| Assets and Liabilities Measured at Fair Value |
(4) Assets and Liabilities Measured at Fair Value
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.
The Company’s assets and liabilities measured at fair value are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
|
|
|
|
Quoted prices
|
|
Significant
|
|
|
|
Quoted prices
|
|
Significant
|
|
|
|
|
|
|
|
in active
|
|
other
|
|
|
|
in active
|
|
other
|
|
|
|
|
|
|
|
markets for
|
|
observable
|
|
|
|
markets for
|
|
observable
|
|
|
|
|
|
|
|
identical assets
|
|
inputs
|
|
|
|
identical assets
|
|
inputs
|
|
|
Description
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
|
|
|
amounts in thousands
|
|
|
Cash equivalents
|
|
$
|
198,011
|
|
198,011
|
|
—
|
|
639,956
|
|
639,956
|
|
—
|
|
|
Short-term marketable securities
|
|
$
|
—
|
|
—
|
|
—
|
|
9,014
|
|
9,014
|
|
—
|
|
|
Available-for-sale securities
|
|
$
|
—
|
|
—
|
|
—
|
|
439,560
|
|
439,560
|
|
—
|
|
|
Derivative instruments (1)
|
|
$
|
49,019
|
|
—
|
|
49,019
|
|
—
|
|
—
|
|
—
|
|
|
(1)
|
|
As of December 31, 2016, the Company has an outstanding zero-strike call option on 704,908 shares of Liberty Broadband Series C common stock which expires in March 2017. The Company prepaid a premium of $47.9 million in December 2016. Liberty Broadband has the option to settle in cash or shares of Liberty Broadband Series C common stock upon expiration of the contract.
|
The fair value of Level 2 derivative instruments were derived from a Black-Scholes model using observable market data as the significant inputs. The inputs used in the model during the period outstanding (exclusive of the applicable trading price of Series C Liberty Broadband common stock and the strike prices associated with the call options) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Range
|
|
|
Volatility
|
|
21.1
|
%
|
—
|
21.5
|
%
|
|
|
Interest rate
|
|
1.0
|
%
|
—
|
1.0
|
%
|
|
|
Dividend yield
|
|
0
|
%
|
—
|
0
|
%
|
|
Other Financial Instruments
Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our consolidated balance sheets. The carrying value of our long-term debt bears interest at a variable rate and therefore is also considered to approximate fair value.
Realized and Unrealized Gains (Losses) on Financial Instruments
Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
(amounts in thousands)
|
|
|
Legacy Charter warrants (1)
|
|
$
|
NA
|
|
NA
|
|
32,782
|
|
|
Time Warner Cable investment and financial instruments (2)(3)(4)
|
|
|
92,990
|
|
2,619
|
|
18,407
|
|
|
Derivative instruments (5)
|
|
|
1,132
|
|
—
|
|
—
|
|
|
|
|
$
|
94,122
|
|
2,619
|
|
51,189
|
|
|
(1)
|
|
As discussed in note 6, Liberty Broadband exercised all of the Company’s outstanding warrants to purchase shares of Legacy Charter common stock during November 2014, subsequent to the completion of the Broadband Spin-Off.
|
|
(2)
|
|
As of December 31, 2014, the Company had an outstanding written call option on 625,000 Time Warner Cable shares with a strike price of $92.02 per share which expired in February 2015. Upon expiration, this written call option was rolled into a new written call option on 625,000 Time Warner Cable shares with a strike price of $100.39 per share which the Company cash settled during June 2015 for $48.3 million. Additionally, as of December 31, 2014, the Company had another outstanding written call option on 625,000 Time Warner Cable shares with a strike price of $90.84 per share which the Company cash settled during April 2015 for $36.7 million. No written call options on Time Warner Cable shares were outstanding as of or during the year ended December 31, 2016.
|
|
(3)
|
|
On March 27, 2015, Liberty Broadband entered into a cashless collar agreement with a financial institution on 1.7 million Time Warner Cable shares held by the Company with a put option strike price of $136.80 per share and a call option strike price of $161.62 per share. The collar was originally scheduled to expire during March 2017. The Company unwound the agreement during July 2015 for $67.1 million cash paid to the counterparty. In connection with this collar agreement, the Company also entered into a revolving loan agreement with an availability of $234 million, which was terminated upon unwinding of the collar agreement during July 2015 (note 8).
|
|
(4)
|
|
As discussed in note 6, Time Warner Cable merged with Charter on May 18, 2016. Therefore the Company no longer has an investment in Time Warner Cable as of May 18, 2016, and the unrealized gain (loss) related to our investment in Time Warner Cable is recorded through this date. In connection with the merger, the Company exchanged, in a tax-free transaction, its shares of Time Warner Cable for shares of Charter Class A common stock.
|
|
(5)
|
|
As of December 31, 2016, the Company had an outstanding zero-strike call option on 704,908 shares of Liberty Broadband Series C common stock which expires in March 2017. The Company had an unrealized gain on the option during the current year primarily due to an increase in the market price of Liberty Broadband Series C common stock during that period.
|
|