Financial Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Financial Instruments

FINANCIAL INSTRUMENTS

Fuel Hedges

We have entered into multiple swap agreements designated as cash flow hedges to mitigate some of our exposure related to changes in diesel fuel prices. The swaps qualified for, and were designated as, effective hedges of changes in the prices of forecasted diesel fuel purchases (fuel hedges).

The following table summarizes our outstanding fuel hedges as of June 30, 2012:

Inception Date	Commencement Date	Termination Date	Notional Amount (in Gallons per Month)	Contract Price per Gallon
November 5, 2007	January 5, 2009	December 30, 2013	60,000	$	3.28
March 17, 2008	January 5, 2009	December 31, 2012	50,000	3.72
March 17, 2008	January 5, 2009	December 31, 2012	50,000	3.74
July 10, 2009	January 1, 2012	December 31, 2012	100,000	3.20
August 8, 2011	July 1, 2012	December 31, 2012	500,000	3.84
August 8, 2011	January 1, 2013	December 31, 2013	500,000	3.83
August 8, 2011	January 1, 2014	December 31, 2014	500,000	3.82
August 8, 2011	July 2, 2012	December 31, 2012	500,000	3.84
August 8, 2011	January 7, 2013	December 30, 2013	500,000	3.82
August 9, 2011	July 1, 2012	December 31, 2012	250,000	3.80
August 9, 2011	January 1, 2013	December 31, 2013	250,000	3.83
August 9, 2011	January 1, 2014	December 31, 2014	250,000	3.82
August 9, 2011	January 6, 2014	December 29, 2014	500,000	3.83
September 30, 2011	January 6, 2014	December 29, 2014	250,000	3.69
September 30, 2011	January 7, 2013	December 30, 2013	250,000	3.70
October 3, 2011	January 5, 2015	December 28, 2015	250,000	3.68

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, we receive the difference between the average price and the contract price (multiplied by the notional gallons) from the counter-party. If the national U.S. on-highway average price for a gallon of diesel fuel is less than the contract price per gallon, we pay the difference to the counter-party.

The fair values of our fuel hedges are determined using standard option valuation models with assumptions about commodity prices being based on those observed in underlying markets (Level 2 in the fair value hierarchy). The aggregated fair values of our outstanding fuel hedges at June 30, 2012 and December 31, 2011 were current assets of $0.7 million and $1.6 million, respectively, and current liabilities of $10.8 million and $4.7 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively. The ineffective portions of the changes in fair values resulted in (losses) gains of less than $0.1 million for the three and six months ended June 30, 2012 and 2011, respectively, and have been recorded in other income (expense), net in our consolidated statements of income.

The following table summarizes the impact of our fuel hedges on our results of operations and comprehensive income for the three and six months ended June 30, 2012 and 2011:

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)						Statement of Income Classification	Amount of Realized Gain
	Three Months Ended June 30,							Three Months Ended June 30,
	2012			2011				2012		2011
Fuel hedges	$	(11.9	)	$	(0.9	)	Cost of operations	$	0.4	$	0.5
	Six Months Ended June 30,							Six Months Ended June 30,
	2012			2011				2012		2011
Fuel hedges	$	(4.2	)	$	1.6		Cost of operations	$	0.8	$	0.4

Recycling Commodity Hedges

Our revenue from sales of recycling commodities is primarily from sales of old corrugated cardboard (OCC) and old newspaper (ONP). We use derivative instruments such as swaps and costless collars designated as cash flow hedges to manage our exposure to changes in prices of these commodities. We have entered into multiple agreements related to forecasted OCC and ONP sales. The agreements qualified for, and were designated as, effective hedges of changes in the prices of certain forecasted recycling commodity sales (commodity hedges).

As of June 30, 2012, we had one OCC swap outstanding for 1,500 short tons per month at a contract price of $115.00. We entered into this swap on October 11, 2010, having a commencement date of January 1, 2011 and a termination date of December 31, 2012.

If the price per short ton of the hedging instrument (average price) as reported on the Official Board Market is less than the contract price per short ton, we receive the difference between the average price and the contract price (multiplied by the notional short tons) from the counter-party. If the price of the commodity exceeds the contract price per short ton, we pay the difference to the counter-party.

The fair values of our commodity swaps are determined using standard option valuation models with assumptions about commodity prices being based on those observed in underlying markets (Level 2 in the fair value hierarchy).

We entered into costless collar agreements on forecasted sales of OCC and ONP. The agreements involve combining a purchased put option giving us the right to sell OCC and ONP at an established floor strike price with a written call option obligating us to deliver OCC and ONP at an established cap strike price. The puts and calls have the same settlement dates, are net settled in cash on such dates and have the same terms to expiration. The contemporaneous combination of options resulted in no net premium for us and represent costless collars. Under the agreements, no payments will be made or received by us, as long as the settlement price is between the floor price and cap price. However, if the settlement price is above the cap, we will be required to pay the counterparty an amount equal to the excess of the settlement price over the cap times the monthly volumes hedged. Also, if the settlement price is below the floor, the counterparty will be required to pay us the deficit of the settlement price below the floor times the monthly volumes hedged. The objective of these agreements is to reduce the variability of the cash flows of the forecasted sales of OCC and ONP between two designated strike prices.

