NOTE R -FAIR VALUE OF FINANCIAL INSTRUMENTS, DERIVATIVES AND MARKETABLE SECURITIES

We use derivative instruments to manage certain foreign currency exposures and interest rate exposures. The Company does 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 the Company's 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 mergers, without exception. The remedy for default is settlement in entirety or payment of the fair value of the contracts, which is $6.8 million in the aggregate for all of our contracts as of December 31, 2012. The unrealized loss related to the Company's derivative instruments included in accumulated other comprehensive income (loss) was $7.4 million and $8.6 million as of December 31, 2012 and 2011, respectively.

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

(Amounts in thousands)			Asset Derivatives 2012				Liability Derivatives 2012
	Current Notional		Balance Sheet		Fair		Balance Sheet		Fair Value
As of December 31, 2012	Amount		Location		Value		Location
Interest Rate Swaps-S/T		-		-		-	Current Liabilities			-
Interest Rate Swaps-L/T*	$	74,207		-		-	Other Liabilities		$	(7,683	)
Foreign Exchange Contracts	$	1,700	Current Assets		$	147		-		-
Foreign Exchange Contracts	$	6,000					Current Liabilities		$	(257	)
Total derivatives designated as hedging instruments	$	81,907		-	$	147		-	$	(7,940	)

*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 $61,540,235 (based on a Yen to USD exchange rate of 86.74 as of December 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 $87,000 gain for the year ended December 31, 2012 and this amount was included in earnings. We paid down this facility in January 2012 in an amount of Yen 686,318,979 to bring our Asset Maintenance Loan to Value Facility requirement in line. The fair value balance as of December 31, 2012, includes a negative $1,003,619 balance related to an interest rate swap from our 25% investment in Oslo Bulk AS. Also included in earnings is a $571,000 loss, related to the early pay-off of loans relating to two of our Pure Car Truck Carriers that were part of our recent Sale Leasebacks.

The notional and fair value amounts of our derivative instruments as of December 31, 2011 were as follows:

(Amounts in thousands)			Asset Derivatives 2011				Liability Derivatives 2011
	Current Notional		Balance Sheet		Fair		Balance Sheet		Fair Value
As of December 31, 2011	Amount		Location		Value		Location
Interest Rate Swaps-S/T	$	12,845		-		-	Current Liabilities		$	(545	)
Interest Rate Swaps-L/T*	$	140,455		-		-	Other Liabilities		$	(8,901	)
Foreign Exchange Contracts	$	2,400	Other Assets		$	202		-		-
Total derivatives designated as hedging instruments	$	155,700		-	$	202		-	$	(9,446	)

The effect of derivative instruments designated as cash flow hedges on our consolidated statement of income for the year ended December 31, 2012 is as follows:

(Amounts in thousands) Year Ended December 31, 2012	Gain/(Loss) Recognized in Other Comprehensive Income			Location of Gain (Loss) Reclassified from AOCI to Income		Amount of Gain(Loss) Reclassified from AOCI to Income			Gain (Loss) Recognized in Income from Ineffective portion
Interest Rate Swaps	$	1,486		Interest Expense		$	(3,106	)	$	(485	)
Foreign Exchange Contracts	$	(243	)	Other Revenues		$	(180	)		-
Total Derivatives designated as hedging instruments	$	1,243			-	$	(3,286	)	$	(485	)

The effect of derivative instruments designated as cash flow hedges on our consolidated statement of income for the year ended December 31, 2011 is as follows:

(Amounts in thousands) Year Ended December 31, 2011	Gain Recognized in Other Comprehensive Income		Location of Gain(Loss) Reclassified from AOCI to Income		Amount of Gain(Loss) Reclassified from AOCI to Income			Gain (Loss) Recognized in Income from Ineffective portion
Interest Rate Swaps	$	72	Interest Expense		$	(3,982	)	$	(101	)
Foreign Exchange Contracts	$	29	Other Revenues		$	434			-
Total Derivatives designated as hedging instruments	$	101		-	$	(3,548	)	$	(101	)

