Annual report pursuant to Section 13 and 15(d)

Derivative Financial Instruments

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Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2011
Derivative Financial Instruments [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 14—DERIVATIVE FINANCIAL INSTRUMENTS

At December 31, 2011, we had interest rate swaps consisting of the following:

 

  a) An interest rate swap with a notional amount of approximately $2.2 million at December 31, 2011, entered into in February 2006, related to the Company’s Series 1999 New York Industrial Revenue Bond which effectively fixes the rate at 3.99% plus a spread based on the Company’s leverage ratio on this obligation through 2016.

 

  b) An interest rate swap with a notional amount of $9.0 million at December 31, 2011, entered into on March 19, 2009 related to the Company’s term note issued January 30, 2009. The swap effectively fixes the rate at 2.115% plus a spread based on the Company’s leverage ratio on the notional amount (which decreases in concert with the scheduled note repayment schedule). The swap agreement became effective October 1, 2009 and expires January 30, 2014.

At December 31, 2011 and 2010, the fair value of interest rate swaps was a liability of $0.4 million and $0.5 million, respectively, which is included in other long-term liabilities.

To the extent the interest rate swaps are not perfectly effective in offsetting the change in the value of the payments being hedged; the ineffective portion of these contracts is recognized in earnings immediately as interest expense. Ineffectiveness was not significant in 2011, 2010 or 2009. For a derivative not designated as a hedging instrument, the gain or loss is recognized in earnings in the period of change. The Company classifies the cash flows from hedging transactions in the same category as the cash flows from the respective hedged items. The Company reclassified $0.2 million, $0.4 million and $0.2 million from AOCI to interest expense during 2011, 2010 and 2009, respectively. Amounts expected to be reclassified during 2012 are not expected to be significant.