Financial Instruments | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments |
Corporate Bonds In connection with CBIZ’s payroll business, the Company invests certain client funds in investment grade corporate bonds. At September 30, 2011 and December 31, 2010, CBIZ held corporate bonds with par values totaling $30.9 million and $14.6 million, respectively. These corporate bonds have maturity dates ranging from October 2011 through June 2016, and are included in “Funds held for clients – current” on the consolidated balance sheets as these investments are highly liquid and are classified as available-for-sale. During the nine months ended September 30, 2011, CBIZ purchased bonds with a par value totaling $18.9 million, sold bonds with a par value totaling $1.5 million, and had an additional $1.1 million par value of bonds that matured. Auction Rate Securities (“ARS”) During the nine months ended September 30, 2011, CBIZ sold its three investments in ARS and recorded a loss of approximately $0.1 million in “Other income (loss), net” on the consolidated statements of operations. At September 30, 2011, CBIZ had no remaining investments in ARS. See Note 8 for further discussion of ARS. Interest Rate Swaps CBIZ uses interest rate swaps to manage interest rate risk exposure. CBIZ’s interest rate swaps effectively mitigate the Company’s exposure to interest rate risk, primarily through converting portions of floating rate debt under the credit facility, to a fixed rate basis. These agreements involve the receipt or payment of floating rate amounts in exchange for fixed rate interest payments over the life of the agreements without an exchange of the underlying principal amounts. CBIZ does not enter into derivative instruments for trading or speculative purposes. CBIZ’s interest rate swaps have been designated as cash flow hedges. Accordingly, the interest rate swaps are recorded as either assets or liabilities in the consolidated balance sheets at fair value. Changes in fair value are recorded as a component of other comprehensive loss, net of tax, to the extent the swaps are effective. Amounts recorded to other comprehensive loss are reclassified to interest expense as interest on the underlying debt is recognized. Net amounts due related to the swaps are recorded as adjustments to interest expense when incurred or payable. At inception, the critical terms of the interest rate swaps matched the underlying risks being hedged, and as such the interest rate swaps are expected to be highly effective in offsetting fluctuations in the designated interest payments resulting from changes in the benchmark interest rate. The interest rate swaps are assessed for effectiveness and continued qualification for hedge accounting on a quarterly basis. If an interest rate swap were to be de-designated as a hedge it would be accounted for as a financial instrument used for trading and any changes in fair value would be recorded in the consolidated statements of operations. All swaps were deemed to be effective for the three and nine months ended September 30, 2011 and 2010. As a result of the use of derivative instruments, CBIZ is exposed to risk that the counterparties will fail to meet their contractual obligations. To mitigate the counterparty credit risk, CBIZ only enters into contracts with financial institutions based upon their credit ratings and other factors, and continually assesses the creditworthiness of counterparties. At September, 2011, all of the counterparties to CBIZ’s interest rate swaps had investment grade ratings. To date, all counterparties have performed in accordance with their contractual obligations. There are no credit risk-related contingent features in CBIZ’s interest rate swaps nor do the swaps contain provisions under which the Company has, or would be required, to post collateral. At September 30, 2011 and December 31, 2010, the interest rate swaps were classified as liability derivatives. The following table summarizes CBIZ’s outstanding interest rate swaps and their effects on the consolidated balance sheets at September 30, 2011 and December 31, 2010 (in thousands).
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