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

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 with the exception of a small portion of one contract. Accordingly, the effective portion of the change in fair value of the swap is recorded in Other Comprehensive Income (Loss) while the ineffective portion is recorded to the earnings in the period of change in fair value. As of December 31, 2012, the Company has the following swap contracts outstanding:

Effective Date	Termination Date	Current Notional Amount		Swap Rate			Type
9/26/05	9/28/15	$	6,333,333		4.41	%	Fixed
9/26/05	9/28/15	$	6,333,333		4.41	%	Fixed
3/15/09	9/15/20	$	*61,540,235		2.065	%	Fixed
Total:		$	74,206,901

*Notional Amount converted from Yen at December 31, 2012 at a Yen to USD exchange rate of 86.74

Foreign Currency Contracts

We enter into forward exchange contracts to hedge certain firm purchase and sale commitments denominated in foreign currencies. The purpose of our foreign currency hedging activities is to protect us from the risk that the eventual dollar cash inflows or outflows resulting from revenue collections from foreign customers and purchases from foreign suppliers will be adversely affected by changes in exchange rates. The term of the currency contracts is rarely more than one year. Our foreign currency contracts are accounted for as effective cash flow hedges. Accordingly, the effective portion of the change in fair value is recorded in Other Comprehensive Income (Loss).

During 2012, we entered into seven 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 13.7787; the second was for Mexican Pesos for $250,000 U.S. Dollar equivalents at an exchange rate of 14.2939; the third was for Mexican Pesos for $700,000 U.S. Dollar equivalents at an exchange rate of 14.5700; the fourth was for Japanese Yen for $1.5 million U.S. Dollar equivalents at an exchange rate of 80.00; the fifth was for Japanese Yen for $1.5 million U.S. Dollar equivalents at an exchange rate of 81.02; the sixth was for Japanese Yen for $1.5 million U.S. Dollar Equivalents at an exchange rate of 85.16 and the seventh was for Japanese Yen for $1.5 million U.S. Dollar equivalents at an exchange rate of 85.27. Our foreign exchange contracts represent approximately 60% of our projected Mexican Peso exposure. There were no forward sales contracts as of December 31, 2012 or 2011.

The following table summarizes these contracts:

(Amounts in Thousands)
Transaction Date	Type of Currency	Transaction Amount in Dollars	Effective Date	Expiration Date
May-12	Peso	750	January-13	May-13
May-12	Peso	250	January-13	May-13
May-12	Peso	700	June-13	December-13
November-12	Yen	1,500	November-12	March-13
November-12	Yen	1,500	November-12	March-13
December-12	Yen	1,500	December-12	December-13
December-12	Yen	1,500	December-12	December-13
		7,700

Long-Term Debt

The fair value of long-term debt, which is estimated based on the current rates offered to us on outstanding obligations, approximated the carrying amounts of $237.6 million and $322.1 million as of December 31, 2012 and 2011, respectively.

Amounts Due from Related Parties

The carrying amount of these notes receivable approximated fair market value as of December 31, 2012 and 2011. Fair market value takes into consideration the current rates at which similar notes would be made.

Marketable Securities

In the fourth quarter of 2012, we sold our entire portfolio of corporate bonds and mutual funds, generating a gain of $447,000, which is included in the $580,000 Gain reported on our Income Statement, under the heading (Gain) Loss on Sale of Investments. Management performs a quarterly evaluation of marketable securities for any other-than-temporary impairment. For the years ended December 31, 2012, 2011 and 2010, respectively, there were no impairments taken on any of our marketable securities.

The following table includes cost and valuation information on our marketable securities:

(Amounts in thousands)	December 31, 2011
Security Type	Cost Basis		AOCI Unrealized Holding Gains		Estimated Fair Value
Corporate Bonds	$	8,553	$	70	$	8,623
Mutual Funds		4,146		58		4,204
	$	12,699	$	128	$	12,827