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Derivatives and Other Financial Instruments
10801 - Disclosure - Derivatives and Other Financial Instruments
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<div>
<div style="width: 7.2in; font-family: 'Times New Roman',Times,serif; margin-left: 0.25in;">
<div style="margin-top: 10pt; font-size: 10pt;" align="justify"><b>8. Derivatives and Other Financial Instruments</b> </div>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">As of June 30, 2010, the Company had two interest rate swaps with an aggregate notional amount of $150.0 million under which at each monthly settlement date the Company either (1) receives the difference between a fixed interest rate (the "Strike Rate") and one-month LIBOR if the Strike Rate is less than LIBOR or (2) pays such difference if the Strike Rate is greater than LIBOR. The interest rate swaps hedge the Company's exposure to the variability on expected cash flows attributable to changes in interest rates on the first interest payments, due on the date that is on or closest after each swap's settlement date, associated with the amount of LIBOR-based debt equal to each swap's notional amount. These interest rate swaps, with a notional amount of $150.0 million (interest rate of 5.8%, including the applicable credit spread), are currently intended to hedge interest payments associated with the Company's unsecured line of credit. An additional interest rate swap with a notional amount of $250.0 million, initially intended to hedge interest payments related to the Company's secured term loan, expired during the three months ended June 30, 2010. No initial investment was made to enter into the interest rate swap agreements. </div></div>
<div style="width: 7.2in; font-family: 'Times New Roman',Times,serif; margin-left: 0.25in;">
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">As of June 30, 2010, the Company had deferred interest costs of approximately $59.7 million in other comprehensive income related to forward starting swaps, which were settled with the corresponding counterparties in March and April 2009. The forward starting swaps were entered into to mitigate the Company's exposure to the variability in expected future cash flows attributable to changes in future interest rates associated with a forecasted issuance of fixed-rate debt, with interest payments for a minimum of ten years. In June 2009 the Company closed on $368.0 million in fixed-rate mortgage loans secured by its 9865 Towne Centre Drive and Center for Life Science | Boston properties (see Note 4). The remaining deferred interest costs of $59.7 million will be amortized as additional interest expense over a remaining period of approximately nine years. </div>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">The following is a summary of the terms of the interest rate swaps and a stock purchase warrant held by the Company and their fair-values, which are included in other assets (asset account) and derivative instruments (liability account) based on their respective balances on the accompanying consolidated balance sheets (in thousands): </div>
<div align="center">
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="bottom"><td width="28%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="7%"> </td>
<td width="1%"> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td colspan="2" nowrap="nowrap" align="center"><b>Current</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>Fair-Value(1)</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td colspan="2" nowrap="nowrap" align="center"><b>Notional</b></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td colspan="2" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td colspan="2" nowrap="nowrap" align="center"><b>December 31,</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>Amount</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>Strike Rate</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>Effective Date</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>Expiration Date</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td align="left">$</td>
<td align="right">115,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">4.673</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">October 1, 2007</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">August 1, 2011</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(5,074</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(6,530</td>
<td nowrap="nowrap">)</td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td> </td>
<td align="right">35,000</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">4.700</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">October 10, 2007</td>
<td> </td>
<td colspan="3" nowrap="nowrap" align="center">August 1, 2011</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,557</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(2,004</td>
<td nowrap="nowrap">)</td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">Interest rate swaps</div></td>
<td> </td>
<td> </td>
<td align="right">150,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6,631</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8,534</td>
<td nowrap="nowrap">)</td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">Interest rate swap(2)</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4,017</td>
<td nowrap="nowrap">)</td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">Other(3)</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">132</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">119</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;">Total derivative instruments</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">150,000</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(6,499</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(12,432</td>
<td nowrap="nowrap">)</td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr></table></div>
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr style="font-size: 6pt;"><td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td></tr>
<tr valign="top"><td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify;">Fair-value of derivative instruments does not include any related accrued interest payable, which is included in accrued expenses on the accompanying consolidated balance sheets.</div></td></tr>
<tr style="font-size: 3pt;"><td> </td></tr>
<tr valign="top"><td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>
<div style="text-align: justify;">The interest rate swap, with notional amount of $250.0 million, expired during the three months ended June 30, 2010.</div></td></tr>
<tr style="font-size: 3pt;"><td> </td></tr>
<tr valign="top"><td nowrap="nowrap" align="left">(3)</td>
<td> </td>
<td>
