Financial Instruments and Fair Value

9 Months Ended

Sep. 30, 2011

Financial Instruments and Fair Value [Abstract]

Financial Instruments and Fair Value

6 — Financial Instruments and Fair Value

Certain methods and assumptions were used by the Company in estimating the fair value of financial instruments at September 30, 2011. The carrying value of current assets and current liabilities approximates the fair value due to the short maturity of these items.

The fair value of the Company’s long-term debt is based on secondary market indicators. Since the Company’s debt is not quoted, estimates are based on each obligation’s characteristics, including remaining maturities, interest rate, credit rating, collateral, amortization schedule and liquidity. The carrying amount approximates fair value.

If investments are deemed to be impaired, the Company determines whether the impairment is temporary or other than temporary. If the impairment is deemed to be temporary, the Company records an unrealized loss in other comprehensive income. If the impairment is deemed other than temporary, the Company records the impairment in the Company’s consolidated statement of operations.

In prior years, the Company invested in interest-bearing short-term investments primarily consisting of investment-grade auction rate securities classified as available-for-sale and reported at fair value. These types of investments were designed to provide liquidity through an auction process that reset the applicable interest rates at predetermined periods ranging from 1 to 35 days. This reset mechanism was intended to allow existing investors to continue to own their respective interest in the auction rate security or to gain immediate liquidity by selling their interests at par.

As a result of the liquidity issues experienced in the global capital markets, auctions for investment grade securities held by the Company have failed. An auction fails when there is insufficient demand. However, a failed auction does not represent a default by the issuer. The auction rate securities continue to pay interest in accordance with the terms of the underlying security; however, liquidity will be limited until there is a successful auction or until such time as other markets for these investments develop. The Company has the intent and ability to hold these auction rate securities until liquidity returns to the market. The Company does not believe that the lack of liquidity relating to its auction rate securities will have a material impact on its ability to fund operations.

As of September 30, 2011, the Company held auction rate securities with underlying tax-exempt municipal bonds that mature in 2030 that have a fair value of $6.6 million and a cost basis of $7.6 million. These bonds have credit wrap insurance and a credit rating of Aa3 by Moody’s.

As of September 30, 2011, the Company has valued these investments at fair value. The Company used observable inputs to determine fair value, including consideration of broker quotes, the overall quality of the underlying municipality, the credit quality of the insurance company, and observable transactions. Accordingly, the Company has considered this fair value to be a Level 2 valuation under ASC 820-10, “Fair Value Measurements and Disclosures.” In the second quarter of 2011, the Company recorded a pre-tax impairment charge of $1.0 million on these investments. The Company believes that the impairment is temporary and has recognized the impairment in accumulated other comprehensive loss.

The table below presents disclosures about the financial instruments measured at fair value on a recurring basis in the Company’s financial statements as of September 30, 2011 and December 31, 2010 (in millions):

	At September 30, 2011
			Fair Value Estimated Using
	Cost Basis		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Investment in auction rate securities	$	7,575	$	—	$	6,628	$	—

	At December 31, 2010
			Fair Value Estimated Using
	Cost Basis		Level 1		Level 2		Level 3
	Amount		Inputs		Inputs		Inputs
Investment in auction rate securities	$	7,575	$	—	$	7,575	$	—

Interest Rate Swap Agreements

The Company has entered into swap agreements to hedge against the potential impact of increases in interest rates on its floating-rate real estate debt instruments. Swap agreements that hedge exposures to changes in interest rates expose us to credit risk and market risk. Credit risk is the potential failure of the counterparty to perform under the terms of the swap agreement. The Company attempts to minimize this risk by entering into transactions with high-quality counterparties. Market risk is the potential adverse effect on the value of the swap agreement that results from a decline in interest rates. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

At September 30, 2011, the Company had an aggregate $45.0 million notional amount of interest rate swap contracts, which have been designated as cash flow hedges, to pay fixed rates of interest and receive a floating interest rate based on LIBOR. The fixed interest rates specified in the interest rate swap contracts become effective on or about January 1, 2012. The Company’s interest rate swaps qualify for cash flow hedge accounting treatment. Unrealized gains or losses are recorded in accumulated other comprehensive loss. Realized gains and losses will be recognized in interest expense, if they occur. Amounts to be received or paid under the contracts will be recognized as interest expense over the life of the contracts. There was no ineffectiveness for these swaps during the quarters ended September 30, 2010 and September 30, 2011.

The fair value of cash flow swaps is calculated as the present value of expected future cash flows, determined on the basis of forward interest rates and present value factors. As such, the carrying amounts for these swaps are designated to be Level 2 fair values and totaled $2.1 million as of September 30, 2011. The carrying value of these swaps is included in Other Long-Term Liabilities on the accompanying Consolidated Balance Sheet as of September 30, 2011.

As of September 30, 2011, the Company was party to derivative financial instruments as described in the following table (in thousands):

			Fixed
	Notional		Interest
Agreement	Amount		Rate			Expiration Date	Fair Value
Interest Rate Swap	$	2,196		5.075	%	July 1, 2015	$	(96	)
Interest Rate Swap		4,536		5.075	%	July 1, 2015		(198	)
Interest Rate Swap		7,847		5.39	%	December 31, 2014		(339	)
Interest Rate Swap		1,517		5.39	%	December 31, 2014		(66	)
Interest Rate Swap		2,700		5.39	%	December 31, 2014		(117	)
Interest Rate Swap		6,109		5.39	%	December 31, 2014		(264	)
Interest Rate Swap		5,616		5.38	%	June 29, 2015		(311	)
Interest Rate Swap		864		5.29	%	June 30, 2015		(45	)
Interest Rate Swap		1,656		5.29	%	June 30, 2015		(87	)
Interest Rate Swap		8,352		5.29	%	June 30, 2015		(437	)
Interest Rate Swap		720		5.29	%	June 30, 2015		(38	)
Interest Rate Swap		2,894		5.29	%	June 30, 2015		(151	)

Fair values of derivative instruments are on the accompanying Consolidated Balance Sheet as of September 30, 2011 (in thousands):

Derivatives Designated as	Asset Derivatives				Liability Derivatives
Hedging Instruments	Balance Sheet Location		Fair Value		Balance Sheet Location	Fair Value
Interest Rate Swaps		—		—	Other Long-Term Liabilities	$	2,149