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NOTE 6 - DERIVITIVE INSTRUMENTS
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Jun. 30, 2011
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| Derivative Instruments and Hedging Activities Disclosure [Text Block] |
NOTE
6 – DERIVITIVE INSTRUMENTS
We
are exposed to certain risks relating to our ongoing business
operations. The primary risk managed by us using
derivative instruments is interest rate risk. We
have in the past entered into interest rate swap agreements
to manage interest rate risk exposure. The
interest rate swap agreements utilized by us effectively
modified our exposure to interest rate risk by converting our
floating-rate debt to a fixed rate basis during the period of
the interest rate swap, thus reducing the impact of
interest-rate changes on future interest expense.
At
inception, we designated our interest rate swaps as cash flow
hedges of floating-rate borrowings. In accordance
with ASC Topic 815, derivatives that have been designated and
qualify as cash flow hedging instruments are reported at fair
value. The gain or loss on the effective portion of the hedge
(i.e., change in fair value) is initially reported as a
component of accumulated other comprehensive loss in the
consolidated statement of equity deficit. The remaining gain
or loss, if any, is recognized currently in earnings.
Unrealized gain or loss on the change in fair value of
interest rate swaps that do not qualify as hedges are
recognized in earnings.
As
a result of our refinancing and
the New Credit Agreement and the issuance of the Notes
completed on April 6, 2010, our interest rate swaps do not
match the terms of our current bank debt and so accordingly,
we have determined that they are no longer designated as cash
flow hedges. Accordingly, all changes in their
fair value after April 6, 2010 are, and will continue to be
recognized in earnings.
The
related Accumulated Other Comprehensive Loss (AOCL) of $3.1
million associated with the negative fair values of these
interest rate swaps on April 6, 2010, the date of our
refinancing, is being amortized on a straight-line basis to
interest expense through November 15, 2012, the maturity
date of these cash flow hedges. From April 6, 2010
to June 30, 2011, approximately $1.5 million of AOCL was
amortized to interest expense bringing the remaining balance
of AOCL to $1.6 million at June 30, 2011. As of
April 6, 2010, the fair value of the interest rate swaps was
a negative $10.4 million.
At
June 30, 2011 the negative fair value of these interest rate
swaps was $8.4 million and was classified as other
non-current liabilities in our condensed consolidated balance
sheet. For the six months ended June 30, 2011, we
recognized approximately $2.1 million in other income related
to the change in fair value of these interest rate
swaps.
A tabular
presentation of the fair value of derivative instruments as
of December 31, 2010 is as follows (amounts in
thousands):
A tabular
presentation of the fair value of derivative instruments as
of June 30, 2011 is as follows (amounts in thousands):
A
tabular presentation of the effect of derivative instruments
on our statement of operations is as follows (amounts in
thousands):
For the
Three Months Ended June 30, 2011
For the
Three Months Ended June 30, 2010
For the
Six Months Ended June 30, 2011
For the
Six Months Ended June 30, 2010
* Amortization
of OCI associated with the cash flow hedges through April 6,
2010 (see discussion above).
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