Interest Rate Swap Agreements

9 Months Ended

Sep. 30, 2013

Interest Rate Swap Agreements

12. Interest Rate Swap Agreements

The Company is currently a party to three interest rate swap agreements that are used to hedge interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. The fair values of the interest rate swaps are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The changes in fair values are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings.

The valuation technique used to determine fair value is the income approach and under this approach, the Company uses projected future interest rates as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under these agreements. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 3 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. There were no changes in valuation techniques during the period and no transfers in or out of Level 3. See Note 15 for a summary of unrealized gains or losses recorded in accumulated other comprehensive loss and earnings.

Below is a summary of the Company’s current interest rate swap agreements designated as cash flow hedges as of September 30, 2013:

									Estimated
Nominal Amount	Effective Date	Pay Rate	Receive Rate	Expiration Date	Current Liability (1)		Long- Term Liability (2)		Total Fair Value at September 30, 2013
$175,000	December 2010	1.3975%	1-Month LIBOR	September 2015	$	1,961	$	1,624	$	3,585
$175,000	December 2010	1.4000%	1-Month LIBOR	September 2015		1,991		1,614		3,605
$100,000	November 2011	1.7150%	1-Month LIBOR	April 2016		1,437		1,623		3,060
$450,000					$	5,389	$	4,861	$	10,250

⁽¹⁾  Included in accounts payable and accrued expenses on the condensed consolidated balance sheet as of September 30, 2013.

⁽²⁾  Included in other long-term liabilities on the condensed consolidated balance sheet as of September 30, 2013.

The Company amortized approximately $2,470 to interest expense during the nine months ended September 30, 2012 related to a previously terminated interest rate swap agreement. The accumulated other comprehensive loss related to the terminated interest rate swap agreement became fully amortized in August 2012. See Note 15 for additional information about the Company’s fair value measurements related to its interest rate swap agreements.

The changes in accumulated other comprehensive loss, net of taxes, related to the Company’s interest rate swap agreements for the three months ended September 30, 2013 and 2012 were as follows:

	Interest Rate Swaps
	2013			2012
Beginning balances – July 1	$	(6,501	)	$	(10,338	)
Other comprehensive loss before reclassifications, net of taxes		(1,352	)		(5,000	)
Amounts reclassified from accumulated other comprehensive loss to interest expense		1,467			5,415
Net other comprehensive income	$	115		$	415
Ending balances – September 30	$	(6,386	)	$	(9,923	)

The changes in accumulated other comprehensive loss, net of taxes, related to the Company’s interest rate swap agreements for the nine months ended September 30, 2013 and 2012 were as follows:

	Interest Rate Swaps
	2013			2012
Beginning balances – January 1	$	(8,867	)	$	(12,358	)
Other comprehensive loss before reclassifications, net of taxes		(1,866	)		(11,219	)
Amounts reclassified from accumulated other comprehensive loss to interest expense		4,347			13,654
Net other comprehensive income	$	2,481		$	2,435
Ending balances – September 30	$	(6,386	)	$	(9,923	)