Virgin Media 2012 Annual Report Download - page 52

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In 2010, loss on extinguishment of debt was £70.0 million, which related to the write off of deferred financing costs as
a result of the partial repayments of our senior credit facility in 2010 and the call premium totaling £5.5 million on the
repayment of a portion of the senior notes due 2014.
Gain (Loss) on Derivative Instruments
The gain on derivative instruments of £148.1 million in 2012 primarily arose from a gain of £173.3 million on the
conversion hedges we hold in respect of our convertible debt, which was driven by an increase in the price of our
common stock from $21.38 as of December 31, 2011 to $36.75 as of December 31, 2012. This gain is partially offset
by a loss of £11.4 million on the cross currency interest rate swap we hold in respect of our convertible senior notes
that are not designated as hedges for accounting purposes, and an £10.4 million loss on the interest rate hedge held
in respect of our senior credit facility.
The loss on derivative instruments of £50.7 million in 2011 was primarily driven by the loss on the conversion hedges
as a result of a decrease in the price of our common stock and an increase in the amount of the counterparty credit
risk adjustment used in the calculation of the fair values of the conversion hedges, and losses on derivative instruments
resulting from a fall in interest rates, partially offset by the reclassification of gains of £31.1 million on derivative
instruments previously designated as accounting hedges from accumulated other comprehensive income to earnings
in conjunction with the discontinuance of hedge accounting on these instruments.
The losses on derivative instruments of £65.6 million in 2010 were mainly driven by the termination of swaps relating
to the previous senior credit facility refinanced in March 2010, and also include a loss of £13.5 million related to our
conversion hedges, which represents the difference between the cash we paid and the fair value, as of December 31,
2010, and a loss of £5.1 million related to cross-currency interest swaps on our U.S. dollar convertible senior notes
that are not designated as hedges for accounting purposes.
Foreign Currency Losses
Foreign currency losses of £6.3 million in 2012 were primarily due to foreign exchange movements between the
issuance of our $500 million U.S. dollar denominated senior notes due 2022 on March 13, 2012, and the redemption
of $500 million of our 9.50% U.S. dollar denominated senior notes due 2016 on March 28, 2012. Although this generated
an accounting loss, any economic exposure during this period was fully mitigated by our holding a matching asset and
liability position.
Foreign currency losses of £2.4 million in 2011 were primarily due to remeasurement gains on our convertible senior
notes and U.S. dollar denominated senior notes due 2019, offset by the weakening of the pound sterling relative to
the U.S. dollar.
Foreign currency losses of £34.1 million in 2010 were primarily due to the weakening of the pound sterling relative to
the U.S. dollar and related foreign exchange gains on the principal portion of our U.S. dollar convertible senior notes.
Interest Income and Other, Net
Interest income and other of £6.8 million in 2012 reflects amounts earned on cash balances together with the reversal
of a contingent liability for which the related exposure expired during the second quarter of 2012. In 2011 interest
income and other increased to £82.6 million from £8.3 million in 2010 due to the £77.6 million recognized following
the agreement with the U.K. tax authorities regarding the Value Added Tax, or VAT, treatment of certain of our revenue
generating activities and a related refund.
Share of Income from Equity Investments
In 2011 our share of income from equity investments was £18.6 million as compared with income of £24.0 million for
the same period in 2010. Both periods include our proportionate share of the income earned by UKTV prior to the
sale of our interest on September 30, 2011. As a result of this sale we had no income from equity investments during
2012.
UKTV received financing through loans from Virgin Media, which effectively acted as a revolving facility for UKTV. We
received cash payments from UKTV in the form of loan capital repayments of £108.2 million for the year ended
December 31, 2011. We received dividends, interest payments and payments for consortium tax relief from UKTV
totaling £28.1 million during 2011.
Loss on Disposal of Equity Investments
In 2011 the loss on disposal of equity investments was £7.2 million relating to the disposal of our share in the UKTV
companies. We had no such disposals during 2012.
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