DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

12 Months Ended

Dec. 31, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

DERIVATIVE CONTRACTS AND COLLATERALIZED INDEBTEDNESS

Prepaid Forward Contracts

The Company has entered into various transactions to limit the exposure against equity price risk on its shares of Comcast Corporation ("Comcast") common stock. The Company has monetized all of its stock holdings in Comcast through the execution of prepaid forward contracts, collateralized by an equivalent amount of the respective underlying stock. At maturity, the contracts provide for the option to deliver cash or shares of Comcast stock with a value determined by reference to the applicable stock price at maturity. These contracts, at maturity, are expected to offset declines in the fair value of these securities below the hedge price per share while allowing the Company to retain upside appreciation from the hedge price per share to the relevant cap price.

The Company received cash proceeds upon execution of the prepaid forward contracts discussed above which has been reflected as collateralized indebtedness in the accompanying consolidated balance sheets. In addition, the Company separately accounts for the equity derivative component of the prepaid forward contracts. These equity derivatives have not been designated as hedges for accounting purposes. Therefore, the net fair values of the equity

derivatives have been reflected in the accompanying consolidated balance sheets as an asset or liability and the net increases or decreases in the fair value of the equity derivative component of the prepaid forward contracts are included in gain (loss) on derivative contracts in the accompanying consolidated statements of operations.

All of the Company's monetization transactions are obligations of its wholly-owned subsidiaries that are not part of the Restricted Group; however, CSC Holdings has provided guarantees of the subsidiaries' ongoing contract payment expense obligations and potential payments that could be due as a result of an early termination event (as defined in the agreements). If any one of these contracts was terminated prior to its scheduled maturity date, the Company would be obligated to repay the fair value of the collateralized indebtedness less the sum of the fair values of the underlying stock and equity collar, calculated at the termination date. As of December 31, 2021, the Company did not have an early termination shortfall relating to any of these contracts.

The Company monitors the financial institutions that are counterparties to its equity derivative contracts. All of the counterparties to such transactions carry investment grade credit ratings as of December 31, 2021.

Interest Rate Swap Contracts

To manage interest rate risk, we have from time to time entered into interest rate swap contracts to adjust the proportion of total debt that is subject to variable and fixed interest rates. Such contracts effectively fix the borrowing rates on floating rate debt to provide an economic hedge against the risk of rising rates and/or effectively convert fixed rate borrowings to variable rates to permit the Company to realize lower interest expense in a declining interest rate environment. We monitor the financial institutions that are counterparties to our interest rate swap contracts and we only enter into interest rate swap contracts with financial institutions that are rated investment grade. All such contracts are carried at their fair market values on our consolidated balance sheets, with changes in fair value reflected in the consolidated statements of operations. As of December 31, 2021, the Company did not hold and has not issued derivative instruments for trading or speculative purposes.

The following represents the location of the assets and liabilities associated with the Company's derivative instruments within the consolidated balance sheets:

Derivatives Not Designated as Hedging Instruments	Balance Sheet Location	Fair Value at December 31,
		2021		2020
Asset Derivatives:
Interest rate swap contracts	Prepaid expenses and other current assets	$	2,993	$	5,132
Prepaid forward contracts	Prepaid expenses and other current assets	—		45,653
Interest rate swap contracts	Other assets, long-term	—		4,774
		$	2,993	$	55,559
Liability Derivatives:
Interest rate swap contracts	Other current liabilities	(3,441)		—
Prepaid forward contracts	Other current liabilities	—		(45,653)
Prepaid forward contracts	Liabilities under derivative contracts, long-term	(161,942)		(247,853)
Interest rate swap contracts	Liabilities under derivative contracts, long-term	(114,991)		(275,297)
		$	(280,374)	$	(568,803)

The following table presents certain consolidated statement of operations data related to our derivative contracts and the Comcast common stock:

	Years Ended December 31,
	2021		2020		2019
Gain (loss) on derivative contracts related to change in the value of equity derivative contracts related to Comcast common stock	$	85,911	$	(178,264)	$	(282,713)
Change in fair value of Comcast common stock included in gain (loss) on investments	(88,917)		319,157		469,071
Gain (loss) on interest rate swap contracts, net of a gain of $74,835 recorded in 2020 in connection with the early termination of the swap agreements discussed below	92,735		(78,606)		(53,902)

In March 2020, the Company terminated two swap agreements whereby the Company was paying a floating rate of interest and receiving a fixed rate of interest on an aggregate notional value of $1,500,000. These contracts were due to mature in May 2026. In connection with the early termination, the Company received cash of $74,835 which has been recorded in gain (loss) on interest swap contracts, net in our consolidated statements of operations and presented in operating activities in our consolidated statements of cash flows.

In addition, in March 2020, the Company executed amendments to two interest swap contracts that reduced the fixed rate of interest that the Company was paying on an aggregate notional value of $1,000,000 and extended the maturity date of the contracts to January 15, 2025 from January 15, 2022.

In April 2020, the Company entered into a new interest rate swap contract with an aggregate notional value of $2,850,000, which matured in April 2021.

The following is a summary of interest rate swap contracts outstanding at December 31, 2021:

Contract/Amended Contract Date	Maturity Date	Notional Amount		Company Pays	Company Receives
December 2018	January 2022	$	500,000	Fixed rate of 2.733%	Three-month LIBOR
March 2020	January 2022	500,000		Three-month LIBOR	Fixed rate of 2.733%
March 2020	January 2025	500,000		Fixed rate of 1.53%	Three-month LIBOR
December 2018	January 2025	500,000		Fixed rate of 1.625%	Three-month LIBOR
March 2020	January 2025	500,000		Fixed rate of 1.458%	Three-month LIBOR
December 2018	December 2026	750,000		Fixed rate of 2.9155%	Three-month LIBOR
December 2018	December 2026	750,000		Fixed rate of 2.9025%	Three-month LIBOR

In November 2019, the Company entered into a new monetization contract related to 5,337,750 shares of Comcast common stock held by us, which synthetically reversed the existing contract related to these shares. In addition, the Company entered into amendments to monetization contracts related to 37,617,486 shares of Comcast common stock held by us. The new and amended monetization contracts extended the maturity date to April 28, 2023 and provide the Company with downside protection below the hedge price of $40.95 per share and upside benefit of stock price appreciation up to $49.55 per share. In connection with the execution of these contracts, the Company received cash of $93,000 and recorded (i) an increase in the fair value of the equity derivative contracts of $103,781, ii) an increase in notes payable, net of discount, of $36,587, and (iii) an increase in collateralized debt, net of discount of $160,194.