Financial Instruments and Concentration of Risk

12 Months Ended

Dec. 31, 2012

Derivative Instrument Detail [Abstract]

Fair Value Disclosures [Text Block]

FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF RISK

FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated fair values of our financial instruments are as follows:

(Dollars in thousands)

	2012				2011
	CARRYING AMOUNT		FAIR VALUE		CARRYING AMOUNT		FAIR VALUE
Cash and short-term investments (Level 1)	$	80,062	$	80,062	$	70,808	$	70,808
Net derivative asset related to interest rate swaps (Level 2)	2,952		2,952		2,409		2,409
Derivative asset related to lumber swap (Level 2)	—		—		480		480
Long-term debt (including current installments on long-term debt and fair value adjustments related to fair value swaps) (Level 2)	357,576		379,048		366,403		373,791

A framework has been established for measuring fair value, which provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below.

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs to the valuation methodology include:

• Quoted prices for similar assets or liabilities in active markets;

• Quoted prices for identical or similar assets or liabilities in inactive markets;

• Inputs other than quoted prices that are observable for the asset or liability; and

• Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observed for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset's or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

For cash and short-term investments, the carrying amount approximates fair value due to the short-term nature of these financial instruments. The fair value of the interest rate swaps has been determined based upon quoted market prices for similar assets and liabilities in active markets. The fair value of the non-designated lumber swap has been determined primarily from observable data by correlation and other means. The fair value of our long-term debt is estimated based upon the quoted market prices for the same or similar debt issues. For long-term debt for which there is no quoted market price, fair value is estimated based on average market prices for comparable liquid revenue bonds.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We record all derivatives on our balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk in a fair value hedge.

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.

FAIR VALUE HEDGES OF INTEREST RATE RISK

As of December 31, 2012, we had six separate interest rate swaps with notional amounts totaling $46.75 million associated with our $22.5 million debentures and $24.25 million of our medium-term notes. The swaps convert interest payments with fixed rates ranging between 6.95% and 8.89% to a variable rate of 3-month LIBOR plus a spread between 4.738% and 6.518%. The interest rate swaps terminate at various dates between December 2015 and February 2018.

NON-DESIGNATED LUMBER SWAP

Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, commodity price movements or other identified risks, but do not meet the strict hedge accounting requirements. In February 2012, we entered into two commodity swap contracts for a total of 22,500 mbf (thousand board feet) of southern yellow pine, which settled during the second quarter of 2012. In September 2011, we entered into two commodity swap contracts for 31,200 mbf of southern yellow pine with an effective date of November 1, 2011 and a termination date of February 29, 2012. In October 2010, we entered into a commodity swap contract for 14,300 mbf of southern yellow pine, which settled in the first quarter of 2011. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income. As of December 31, 2012 there were no outstanding lumber swap contracts.

The fair values of derivative instruments on our Consolidated Balance Sheets as of December 31 are as follows:

(Dollars in thousands)

	DERIVATIVE ASSETS
		2012		2011
	BALANCE SHEET LOCATION	FAIR VALUE		FAIR VALUE
Derivatives designated as hedging instruments:
Interest rate contracts	Other assets (non-current)	$	2,952	$	2,409
Total derivatives designated as hedging instruments		$	2,952	$	2,409
Derivative not designated as hedging instruments:
Lumber contracts	Other assets (current)	$	—	$	480
Total derivative not designated as hedging instruments		$	—	$	480

There were no derivatives recored as liabilities as of December 31, 2012 or 2011.

The effect of derivatives on the Consolidated Statements of Income for the years ended December 31, 2012, 2011 and 2010 are as follows:

(Dollars in thousands)

	LOCATION OF GAIN (LOSS) RECOGNIZED IN INCOME	AMOUNT OF GAIN (LOSS) RECOGNIZED IN INCOME
		2012			2011		2010
Derivatives designated in fair value hedging relationships:
Interest rate contracts
Realized gain on hedging instrument1	Interest expense	$	868		$	1,027	$	481
Net gain recognized in income from fair value hedges		$	868		$	1,027	$	481
Derivatives not designated as hedging instruments:
Lumber contracts
Unrealized gain (loss) on derivative	Cost of goods sold	$	(480	)	$	3,356	$	(2,876	)
Realized gain (loss) on derivative	Cost of goods sold	(396		)	1,164		—
Net gain (loss) recognized in income from derivatives not designated as hedging instruments		$	(876	)	$	4,520	$	(2,876	)

¹  Realized gain on hedging instrument consists of net cash settlements and interest accruals on the interest rate swaps during the period.

No net unrealized gain or loss associated with the interest rate swaps was recognized in income for any of the periods presented because we recognized no hedge ineffectiveness.

CONCENTRATION RISK

For the years ended December 31, 2012, 2011 and 2010, no customers accounted for 10% or more of our revenues.