Accounting for Derivative Instruments and Hedging Activities

3 Months Ended

Mar. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Accounting for Derivative Instruments and Hedging Activities

Accounting for Derivative Instruments and Hedging Activities

The Company uses interest rate swap agreements to manage its interest costs and reduce the Company’s exposure to increases in floating interest rates. The Company manages its exposure to fluctuations in interest rates by maintaining a mix of fixed and variable rate debt. Using interest rate swap agreements, including those entered into in April 2012 discussed below, the Company agrees to exchange, at specified intervals through 2017, the difference between fixed and variable interest amounts calculated by reference to agreed-upon notional principal amounts.

The Company does not hold or issue derivative instruments for speculative trading purposes. The Company has certain interest rate derivative instruments that have been designated as cash flow hedging instruments. Such instruments effectively convert variable interest payments on certain debt instruments into fixed payments. For qualifying hedges, realized derivative gains and losses offset related results on hedged items in the consolidated statements of operations. The Company formally documents, designates and assesses the effectiveness of transactions that receive hedge accounting.

The effect of derivative instruments on the Company’s condensed consolidated balance sheets is presented in the table below:

	March 31, 2012			December 31, 2011
Other long-term liabilities:
Fair value of interest rate derivatives designated as hedges	$	64		$	65
Accumulated other comprehensive loss:
Interest rate derivatives designated as hedges	$	(64	)	$	(65	)

Changes in the fair value of interest rate agreements that are designated as hedging instruments of the variability of cash flows associated with floating-rate debt obligations, and that meet effectiveness criteria are reported in accumulated other comprehensive loss. The amounts are subsequently reclassified as an increase or decrease to interest expense in the same periods in which the related interest on the floating-rate debt obligations affected earnings (losses).

The effects of derivative instruments on the Company’s condensed consolidated statements of comprehensive loss and condensed consolidated statements of operations is presented in the table below.

	Three Months Ended March 31,
	2012			2011
Other comprehensive loss:
Gain on interest rate derivatives designated as hedges (effective portion)	$	1		$	11
Net loss:
Amount of loss reclassified from accumulated other comprehensive loss into interest expense	$	(8	)	$	(10	)

As of March 31, 2012 and December 31, 2011, the Company had $2.0 billion in notional amounts of interest rate swap agreements outstanding. The notional amounts of interest rate instruments do not represent amounts exchanged by the parties and, thus, are not a measure of exposure to credit loss. The amounts exchanged were determined by reference to the notional amount and the other terms of the contracts.

In April 2012, the Company entered into $1.1 billion in notional amounts of delayed start interest rate swap agreements, extending until 2016 and 2017 a portion of the portfolio that is scheduled to expire in 2013 through 2015.