Home Shopping Network 2008 Annual Report Download - page 38

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35
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
At December 31, 2008, approximately 41.6% of our $408.5 million of outstanding long-term debt bore
interest at variable rates, generally tied to a reference rate such as the LIBOR rate or the prime rate of interest of
certain banks. Changes in interest rates on loans from these financial institutions could affect our earnings as a result
of interest rates charged on certain underlying obligations that are variable. At December 31, 2008, a hypothetical
100 basis point increase in interest rates on our variable rate obligations would have resulted in an increase of
approximately $1.7 million in annual pre-tax interest expense.
Foreign Currency Exchange Risk
During the second quarter of 2003, one of our foreign subsidiaries entered into a foreign exchange forward
contract with a notional amount of $38.6 million which was used to hedge against the change in value of a liability
denominated in a currency other than the subsidiary’s functional currency. In connection with the sale of HSE, we
unwound the foreign exchange forward contract during June 2007. Prior to unwinding this contract, all foreign
exchange remeasurement gains and losses related to the contract and liability were recognized each period in the
statements of operations and were offsetting. Subsequent to the sale of HSE, we do not have significant exposure to
foreign currency risk and do not hold any foreign currency derivative instruments at December 31, 2008.