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DERIVATIVE INSTRUMENTS
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12 Months Ended |
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Dec. 31, 2011
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| DERIVATIVE INSTRUMENTS |
NOTE 7. DERIVATIVE INSTRUMENTS During 2005, we entered into three interest rate swap transactions intended to offset the risks associated with the variable interest rate on our then outstanding Term Loan C. The interest rate swaps were designated and qualified as cash flow hedges under FASB ASC Topic 815 “Derivatives and Hedging.” The effective portion of the gain or loss on these derivative instruments was reported as a component of other comprehensive income (outside earnings) and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affected earnings. Effective October 1, 2008, we elected a one-month reset on our Term Loan C rather than a three-month, resulting in the swaps no longer qualifying as a cash flow hedge. As the interest rate swap agreements contained a three-month reset period, the swaps were no longer effective and no longer qualified as a cash flow hedge. Changes in the fair value of these swaps after October 1, 2008 were reported in current period income rather than deferred in other comprehensive income. On December 1, 2009, the swap transactions were terminated when the underlying Term Loan C was paid in full.
Details of the three swap transaction were as follows: On April 8, 2005, we entered into an interest rate swap arrangement for the notional principal amount of $30.0 million whereby we were to pay a fixed interest rate of 4.99% as compared to LIBOR on our then outstanding bank credit facility borrowing. Interest expense for year ended December 31, 2009, was approximately $0.9 million based on the difference between the interest rates. The swap was settled on December 1, 2009 for $3.1 million when the underlying bank credit facility was terminated. The ineffective portion of this swap reported in current period expenses was a $0.6 million gain and upon termination of the swap, we recognized a $0.8 million loss. Effective on October 1, 2008, we had elected a one-month reset on our Term Loan C rather than the three-month reset period. As this interest rate swap agreement contained a three-month reset period, the swap was no longer effective and no longer qualified as a cash flow hedge. Changes in the fair value of this swap after October 1, 2008 were reported in current period income rather than deferred in other comprehensive income. An additional $0.3 million of accumulated other comprehensive loss was reclassified into interest expense as of December 1, 2009 in order to recognize the impact over the same period in which the hedged transaction affected earnings. On December 1, 2009, the remaining $1.0 million in accumulated other comprehensive loss was reclassified into interest expense. On April 26, 2005, we entered into an interest rate swap arrangement for the notional principal amount of $30.0 million whereby we were to pay a fixed interest rate of 4.70% as compared to LIBOR on our then outstanding bank credit facility borrowing. Interest expense for year ended December 31, 2009, was approximately $0.8 million based on the difference between the interest rates. The swap was settled on December 1, 2009 for $2.9 million when the underlying bank credit facility was terminated. The ineffective portion of this swap reported in current period expenses was a $0.5 million gain and upon termination of the swap, we recognized a $0.8 million loss. Effective on October 1, 2008, we had elected a one-month reset on our Term Loan C rather than the three-month reset period. As this interest rate swap agreement contained a three-month reset period, the swap was no longer effective and no longer qualified as a cash flow hedge. Changes in the fair value of this swap after October 1, 2008 were reported in current period income rather than deferred in other comprehensive income. An additional $0.3 million of accumulated other comprehensive loss was reclassified into interest expense as of December 1, 2009 in order to recognize the impact over the same period in which the hedged transaction affected earnings. On December 1, 2009, the remaining $0.7 million in accumulated other comprehensive loss was reclassified into interest expense. On May 5, 2005, we entered into a third interest rate swap arrangement for the notional principal amount of $30.0 million whereby we were to pay a fixed interest rate of 4.53% as compared to LIBOR on then outstanding bank credit facility borrowing. Interest expense for year ended December 31, 2009, was approximately $0.8 million based on the difference between the interest rates. The swap was settled on December 1, 2009 for $2.7 million when the underlying bank credit facility was terminated. The ineffective portion of this swap reported in current period expenses was a $0.5 million gain and upon termination of the swap, we recognized a $0.7 million loss. Effective on October 1, 2008, we had elected a one-month reset on our Term Loan C rather than the three-month reset period. As this interest rate swap agreement contained a three-month reset period, the swap was no longer effective and no longer qualified as a cash flow hedge. Changes in the fair value of this swap after October 1, 2008 were reported in current period income rather than deferred in other comprehensive income. An additional $0.2 million of accumulated other comprehensive loss was reclassified into interest expense as of December 1, 2009 in order to recognize the impact over the same period in which the hedged transaction affected earnings. On December 1, 2009, the remaining $0.6 million in accumulated other comprehensive loss was reclassified into interest expense. |