Quarterly report pursuant to sections 13 or 15(d)

Derivative Financial Instruments

Derivative Financial Instruments
6 Months Ended
Jun. 30, 2012
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments
5. Derivative Financial Instruments

The Company uses derivative instruments to manage interest rate risk and had previously designated an interest rate swap as a cash flow hedge of interest expense related to variable-rate long-term debt. To the extent this hedging relationship was effective; changes in the fair value of the interest rate swap were recorded in Accumulated Other Comprehensive Loss (“AOCL”). Amounts were reclassified from AOCL to interest expense in the period when the hedged forecasted transaction affects earnings. As a result of the extinguishment of debt during the three months ended June 30, 2012, forecasted cash flows associated with the hedged variable-rate debt interest payments were concluded to no longer be probable. Consequently, $0.1 million recorded in AOCL relating to the hedging relationship, was reclassified to interest expense. The outstanding interest rate swap has not been designated in a new hedge accounting relationship and changes in fair value subsequent to the termination of the cash flow hedge will be reported in interest expense.

As of June 30, 2012 and December 31, 2011, the Company had a single interest rate swap liability outstanding with a fair market value of $0.2 million and $0.3 million, respectively, classified in Derivative Liabilities. This swap had a notional value of $14.l million and $15.6 million, as of June 30, 2012 and December 31, 2011, respectively, and the swap matures in June 2014. The company measures the fair value of its interest rate swap using Level 2 fair value measurement inputs which are observable in the market. There were no reclassifications between fair value measurement levels during the three or six month periods ended June 30, 2012 or 2011.


The following table presents the changes in the fair values of derivatives designated as hedging instruments had on AOCL and earnings during the six months ended June 30, 2012 (in thousands):




  Gain Recognized
in OCL
    Location of
Reclassified  from
AOCL into Income
(Effective Portion)
Reclassified from
AOCL into Income
(Effective Portion)

Interest rate swap

  $ 1     Interest expense   $ (111








  $ 1         $ (111