Derivative instruments and hedging activities

6 Months Ended

Jun. 30, 2011

Derivative instruments and hedging activities [Abstract]

Derivative Instruments and Hedging Activities

Derivative instruments and hedging activities

From time to time, the Company seeks to manage interest rate risk associated with variable rate borrowings through the use of derivative instruments designated as cash flow hedges.

In 2008, the Company entered into two forward interest rate swaps with two different commercial banks to fix the interest rate on certain LIBOR-based borrowings under the previous credit facility. Both swaps were designated as cash flow hedges and matured on July 19, 2010. Pursuant to each of the interest rate swap agreements, the Company was obligated to make quarterly fixed rate payments to the counterparty, while the counterparty was obligated to make quarterly floating rate payments to the Company based on three-month LIBOR on the same notional amount.

As of June 30, 2010, the Company’s interest rate swaps were valued as a $1.3 million liability and were included in accrued liabilities. For the six months ended June 30, 2010, the swaps increased the Company’s interest expense by $15.3 million.

The Company may enter into additional swap transactions or other interest rate protection agreements in the future, although it has no current intention to do so.