Derivative Financial Instruments

3 Months Ended

Mar. 31, 2012

Derivative Financial Instruments [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

9. 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 income (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 March 31, 2012, the Company’s derivative instruments included three interest rate swap agreements as follows:

Date Entered	Notional Amount		Fixed Interest Rate Paid*			Variable Interest Rate Received		Effective Date	Expiration Date
March 2009	$	175,000		2.85	%		1-month LIBOR	February 2011	February 2014
August 2011	$	150,000		0.80	%		1-month LIBOR	April 2012	January 2015
December 2011	$	175,000		1.60	%		1-month LIBOR	February 2014	February 2017

* 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 March 31, 2012, the Company’s derivative instruments included one fuel hedge agreement as follows:

Date Entered	Notional Amount (in  gallons per month)		Diesel Rate Paid Fixed (per gallon)		Diesel Rate Received Variable	Effective Date	Expiration Date
December 2008		400,000	$	3.03	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 (“DOE”), 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 March 31, 2012, are as follows:

Derivatives Designated as Cash Flow Hedges	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps				Accrued liabilities(a)	$	(5,089	)
				Other long-term liabilities		(3,892	)
Fuel hedges	Prepaid expenses and other current assets (b)	$	3,850
Total derivatives designated as cash flow hedges		$	3,850		$	(8,981	)

(a) Represents the estimated amount of the existing unrealized losses on interest rate swaps as of March 31, 2012 (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 March 31, 2012 (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, 2011, are as follows:

Derivatives Designated as Cash Flow Hedges	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Interest rate swaps				Accrued liabilities	$	(4,476	)
				Other long-term liabilities		(4,642	)
Fuel hedges	Prepaid expenses and other current assets	$	3,506
Total derivatives designated as cash flow hedges		$	3,506		$	(9,118	)

The following table summarizes the impact of the Company’s cash flow hedges on the results of operations, comprehensive income and accumulated other comprehensive income (loss) (“AOCIL”) as of and for the three months ended March 31, 2012 and 2011:

Derivatives Designated as Cash Flow Hedges	Amount of Gain or (Loss) Recognized as AOCIL on Derivatives, Net of Tax (Effective Portion)(a)					Statement of Income Classification	Amount of (Gain) or Loss Reclassified from AOCIL  into Earnings, Net of Tax (Effective Portion) (b),(c)
	Three Months Ended March 31,						Three Months Ended March 31,
	2012			2011			2012			2011
Interest rate swaps	$	(623	)	$	41	Interest expense	$	708		$	1,157
Fuel hedges		913			2,882	Cost of operations		(700	)		(503	)
Total	$	290		$	2,923		$	8		$	654

(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 AOCIL. 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 AOCIL. 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 AOCIL 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 AOCIL 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 Net 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 three months ended March 31, 2012 and 2011.

See Note 12 for further discussion on the impact of the Company’s hedge accounting to its consolidated Comprehensive income and AOCIL.