Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities

Derivative instruments and hedging activities

NOTE 6 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES 

Historically, the Company entered into interest rate swap contracts with various counterparties to mitigate cash flow risk associated with floating interest rates on outstanding borrowings under its previous asset-based revolving credit facility (the “ABL Credit Facility”).  The interest rate swap contracts were designated as cash flow hedges with interest payments designed to offset the interest payments for borrowings under the ABL Credit Facility that corresponded with the notional amounts of the swaps.  In January of 2011, the ABL Credit Facility was retired concurrent with the issuance of the Company’s 4.875% Senior Notes due 2021 (see Note 4), and all interest rate swap contracts were terminated at the Company’s request.  The Company recognized a charge of $4.2 million related to the termination of the interest rate swap contracts, which was included as a component of “Other income (expense)” in the accompanying Condensed Consolidated Statements of Income for the nine months ended September 30, 2011.  As of September 30, 2012, the Company did not hold any instruments that qualified as cash flow hedge derivatives. 

The table below outlines the effects the Company’s derivative financial instruments had on its Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2012 and 2011 (in thousands): 

	Location and Amount of Loss Recognized in Income on Derivatives
Derivatives Designated as  Hedging Instruments			For the Three Months Ended September 30,				For the Nine Months Ended September 30,
		Classification	2012		2011		2012		2011
Interest rate swap contracts		Other income (expense)	$	-	$	-	$	-	$	(4,237)