DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

3 Months Ended

Mar. 31, 2012

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 8DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are primarily exposed to interest rate risks related to our variable interest debt, and we seek to manage this risk by utilizing interest rate derivatives. Our objectives in using interest rate derivatives are to add stability to interest costs by reducing our exposure to interest rate movements.  To accomplish this objective and predictability, we primarily use interest rate swaps and caps as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Interest rate caps designated as cash flow hedges involve the receipt of variable amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income (“AOCI”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The outstanding derivatives at March 31, 2012 were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. During the three months ended March 31, 2012, the amount of ineffectiveness recorded in earnings was insignificant.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on our variable-rate debt. Over the next 12 months, we estimate that an additional $2.2 million will be reclassified as an increase to interest expense.

As of March 31, 2012, the Company had gross notional amounts of $172.0 million of interest rate swaps and a $100.0 million interest rate cap that were designated as cash flow hedges of interest risk. The fair value of the interest rate cap derivative was insignificant.

The table below presents the fair value of the Company’s derivative financial instruments which are included in accounts payable and accrued liabilities in the Condensed Consolidated Balance Sheets:

	March 31,			December 31,
	2012			2011
	Fair Value			Fair Value
	(In thousands)
Interest Rate Swaps	$	(4,166	)	$	(4,367	)
Total derivatives designated as hedging instruments	$	(4,166	)	$	(4,367	)

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Income Statement:

	Three months ended March 31,						Three months ended March 31,
	2012			2011			2012			2011
Cash Flow Hedges	Amount of (Loss) Recognized in OCI			Amount of Gain (Loss) Recognized in OCI		Location of Gain (Loss) Reclassified from Accumulated OCI into Earnings	Amount of (Loss) Reclassified from Accumulated OCI into Earnings			Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings
	(In thousands)						(In thousands)
Interest Rate Swaps	$	(391	)	$	—	Interest Expense	$	(493	)	$	—
	$	(391	)	$	—		$	(493	)	$	—