Derivative Instruments

3 Months Ended

Mar. 31, 2012

Derivative Instruments [Abstract]

Derivative Instruments

Note 14.  Derivative Instruments

We use derivative instruments to manage certain foreign currency and interest rate risk exposures. We do not use derivative instruments for speculative trading purposes.  All derivative instruments are recorded on the balance sheet at fair value.  For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to other comprehensive income, and is reclassified to earnings when the derivative instrument is settled.  Any ineffective portion of changes in the fair value of the derivative is reported in earnings.  None of our derivative contracts contain credit-risk related contingent features that would require us to settle the contract upon the occurrence of such contingency.  However, all of our contracts contain clauses specifying events of default under specified circumstances, including failure to pay or deliver, breach of agreement, default under the specific agreement to which the hedge relates, bankruptcy, misrepresentation and the occurrence of certain transactions.  The remedy for default is settlement in entirety or payment of the fair value of the contracts, which is $7.9 million in the aggregate for all of our contracts, with no posted collateral as of March 31, 2012.  The unrealized loss related to our derivative instruments included in accumulated other comprehensive loss, net of taxes was $7.4 million as of March 31, 2012 and $8.6 million as of December 31, 2011.

The notional and fair value amounts of our derivative instruments as of March 31, 2012 were as follows:

(Amounts in thousands)		Asset Derivatives		Liability Derivatives
	Current Notional	Balance Sheet	Fair Value	Balance Sheet	Fair Value
	Amount	Location		Location
Interest Rate Swaps - S/T	$12,495	N/A	-	Current Liabilities	(400)
Interest Rate Swaps - L/T*	$110,433	N/A	N/A	Other Liabilities	($7,472)
Foreign Exchange Contracts	$900	Other Current Assets	$28	N/A	N/A
Foreign Exchange Contracts	$2,400	N/A		Current Liabilities	($53)
Total Derivatives Designated as Hedging Instruments	$126,228	-	$28	-	($7,925)
*We have outstanding a variable-to-fixed interest rate swap with respect to a Yen-based facility for the financing of a PCTC delivered in March 2010.   The notional amount under this contract is $68,244,385 (based on a Yen to USD exchange rate of 82.82 as of March 31, 2012).  With the bank exercising its option to reduce the underlying Yen loan from 80% to 65% funding of the vessel's delivery cost, the 15% reduction represents the ineffective portion of this swap, which consists of the portion of the derivative instrument that is no longer supported by underlying borrowings.  The change in fair value related to the ineffective portion of this swap was a $149,000 gain for the quarter ended March 31, 2012 and this amount was included in earnings.

The effect of derivative instruments designated as cash flow hedges on our condensed consolidated statement of income for the three months ended March 31, 2012 was as follows:

(Amounts in thousands)	Net Gain / (Loss) Recognized in Other Comprehensive Income	Location of Gain (Loss) Reclassified from AOCI to Income	Amount of (Loss) Gain Reclassified from AOCI to Income	Income Recognized in Income from Ineffective portion
	2012		2012	2012
Interest Rate Swaps	$1,374	Interest Expense	($861)	$149
Foreign Exchange contracts	($147)	Voyage Expenses	$15	-
Total	$1,227	-	($846)	$149

Interest Rate Swap Agreements

We enter into interest rate swap agreements to manage well-defined interest rate risks. The Company records the fair value of the interest rate swaps as an asset or liability on its balance sheet. The Company's interest rate swaps are accounted for as effective cash flow hedges.  Accordingly, the effective portion of the change in fair value of the swap is recorded in Other Comprehensive Income.

As of March 31, 2012, we had the following swap contracts outstanding:

Effective Date	Termination Date	Current Notional Amount	Swap Rate	Type
11/30/05	11/30/12	12,495,000	5.17%	Fixed
3/31/08	9/30/13	$9,174,000	3.46%	Fixed
9/30/10	9/30/13	$9,174,000	2.69%	Fixed
9/30/10	9/30/13	$9,174,000	2.45%	Fixed
9/26/05	9/28/15	$7,333,333	4.41%	Fixed
9/26/05	9/28/15	$7,333,333	4.41%	Fixed
3/15/09	9/15/20	*$68,244,385	2.065%	Fixed
Total:		$122,928,051

*Notional amount converted from Yen at March 31, 2012 at a Yen to USD exchange rate of 82.82

Foreign Exchange Rate Risk.

We have entered into foreign exchange contracts to hedge certain firm foreign currency purchase commitments.  In 2011, we entered into four forward purchase contracts which expire in 2012. The first was for Mexican Pesos for $750,000 U.S. Dollar equivalents at an exchange rate of 12.1818, the second was for Mexican Pesos for $1,200,000 U.S. Dollar equivalents at an exchange rate of 12.4717, the third was for Mexican Pesos for $450,000 U.S. Dollar equivalents at an exchange rate of 13.036 and the fourth was for Mexican Pesos for $750,000 U.S. Dollar equivalents at an exchange rate of 14.0292.  In March 2012, we purchased approximately 125 million Yen to cover our June 15, 2012 installment payment under a Yen-denominated loan at an exchange rate of 83.34 to 1 USD, or a USD equivalent of $1,500,000. Our Mexican Peso foreign exchange contracts represent approximately 100% of our projected Peso exposure.

The following table summarizes the current value of these contracts:

(Amounts in Thousands)
Transaction Date	Type of Currency	Transaction Amount in Dollars	Effective Date	Expiration Date
August 2011	Peso	$ 225,000	September 2011	June 2012
August 2011	Peso	$ 675,000	September 2011	January 2013
September 2011	Peso	$ 450,000	July 2012	December 2012
September 2011	Peso	$ 450,000	October 2011	December 2012
March 2012	Yen	$1,500,000	June 2012	June 2012