DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

9 Months Ended

Sep. 30, 2013

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

NOTE 12 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING

Information about our derivative financial instruments at September 30, 2013 and December 31, 2012 follows (dollars in thousands):

	September 30, 2013						December 31, 2012
	Number of Instruments	Notional Amount		Fair Value			Number of Instruments	Notional Amount		Fair Value
Interest rate swaps (asset)	3	$	29,587	$	98		—	$	—	$	—
Interest rate swaps (liability)	2	85,353		(2,047		)	4	41,095		(641		)
	5	$	114,940	$	(1,949	)	4	$	41,095	$	(641	)

On September 5, 2013, we entered into an interest rate swap with a notional value of $75.0 million that will become effective on January 2, 2014 and matures on October 1, 2018. This interest rate swap was designated a cash flow hedge and will effectively convert a $75.0 million variable rate term loan that we expect to fund in the fourth quarter of 2013 into a fixed rate loan.

All of our interest rate swaps have been designated cash flow hedges and are valued using a market approach, which is a Level 2 valuation technique. At September 30, 2013, three of our interest rate swaps were in an asset position and two were in a liability position. At December 31, 2012, all of our interest rate swaps were in a liability position. We have not posted any collateral related to these agreements and are not in breach of any financial provisions of the agreements. If we had breached any agreement provisions at September 30, 2013, we could have been required to settle our obligation under the agreements that were in a liability position at their termination value of $1.9 million.

Details of the location in the financial statements of the loss recognized on derivative financial instruments designated as cash flow hedges follow (in thousands):

	Third Quarter						First Nine Months
	2013			2012			2013			2012
Gain (loss) recognized in accumulated other comprehensive income on derivative financial instruments (effective portion)	$	(2,215	)	$	(291	)	$	(1,571	)	$	(587	)
Gain (loss) reclassified from accumulated other comprehensive income to interest expense (effective portion)	$	(88	)	$	(50	)	$	(261	)	$	(66	)
Gain (loss) recognized in gain (loss) on derivative financial instruments (ineffective portion)	$	—		$	(1	)	$	2		$	(2	)

Amounts reported in accumulated other comprehensive income related to derivative financial instruments will be reclassified to interest expense as interest payments are made on the hedged variable-rate debt.