Derivative Financial Instruments

9 Months Ended

Sep. 30, 2014

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

(14)  Derivative Financial Instruments

From time to time, the Company may employ interest rate swaps in an attempt to achieve a more balanced debt portfolio between fixed and variable interest.  The Company does not use derivative financial instruments for trading or speculative purposes.

The Company has three interest rate swaps for notional amounts of $100 million each related to its 7 1/8% senior notes maturing in December 2021.  These interest rate swaps are accounted for as fair value hedges since the swaps hedge against the change in fair value of fixed rate debt resulting from changes in interest rates.  The Company recorded a derivative asset relating to these swaps of $2.6 million and $0.3 million within intangible and other long term assets in the consolidated balance sheets as of September 30, 2014 and December 31, 2013, respectively. 

The changes in fair value of the interest rate swaps are included in the adjustments to reconcile net income to net cash provided by operating activities in the consolidated statement of cash flows. The effect and location of the derivative instruments in the condensed consolidated statement of operations, presented on a pre-tax basis, are as follows (in thousands):

		Three Months Ended September 30,
Effect of derivative instrument	Location of (gain) loss  recognized	2014		2013
Interest rate swap	Interest expense, net	$	1,907	$	(513)
Hedged item - debt	Interest expense, net		(2,639)		615
		$	(732)	$	102

		Nine Months Ended September 30,
		2014		2013
Interest rate swap	Interest expense, net	$	(6,727)	$	7,383
Hedged item - debt	Interest expense, net		4,422		(6,886)
		$	(2,305)	$	497

For the nine months ended September 30, 2014 and 2013,  approximately $2.3 million of interest income and $0.5 million of interest expense, respectively, was related to the ineffectiveness associated with these fair value hedges.  Hedge ineffectiveness represents the difference between the changes in fair value of the derivative instruments and the changes in fair value of the fixed rate debt attributable to changes in the benchmark interest rate.