Derivative Financial Instruments

9 Months Ended

Sep. 30, 2011

Derivative Financial Instruments [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

10. DERIVATIVE FINANCIAL INSTRUMENTS

The Company recognizes all derivatives on the balance sheet at fair value. All of the Company’s derivatives have been designated as cash flow hedges; therefore, the effective portion of the changes in the fair value of derivatives will be recognized in accumulated other comprehensive loss until the hedged item is recognized in earnings. The ineffective portion of the changes in the fair value of derivatives will be immediately recognized in earnings. The Company classifies cash inflows and outflows from derivatives within operating activities in the Condensed Consolidated Statements of Cash Flows.

One of the Company’s objectives for utilizing derivative instruments is to reduce its exposure to fluctuations in cash flows due to changes in the variable interest rates of certain borrowings issued under its credit facility. The Company’s strategy to achieve that objective involves entering into interest rate swaps that are specifically designated to the Company’s credit facility and accounted for as cash flow hedges.

At September 30, 2011, the Company’s derivative instruments included two interest rate swap agreements as follows:

			Fixed			Variable
	Notional		Interest			Interest Rate
Date Entered	Amount		Rate Paid*			Received	Effective Date	Expiration Date
March 2009	$	175,000		2.85	%	1-month LIBOR	February 2011	February 2014
August 2011	$	150,000		0.7975	%	1-month LIBOR	April 2012	January 2015

* Plus applicable margin.

Another of the Company’s objectives for utilizing derivative instruments is to reduce its exposure to fluctuations in cash flows due to changes in the price of diesel fuel. The Company’s strategy to achieve that objective involves entering into fuel hedges that are specifically designated to certain forecasted diesel fuel purchases and accounted for as cash flow hedges.

At September 30, 2011, the Company’s derivative instruments included two fuel hedge agreements as follows:

			Diesel
			Rate
	Notional		Paid
	Amount		Fixed
	(in gallons		(per		Diesel Rate Received		Expiration
Date Entered	per month)		gallon)		Variable	Effective Date	Date
December 2008		400,000	$	2.950	DOE Diesel Fuel Index*	January 2011	December 2011
December 2008		400,000	$	3.030	DOE Diesel Fuel Index*	January 2012	December 2012

* If the national U.S. on-highway average price for a gallon of diesel fuel (“average price”), as published by the Department of Energy, exceeds the contract price per gallon, the Company receives the difference between the average price and the contract price (multiplied by the notional number of gallons) from the counterparty. If the average price is less than the contract price per gallon, the Company pays the difference to the counterparty.

The fair values of derivative instruments designated as cash flow hedges as of September 30, 2011, are as follows:

Derivatives Designated as Cash	Asset Derivatives			Liability Derivatives
Flow Hedges	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps	Other assets, net	$	64	Accrued liabilities(a)	$	(4,510	)
				Other long-term liabilities		(5,320	)
Fuel hedges	Prepaid expenses and other current assets(b)		3,757
	Other assets, net		666
Total derivatives designated as cash flow hedges		$	4,487		$	(9,830	)

(a)	Represents the estimated amount of the existing unrealized losses on interest rate swaps as of September 30, 2011 (based on the interest rate yield curve at that date), included in accumulated other comprehensive loss expected to be reclassified into pre-tax earnings within the next 12 months. The actual amounts reclassified into earnings are dependent on future movements in interest rates.
(b)	Represents the estimated amount of the existing unrealized gains on fuel hedges as of September 30, 2011 (based on the forward DOE diesel fuel index curve at that date), included in accumulated other comprehensive loss expected to be reclassified into pre-tax earnings within the next 12 months. The actual amounts reclassified into earnings are dependent on future movements in diesel fuel prices.

The fair values of derivative instruments designated as cash flow hedges as of December 31, 2010, are as follows:

Derivatives Designated as Cash	Asset Derivatives			Liability Derivatives
Flow Hedges	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps				Accrued liabilities	$	(4,988	)
				Other long-term liabilities		(4,734	)
Fuel hedges	Prepaid expenses and other current assets	$	2,469
	Other assets, net		2,261
Total derivatives designated as cash flow hedges		$	4,730		$	(9,722	)

The following tables summarizes the impact of the Company’s cash flow hedges on the results of operations, comprehensive income and accumulated other comprehensive loss (“AOCL”) as of and for the three and nine months ended September 30, 2011 and 2010:

	Amount of Gain or (Loss)
	Recognized in AOCL on							Amount of (Gain) or Loss
Derivatives	Derivatives,							Reclassified from AOCL into
Designated as Cash	Net of Tax (Effective						Statement of Income	Earnings, Net of Tax (Effective
Flow Hedges	Portion)(a)						Classification	Portion) (b),(c)
	Three Months Ended							Three Months Ended
	September 30,							September 30,
	2011			2010				2011			2010
Interest rate swaps	$	(1,290	)	$	(2,342	)	Interest expense	$	735		$	1,283
Fuel hedges		(646	)		1,164		Cost of operations		(683	)		716
Total	$	(1,936	)	$	(1,178	)		$	52		$	1,999

	Amount of Gain or (Loss)
	Recognized in AOCL on							Amount of (Gain) or Loss
Derivatives	Derivatives,							Reclassified from AOCL into
Designated as Cash	Net of Tax (Effective						Statement of Income	Earnings, Net of Tax (Effective
Flow Hedges	Portion)(a)						Classification	Portion) (b),(c)
	Nine Months Ended							Nine Months Ended
	September 30,							September 30,
	2011			2010				2011			2010
Interest rate swaps	$	(2,904	)	$	(7,776	)	Interest expense	$	2,877		$	4,152
Fuel hedges		1,787			(754	)	Cost of operations		(1,977	)		2,156
Total	$	(1,117	)	$	(8,530	)		$	900		$	6,308

(a)	In accordance with the derivatives and hedging guidance, the effective portions of the changes in fair values of interest rate swaps and fuel hedges have been recorded in equity as a component of AOCL. As the critical terms of the interest rate swaps match the underlying debt being hedged, no ineffectiveness is recognized on these swaps and, therefore, all unrealized changes in fair value are recorded in AOCL. Because changes in the actual price of diesel fuel and changes in the DOE index price do not offset exactly each reporting period, the Company assesses whether the fuel hedges are highly effective using the cumulative dollar offset approach.
(b)	Amounts reclassified from AOCL into earnings related to realized gains and losses on interest rate swaps are recognized when interest payments or receipts occur related to the swap contracts, which correspond to when interest payments are made on the Company’s hedged debt.
(c)	Amounts reclassified from AOCL into earnings related to realized gains and losses on fuel hedges are recognized when settlement payments or receipts occur related to the hedge contracts, which correspond to when the underlying fuel is consumed.

The Company measures and records ineffectiveness on the fuel hedges in Cost of operations in the Condensed Consolidated Statements of Income on a monthly basis based on the difference between the DOE index price and the actual price of diesel fuel purchased, multiplied by the notional number of gallons on the contracts. There was no significant ineffectiveness recognized on the fuel hedges during the nine months ended September 30, 2011 and 2010.

See Note 13 for further discussion on the impact of the Company’s hedge accounting to its consolidated Comprehensive income and AOCL.