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Derivative Instruments (Note)
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3 Months Ended |
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Mar. 31, 2013
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Derivative Instruments |
DERIVATIVE INSTRUMENTS
HSNi uses derivatives in the management of its interest rate risk with respect to its variable rate debt. HSNi's strategy is to eliminate the cash flow risk on a portion of its variable rate debt caused by changes in the benchmark interest rate (LIBOR). Derivative instruments are not entered into for speculative purposes.
HSNi entered into a forward-starting interest rate swap agreement on December 20, 2012 with a notional amount of $187.5 million at a fixed rate of 0.8525%, resulting in an all-in fixed rate of 2.3525% based on HSNi's leverage ratio as of March 31, 2013. The interest rate swap takes effect on January 31, 2014 with a maturity date in April 2017. Under this swap, HSNi pays at a fixed rate and receives payments at a variable rate based on one-month LIBOR. The swap effectively fixes the floating LIBOR-based interest of our outstanding LIBOR-based debt. The interest rate swap was designated and qualified as a cash flow hedge; therefore, the effective portion of the changes in fair value is recorded in accumulated other comprehensive income. Any ineffective portions of the changes in fair value of the interest rate swap will be immediately recognized directly to earnings in the consolidated statement of operations. For the three months ended March 31, 2013, the change in fair value of the interest rate swap totaling approximately $0.1 million, net of tax, was included in other comprehensive income. See Note 8 for discussion of the fair value measurements concerning this interest rate swap.
The fair value of the interest rate swap liability as of March 31, 2013 was $0.7 million and was recorded in "Other long-term liabilities" in the consolidated balance sheets. As of March 31, 2013, HSNi estimates that less than $0.1 million of the unrealized losses included in accumulated other comprehensive loss related to this swap will be realized and reported in earnings within the next twelve months.
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