Quarterly report pursuant to Section 13 or 15(d)

Note 6 - Derivative Instruments and Hedging Strategies

v3.10.0.1
Note 6 - Derivative Instruments and Hedging Strategies
9 Months Ended
Sep. 30, 2018
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
6.
DERIVATIVE INSTRUMENTS AND HEDGING STRATEGIES
 
Derivative instruments a
re classified as either assets or liabilities based on their individual fair values. The fair values of the Company’s derivative instruments as of
September 30, 2018
were as follows (in thousands):
 
   
Derivative
Asset
(1)
   
Derivative
Liability
 
Derivatives designated as hedging instruments:
 
 
 
 
 
 
 
 
Interest rate swap agreements (cash flow hedges)
  $
    $
10
 
(2)
     
     
10
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Conversion option liability on Convertible Senior Notes    
     
17,928
 
Interest rate swap agreements
   
1,565
     
25
(2)
    $
1,565
    $
17,963
 
 
 
______________________
(
1
)
Included in other receivables in the accompanying condensed consolidated balance sheets.
(
2
)
Included in other current liabilities in the accompanying condensed consolidated balance sheets.
   
Cash Flow Hedges.
The
Company and certain of its
50%
or less owned companies have interest rate swap agreements designated as cash flow hedges. By entering into these interest rate swap agreements, the Company and its
50%
or less owned companies have converted the variable LIBOR or EURIBOR component of certain of their outstanding borrowings to a fixed interest rate. The Company recognized immaterial losses on derivative instruments designated as cash flow hedges during the
nine
months ended
September 30, 2018.
As of
September 30, 2018,
the interest rate swaps held by the Company and its
50%
or less owned companies were as follows:
 
 
Windcat Workboats had
two
interest rate swap agreements maturing in
2021
that call for the Company to pay a fixed rate of interest of (
0.03
)% on the aggregate notional value of
€15.0
million (approximately
$17.5
million) and receive a variable interest rate based on EURIBOR on the aggregate notional value.
 
 
MexMar had
five
interest rate swap agreements with maturities in
2023
that call for MexMar to pay a fixed rate of interest ranging from
1.71%
to
2.10%
on the aggregate amortized notional value
of
$100.5
million and
receive a variable interest rate based on LIBOR on the aggregate amortized notional value.
 
Other Derivative Instruments.
The Company recognized (losses) gains on derivative instruments
not
designated as hedging instruments for the
nine
months ended 
September 30 as follows (in thousands):
 
   
201
8
   
201
7
 
Conversion option liability on Convertible Senior Notes
  $
(11,096
)   $
13,119
 
Forward currency exchange, option and future contracts
   
     
(78
)
Interest rate swap agreements
   
1,299
     
(321
)
    $
(9,797
)   $
12,720
 
 
The conversion option liability relates to the bifurcated embedded conversion option in the Convertible Senior Notes (see Note
4
in this Quarterly Report on Form
10
-Q and Note
7
in the Company's Annual Report on Form
10
-K for the year ended December
31,
2017
).
 
The Company and certain of its
50%
or less owned companies have entered into interest rate swap agreements for the general purpose of providing protection against increases in interest rates, which might lead to higher interest costs. As of
September 30, 2018,
the interest rate swaps held by the Company or its
50%
or less owned companies were as follows:
 
 
OSV Partners had
two
interest rate swap agreements with maturities in
2020
that call for OSV Partners to pay a fixed rate of interest ranging from
1.89%
to
2.27%
on the aggregate amortized notional value of
$29.2
million and receive a variable interest rate based on LIBOR on the aggregate amortized notional value.
 
On
September 28, 2018, 
the Company refinanced and extinguished its debts related to the following interest rate swaps:
 
 
Falcon Global International had an interest rate swap agreement maturing in
2022
that called for the Company to pay a fixed interest rate of
2.06%
on the amortized notional value of
$51.6
million and receive a variable interest rate based on LIBOR on the amortized notional value.  The swap was terminated on September
28,
2018
with de minimis breakage costs, and the
$1.2
million fair market value of the swap was received in October
2018.
 
 
Sea-Cat Crewzer II had an interest rate swap agreement maturing in
2019
that called for Sea-Cat Crewzer II to pay a fixed rate of interest of
1.52%
on the amortized notional value of
$19.1
million and receive a variable interest rate based on LIBOR on the amortized notional value. The swap was terminated on September
28,
2018
with de minimis breakage costs, and the
$0.2
million fair market value of the swap was received in October
2018.
 
 
Sea-Cat Crewzer had an interest rate swap agreement maturing in
2019
that called for Sea-Cat Crewzer to pay a fixed rate of interest of
1.52%
on the amortized notional value of
$16.9
million and receive a variable interest rate based on LIBOR on the amortized notional value. The swap was terminated on September
28,
2018
with de minimis breakage costs, and the
$0.2
million fair market value of the swap was received in October
2018.