Derivative Financial Instruments

12 Months Ended

Dec. 31, 2011

Derivative Financial Instruments [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

6. DERIVATIVE FINANCIAL INSTRUMENTS

In June 2009, the Company entered into an interest rate swap contract (the “Swap”), to partially offset its exposure to the effects of changes in interest rates on its variable-rate financing obligations. As a result of entering into the Swap, the Company had economically hedged the variability on future interest payments resulting in a fixed rate of 3.36% for $1.4 million of the Company’s notes payable as of December 31, 2010. The interest rate swap contract matured in April 2011 and was not renewed. At December 31, 2011, there was no interest rate swap contract outstanding.

The Company does not hold derivative financial instruments for trading or speculative purposes. The Swap was considered a cash flow hedge.

For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in current earnings.

All derivatives are recorded at fair value in either prepaid and other current assets or other accrued liabilities. The Company reports cash flows from derivative instruments in cash flows from operating activities. As of December 31, 2010, the notional amount of the outstanding interest rate swap contract was $1.4 million. The effect of derivative instruments on the Statement of Operations for the years ended December 31, 2010 and 2009 was not material. The fair values of the Company’s derivative assets and liabilities as of December 31, 2010 and 2009 were not material. At December 31, 2011, there was no interest rate swap contract outstanding as the interest rate swap contract matured in April 2011 and was not renewed.

The Company will continue to revaluate the fair value of the derivative instrument at each period end and record corresponding impact on the balance sheet and Statement of Operations.