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Financial Instruments
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3 Months Ended |
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Mar. 31, 2014
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Financial Instruments | Financial Instruments The Company is subject to interest rate risk related to the variable rate debt under the Credit Agreement. When interest rates increase, interest expense would increase. Conversely, when interest rates decrease, interest expense would also decrease. In order to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rates used in the Credit Agreement, the Company entered into a 3-year interest rate swap agreement with a total notional amount of $500 million. The swap agreement fixed the variable LIBOR rate on the Company's Term Loan Facility to 0.52%, resulting in a current effective rate as of March 31, 2014 of 2.14% after taking into account the 1.63% margin per the Credit Agreement, as amended. Under the interest rate swap, the Company receives LIBOR-based variable interest rate payments and makes fixed interest rate payments, thereby creating the equivalent to fixed-rate debt with respect to the notional amount of such swap agreements. This interest rate contract derivative instrument was designated as a cash flow hedge upon inception in August, 2012 and it expires in August 2015. The Company assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. The Company does not enter into derivative instruments for any purpose other than hedging identified exposures. That is, the Company does not speculate using derivative instruments and has not designated any instruments as fair value hedges or hedges of the foreign currency exposure of a net investment in foreign operations. The fair value of the interest rate swap liability as of March 31, 2014 was $1.9 million. Interest expense for the three months ended March 31, 2014 includes $0.4 million of expense reclassified from other comprehensive income into current earnings. As of March 31, 2014, approximately $1.0 million of deferred expenses related to the derivative instruments accumulated in other comprehensive income is expected to be reclassified as interest expense during the next twelve months. This expectation is based on the expected timing of the occurrence of the hedged forecasted transactions and assumes the current LIBOR rate will remain consistent. Fluctuations in the market LIBOR rate will have an impact on the amount of expense reclassified from accumulated other comprehensive income to interest expense, as well as the overall fair value of the derivative instrument. |