Chesapeake Energy 2000 Annual Report Download - page 59

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activities and supersedes and amends a number of existing standards. SFAS 133 (as amended by SFAS 137 and
SFAS 138) is effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
SFAS 133 standardizes the accounting for derivative instruments by requiring that all derivatives be recognized
as assets and liabilities and measured at fair value. The accounting for changes in the fair value of derivatives (gains
and losses) depends on (i) whether the derivative is designated and qualifies as a hedge, and (ii) the type of hedging
relationship that exists. Changes in the fair value of derivatives that are not designated as hedges or that do not meet
the hedge accounting criteria in SFAS 133 are required to be reported in earnings. In addition, all hedging
relationships must be designated, reassessed and documented pursuant to the provisions of SFAS 133. We will fully
adopt SFAS 133 on January 1, 2001, the effective date as amended by SFAS 138. SFAS 133 is expected to increase
volatility of stockholders' equity, reported earnings (losses) and other comprehensive income. Ifwe had adopted
SFAS 133 on December 31, 2000, Chesapeake would have recorded an additional $9.3 million in current assets and
$98.6 million in current liabilities related to our existing oil and gas hedges based on the forward price curve in effect
at December 31, 2000. The net liability of $89.3 million related to qualifying hedge instruments would have been
charged to other comprehensive income which appears in the equity section of the balance sheet. After adoption,
Chesapeake will be required to recognize any hedge ineffectiveness in the income statement each period.
Debt Issue Costs
Included in other assets are costs associated with the issuance of our senior notes. The remaining unamortized
costs on these issuances of senior notes at December 31, 1999 and 2000 totaled $16.6 million and $13.9 million,
respectively, and are being amortized over the life of the senior notes.
Currency Translation
The results of operations for non-U.S. subsidiaries are translated from local currencies into U.S. dollars using
average exchange rates during each period; assets and liabilities are translated using exchange rates at the end of
each period. Adjustments resulting from the translation process are reported in a separate component of
stockholders' equity, and are not included in the determination of the results of operations.
Reclassflcations
Certain reclassifications have been made to the consolidated financial statements for 1998 and 1999 to conform
to the presentation used for the 2000 consolidated financial statements.
2. Senior Notes
On April 22, 1998, we issued $500 million principal amount of 9.625% Senior Notes due 2005. The 9.625%
Senior Notes are redeemable at our option at any time on or after May 1, 2002 at the redemption prices set forth in
the indenture or at the make-whole prices, as set forth in the indenture, if redeemed prior to May 1, 2002. We may
also redeem at our option up to $167 million of the 9.625% Senior Notes at 109.625% of their principal amount with
the proceeds of an equity offering completed prior to May 1, 2001.
On March 17, 1997, we issued $150 million principal amount of 7.875% Senior Notes due 2004. The 7.875%
Senior Notes are redeemable at our option at any time prior to March 15, 2004, at the make-whole prices
determined in accordance with the indenture.
Also on March 17, 1997, we issued $150 million principal amount of 8.5% Senior Notes due 2012. The 8.5%
Senior Notes are redeemable at our option at any time prior to March 15, 2004, at the make-whole prices
determined in accordance with the indenture and, on or after March 15, 2004, at the redemption prices set forth in
the indenture. As of March28, 2001, Chesapeake has purchased and subsequently retired $7.3 million of these notes
for total consideration of $7.4 million, including accrued interest of $0.2 million.
On April 9, 1996, we issued $120 million principal amount of 9.125% Senior Notes due 2006. The 9.125%
Senior Notes are redeemable at our option at any time prior to April 15, 2001 at the make-whole prices determined
in accordance with the indenture and, on or after April 15, 2001, at the redemption prices set forth in the indenture.
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