Home Shopping Network 2015 Annual Report Download - page 52

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additional amount that could be borrowed under the revolving credit facility under the prior credit agreement, in consideration
of the financial covenants and outstanding letters of credit, was approximately $600.3 million.
Aggregate contractual maturities of long-term debt are as follows (in thousands):
Years Ending December 31,
2016. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,000
2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
2018. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500
2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,500
2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,000
$ 640,000
NOTE 8—DERIVATIVE INSTRUMENTS
HSNi uses derivatives in the management of its interest rate risk with respect to its variable rate debt. HSNi's strategy
is to eliminate the cash flow risk on a portion of its variable rate debt caused by changes in the benchmark interest rate
(LIBOR). Derivative instruments are not entered into for speculative purposes.
HSNi entered into a forward-starting interest rate swap agreement on December 20, 2012 with a notional amount of
$187.5 million at a fixed rate of 0.8525%, resulting in an all-in fixed rate of 2.3525% based on HSNi's leverage ratio as of
December 31, 2015. The interest rate swap took effect on January 31, 2014 with a maturity date in April 2017. Under this
swap, HSNi pays at a fixed rate and receives payments at a variable rate based on one-month LIBOR. The swap effectively
fixes the floating LIBOR-based interest of our outstanding LIBOR-based debt. The interest rate swap was designated and
qualified as a cash flow hedge; therefore, the effective portion of the changes in fair value is recorded in accumulated other
comprehensive income (loss). Any ineffective portions of the changes in fair value of the interest rate swap will be
immediately recognized directly to earnings in the consolidated statements of operations. The change in fair value of the
interest rate swap (inclusive of reclassifications to net income) were losses of $0.2 million, net of tax, for the years ended
December 2015 and 2014, and were reflected in "Accumulated other comprehensive income (loss)" in the consolidated balance
sheets. As of December 31, 2015, HSNi estimates that approximately $0.3 million of unrealized losses included in
accumulated other comprehensive income (loss) related to this swap will be realized and reported in earnings within the next
twelve months.
The fair value of the interest rate swap liability as of December 31, 2015 was $0.2 million and was recorded in "Other
long-term liabilities." The fair value of the interest rate swap asset as of December 31, 2014 was $0.2 million and was recorded
in "Other non-current assets" in the consolidated balance sheets. See Note 9 for discussion of the fair value measurements
concerning this interest rate swap.
NOTE 9—FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. Fair value assumptions are made at a specific point in time and changes in underlying
assumptions could significantly affect these estimates. HSNi applies the following framework for measuring fair value which
is based on a three-level hierarchy:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active,
or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available
assumptions made by other market participants. These valuations require significant judgment.