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Financial Instruments: Derivatives and Hedging | 9 Months Ended
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Sep. 30, 2011
Financial Instruments: Derivatives and Hedging |
Financial Instruments: Derivatives and Hedging |
6. Financial Instruments: Derivatives and Hedging The Company’s hedging activity was limited to an interest rate swap. The purpose of the interest rate swap, which was terminated on February 22, 2011, was to fix the interest rate for the term of the loan and protect the Company from future interest rate increases on the Term Loan that is described in Note 5. The fair value of the Company’s derivative instrument was determined using the net discounted cash flows of the expected cash flows of the derivative based on the market based interest rate curve. This financial instrument was classified within Level 2 of the fair value hierarchy and was classified as a liability on the condensed consolidated balance sheets. The following table provides the fair value information for the Company’s interest rate swap as of December 31, 2010:
(dollars in thousands) |  | Notional Value |  | Strike Rate |  | Effective Date |  | Expiration Date |  | Fair Value |
Interest Rate Swap |  | $ | 75,000 |  | 5.840% |  | 10/2008 |  | 10/2011 |  | $ | (1,077) |
The interest rate swap represented a cash flow hedge and was recorded at fair value and classified as a liability. Changes in the recorded fair value of the interest rate swap were recorded to other comprehensive income. On February 22, 2011, the interest rate swap agreement applicable to the Term Loan with a value of approximately $75 million was terminated and a payment was made of approximately $982,000. The payment to terminate the interest rate swap liability will be amortized into interest expense through October 15, 2011. As of September 30, 2011, the unamortized balance was approximately $63,000. The interest amortization for the Company’s terminated interest rate swap reclassified from Accumulated Other Comprehensive Income into interest expense during the three and nine months ended September 30, 2011 was as follows:
|  | Three Months |  | Nine Months |
|  | Ended |  | Ended |
(in thousands) |  | September 30, |  | September 30, |
Income Statement Location |  | 2011 |  | 2011 |
Interest expense |  | $ | 385 |  | $ | 921 |
The effective portion of the loss on outstanding derivative recognized in Other Comprehensive Income for the three and nine months ended September 30, 2011 was as follows:
|  | Three Months |  | Nine Months |
|  | Ended |  | Ended |
(in thousands) |  | September 30, |  | September 30, |
Income Statement Location |  | 2011 |  | 2011 |
Interest rate swap |  | $ | 385 |  | $ | 921 |

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