Note 3 - Derivatives

12 Months Ended

Dec. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Text Block]

3.       Derivatives

Risk Management Objective of Using Derivatives

We are exposed to certain risks arising from business operations and economic conditions. We attempt to manage our exposure to a wide variety of business and operational risks principally through management of our core business activities.  We attempt to manage economic risk, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of our debt financing and, at certain times, the use of interest rate swap agreements.  Specifically, we enter into interest rate swap agreements to manage interest rate exposure with the following objectives:

· managing current and forecasted interest rate risk while maintaining financial flexibility and solvency;

· proactively managing our cost of capital to ensure that we can effectively manage operations and execute our business strategy, thereby maintaining a competitive advantage and enhancing stockholder value; and

· complying with any financial or other covenant requirements in our financing or other agreements.

Cash Flow Hedges of Interest Rate Risk

In using interest rate derivatives, our objectives are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swap agreements as part of our interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable rate amounts from a counterparty in exchange for our making fixed-rate payments over the life of the applicable agreement, without exchange of the underlying notional amount.

During 2007, we entered into three swap agreements to convert $465.0 million of our variable rate debt under the 2007 Senior Credit Facility to fixed rate debt.  These interest rate swap agreements expired on April 3, 2010, and they were our only derivatives in effect during the year ended December 31, 2010. Upon entering into the swap agreements, we designated them as hedges of variability of our variable rate interest payments attributable to changes in three-month LIBOR, the designated interest rate.  Therefore, these interest rate swap agreements were considered cash flow hedges.

Under these swap agreements, we received variable rate interest at the LIBOR and paid fixed interest at an annual rate of 5.48%.

Upon entering into a swap agreement, we document our hedging relationships and our risk management objectives.  Our swap agreements did not include written options. Our swap agreements were intended solely to modify the payments for a recognized liability from a variable rate to a fixed rate.  Our swap agreements did not qualify for the short-cut method of accounting, because the variable rate debt being hedged was pre-payable.

Hedge effectiveness was evaluated at the end of each quarter. We compared the notional amount, the variable interest rate and the settlement dates of the interest rate swap agreements to the hedged portion of the debt. Our swap agreements were highly effective at hedging our interest rate exposure.

During the term of each interest rate swap agreement, we recognized such swap agreements at their fair value as an asset or liability on our balance sheet. The effective portion of the change in the fair value of our interest rate swap agreements was recorded in accumulated other comprehensive loss. The ineffective portion of the change in fair value of the derivatives was recognized directly in earnings (loss).

Amounts reported in accumulated other comprehensive loss related to derivatives were reclassified to interest expense as the related interest payments were made on our variable rate debt.

We did not have any derivatives in effect as of December 31, 2012 or December 31, 2011.

The following table presents the effect of our derivative financial instruments on our consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010 (in thousands).

	Cash Flow Hedging Relationships for the Year Ended December 31,
	2012		2011		2010
Interest rate swap agreements:
Liability at beginning of period	$	-	$	-	$	(6,344	)
Effective portion of losses recognized in other comprehensive loss		-		-		(5,936	)
Effective portion of gains recorded in accumulated other comprehensive loss and reclassified into interest expense		-		-		12,280
Liability at end of period	$	-	$	-	$	-

For the year ended December 31, 2010, we recorded a gain on derivatives as other comprehensive income of $3.8 million, net of a $2.5 million income tax expense.

Credit-risk Related Contingent Features

We managed our counterparty risk by entering into derivative instruments with global financial institutions that we believe presented a low risk of credit loss resulting from nonperformance.  As of December 31, 2012 and 2011, we had not recorded a credit value adjustment related to any interest rate swap agreements, as none were in effect.