Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2012

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments Disclosure

12.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of financial instruments has been estimated by the Company using available market information as of June 30, 2012 and December 31, 2011, and valuation methodologies considered appropriate. The estimates presented are not necessarily indicative of amounts the Company could realize in a current market exchange (in thousands):

	June 30, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets:
Cash and cash equivalents	$	115,109	$	115,109	$	129,865	$	129,865
Available-for-sale securities		33,943		33,943		31,582		31,582
Trading securities		34,946		34,946		30,486		30,486
Liabilities:
Credit Facility		5,974,062		5,870,228		5,979,383		5,780,877
8⅞% Senior Notes		931,235		961,193		1,777,617		1,842,322
8% Senior Notes		2,023,955		2,065,000		1,000,000		995,000
Other debt		348,575		348,575		41,143		41,143

The estimated fair value is determined using the methodologies discussed below in accordance with accounting standards related to the determination of fair value based on the U.S. GAAP fair value hierarchy as discussed in Note 13.The estimated fair value for financial instruments with a fair value that does not equal its carrying value is considered a Level 2 valuation.  The Company utilizes the market approach and obtains indicative pricing from the administrative agent to the Credit Facility to determine fair values, which are validated through subscription services such as Bloomberg where relevant.

Cash and cash equivalents.  The carrying amount approximates fair value due to the short-term maturity of these instruments (less than three months).

Available-for-sale securities.  Estimated fair value is based on closing price as quoted in public markets.

Trading securities.  Estimated fair value is based on closing price as quoted in public markets.

Credit Facility.  Estimated fair value is based on information from the Company’s bankers regarding relevant pricing for trading activity among the Company’s lending institutions.

8⅞% Senior Notes.  Estimated fair value is based on the average bid and ask price as quoted by the bank who served as underwriters in the sale of these notes.

8% Senior Notes.  Estimated fair value is based on the average bid and ask price as quoted by the bank who served as underwriters in the sale of these notes.

Other debt.  The carrying amount of all other debt approximates fair value due to the nature of these obligations.

Interest rate swaps.  The fair value of interest rate swap agreements is the amount at which they could be settled, based on estimates calculated by the Company using a discounted cash flow analysis based on observable market inputs and validated by comparison to estimates obtained from the counterparty. The Company incorporates credit valuation adjustments (“CVAs”) to appropriately reflect both its own nonperformance or credit risk and the respective counterparty’s nonperformance or credit risk in the fair value measurements. In adjusting the fair value of its interest rate swap agreements for the effect of nonperformance or credit risk, the Company has considered the impact of any netting features included in the agreements.

The Company assesses the effectiveness of its hedge instruments on a quarterly basis. For the three and six months ended June 30, 2012 and 2011, the Company completed an assessment of the cash flow hedge instruments and determined the hedges to be highly effective. The Company has also determined that the ineffective portion of the hedges do not have a material effect on the Company’s consolidated financial position, operations or cash flows. The counterparties to the interest rate swap agreements expose the Company to credit risk in the event of nonperformance. However, at June 30, 2012, each swap agreement entered into by the Company was in a net liability position so that the Company would be required to make the net settlement payments to the counterparties; the Company does not anticipate nonperformance by those counterparties. The Company does not hold or issue derivative financial instruments for trading purposes.

Interest rate swaps consisted of the following at June 30, 2012:

Swap #	Notional Amount (in 000’s)		Fixed Interest Rate		Termination Date	Fair Value of Liability (in 000’s)
1	$	200,000	4.685	%	September 11, 2012	$	1,679
2		100,000	3.352	%	October 23, 2012		908
3		125,000	4.375	%	November 23, 2012		1,953
4		75,000	4.380	%	November 23, 2012		1,174
5		150,000	5.020	%	November 30, 2012		2,862
6		200,000	2.242	%	February 28, 2013		2,347
7		100,000	5.023	%	May 30, 2013		4,144
8		300,000	5.242	%	August 6, 2013		15,631
9		100,000	5.038	%	August 30, 2013		5,276
10		50,000	3.586	%	October 23, 2013		2,013
11		50,000	3.524	%	October 23, 2013		1,972
12		100,000	5.050	%	November 30, 2013		6,383
13		200,000	2.070	%	December 19, 2013		4,540
14		100,000	5.231	%	July 25, 2014		9,511
15		100,000	5.231	%	July 25, 2014		9,511
16		200,000	5.160	%	July 25, 2014		18,734
17		75,000	5.041	%	July 25, 2014		6,843
18		125,000	5.022	%	July 25, 2014		11,357
19		100,000	2.621	%	July 25, 2014		4,216
20		100,000	3.110	%	July 25, 2014		5,208
21		100,000	3.258	%	July 25, 2014		5,508
22		200,000	2.693	%	October 26, 2014		9,682
23		300,000	3.447	%	August 8, 2016		30,536
24		200,000	3.429	%	August 19, 2016		20,306
25		100,000	3.401	%	August 19, 2016		10,048
26		200,000	3.500	%	August 30, 2016		20,957
27		100,000	3.005	%	November 30, 2016		8,828

The Company is exposed to certain risks relating to its ongoing business operations. The risk managed by using derivative instruments is interest rate risk. Interest rate swaps are entered into to manage interest rate fluctuation risk associated with the term loans in the Credit Facility. Companies are required to recognize all derivative instruments as either assets or liabilities at fair value in the condensed consolidated statement of financial position. The Company designates its interest rate swaps as cash flow hedges. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is reported as a component of OCI and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

Assuming no change in June 30, 2012 interest rates, approximately $111.3 million of interest expense resulting from the spread between the fixed and floating rates defined in each interest rate swap agreement will be recognized during the next 12 months. If interest rate swaps do not remain highly effective as a cash flow hedge, the derivatives’ gains or losses resulting from the change in fair value reported through OCI will be reclassified into earnings.

The following tabular disclosure provides the amount of pre-tax loss recognized as a component of OCI during the three and six months ended June 30, 2012 and 2011 (in thousands):

	Amount of Pre-Tax Loss Recognized in OCI (Effective Portion)
Derivatives in Cash Flow Hedging Relationships	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Interest rate swaps	$	(21,704)	$	(67,685)	$	(44,826)	$	(63,572)

The following tabular disclosure provides the location of the effective portion of the pre-tax loss reclassified from accumulated other comprehensive loss (“AOCL”) into interest expense on the condensed consolidated statements of income during the three and six months ended June 30, 2012 and 2011 (in thousands):

	Amount of Pre-Tax Loss Reclassified from AOCL into Income (Effective Portion)
Location of Loss Reclassified from AOCL into Income (Effective Portion)	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Interest expense, net	$	37,316	$	53,649	$	76,926	$	106,573

The fair values of derivative instruments in the condensed consolidated balance sheets as of June 30, 2012 and December 31, 2011 were as follows (in thousands):

Asset Derivatives

Liability Derivatives

June 30, 2012

December 31, 2011

June 30, 2012

December 31, 2011

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Derivatives designated as hedging instruments

Other assets, net

$

-

Other assets, net

$

-

Other long-term liabilities

$

222,127

Other long-term liabilities

$

254,228