Annual report pursuant to Section 13 and 15(d)

Derivative Financial Instruments

v2.4.0.6
Derivative Financial Instruments
 12 Months Ended
Dec. 31, 2012
Derivative Financial Instruments [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 15 — DERIVATIVE FINANCIAL INSTRUMENTS

At December 31, 2012, we had interest rate swaps consisting of the following:

 

  a) An interest rate swap with a notional amount of approximately $1.9 million at December 31, 2012, entered into on February 6, 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 February 1, 2016.

 

  b) An interest rate swap with a notional amount of $5.0 million at December 31, 2012, 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, 2012 and 2011, the fair value of interest rate swaps was a liability of $0.2 million and $0.4 million, respectively, which is included in other liabilities (See Note 14—Fair Value). Amounts expected to be reclassified to earnings in the next 12 months is not expected to be significant.

Activity in AOCI related to these derivatives is summarized below:

 

                         
(In thousands)   2012     2011     2010  

Derivative Balance at the Beginning of the Year in AOCI

   $ (256 )    $ (338 )    $ (242 ) 

Net Deferral in AOCI of Derivatives:

                        

Net (Increase) Decrease in Fair Value of Derivatives

     (34 )      (171 )      (527 ) 

Tax Effect

     14       61       184  
   

 

 

    

 

 

    

 

 

  
      (20 )      (110 )      (343 ) 
   

 

 

    

 

 

    

 

 

  

Net Reclassification from AOCI into Earnings:

                        

Reclassification from AOCI into Earnings – Interest Expense

     209       298       380  

Tax Effect

     (75 )      (106 )      (133 ) 
   

 

 

    

 

 

    

 

 

  
      134       192       247  
   

 

 

    

 

 

    

 

 

  

Net Change in Derivatives for the Year

     114       82       (96 ) 
   

 

 

    

 

 

    

 

 

  

Derivative Balance at the End of the Year in AOCI

   $ (142 )    $ (256 )    $ (338 ) 
   

 

 

    

 

 

    

 

 

  

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, if any, was not significant for the years ended December 31, 2012, 2011 and 2010. The Company classifies the cash flows from hedging transactions in the same category as the cash flows from the respective hedged items. Amounts from ineffectiveness, if any, to be reclassified during 2013 are not expected to be significant.