Quarterly report pursuant to Section 13 or 15(d)

Interest Rate Derivatives

v2.4.0.6
Interest Rate Derivatives
9 Months Ended
Sep. 30, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Interest Rate Derivatives
Interest Rate Derivatives
 
The following table sets forth the key terms and fair values of our interest rate swap derivatives (dollars in thousands):
 
 
 
 
 
 
 
 
 
 
Fair Value at
Notional Amount
 
Fixed Rate
 
Floating Rate Index
 
Effective Date
 
Expiration Date
 
September 30,
2012
 
December 31,
2011
$
100,000

 
0.6123
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2014
 
$
(671
)
 
$
55

100,000

 
0.6100
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2014
 
(667
)
 
56

100,000

 
0.8320
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2015
 
(1,447
)
 
(66
)
100,000

 
0.8320
%
 
One-Month LIBOR
 
1/3/2012
 
9/1/2015
 
(1,447
)
 
(49
)
38,671

(1)
3.8300
%
 
One-Month LIBOR
 
11/2/2010
 
11/2/2015
 
(1,393
)
 
(1,054
)
100,000

 
0.8055
%
 
One-Month LIBOR
 
9/2/2014
 
9/1/2016
 
(262
)
 

100,000

 
0.8100
%
 
One-Month LIBOR
 
9/2/2014
 
9/1/2016
 
(272
)
 

100,000

 
1.6730
%
 
One-Month LIBOR
 
9/1/2015
 
8/1/2019
 
(123
)
 

100,000

 
1.7300
%
 
One-Month LIBOR
 
9/1/2015
 
8/1/2019
 
(261
)
 

50,000

 
0.5025
%
 
One-Month LIBOR
 
1/3/2011
 
1/3/2012
 

 
(1
)
50,000

 
0.5025
%
 
One-Month LIBOR
 
1/3/2011
 
1/3/2012
 

 
(1
)
120,000

 
1.7600
%
 
One-Month LIBOR
 
1/2/2009
 
5/1/2012
 

 
(552
)
100,000

 
1.9750
%
 
One-Month LIBOR
 
1/1/2010
 
5/1/2012
 

 
(532
)
100,000

(2)
3.8415
%
 
Three-Month LIBOR
 
9/30/2011
 
9/30/2021
 

 
(16,333
)
75,000

(2)
3.8450
%
 
Three-Month LIBOR
 
9/30/2011
 
9/30/2021
 

 
(12,275
)
100,000

(2)
2.0525
%
 
Three-Month LIBOR-Reverse
 
12/30/2011
 
9/30/2021
 

 
345

75,000

(2)
2.0525
%
 
Three-Month LIBOR-Reverse
 
12/30/2011
 
9/30/2021
 

 
260

 

 
 

 
 
 
 
 
 
 
$
(6,543
)
 
$
(30,147
)

(1)
The notional amount of this instrument is scheduled to amortize to $36.2 million.
(2)
As described further in our 2011 Annual Report on Form 10-K, on January 5, 2012, we settled these instruments, along with interest accrued thereon, for an aggregate of $29.7 million.  Our policy is to present payments to terminate interest rate swaps entered into in order to hedge forecasted interest payments as operating activities on our consolidated statement of cash flows.  Accordingly, the payments to settle these instruments were included in net cash provided by operating activities on our consolidated statement of cash flows.

Each of the one-month LIBOR interest rate swaps set forth in the table above was designated as cash flow hedges of interest rate risk.
 
The table below sets forth the fair value of our interest rate derivatives as well as their classification on our consolidated balance sheet (in thousands):
 
 
September 30, 2012
 
December 31, 2011
Derivatives
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Interest rate swaps designated as cash flow hedges
 
Prepaid expenses and other assets
 
$

 
Prepaid expenses and other assets
 
$
111

Interest rate swaps not designated as hedges
 
N/A
 

 
Prepaid expenses and other assets
 
605

Interest rate swaps designated as cash flow hedges
 
Interest rate derivatives
 
(6,543
)
 
Interest rate derivatives
 
(2,255
)
Interest rate swaps not designated as hedges
 
N/A
 

 
Interest rate derivatives
 
(28,608
)

 
The table below presents the effect of our interest rate derivatives on our consolidated statements of operations and comprehensive income (in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2012
 
2011
 
2012
 
2011
Amount of loss recognized in accumulated other comprehensive loss (“AOCL”) (effective portion)
$
(2,760
)
 
$
(21,869
)
 
$
(7,386
)
 
$
(30,463
)
Amount of loss reclassified from AOCL into interest expense (effective portion)
(632
)
 
(1,179
)
 
(3,034
)
 
(3,446
)


Over the next 12 months, we estimate that approximately $2.6 million will be reclassified from AOCL as an increase to interest expense.

We have agreements with each of our interest rate derivative counterparties that contain provisions under which, if we default or are capable of being declared in default on any of our indebtedness, we could also be declared in default on our derivative obligations.  These agreements also incorporate the loan covenant provisions of our indebtedness with a lender affiliate of the derivative counterparties.  Failure to comply with the loan covenant provisions could result in our being declared in default on any derivative instrument obligations covered by the agreements.  As of September 30, 2012, the fair value of interest rate derivatives in a liability position related to these agreements was $6.5 million, excluding the effects of accrued interest. As of September 30, 2012, we had not posted any collateral related to these agreements.  We are not in default with any of these provisions.  If we breached any of these provisions, we could be required to settle our obligations under the agreements at their termination value of $7.1 million.