Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities

Note 8 – Derivative Instruments and Hedging Activities

Cash Flow Hedges of Interest Rate Risk

In connection with the Term Loan, the Company entered into a three-year $200.0 million LIBOR notional swap agreement. (See Note 7 in the Notes to the Consolidated Financial Statements contained in this Form 10-Q for information about the Term Loan related to the $200.0 million notional swap.) The Swap fixes the underlying LIBOR rate on the Term Loan at 1.11% per annum for the first three years. Based on actual leverage as of June 30, 2012, the Company’s spread over LIBOR was 1.95% resulting in an actual all-in interest rate of 3.06% per annum. The Company has designated the swap as a cash flow hedge. No gain or loss was recognized in the Consolidated Statements of Income and Comprehensive Income related to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedge during the three months and six months ended June 30, 2012.

Amounts reported in accumulated other comprehensive loss on the Consolidated Balance Sheets related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that an additional $1.6 million will be reclassified as an increase to interest expense.

Derivative Instruments and Hedging Activities

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the Company’s Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011 (amounts in thousands).

	Balance Sheet Location	June 30, 2012		December 31, 2011
Interest Rate Swap	Accrued payroll and other operating expenses	$	2,959	$	2,547

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the three months ended June 30, 2012 and 2011.

Derivatives in Cash Flow Hedging Relationship	Amount of loss recognized in OCI on derivative (effective portion)				Location of loss reclassified from accumulated OCI	Amount of loss reclassified from accumulated OCI into income (effective portion)
	June 30, 2012		June 30, 2011		into income (effective portion)	June 30, 2012		June 30, 2011
Interest Rate Swap	$	471	$	336	Interest Expense	$	437	$	—

The tables below present the effect of the Company’s derivative financial instruments on the Consolidated Statements of Income and Comprehensive Income for the six months ended June 30, 2012 and 2011.

Derivatives in Cash Flow Hedging Relationship	Amount of loss recognized in OCI on derivative (effective portion)				Location of loss reclassified from accumulated OCI	Amount of loss reclassified from accumulated OCI into income (effective portion)
	June 30, 2012		June 30, 2011		into income (effective portion)	June 30, 2012		June 30, 2011
Interest Rate Swap	$	1,271	$	336	Interest Expense	$	859	$	—

The Company determined that no adjustment was necessary for nonperformance risk on its derivative obligation. As of June 30, 2012, the Company has not posted any collateral related to this agreement.