<div style="text-align: justify;">A stock purchase warrant was received in connection with an early lease termination in September 2009 and was recorded as a derivative instrument with an initial fair-value of approximately $199,000 in other assets in the accompanying consolidated balance sheets.</div></td></tr></table>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">For derivatives designated as cash flow hedges, the effective portion of changes in the fair-value of the derivative is initially reported in accumulated other comprehensive income (outside of earnings) and subsequently reclassified to earnings in the period in which the hedged transaction affects earnings. During the three and six months ended June 30, 2010, such derivatives were used to hedge the variable cash flows associated with the Company's unsecured line of credit and secured term loan. During the three and six months ended June 30, 2009, such derivatives were used to hedge the variable cash flows associated with the Company's unsecured line of credit, secured term loan, secured construction loan, and the forecasted issuance of fixed-rate debt. The ineffective portion of the change in fair-value of the derivatives is recognized directly in earnings. </div>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">Due to the Company's voluntary early prepayment of the remaining balance outstanding on the secured term loan (see Note 5) and additional repayment of a portion of the outstanding indebtedness on the unsecured line of credit, the Company's variable-rate indebtedness fell below the combined notional value of the outstanding interest rate swaps, causing the Company to be temporarily overhedged. As a result, the Company reperformed tests to assess the effectiveness of the Company's interest rate swaps. The tests indicated that the $250.0 million interest rate swap was no longer highly effective, resulting in the prospective discontinuance of hedge accounting. From the date that hedge accounting was discontinued, changes in the fair-value associated with this interest rate swap were recorded directly to earnings, resulting in the recognition of a gain of approximately $1.1 million for the three months ended June 30, 2010, which is included as a component of loss on derivative instruments. In addition, the Company recorded a charge to earnings of approximately $1.1 million associated with this interest rate swap, relating to interest payments to the swap counterparty and hedge ineffectiveness, which is also included as a component of loss on derivative instruments. </div>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">Although the remaining interest rate swaps with an aggregate notional amount of $150.0 million passed the assessment tests and continued to qualify for hedge accounting, the Company accelerated the reclassification of amounts deferred in accumulated other comprehensive loss to earnings related to the hedged forecasted transactions that became probable of not occurring during the period in which the Company was overhedged. This resulted in a charge to earnings of approximately $980,000, partially offset by a gain of approximately $647,000 primarily attributable to the elimination of the Company's overhedged status with respect to the interest rate swaps, upon the expiration of the $250.0 million interest rate swap on June 1, 2010. </div></div>
<div style="width: 7.2in; font-family: 'Times New Roman',Times,serif; margin-left: 0.25in;">
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">During the three and six months ended June 30, 2010, the Company recorded total losses on derivative instruments of $497,000 and $347,000, respectively, primarily related to the discontinuance of hedge accounting for the Company's former $250.0 million interest rate swap (see above), hedge ineffectiveness on cash flow hedges due to mismatches in maturity dates and interest rate reset dates between the interest rate swaps and corresponding debt and changes in the fair-value of other derivative instruments. During the three and six months ended June 30, 2009, the Company recorded a gain on derivative instruments of $360,000 and $303,000, respectively, as a result of hedge ineffectiveness on cash flow hedges due to mismatches in the maturity date and the interest rate reset dates between the interest rate swaps and the corresponding debt, and changes in the fair-value of derivatives no longer considered highly effective. </div>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company's variable-rate debt. During the next twelve months, the Company estimates that an additional $13.3 million will be reclassified from other accumulated comprehensive income as an increase to interest expense. In addition, approximately $293,000 and $582,000 for the three and six months ended June 30, 2010, respectively, and approximately $754,000 and $1.7 million for the three and six months ended June 30, 2009, respectively, of settlement payments on interest rate swaps have been deferred in accumulated other comprehensive loss and will be amortized over the useful lives of the related development or redevelopment projects. </div>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">The following is a summary of the amount of gain recognized in accumulated other comprehensive income related to the derivative instruments for the three and six months ended June 30, 2010 and 2009 (in thousands): </div>
<div align="center">
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="bottom"><td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td colspan="6" nowrap="nowrap" align="center"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td colspan="6" nowrap="nowrap" align="center"><b>Six Months Ended</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Amount of gain recognized in other comprehensive income (effective portion):</b></div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Cash flow hedges</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 45px;">Interest rate swaps</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,897</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3,368</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,825</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,355</td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 45px;">Forward starting swaps</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,303</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">11,782</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Total cash flow hedges</div></td>
<td> </td>
<td> </td>
<td align="right">2,897</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">8,671</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5,825</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,137</td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Ineffective interest rate swaps(1)</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,321</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Total interest rate swaps</b></div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,897</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,671</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5,825</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">21,458</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr></table></div>
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr style="font-size: 6pt;"><td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td></tr>
