Thrifty Car Rental 2009 Annual Report Download - page 70

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The interest rate swap agreements related to the asset backed medium term note issuances in 2005
and 2006 do not qualify for hedge accounting treatment. The (gain) loss recognized in income on
derivatives not designated as hedging instruments for the years ended December 31, 2009 and
2008 are as follows (in thousands):
2009 2008
Interest rate contracts (28,848)$ 36,114$
Total (28,848)$ 36,114$
Net (increase) decrease in fair
value of derivatives
Derivatives Not Designated as Hedging
Instruments
Location of (Gain) or Loss
Recognized in Income on
Derivative
Years Ended
December 31,
Amount of (Gain) or Loss
Recognized in Income on
Derivative
The interest rate swap agreement entered into in May 2007 related to the 2007 asset backed
medium term note issuance (“2007 Swap”) constitutes a cash flow hedge and satisfies the criteria
for hedge accounting. Gains (losses) recognized on derivatives are initially recorded in other
comprehensive income (loss) (“OCI”) and are reclassified into income (loss) as the hedge impacts
interest expense. The amount of gain (loss) recognized on derivatives in OCI and the amount of the
gain (loss) reclassified from Accumulated OCI into income (loss) for the years ended December 31,
2009 and 2008 are as follows (in thousands):
2009 2008 2009 2008
Years Ended
December 31,
Interest rate contracts 8,662$ (20,973)$ (13,953)$ (6,415)$
Total 8,662$ (20,973)$ (13,953)$ (6,415)$
Interest expense, net of interest
income
Derivatives in Cash
Flow Hedging
Relationships
Amount of Gain or (Loss)
Recognized in OCI on
Derivative (Effective Portion)
Amount of Gain or (Loss)
Reclassified from AOCI into
Income (Effective Portion)
Location of (Gain) or Loss
reclassified from AOCI in
Income (Effective Portion)
At December 31, 2009, the Company’s interest rate contracts related to the 2007 Swap were
effectively hedged, and no ineffectiveness was recorded in income. Based on projected market
interest rates, the Company estimates that approximately $13.2 million of net deferred loss related
to the 2007 Swap will be reclassified into earnings within the next 12 months.
12. FAIR VALUE MEASUREMENTS
Financial instruments are presented at fair value in the Company’s balance sheets. Fair value is
defined as the price which would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Assets and liabilities
recorded at fair value in the balance sheets are categorized based upon the level of judgment
associated with the inputs used to measure their fair values. These categories include (in
descending order of priority): Level 1, defined as observable inputs such as quoted prices in active
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