Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements

Fair Value Measurements

11.Fair Value Measurements

In its ongoing business operations, the Company’s primary market risk exposure with regard to financial instruments is due to changes in interest rates. The Company manages this risk by monitoring interest rates and future cash requirements and evaluating opportunities to refinance borrowings at various maturities and interest rates. The Company also utilized interest rate swaps or other derivatives to reduce risks associated with changes in interest rates.

GAAP requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

In July 2008, the Company issued $40 million in senior secured notes that were convertible into the Company’s common stock. The conversion features related to the notes gave rise to a derivative liability carried at fair value, with changes in fair value recognized currently in interest expense.  In August 2010, the convertible notes were fully repaid.

In January 2008, the Company entered into interest rate swap agreements to reduce future cash flow variability for approximately two years on $55 million of variable rate debt. The transactions were not designated as hedges, and, accordingly, the gains and losses resulting from the change in fair value from these interest rate swaps were recognized currently in interest expense. The interest rate swap agreements expired in January 2010.

Information regarding amounts recognized in the statement of operations is as follows:

	Location of gain recognized in	Amount of gain recognized on derivative		Amount of gain recognized on derivative
	statement of	Three Months Ended		Nine Months Ended
Derivatives not designated as hedges:	operations	9/30/11	9/30/10	9/30/11	9/30/10
		(in thousands)		(in thousands)
Interest rate swap agreements	Interest expense	—	—	—	63
Derivative liability related to convertible debt	Interest expense	—	12	—	489

In March 2011, assets held for sale with a carrying value of $1,078,000 were written down to the lower of net book value or estimated fair value less costs to sell of $623,000 (based on Level 3 inputs), resulting in a loss of $455,000.  The fair value was estimated based on the fair values of similar assets and recent offers received for the property as well as other market information.

The fair value of long-term debt was estimated based on rates currently available to the Company for debt with similar terms and remaining maturities. The carrying amount of long-term debt (including current portion) at September 30, 2011 and December 31, 2010 was $43,821,000 and $45,200,000, respectively, which approximated fair value.  The carrying amount of the Company’s other financial instruments approximates fair value.