DERIVATIVE INSTRUMENT

6 Months Ended

Mar. 31, 2013

DERIVATIVE INSTRUMENT

7. DERIVATIVE INSTRUMENT

Interest Rate Swap Agreement. On January 24, 2013, we entered into a floating-to-fixed interest rate swap with an initial notional amount of $58,875 (such notional amount reducing over the life of the arrangement), terminating October 26, 2017, which will effectively convert our floating-rate debt to a fixed rate (the “Swap Agreement”). Under the terms of the Swap Agreement, we will pay a fixed rate of approximately 0.775%, we will receive a floating-rate payment tied to the one-month LIBOR, and there will be no exchange of notional amounts. Our objective in using an interest rate derivative is to add stability to interest expense and to manage our exposure to interest rate movements.

We designated the Swap Agreement as a cash flow hedge in accordance with the accounting guidance in ASC Topic 815. As of March 31, 2013, the fair value of the Swap Agreement was a liability of $284. The effective portion of the change in the fair value of a derivative designated and that qualifies as a cash flow hedge is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in the fair value of the derivative is recognized directly in earnings. For the six-months ended March 31, 2013, we had no hedge ineffectiveness.

The following table provides quantitative disclosures about the Swap Agreement before income tax effects:

	March 31,		September 30,
	2013		2012
Balance sheet location of fair value:
Other assets	$	20	$	-
Accrued liabilities	$	304	$	-

	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2013		2012		2013		2012
Amount of gain (loss) recognized in other comprehensive income (effective portion)	$	(340)	$	-	$	(340)	$	-
Amount reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	56	$	-	$	56	$	-