Fair Value Measurements and Interest Rate Swaps

9 Months Ended

Sep. 30, 2011

Fair Value Measurements and Interest Rate Swaps [Abstract]

Fair Value Measurements and Interest Rate Swaps

Note 5 – Fair Value Measurements and Interest Rate Swaps

In measuring the fair value of our assets and liabilities, we use significant other observable market data or assumptions (Level 2 inputs as defined in the accounting guidance) that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate.  Our assets and liabilities that are measured at fair value on a recurring basis include the unrealized gains or losses on our interest rate swaps.

As of September 30, 2011, we had two interest rate swap agreements in effect that reduced our exposure to fluctuations in interest rates on our Floating Rate Senior Notes (the Notes) and our $240.0 million five-year revolving credit facility (the Previous Revolver).  One interest rate swap agreement converts the variable interest rate on the Notes to a fixed rate of 5.088%.  The current notional amount for this swap agreement is $50.0 million.  This swap agreement was effective February 12, 2007 and terminates on February 12, 2012.  Our other interest rate swap agreement converted the variable interest rate on the Previous Revolver to a fixed rate of 1.725% on a notional amount of $50.0 million.  This swap agreement was effective January 27, 2010 and is scheduled to terminate on January 27, 2012.  We de-designated this interest rate swap when we replaced the Previous Revolver in October 2011.  For additional discussion of subsequent events, see Note 6.

We recognize any differences between the variable interest rate payments and the fixed interest rate settlements from our swap counterparties as an adjustment to interest expense over the life of the swaps.  We have designated these swaps as cash flow hedges and we record the changes in the fair value of the swaps to Accumulated other comprehensive income (loss).  Since inception, we have not recognized any gains or losses on these swaps through income and there has been no effect on income from hedge ineffectiveness.

The table below presents the estimated fair value of our swap agreements (in thousands):

	Unrealized Losses at September 30,
Balance Sheet Line Item		2011			2010
Accrued expenses and other current liabilities	$	(1,104	)	$	(4,167	)

Failure of our swap counterparties would result in the loss of any potential benefit to us under our swap agreements.  In this case, we would still be obligated to pay the variable interest payments underlying our debt agreements.  Additionally, failure of our swap counterparties would not eliminate our obligation to continue to make payments under our existing swap agreements if we continue to be in a net pay position.

As discussed in Note 1 to the Consolidated Financial Statements in our 2010 Annual Report on Form 10-K, the carrying amount of long-term debt approximates fair value as it bears interest at variable rates.