million 9.125% senior notes due 2016, the A225 million
senior notes due 2014 and the $628 million and A485 million principal obligations under the senior
credit facility are hedged with the cross-currency interest rate swaps.
Foreign Currency Forward Rate Contracts—Relating to the Purchase Price of Telewest Global, Inc.
As of December 31, 2005, we had outstanding foreign currency forward rate contracts to purchase
the U.S. dollar equivalent of £1.8 billion, maturing in April 2006. These contracts were intended to
offset changes in the pound sterling value of the borrowed position of the cash purchase price of
Telewest.
These foreign currency forward rate and collar contracts were not accounted for as hedges under
FAS 133. As such, the contracts were carried at fair value in our balance sheet with changes in the fair
value recognized immediately in the statement of operations. Losses on the settlement of these
contracts totaling £101.0 million are reported within foreign currency transactions gains (losses) in the
statement of operations for the year ended December 31, 2006.
11. Fair Values of Financial Instruments
In estimating the fair value of our financial instruments, we used the following methods and
assumptions:
Cash and cash equivalents, and restricted cash: The carrying amounts reported in the consolidated
balance sheets approximate fair value due to the short maturity and nature of these financial
instruments.
Long term debt: The carrying amount of the senior credit facility approximates its fair value due to
the fact that this debt instrument pays a floating rate of interest based upon market rates that are reset
semi-annually. The fair values of our other debt in the following table are based on the quoted market
prices.
The carrying amounts and fair values of our long term debt are as follows (in millions):
December 31, 2007 December 31, 2006
Carrying Fair Carrying Fair
Amount Value Amount Value
8.75% U.S. dollar senior notes due 2014 .................. £214.2 £ 221.0 £ 217.0 £ 226.7
9.75% Sterling senior notes due 2014 ..................... 375.0 358.6 375.0 398.6
8.75% Euro senior notes due 2014 ....................... 165.6 157.6 151.6 173.2
9.125% U.S. dollar senior notes due 2016 .................. 277.2 283.7 280.8 295.9
12. Stock-Based Compensation Plans
At December 31, 2007, we had a number of stock-based compensation plans, which are described
below. In the years ended December 31, 2007 and December 31, 2006, the compensation cost that has
been charged against income for these plans was £17.5 million and £36.7 million, respectively. Prior to
the adoption of FAS 123R, the compensation cost that was recognized under the principles of FAS 123
was £9.8 million for the year ended December 31, 2005. As a result of the adoption of FAS 123R in
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