Derivative Instruments And Hedging Strategies

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments And Hedging Strategies

DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES

Derivative instruments are classified as either assets or liabilities based on their individual fair values. Derivative assets and liabilities are included in other receivables and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. The fair values of the Company’s derivative instruments as of September 30, 2012 were as follows (in thousands):

	Derivative Asset		Derivative Liability
Derivatives designated as hedging instruments:
Interest rate swap agreements (cash flow hedges)	$	—	$	3,788
	—		3,788
Derivatives not designated as hedging instruments:
Options on equities and equity indices	752		96
Forward currency exchange, option and future contracts	496		238
Interest rate swap agreements	—		2,755
Commodity swap, option and future contracts:
Exchange traded	4,149		3,636
Non-exchange traded	4,990		530
	10,387		7,255
	$	10,387	$	11,043

Fair Value Hedges. During the nine months ended September 30, 2011, the Company utilized forward currency exchange contracts designated as fair value hedges to fix a portion of its euro-denominated capital commitments in U.S. dollars to protect against currency fluctuations. As of September 30, 2012, there were no forward currency exchange contracts designated as fair value hedges.

The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the nine months ended September 30 as follows (in thousands):

	Derivative losses, net
	2012		2011
Forward currency exchange contracts, effective and ineffective portions	$	—	$	6,517
Decrease in fair value of hedged items included in property and equipment corresponding to   effective portion of derivative gains	—		(6,557		)
	$	—	$	(40	)

Cash Flow Hedges. As of September 30, 2012, the Company is a party to various interest rate swap agreements, with maturities in 2013, which have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates ranging from 2.46% to 2.85% on aggregate notional values of $75.0 million and receive a variable interest rate based on the London Interbank Offered Rate (“LIBOR”) on these notional values. During the nine months ended September 30, 2012, the Company dedesignated $50.0 million notional value of its interest rate swaps previously designated as cash flow hedges. Subsequent to September 30, 2012, the Company dedesignated the remaining $75.0 million notional value of its interest rate swaps previously designated as cash flow hedges. As of September 30, 2012, one of the Company’s Offshore Marine Services 50% or less owned companies had an interest rate swap agreement maturing in 2015 that has been designated as a cash flow hedge. This instrument calls for the joint venture to pay a fixed interest rate of 1.48% on the amortized notional value of $18.5 million and receive a variable interest rate based on LIBOR on the amortized notional value. As of September 30, 2012, one of the Company’s Inland River Services 50% or less owned companies had four interest rate swap agreements with maturities ranging from 2013 through 2015 that have been designated as cash flow hedges. These instruments call for the joint venture to pay fixed rates of interest ranging from 1.53% to 4.16% on the aggregate amortized notional value of $45.4 million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value. Additionally, as of September 30, 2012, one of the Company’s Marine Transportation Services 50% or less owned companies had an interest rate swap agreement maturing in 2017 that has been designated as a cash flow hedge. The instrument calls for the joint venture to pay a fixed interest rate of 2.79% on the amortized notional value of $40.0 million and received a variable interest rate based on LIBOR on the amortized notional value. By entering into these interest rate swap agreements, the Company and its joint ventures have converted the variable LIBOR component of certain of their outstanding borrowings to a fixed interest rate.

The Company recognized gains (losses) on derivative instruments designated as cash flow hedges for the nine months ended September 30 as follows (in thousands):

	Other comprehensive income (loss)
	2012			2011
Interest rate swap agreements, effective portion	$	(1,238	)	$	(3,448	)
Reclassification of net derivative losses to interest expense or equity in earnings of 50% or less owned companies	2,285			1,456
Reclassification of net derivative losses on cash flow hedges to derivative losses, net upon dedesignation	1,330			—
	$	2,377		$	(1,992	)
	Derivative losses, net
	2012			2011
Interest rate swap agreements, ineffective portion	$	(55	)	$	(108	)
Reclassification of net derivative losses on cash flow hedges to derivative losses, net upon dedesignation	(1,330		)	$	—
	$	(1,385	)	$	(108	)

Other Derivative Instruments. The Company recognized gains (losses) on derivative instruments not designated as hedging instruments for the nine months ended September 30 as follows (in thousands):

	Derivative losses, net
	2012			2011
Options on equities and equity indices	$	(735	)	$	2,725
Forward currency exchange, option and future contracts	884			990
Interest rate swap agreements	(803		)	(2,489		)
Commodity swap, option and future contracts:
Exchange traded	(4,743		)	(8,818		)
Non-exchange traded	1,501			1,293
U.S. Treasury notes, rate-locks and bond future and option contracts	—			(29,426		)
	$	(3,896	)	$	(35,725	)

The Company holds positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the underlying equity security or index. The Company’s investment in equity options primarily includes positions in energy, marine, transportation and other related businesses. These contracts are typically entered into to mitigate the risk of changes in the market value of marketable security positions that the Company is either about to acquire, has acquired or is about to dispose of.

The Company enters and settles forward currency exchange, option and future contracts with respect to various foreign currencies. As of September 30, 2012, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $18.2 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in currency exchange rates with respect to the Company’s business conducted outside of the United States. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months.

The Company has entered into various interest rate swap agreements with maturities ranging from 2012 through 2015 that call for the Company to pay fixed interest rates ranging from 1.67% to 2.59% on aggregate amortized notional values of $141.7 million and receive a variable interest rate based on LIBOR on these notional values. In addition, one of the Company’s Offshore Marine Services 50% or less owned companies has entered into an interest rate swap agreement maturing in 2014 that calls for the joint venture to pay a fixed interest rate of 3.05% on the amortized notional value of $24.4 million million and receive a variable interest rate based on LIBOR on the amortized notional value. The general purpose of these interest rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company or its joint venture.

The Company enters and settles positions in various exchange and non-exchange traded commodity swap, option and future contracts. In the Company’s commodity trading and logistics business, fixed price future purchase and sale contracts for ethanol and sugar are included in the Company’s non-exchange traded derivative positions. The Company enters into exchange traded positions to protect these purchase and sale contracts as well as its inventory balances from market changes. As of September 30, 2012, the net market exposure to ethanol and sugar under these contracts was not material. The Company also enters into exchange traded positions (primarily natural gas, heating oil, crude oil, gasoline, ethanol and sugar) to provide value to the Company should there be a sustained decline in the price of commodities that could lead to a reduction in the market values and cash flows of the Company’s Offshore Marine Services and Inland River Services businesses. As of September 30, 2012, these positions were not material.

The Company enters and settles various positions in U.S. Treasury notes and bonds through rate locks, futures or options on futures tied to U.S. Treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. Treasury notes and bonds decline, leading to generally higher interest rates, which might lead to higher interest costs for the Company. As of September 30, 2012, there were none of these types of positions outstanding.