Virgin Media 2013 Annual Report Download - page 119

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III - 9
Impairment, restructuring and other operating items, net
We recognized impairment, restructuring and other operating charges (credits) of £87.7 million and (£11.8 million) during
2013 and 2012, respectively. The 2013 amount includes (i) severance and other costs of £33.2 million, substantially all of which
were recorded in connection with certain organizational and staffing changes that we implemented in connection with our ongoing
integration with Liberty Global, (ii) direct acquisition costs associated with the LG/VM Transaction of £54.3 million, (iii) a £9.2
million charge related to the impairment of certain network assets and (iv) a £8.5 million gain related to the disposal of certain
assets. The 2012 amount includes a net gain of £12.5 million related to the termination of a capital lease during the second quarter
of 2012. We expect to incur additional restructuring costs during 2014 as the integration process with Liberty Global continues.
Interest expense – third-party
Our third-party interest expense increased £22.1 million or 5.5% during 2013, as compared to 2012, due primarily to the net
effect of (i) higher average outstanding third-party debt balances and (ii) lower weighted average interest rates.
For additional information regarding our outstanding third-party indebtedness, see note 7 to our consolidated financial
statements.
Interest expense – related-party
Our related-party interest expense increased £5.8 million during 2013, as compared to 2012, due to interest expense incurred
on a related-party note payable to LGI that we entered into in connection with the LG/VM Transaction. This note was repaid in
full during 2013. For additional information regarding our related-party indebtedness, see note 11 to our consolidated financial
statements.
Interest income – related-party
Our related-party interest income increased £107.0 million during 2013, as compared to 2012, primarily due to interest income
earned on related-party notes receivable from Lynx Europe 2 that we entered into following the LG/VM Transaction. For additional
information, see note 11 to our consolidated financial statements.
Gain (loss) on debt modification and extinguishment, net
We recognized gains (losses) on debt modification and extinguishment, net, of £0.5 million and (£187.8 million) during 2013
and 2012, respectively. The loss during 2012 relates to the redemption of (i) $1,350.0 million (£814.9 million) principal amount
of the 9.5% Senior Notes, (ii) $92.9 million (£56.1 million) principal amount of the 2019 VM Dollar Senior Notes, (iii) €180.0
million (£149.8 million) principal amount of the 9.5% Senior Notes and (iv) £96.5 million principal amount of the 2019 VM
Sterling Senior Notes. In connection with these transactions, we recognized losses on debt extinguishment of £187.8 million
representing (i) premiums paid of £152.1 million, (ii) the write-off of unamortized original issue discounts of £22.6 million and
(iii) the write-off of £13.1 million of deferred financing costs.
Realized and unrealized gains (losses) on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our
derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii)
realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized
gains (losses) on derivative instruments, net, are as follows:
Year ended December 31,
2013 2012
in millions
Cross-currency and interest rate derivative contracts (a)..................................................................... £(231.0) £ (25.2)
Equity-related derivative instruments (b)............................................................................................. 81.1 174.1
Foreign currency forward contracts ..................................................................................................... (1.7)(0.8)
Total................................................................................................................................................. £(151.6) £ 148.1