Derivative Financial Instruments

9 Months Ended

Jun. 30, 2011

Derivative Financial Instruments

Derivative Financial Instruments

11.   DERIVATIVE FINANCIAL INSTRUMENTS

Market risks relating to the Company's operations result primarily from changes in interest rates and changes in foreign currency exchange rates. The Company is exposed to market risk related to changes in interest rates and selectively uses derivative financial instruments, including forward contracts and swaps, to manage these risks.  During the third quarter of 2010, the Company entered into a $60 million one-year forward interest rate swap effective October 5, 2010.  All derivative instruments are reported on the balance sheet at fair value.  The derivative instruments are designated as a cash flow hedge and the gain or loss on the derivative is deferred in accumulated other comprehensive income until recognized in earnings with the underlying hedged item.  Including the impact of interest rate swaps outstanding, the interest rates on approximately 40% of the Company's total borrowings were effectively fixed as of June 30, 2011.

The following is a summary of the notional transaction amounts and fair values for the Company's outstanding derivative financial instruments as of June 30, 2011.

		Average
(In thousands)	Notional Amount	Receive Rate	Average Pay Rate	Fair Value
Interest rate swap	$ 60,000	0.19%	1.10%	$(143)

Fair Value of Financial Instruments

The Company's interest rate swaps are classified within Level 2 of the valuation hierarchy in accordance with FASB Accounting Standards Codification (ASC) 825, as presented below as of June 30, 2011:

(In thousands)	Level 1	Level 2	Level 3	Total
Liabilities:
Interest rate swaps	$ -	$143	$ -	$143