Annual report pursuant to Section 13 and 15(d)

Derivative Instruments

v2.4.0.6
Derivative Instruments
12 Months Ended
Dec. 31, 2011
Derivative Instrument Detail [Abstract]  
Derivative Instruments
DERIVATIVE INSTRUMENTS
We enter into interest rate swaps from time to time to manage our exposure to variable interest rate risk. We do not purchase derivatives for speculation. In February 2008, we entered into an interest rate swap with a notional amount of $100 million that expired in February 2010. In May 2009, we entered into a forward interest rate swap with a notional amount of $100 million that expired in November 2011. Both interest rate swaps qualified as cash flow hedges. Our cash flow hedges were recorded at fair value in accordance with GAAP, based on discounted cash flow methodologies and observable inputs. We recorded the effective portion of changes in fair value of cash flow hedges in other comprehensive income. The change in fair value of cash flow hedges was the only activity in other comprehensive income (loss) during periods presented in our consolidated financial statements. We assessed the effectiveness of our cash flow hedges both at inception and on an ongoing basis. We deemed the hedges to be effective for the year ended December 31, 2010 and for periods prior to expiration in 2011. We had no derivative instruments outstanding as of December 31, 2011.

The fair value and balance sheet locations of the interest rate swaps as of December 31, 2011 and 2010, are as follows (in millions):
 
December 31, 2011
 
December 31, 2010
 
Fair Value
 
Fair Value
Accounts payable and other liabilities
$

 
$
1.5


The interest rate swaps have been effective since inception. The gain or loss on the effective swaps is recognized in other comprehensive income, as follows (in millions):
 
Year Ended December 31,
 
2011
 
2010
 
Fair Value
 
Fair Value
Change in other comprehensive income (loss)
$
1.5

 
$
0.3


Derivative instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate hedge agreement. We believe that we minimize our credit risk on these transactions by dealing with major, creditworthy financial institutions. As part of our on-going control procedures, we monitor the credit ratings of counterparties and our exposure to any single entity, thus minimizing our credit risk concentration.