Derivatives

6 Months Ended

Jun. 30, 2011

Derivatives

Derivatives

11.   Derivatives.

Interest Rate Swap.  On October 25, 2010, we entered into a $55 million pay-fixed, receive-variable interest rate swap with Wells Fargo at a fixed interest rate of 2.73%.  The variable portion of the interest rate swap is tied to the one-Month LIBOR (the benchmark interest rate).  The interest rates under both the interest rate swap and the underlying debt are reset, the swap is settled with the counterparty, and interest is paid, on a monthly basis.  The interest rate swap expires September 10, 2015.

At June 30, 2011, the interest rate swap qualified as a cash flow hedge.  During the three and six-month periods ended June 30, 2011, the amount reclassified from accumulated other comprehensive income to earnings due to hedge effectiveness was approximately $30,000 and $67,000, respectively, which is included in interest expense in the accompanying consolidated statements of operations.  The fair value of our cash flow hedge at June 30, 2011 was an asset of approximately $247,000, which was offset by approximately $96,000 of deferred tax liability.

Foreign Currency Forward Contracts.  On May 31, 2011, we forecasted a net exposure for June 30, 2011 (representing the difference between Euro and Great Britain Pound (“GBP”)-denominated receivables and Euro-denominated payables) of approximately 416,000 Euros and 280,000 GBPs.  In order to partially offset such risks, on May 31, 2011, we entered into a 30-day forward contract for the Euro and GBP with notional amounts of approximately 416,000 Euros and 280,000 GBPs.  We enter into similar transactions at various times during the year to partially offset exchange rate risks we bear throughout the year.  These contracts are marked to market at each month-end.  During the three and six-month periods ended June 30, 2011 and 2010, the effect on the consolidated statement of operations of all forward contracts and the fair value of our open positions was not material.