Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements

Fair Value Measurements

Note 6 – Fair Value Measurements

Fair value is the price to hypothetically sell an asset or transfer a liability in an orderly manner in the principal market for that asset or liability. Accounting standards prioritize the use of observable inputs in measuring fair value. The level of a fair value measurement is determined entirely by the lowest level input that is significant to the measurement. The three levels are (from highest to lowest):

Level 1 –	observable prices in active markets for identical assets and liabilities;
Level 2 –	observable inputs other than quoted market prices in active markets for identical assets and liabilities, which include quoted prices for similar assets or liabilities in an active market and market-corroborated inputs; and
Level 3 –	unobservable inputs.

The company carried the following financial assets and (liabilities) at fair value:

	Fair Value Measurements Using
(In thousands)	Total			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Unobservable Inputs (Level 3)
June 30, 2011
Purchased euro put options	$	2,355		$	0	$	2,355		$	0
Sold euro call options		(1,968	)		0		(1,968	)		0
Bunker fuel forward contracts		53,990			0		53,990			0
30-day euro forward contracts		(1,436	)		0		(1,436	)		0
Available-for-sale investment		3,171			3,171		0			0
	$	56,112		$	3,171	$	52,941		$	0
December 31, 2010
Purchased euro put options	$	293		$	0	$	293		$	0
Bunker fuel forward contracts		27,314			0		27,314			0
30-day euro forward contracts		(1,841	)		0		(1,841	)		0
Available-for-sale investment		2,908			2,908		0			0
	$	28,674		$	2,908	$	25,766		$	0
June 30, 2010
Purchased euro put options	$	15,925		$	0	$	15,925		$	0
Sold euro call options		(268	)		0		(268	)		0
Bunker fuel forward contracts		(9,657	)		0		(9,657	)		0
30-day euro forward contracts		1,286			0		1,286			0
Available-for-sale investment		2,863			2,863		0			0
	$	10,149		$	2,863	$	7,286		$	0

The company values fuel hedging positions by applying an observable discount rate to the current forward prices of identical hedge positions. The company values currency hedging positions by utilizing observable or market-corroborated inputs such as exchange rates, volatility and forward yield curves. The company trades only with counterparties that meet certain liquidity and creditworthiness standards, and does not anticipate non-performance by any of these counterparties. The company does not require collateral from its counterparties, nor is it obligated to provide collateral when contracts are in a liability position. However, consideration of non-performance risk is required when valuing derivative instruments, and the company includes an adjustment for non-performance risk in the recognized measure of derivative instruments to reflect the full credit default spread ("CDS") applied to a net exposure by counterparty. When there is a net asset position, the company uses the counterparty's CDS, which is generally an observable input; when there is a net liability position, the company uses its own estimated CDS, which is an unobservable input. CDS is generally not a significant input in measuring fair value. The company's adjustment for non-performance risk was not significant for any of its derivative instruments in any period presented. See further discussion and tabular disclosure of hedging activity in Note 5.

The company did not elect to carry its debt at fair value. The carrying values of the company's debt represent amortized cost and are summarized below with estimated fair values:

	June 30, 2011				December 31, 2010				June 30, 2010
(In thousands)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial instruments not carried at fair value:
Parent company debt:
7 1/2% Senior Notes	$	156,438	$	159,000	$	156,438	$	161,000	$	156,438	$	154,000
8 7/8% Senior Notes		177,015		181,000		177,015		179,000		177,015		176,000
4.25% Convertible Senior Notes1		138,933		192,000		134,761		193,000		130,834		173,000
Subsidiary debt:
Term Loan (Credit Facility)		155,000		155,000		165,000		165,000		175,000		175,000
Other		1,045		1,000		928		900		93		90

¹  The principal amount of the Convertible Notes is $200 million. The carrying amount of the Convertible Notes is less than the principal amount due to the application of accounting standards for Convertible Notes as described in Note 4.

The fair value of the parent company debt is based on observable inputs, which include quoted prices for similar assets or liabilities in an active market and market-corroborated inputs (Level 2). The Term Loan may be traded on the secondary loan market, and the fair value of the Term Loan is based on either the last available trading price, if recent, or trading prices of comparable debt (Level 3). Level 3 fair value measurements are used in the impairment reviews of goodwill and intangible assets, which take place annually during the fourth quarter, or as circumstances indicate the possibility of impairment. Fair value measurements of benefit plan assets included in net benefit plan liabilities are based on quoted market prices in active markets (Level 1) or quoted prices in inactive markets (Level 2). The carrying amounts of cash and equivalents, accounts receivable and accounts payable approximate fair value.