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10. DERIVATIVE INSTRUMENTS
 12 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS

We are exposed to certain risks relating to our ongoing business operations.  The primary risk managed by us using derivative instruments is interest rate risk.  We have in the past entered into interest rate swap agreements to manage interest rate risk exposure.  The interest rate swap agreements utilized by us effectively modified our exposure to interest rate risk by converting our floating-rate debt to a fixed rate basis during the period of the interest rate swap, thus reducing the impact of interest-rate changes on future interest expense.

 

At inception, we designated our interest rate swaps as cash flow hedges of floating-rate borrowings.  In accordance with ASC Topic 815, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e., change in fair value) is initially reported as a component of accumulated other comprehensive income in the consolidated statement of equity deficit. The remaining gain or loss, if any, is recognized currently in earnings. Unrealized gains or losses on the change in fair value of our interest rate swaps that do not qualify as hedges are recognized in earnings.

 

As a result of our senior secured credit facilities that were refinanced on October 10, 2012 and the issuance of the senior notes completed on April 6, 2010, our interest rate swaps do not match the terms of our current bank debt and so accordingly, they were no longer designated as cash flow hedges after the date of refinancing. Accordingly, all changes in their fair value after April 6, 2010, and through November 15, 2012, their maturity date, were recognized in earnings as other expense.

 

The related Accumulated Other Comprehensive Loss (“AOCL”) of $3.1 million associated with the negative fair values of these interest rate swaps on April 6, 2010 was amortized on a straight-line basis to interest expense through November 15, 2012, the maturity date of these cash flow hedges.

 

 

A tabular presentation of the effect of derivative instruments on our statement of operations is as follows (amounts in thousands):

 

For the Year Ended December 31, 2012

 

Ineffective Interest Rate Swap  Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)  Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)  Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)  Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)  Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
                
Interest rate contracts  None  $5,064  Other income/ (expense)  *  ($918)  Interest income/(expense)

 

For the Year Ended December 31, 2011

 

Ineffective Interest Rate Swap  Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)  Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)  Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion)  Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)  Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
                
Interest rate contracts  None  $5,441  Other income/ (expense)  *   ($1,225)  Interest income/(expense)

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* Amortization of OCI associated with the cash flow hedges built up through April 6, 2010 (see discussion above).