Derivative Financial Instruments

3 Months Ended

Mar. 31, 2012

Derivative Financial Instruments [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

9. 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 economically hedged the variability on future interest payments resulting in a fixed rate of 3.36% for $357,000 of the Company’s notes payable as of March 31, 2011. The Swap was considered a cash flow hedge. The Company does not hold derivative financial instruments for trading or speculative purposes. The interest rate swap contract matured in April 2011 and was not renewed. As of March 31, 2012, there was no interest rate swap contract outstanding.

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 March 31, 2012, there was no notional amount of the outstanding interest rate swap contract. The effect of derivative instruments on the Statement of Operations for the three months ended March 31, 2012 and 2011 was not material.