Note 4 - Derivative Financial Instruments

3 Months Ended

Dec. 31, 2011

Note 4 - Derivative Financial Instruments Disclosure

Note 4 - Derivative Financial Instruments

Note 4 – Derivative Financial Instruments

The Company has an interest rate swap agreement on the $16.3 million term loan in order to avoid the risks associated with fluctuating interest rates on this term loan and to eliminate the variability in the cash outflow for interest payments.  The interest rate swap agreement swaps LIBOR for a fixed interest rate of 4.52% through November 2014.  Therefore, the total effective interest rate on the notional value is 5.92% through November 2012 and 6.92% thereafter through November 2014.  The notional value of the interest rate swap amortizes quarterly with payments that mirror the $16.3 million term loan.  Upon entering into this interest rate swap, the Company has designated this derivative as a cash flow hedge by documenting the Company’s risk management objective and strategy for undertaking the hedge along with methods for assessing the swap’s effectiveness in accordance with FASB ASC 815, Derivatives and Hedging.

The fair value of the interest rate swap is recorded in other liabilities with the offset recorded in other comprehensive income.  At December 31, 2011, the notional value of the swap was $9.8 million and the fair value of the interest rate swap was approximately $0.9 million.  The following table presents certain information regarding our interest rate swap.

	Amount of Gain Recognized in OCI on Derivative, Net of Tax				Amount of Loss Recognized in Accumulated OCI, Net of Tax
	Three Months Ended December 31,				December 31,			September 30,
	2011		2010		2011			2011
Interest rate swap agreement	$	54,369	$	147,169	$	(532,889	)	$	(587,258	)

FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a consistent framework for measuring fair value and establishes a fair value hierarchy based on the observability of inputs used to measure fair value.  The three levels of the fair value hierarchy are as follows:

· Level 1 – Quoted prices for identical assets in active markets or liabilities that we have the ability to access. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

· Level 2 – Inputs are other than quoted prices in active markets included in Level 1 that are either directly or indirectly observable. These inputs are either directly observable in the marketplace or indirectly observable through corroboration with market data for substantially the full contractual term of the asset or liability being measured.

· Level 3 – Inputs that are not observable for which there is little, if any, market activity for the asset or liability being measured. These inputs reflect management’s best estimate of the assumptions market participants would use in determining fair value.

Our interest rate swap is an over-the-counter instrument and is classified in the Level 2 hierarchy as the fair value can be estimated from executed transactions or broker quotes corroborated by other market data. These broker quotes are based on observable market prices at which similar transactions could currently be executed.