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DERIVATIVES AND HEDGING ACTIVITIES (Block)
 12 Months Ended
Dec. 31, 2011
Derivative Instruments And Hedging Activities Disclosure Abstract  
Derivative Instruments And Hedging Activities Disclosure Text Block

9.       DERIVATIVE AND HEDGING ACTIVITIES

 

       The Company from time to time enters into derivative financial instruments, including interest rate hedging transactions, to manage its exposure to fluctuations in interest rates under the Company's variable rate debt.

 

Accounting For Derivative Instruments And Hedging Activities

 

       The Company recognizes at fair value all derivatives, whether designated in hedging relationships or not, in the balance sheet as either assets or liabilities. The accounting for changes in the fair value of a derivative, including certain derivative instruments embedded in other contracts, depends on the intended use of the derivative and the resulting designation. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the statement of operations when the hedged item affects net income. If a derivative does not qualify as a hedge, it is marked to fair value through the statement of operations. Any fees associated with these derivatives are amortized over their term. Under these derivatives, the differentials to be received or paid are recognized as an adjustment to interest expense over the life of the contract. In the event the cash flow hedges are terminated early, any amount previously included in comprehensive income (loss) would be reclassified as interest expense to the statement of operations as the forecasted transaction settles.

 

       The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes ongoing effectiveness assessments by relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company's derivative activities, all of which are for purposes other than trading, are initiated within the guidelines of corporate risk-management policies. The Company reviews the correlation and effectiveness of its derivatives on a periodic basis.

 

       The fair value of these derivatives is determined using observable market based inputs (a Level 2 measurement, as described in Note 17) and the impact of credit risk on a derivative's fair value (the creditworthiness of the transaction's counterparty for assets and the creditworthiness of the Company for liabilities).

 

       As of December 31, 2011 and 2010, the Company had outstanding the aggregate notional amounts of $100.0 million and $475.0 million, respectively, of interest rate transactions.

 

       The following table provides the details of the interest rate transaction outstanding as of December 31, 2011:

Type      Fixed  
Of Notional Effective LIBOR Expiration
Hedge Amount Date Rate Date
  (amounts      
  (in millions)      
          
Swap $ 100.0 May 28, 2008 3.62% May 28, 2012

Hedge Accounting Treatment

 

During the period of an interest rate hedging relationship, the Company's variable rate debt is expected to be greater than the notional amount of the derivative rate hedging transactions. These transactions are tied to the one-month LIBOR interest rate. Under a fixed rate swap, the Company pays a fixed rate on a notional amount to the counterparty, and the counterparty pays to the Company a variable rate on the notional amount equal to the Company's LIBOR borrowing rate. A Collar establishes two separate agreements: an upper limit, or cap, and a lower limit, or floor, for the Company's LIBOR borrowing rate.

 

All of the Company's interest rate transactions entered into in 2008 received hedge accounting treatment, which treatment continued throughout their terms for all hedges other than the hedge with an expiration date of May 28, 2012. In connection with the refinancing on November 23, 2011 (see Note 7(A)), this hedge, which was not terminated, no longer received hedge accounting treatment as the hedge was not effective due to the refinancing. As a result, the Company reclassified as of November 23, 2011 all amounts remaining in accumulated other comprehensive income to the statement of operations.

 

Non-Hedge Accounting Treatment

 

       For the interest rate transaction with an expiration date of May 28, 2012, the Company recognized non-hedge accounting treatment covering the period from November 23, 2011 through December 31, 2011.

 

The following tables include those derivatives that expired during the periods indicated:

Expired Derivatives
Years Ended December 31, 2011
Type        Fixed  
Of Notional Effective   LIBOR Expiration
Hedge Amount Date Collar Rate Date
  (amounts        
  (in millions)        
            
Swap $ 150.0 January 28, 2008 n/a 3.03% January 28, 2011
Collar   100.0 February 28, 2008[Cap 4.00%]February 28, 2011
   Floor 2.14%
Swap 0 125.0 March 28, 2008 n/a 2.91% September 28, 2011
    375.0        
            
Expired Derivatives
Years Ended December 31, 2010
Type        Fixed  
Of Notional Effective   LIBOR Expiration
Hedge Amount Date Collar Rate Date
  (amounts        
  (in millions)        
            
Swap $ 75.0 January 28, 2008 n/a 3.03% January 28, 2010

The following is a summary of the gains (losses) related to the Company's cash flow hedges for the periods indicated:

 

  Years Ended December 31,
Description 2011 2010 2009
  (amounts in thousands)   
          
Type Of Derivative Designated As A Cash Flow Hedge  Interest Rate Interest Rate Interest Rate
Amount Of Gain (Loss) Recognized In OCI $ 5,643 $ 6,155 $ 1,830
Location Of Gain (Loss) Reclassified From         
Accumulated OCI To Statement Of Operations Interest Expense Interest Expense Interest Expense
Amount Of Gain (Loss) Reclassified From          
Accumulated OCI To Statement Of Operations $ (1,634) $0 $0
Location Of Gain (Loss) In Statement Of Operations Interest Expense Interest Expense Interest Expense
Amount Of Gain (Loss) In Statement Of Operations         
Due To Ineffectiveness $ 288 $0 $0

The gains and losses were recorded to the statement of comprehensive income (loss) as these derivatives qualified for hedge accounting treatment (except as disclosed above under Non-Hedge Accounting Treatment). See Note 14 for the net change in the fair value. The fair value of these derivatives was determined using observable market-based inputs (a Level 2 measurement as described under Note 17) and the impact of the credit risk on a derivative's fair value (the creditworthiness of the transaction's counterparty for assets and the creditworthiness of the Company for liabilities).

 

As of November 23, 2011 the remaining amount in accumulated other comprehensive income related to these derivatives was reclassified to the statement of operations for the reasons described above.

       The following table presents the accumulated derivative gain (loss) recorded in the statements of other comprehensive income (loss) as of the periods indicated:

 

 Fair Value Of Accumulated Derivatives Balance Outstanding
 December 31,
 2011 2010 2009
 Assets (Liabilities)
         
 (amounts in thousands)
         
Beginning balance as of January 1$ (7,277) $ (13,432) $(15,262)
Net unrealized gain (loss) on derivatives,        
net of taxes (benefit)  7,277   6,155  1,830
Ending balance$ - $ (7,277) $(13,432)
         

The following is a summary of the fair value of the derivatives outstanding as of the periods indicated:

   Fair Value
   December 31,
 Balance Sheet 2011 2010
 Location Asset (Liability)
   (amounts in thousands)
Designated Derivatives       
Interest rate hedge transactionsCurrent liabilities $ (1,346) $ (2,958)
Interest rate hedge transactionsOther long-term liabilities $ - $ (4,319)