Derivative And Hedging Instruments

6 Months Ended

Jun. 30, 2011

Derivative And Hedging Instruments

Derivative And Hedging Instruments

6.           DERIVATIVE AND HEDGING INSTRUMENTS

Interest Rate Caps.  As of June 30, 2011, we had interest rate cap agreements to manage the interest rate risk on our $325.0 million revolving secured warehouse facility with various maturities between August 2011 and June 2013.  As of December 31, 2010, we had interest rate cap agreements to manage the interest rate risk on our $325.0 million revolving secured warehouse facility with various maturities between February 2011 and May 2012.  As of June 30, 2011 and December 31, 2010, we also had an interest rate cap agreement that matures on September 19, 2013 to manage the interest rate risk on a portion of our $75.0 million revolving secured warehouse facility.  These instruments limit the interest rate on both revolving secured warehouse facilities to 6.75% plus the spread over the LIBOR rate or the commercial paper rate, as applicable.

The interest rate caps have not been designated as hedging instruments.

Interest Rate Swaps.  As ofJune 30, 2011 and December 31, 2010, we had an interest rate swap outstanding which matures in August 2011 to convert $25.0 million of the $75.0 million revolving secured warehouse facility into fixed rate debt, bearing an interest rate of 2.96% and 4.36%, respectively.  The decline in the fixed interest rate, as of June 30, 2011, was due to the 140 basis point reduction in the spread during the second quarter of 2011.  This interest rate swap has been designated as a cash flow hedging instrument.

As of June 30, 2011, we had minimal exposure to credit loss on the outstanding interest rate swap.  We do not believe that any reasonably likely change in interest rates would have a materially adverse effect on our financial position, our results of operations or our cash flows.

Information related to the fair values of derivative instruments in our consolidated balance sheets as of June 30, 2011 and December 31, 2010 is as follows:

(In thousands)		Fair Value as of
	Balance Sheet location	June 30, 2011		December 31, 2010
Derivatives designated as hedging instruments
Liability Derivatives
Interest rate swap	Accounts payable and accrued liabilities	$	49	$	176
Derivatives not designated as hedging instruments
Asset Derivatives
Interest rate caps	Other assets	$	45	$	56
Total Derivatives
Total Asset Derivatives		$	45	$	56
Total Liability Derivatives		$	49	$	176

Information related to the effect of derivative instruments designated as hedging instruments in our consolidated financial statements is as follows:

(In thousands)
Derivatives in Cash Flow Hedging Relationships	(Loss) / Gain Recognized in OCI on Derivative (Effective Portion)					(Loss) / Gain Reclassified from Accumulated OCI into Income (Effective Portion)
	For the Three Months Ended June 30,						For the Three Months Ended June 30,
	2011			2010		Location	2011			2010
Interest rate swap	$	(8	)	$	562	Interest expense	$	(74	)	$	(168	)
(In thousands)
Derivatives in Cash Flow Hedging Relationships	(Loss) / Gain Recognized in OCI on Derivative (Effective Portion)					(Loss) / Gain Reclassified from Accumulated OCI into Income (Effective Portion)
	For the Six Months Ended June 30,						For the Six Months Ended June 30,
		2011			2010	Location		2011			2010
Interest rate swap	$	(16	)	$	611	Interest expense	$	(143	)	$	(608	)

As of June 30, 2011, we expect to reclassify losses less than $0.1 million from accumulated other comprehensive income into income during the next twelve months.

Information related to the effect of derivative instruments not designated as hedging instruments on our consolidated statements of income for the three and six months ended June 30, 2011 and 2010 is as follows:

(In thousands)
Derivatives Not Designated as Hedging Instruments		Amount of (Loss) / Gain Recognized in Income on Derivatives
		For the Three Months Ended June 30,						For the Six Months Ended June 30,
	Location	2011			2010			2011			2010
Interest rate caps	Interest expense	$	(121	)	$	(81	)	$	(141	)	$	(157	)
Interest rate swap	Interest expense		-			-			-			(590	)
Total		$	(121	)	$	(81	)	$	(141	)	$	(747	)