Financial Instruments

6 Months Ended

Jun. 30, 2011

6. Financial Instruments

The carrying amounts of the following assets and liabilities meeting the definition of a financial instrument approximate their fair values due to the short period to maturity of the instruments:

	•		Cash and cash equivalents;

	•		Notes receivable;

	•		Deposits;

	•		Miscellaneous receivables; and

	•		Short-term loans payable.

Long-term Debt

The following financial instruments are measured at fair value for disclosure purposes:


	June 30, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
	(Dollars in thousands)
7.875% Senior Notes	$	250,000	$	260,625	$	250,000	$	266,563
6.50% Convertible Senior Notes, net of unamortized discounts		33,789		36,181		33,368		36,379
Revolving credit facility		448		448		—		—
Other notes		4,320		3,619		4,297		3,600

The fair values of the Senior Notes and the Convertible Notes are based on a third party’s estimated bid prices. The fair values of the revolving credit facility and the other long-term notes are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company that market participants would use in pricing the debt.

Derivative Instruments

All derivative instruments are recognized as either assets or liabilities at fair value. For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified from accumulated other comprehensive income (“AOCI”) into earnings when the hedged transaction affects earnings. For derivatives that are not designated as hedges, the gain or loss on the derivative is recognized in current earnings.

Interest rate swaps. To reduce our exposure to interest rate changes on variable-rate debt, we entered into interest rate swap agreements in 2007. These swaps effectively converted $150 million of a former variable-rate term loan facility to a fixed rate through June 2011. These swaps were designated and qualified as cash flow hedges. The fair value of these swaps was based on the present value of expected future cash flows, which reflected assumptions about current interest rates and the creditworthiness of the Company that market participants would use in pricing the swaps. In the third quarter of 2010, in conjunction with repayment of our remaining outstanding term loans, we settled these swaps and reclassified $6.8 million from accumulated other comprehensive income to miscellaneous expense.

Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not designated as hedging instruments. The fair value of these contracts is based on market prices for comparable contracts. We had foreign currency forward contracts with a notional amount of $277.6 million at June 30, 2011, and $187.3 million at December 31, 2010.

The following table presents the fair value on our consolidated balance sheets of our foreign currency forward contracts, which are not designated as hedging instruments:


	June 30,			December 31,
	2011			2010			Balance Sheet Location
	(Dollars in thousands)
Asset derivatives:
Foreign currency forward contracts	$	1,372		$	1,261		Accrued expenses and other current liabilities
Liability derivatives:
Foreign currency forward contracts		(2,288	)		(1,501	)	Accrued expenses and other current liabilities

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The classifications within the fair value hierarchy of these financial instruments were as follows:


	June 30, 2011										December 31,
	Level 1		Level 2			Level 3		Total			2010
	(Dollars in thousands)
Liabilities:
Foreign currency forward contracts, net	$	—	$	(916	)	$	—	$	(916	)	$	(240	)

The following table presents the effect of derivative instruments on our consolidated financial performance for the six months ended June 30:


						Amount of Gain (Loss)					Location of Gain
	Amount of Gain (Loss)					Reclassified from AOCI					(Loss) Reclassified
	Recognized in OCI					into Income					from AOCI into
	2011		2010			2011		2010			Income
	(Dollars in thousands)
Derivatives in Cash Flow Hedging Relationships:
Interest rate swaps	$	—	$	(996	)	$	—	$	(3,985	)	Interest expense


	Amount of Gain (Loss)
	Recognized in Income
	2011			2010		Location of Gain (Loss) in Income
	(Dollars in thousands)
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	$	(13,422	)	$	14,684	Foreign currency losses, net