Market Risks Associated with Financial Instruments

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Market Risks Associated with Financial Instruments

The Company’s interest expense is sensitive to changes in the general level of domestic interest rates. To mitigate the impact of fluctuations in domestic interest rates, a portion of the Company’s debt is fixed rate accomplished by either borrowing on a long-term basis at fixed rates or by entering into interest rate swap transactions. The interest rate swap agreements are contracts that require the Company to pay a fixed and receive a floating interest rate over the life of the agreements. The floating-rates are based on LIBOR and the fixed-rate is determined at the time the swap agreement was consummated. The interest rate swap agreements do not constitute positions independent of the underlying exposures. The Company does not hold or issue derivative instruments for trading purposes and is not a party to any instruments with leverage features. Certain swap agreements allow the counterparty a one-time option to cancel the agreement one year prior to maturity. The Company is exposed to credit losses in the event of nonperformance by the counterparties to its financial instruments. The counterparties are creditworthy financial institutions, rated AA or better by Moody’s Investor Services and the Company anticipates that the counterparties will be able to fully satisfy their obligations under the contracts. For the years ended December 31, 1999 and 1998, the Company received weighted average rates of 5.5% and 5.7%, respectively, and paid a weighted average rate on its interest rate swap agreements of 5.8% in both years. At December 31, 1997, the Company had no active interest rate swap agreements.

The table below presents information about the Company’s derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including long-term debt and interest rate swaps as of December 31, 1999. For debt obligations, the table presents principal cash flows and related weighted-average interest rates by contractual maturity dates. For interest rate swap agreements, the table presents notional amounts by maturity date and weighted average interest rates based on rates in effect at December 31, 1999. The fair values of long-term debt and interest rate swaps were determined based on market prices quoted at December 31, 1999, for the same or similar debt issues.

	Maturity Date, Fiscal Year Ending December 31
(Dollars in thousands)	2000	2001	2002	2003	2004	Thereafter	Total
Long-term debt:
Fixed rate-Fair value	$3,507	$658	$1,610	$187	$200	$132,244	$138,406
Fixed rate-Carrying value	$3,507	$658	$1,610	$187	$200	$134,458	$140,620
Average interest rates	7.59%	7.47%	9.15%	6.68%	6.68%	9.20%
Variable rate long-term debt	0	0	$263,890	0	0	$18,200	$282,090
Interest rate swaps:
Pay fixed/receive variable notional amounts	$50,000					$75,000	$125,000
Average pay rate	5.78%					6.75%
Average receive rate	3 month					6 month
	LIBOR					LIBOR

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