Derivative Financial Instruments

12 Months Ended

Dec. 31, 2012

Derivative Financial Instruments

Note 9 – Derivative Financial Instruments

We primarily use derivative instruments to manage exposures to interest rate risk. We enter into interest rate swap contracts to hedge interest rate risk associated with our debt obligations. These interest rate swap contracts are designated as cash flow hedges or fair value hedges. Our contracts entered into as of December 31, 2012 do not require collateral or other security from either party.

Fair Value Hedges

Interest rate swaps, under which we agree to pay variable rates of interest, are designated as fair value hedges of fixed-rate debt. For our fair value hedges that qualify for hedge accounting treatment we use the shortcut method and thus there are no gains or losses recognized due to hedge ineffectiveness. Under shortcut hedge accounting treatment, the change in fair value of the interest rate swap is assumed to perfectly offset the change in fair value of the hedged debt.

For the years ended December 31, 2012, 2011 and 2010 gains and (losses) from changes in the fair value of $(3), $14 and $26 were recognized in interest expense with a corresponding offset due to changes in the fair value of the hedged underlying debt, resulting in no impact to interest expense.

For the years ended December 31, 2012, 2011 and 2010, we recorded $6, $10 and $12, respectively, of income related to the amortization of the adjustment to the carrying amount of hedged debt due to the termination of swaps as a reduction of Interest expense.

Cash Flow Hedges

Interest rate swap contracts under which we agree to pay a fixed rate of interest are designated as cash flow hedges of variable-rate debt obligations.

At times, we may hold cash flow hedges that qualify for hedge accounting treatment for which we use the short-cut method, and thus there are no gains or losses recognized due to hedge ineffectiveness. We record unrealized gains or losses from changes in the fair value of cash flow hedges in AOCI.

Other Derivative Instruments

At times, we may hold certain derivatives that do not receive hedge accounting treatment. These may include interest rate derivatives as well as warrants. During 2012, 2011 and 2010, we did not hold derivatives that did not qualify for hedge accounting treatment.

The fair values of derivative instruments included in the Consolidated Balance Sheet were as follows:

December 31, 2012	Other Assets		Other Liabilities
Derivatives designated as hedging instruments – Interest rate swaps	$	26	$	–
December 31, 2011
Derivatives designated as hedging instruments – Interest rate swaps	$	29	$	–

The notional amount of our interest rate swaps is disclosed in Note 8 – Debt.

For the years ended December 31, 2012 and 2011, we did not hold any derivatives in cash flow hedging relationships, resulting in no effect to AOCI or the Statement of Operations.