<tr valign="top"><td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify;">For the six months ended June 30, 2009, the amount represents the reclassification of unrealized losses from accumulated other comprehensive income to earnings relating to a previously effective forward starting swap as a result of the reduction in the notional amount of forecasted debt.</div></td></tr></table>
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">The following is a summary of the amount of loss reclassified from accumulated other comprehensive income to interest expense related to the derivative instruments for the three and six months ended June 30, 2010 and 2009 (in thousands): </div>
<div align="center">
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="bottom"><td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td colspan="6" nowrap="nowrap" align="center"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td colspan="6" nowrap="nowrap" align="center"><b>Six Months Ended</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Amount of loss reclassified from other comprehensive income to income (effective portion):</b></div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Cash flow hedges</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 45px;">Interest rate swaps(1)</div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(2,847</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4,019</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(6,971</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,924</td>
<td nowrap="nowrap">)</td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 45px;">Forward starting swaps(2)</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,781</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,567</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Total interest rate swaps</b></div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4,628</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(4,019</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(10,538</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,924</td>
<td nowrap="nowrap">)</td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr></table></div>
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr style="font-size: 6pt;"><td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td></tr>
<tr valign="top"><td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify;">Amount represents payments made to swap counterparties for the effective portion of interest rate swaps that were recognized as an increase to interest expense for the periods presented (the amount was recorded as an increase and corresponding decrease to accumulated other comprehensive loss in the same accounting period).</div></td></tr>
<tr style="font-size: 3pt;"><td> </td></tr>
<tr valign="top"><td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>
<div style="text-align: justify;">Amount represents reclassifications of deferred interest costs from accumulated other comprehensive loss to interest expense related to the Company's previously settled forward starting swaps.</div></td></tr></table></div>
<div style="width: 7.2in; font-family: 'Times New Roman',Times,serif; margin-left: 0.25in;">
<div style="margin-top: 10pt; text-indent: 4%; font-size: 10pt;" align="justify">The following is a summary of the amount of gain/(loss) recognized in income as a loss on derivative instruments related to the ineffective portion of the derivative instruments for the three and six months ended June 30, 2010 and 2009 (in thousands): </div>
<div align="center">
<table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%">
<tr valign="bottom"><td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td colspan="6" nowrap="nowrap" align="center"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td colspan="6" nowrap="nowrap" align="center"><b>Six Months Ended</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="6" nowrap="nowrap" align="center"><b>June 30,</b></td>
<td> </td></tr>
<tr style="font-size: 10pt;" valign="bottom"><td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2010</b></td>
<td> </td>
<td> </td>
<td style="border-bottom: #000000 1px solid;" colspan="2" nowrap="nowrap" align="center"><b>2009</b></td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Amount of gain/(loss) recognized in income (ineffective portion and amount excluded from effectiveness testing):</b></div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Cash flow hedges</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 45px;">Interest rate swaps</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">56</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 45px;">Forward starting swaps</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(124</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(477</td>
<td nowrap="nowrap">)</td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Total cash flow hedges</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(125</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(488</td>
<td nowrap="nowrap">)</td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Ineffective interest rate swaps</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(416</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">485</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(416</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">791</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Total interest rate swaps</b></div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(416</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">360</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(360</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">303</td>
<td> </td></tr>
<tr valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 30px;">Other derivative instruments</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(81</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">13</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 1px solid;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr>
<tr style="background: #cceeff;" valign="bottom"><td>
<div style="text-indent: -15px; margin-left: 15px;"><b>Total (loss)/gain on derivative instruments</b></div></td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(497</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">360</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(347</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">303</td>
<td> </td></tr>
<tr style="font-size: 1px;"><td>
<div style="text-indent: -15px; margin-left: 15px;"> </div></td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td>
<td> </td>
<td style="border-top: #000000 3px double;" colspan="2" nowrap="nowrap" align="right"> </td>
<td> </td></tr></table></div>
<div style="margin-top: 10pt; font-size: 10pt;" align="justify"><b> </b> </div></div> </div>
8. Derivatives and Other Financial Instruments
As of June 30, 2010, the Company had two interest rate swaps with an aggregate notional amount of
false
false
false
|
us-types:textBlockItemType
textblock
This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items.
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 45
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44
false
1
1
false
UnKnown
UnKnown
UnKnown
false
true