Quarterly report pursuant to Section 13 or 15(d)

Interest Rate Swap Agreements

v2.4.0.8
Interest Rate Swap Agreements
9 Months Ended
Sep. 30, 2014
Interest Rate Swap Agreements

11. Interest Rate Swap Agreements

The Company is currently a party to three interest rate swap agreements that are used to hedge interest rate risk associated with the variable interest rates on the Company’s term loan debt and qualify for cash flow hedge accounting. The fair values of the interest rate swaps are recorded on the Company’s condensed consolidated balance sheet as an asset or liability with the effective portion of the interest rate swaps’ gains or losses reported as a component of accumulated other comprehensive loss and the ineffective portion reported in earnings. The changes in fair values are reclassified from accumulated other comprehensive loss into earnings in the same period that the hedged items affect earnings.

The valuation technique used to determine fair value is the income approach and under this approach, the Company uses projected future interest rates as provided by counterparties to the interest rate swap agreements and the fixed rates that the Company is obligated to pay under these agreements. Therefore, the Company’s measurements use significant unobservable inputs, which fall in Level 3 of the U.S. GAAP hierarchy as defined by FASB ASC Topic 820-10-35. There were no changes in valuation techniques during the period and no transfers in or out of Level 3.

Below is a summary of the Company’s current interest rate swap agreements designated as cash flow hedges as of September 30, 2014:

 

                                          Estimated  

Nominal

Amount

  

Effective Date

   Pay Rate     Receive Rate      Expiration Date    Current
Liability (1)
     Long-Term
Liability (2)
     Total Fair Value at
September 30, 2014
 
$175,000    December 2010      1.3975     1-Month LIBOR       September 2015    $ 1,929       $ —         $ 1,929   
$175,000    December 2010      1.4000     1-Month LIBOR       September 2015      1,953         —           1,953   
$100,000    November 2011      1.7150     1-Month LIBOR       April 2016      1,436         520         1,956   

 

             

 

 

    

 

 

    

 

 

 
$450,000               $ 5,318       $ 520       $ 5,838   

 

             

 

 

    

 

 

    

 

 

 

 

(1)  Included in accounts payable and accrued expenses on the condensed consolidated balance sheet as of September 30, 2014.
(2)  Included in other long-term liabilities on the condensed consolidated balance sheet as of September 30, 2014.

The changes in accumulated other comprehensive loss, net of taxes, related to the Company’s interest rate swap agreements for the three and nine months ended September 30, 2014 and 2013 were as follows:

 

     2014     2013  

Three Months Ended September 30,

    

Beginning balances – July 1

   $ (4,558   $ (6,501 )
  

 

 

   

 

 

 

Other comprehensive loss before reclassifications, net of taxes of $(42) and $(476)

     (70     (806

Amounts reclassified from accumulated other comprehensive loss to interest expense, net of taxes of $571 and $546

     962        921  
  

 

 

   

 

 

 

Net other comprehensive income

     892        115  
  

 

 

   

 

 

 

Ending balances- September 30

   $ (3,666   $ (6,386
  

 

 

   

 

 

 

 

     2014     2013  

Nine Months Ended September 30,

    

Beginning balances – January 1

   $ (5,716   $ (8,867
  

 

 

   

 

 

 

Other comprehensive loss before reclassifications, net of taxes of $(394) and $(156)

     (787     (249

Amounts reclassified from accumulated other comprehensive loss to interest expense, net of taxes of $1,681 and $1,617

     2,837        2,730   
  

 

 

   

 

 

 

Net other comprehensive income

     2,050        2,481   
  

 

 

   

 

 

 

Ending balances – September 30

   $ (3,666   $ (6,386