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Note 9 - Derivative Financial Instrument
 6 Months Ended
Jun. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 9. Derivative Financial Instrument


From time to time, we enter into interest rate swaps to fix a portion of our interest expense. We do not enter into derivative instruments for any purpose other than to manage interest rate exposure to fluctuations in the one-month LIBOR benchmark. That is, we do not engage in interest rate speculation using derivative instruments.


As of June 30, 2014, we had a $25 million interest rate swap outstanding with U.S. Bank Dealer Commercial Services. This interest rate swap matures on June 15, 2016 and has a fixed rate of 5.587% per annum. The variable rate on the interest rate swap is the one-month LIBOR rate. At June 30, 2014, the one-month LIBOR rate was 0.15% per annum, as reported in the Wall Street Journal.


Typically, we designate all interest rate swaps as cash flow hedges and, accordingly, we record the change in fair value for the effective portion of these interest rate swaps in comprehensive income rather than net income until the underlying hedged transaction affects net income. If a swap is no longer designated as a cash flow hedge and the forecasted transaction remains probable or reasonably possible of occurring, the gain or loss recorded in accumulated other comprehensive loss is recognized in income as the forecasted transaction occurs. If the forecasted transaction is probable of not occurring, the gain or loss recorded in accumulated other comprehensive loss is recognized in income immediately. The estimated amount that we expect to reclassify from accumulated other comprehensive loss to net income within the next twelve months is $1.2 million at June 30, 2014.


At June 30, 2014 and December 31, 2013, the fair value of our derivative instrument was included in our Consolidated Balance Sheets as follows (in thousands):


Balance Sheet Information   Fair Value of Liability Derivatives  

Derivatives Designated as Hedging

Instruments

 

Location in Balance

Sheet

 

June 30,

2014

 
             

Interest Rate Swap Contract

 

Accrued liabilities

  $ 1,228  
   

Other long-term liabilities

    1,147  
        $ 2,375  

Balance Sheet Information   Fair Value of Liability Derivatives  

Derivatives Designated as Hedging

Instruments

 

Location in Balance

Sheet

 

December 31,

2013

 
             

Interest Rate Swap Contract

 

Accrued liabilities

  $ 1,215  
   

Other long-term liabilities

    1,685  
        $ 2,900  

The effect of derivative instruments on our Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2014 and 2013 was as follows (in thousands):


Derivatives in Cash

Flow Hedging

Relationships

 

Amount of

Gain

Recognized

in

Accumulated

OCI (Effective

Portion)

 

Location of

Loss

Reclassified

from

Accumulated

OCI into

Income

(Effective

Portion)

 

Amount of Loss

Reclassified

from

Accumulated

OCI into Income

(Effective

Portion)

 

Location of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 

Amount of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 
                             

Three Months Ended

June 30, 2014

       

 

       

 

       
Interest Rate Swap Contract    $  93   Floor plan
interest
expense 		  $  (118 ) 

Floor plan
interest
expense

  $  (188 )
                             

Three Months Ended

June 30, 2013

       

 

       

 

       
Interest Rate Swap Contracts   $ 381  

Floor plan
interest
expense

  $ (166 ) Floor plan
 interest
expense 		  $ (296 )

Derivatives in Cash

Flow Hedging

Relationships

 

Amount of

Gain

Recognized

in

Accumulated

OCI (Effective

Portion)

 

Location of

Loss

Reclassified

from

Accumulated

OCI into

Income

(Effective

Portion)

 

Amount of Loss

Reclassified

from

Accumulated

OCI into Income

(Effective

Portion)

 

Location of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 

Amount of

Loss

Recognized in

Income on

Derivative

(Ineffective

Portion and

Amount

Excluded from

Effectiveness

Testing)

 
                             

Six Months Ended

June 30, 2014

       

 

       

 

       
Interest Rate Swap Contract   $ 201   Floor plan
 interest
expense 		  $ (252 ) Floor plan
 interest
expense 		  $ (359 )
                             

Six Months Ended

June 30, 2013

       

 

       

 

       
Interest Rate Swap Contracts   $ 896   Floor plan
 interest
expense 		  $ (472 ) Floor plan
interest
expense 		  $ (890 )

See also Note 8.