The following costless collar hedges were outstanding as of June 30, 2012:

Inception Date	Commencement Date	Termination Date	Transaction Hedged	Notional Amount (in Short Tons per Month)	Floor Strike Price Per Short Ton		Cap Strike Price Per Short Ton
December 8, 2010	January 1, 2011	December 31, 2012	OCC	2,000	$	80.00	$	180.00
December 8, 2010	January 1, 2011	December 31, 2012	OCC	2,000	86.00		210.00
December 8, 2010	January 1, 2011	December 31, 2012	OCC	2,000	81.00		190.00
December 8, 2010	January 1, 2011	December 31, 2012	OCC	2,000	85.00		195.00
December 8, 2010	January 1, 2011	December 31, 2012	OCC	2,000	87.00		195.00
January 19, 2011	February 1, 2011	December 31, 2012	OCC	2,500	90.00		155.00
January 19, 2011	February 1, 2011	December 31, 2012	OCC	2,500	90.00		155.00
April 15, 2011	July 1, 2011	December 31, 2012	OCC	2,000	90.00		155.00
April 15, 2011	July 1, 2011	December 31, 2012	OCC	2,000	90.00		155.00
January 11, 2012	February 1, 2012	December 31, 2012	OCC	1,000	85.00		135.00
January 11, 2012	February 1, 2012	December 31, 2012	OCC	1,000	85.00		135.00
January 11, 2012	February 1, 2012	December 31, 2012	OCC	1,000	80.00		125.00
January 31, 2012	April 1, 2012	March 31, 2013	OCC	2,000	85.00		136.00
January 31, 2012	April 1, 2012	March 31, 2013	OCC	2,000	85.00		165.00
January 31, 2012	April 1, 2012	March 31, 2013	OCC	2,000	85.00		156.00
April 26, 2011	July 1, 2011	December 31, 2012	ONP	1,000	90.00		165.00
April 26, 2011	July 1, 2011	December 31, 2012	ONP	1,000	90.00		165.00
August 1, 2011	January 1, 2012	December 31, 2012	ONP	2,000	85.00		135.00
August 1, 2011	January 1, 2012	December 31, 2012	ONP	2,000	85.00		135.00
January 31, 2012	April 1, 2012	March 31, 2013	ONP	2,000	80.00		106.00
January 31, 2012	April 1, 2012	March 31, 2013	ONP	2,000	80.00		110.00
January 31, 2012	April 1, 2012	March 31, 2013	ONP	2,000	80.00		110.00
June 7, 2012	January 1, 2013	December 31, 2013	OCC	2,000	90.00		138.00
June 7, 2012	January 1, 2013	December 31, 2013	OCC	2,000	95.00		140.00
June 7, 2012	January 1, 2013	December 31, 2013	OCC	2,000	95.00		148.00

The costless collar hedges are recorded on the balance sheet at fair value. The fair values of the costless collars are determined using standard option valuation models with assumptions about commodity prices based upon forward commodity price curves in underlying markets (Level 2 in the fair value hierarchy).

The aggregated fair values of the outstanding recycling commodity hedges at June 30, 2012 and December 31, 2011 were current assets of $1.4 million, and current liabilities of $1.4 million and $0.7 million, respectively, and have been recorded in other current assets and other accrued liabilities in our consolidated balance sheets, respectively. The ineffective portions of the changes in fair values resulted in (losses) gains of less than $0.1 million for the three and six months ended June 30, 2012 and 2011, respectively, and have been recorded in other income (expense), net in our consolidated statements of income.

The following table summarizes the impact of our recycling commodity hedges on our results of operations and comprehensive income for the three and six months ended June 30, 2012 and 2011:

Derivatives in Cash Flow Hedging Relationships	Amount of (Loss) Gain Recognized in OCI on Derivatives (Effective Portion)						Statement of Income Classification	Amount of Realized Gain or (Loss)
	Three Months Ended June 30,							Three Months Ended June 30,
	2012			2011				2012		2011
Recycling commodity hedges	$	(0.2	)	$	(1.0	)	Revenue	$	0.1	$	(2.1	)
	Six Months Ended June 30,							Six Months Ended June 30,
	2012			2011				2012		2011
Recycling commodity hedges	$	(0.5	)	$	(0.4	)	Revenue	$	0.2	$	(4.0	)

Fair Value Measurements

In measuring fair values of assets and liabilities, we use valuation techniques that maximize the use of observable inputs (Level 1) and minimize the use of unobservable inputs (Level 3). We also use market data or assumptions that we believe market participants would use in pricing an asset or liability, including assumptions about risk when appropriate.

As of June 30, 2012 and December 31, 2011, our assets and liabilities that are measured at fair value on a recurring basis include the following:

	Fair Value Measurements Using
	Total as of June 30, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market mutual funds	$	46.1	$	46.1	$	—	$	—
Bonds	38.5		—		38.5		—
Fuel hedges - other current assets	0.7		—		0.7		—
Commodity hedges - other current assets	1.4		—		1.4		—
Total assets	$	86.7	$	46.1	$	40.6	$	—
Liabilities:
Fuel hedges - other accrued liabilities	$	10.8	$	—	$	10.8	$	—
Commodity hedges - other accrued liabilities	1.4		—		1.4		—
Total liabilities	$	12.2	$	—	$	12.2	$	—
	Fair Value Measurements Using
	Total as of December 31, 2011		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Money market mutual funds	$	100.8	$	100.8	$	—	$	—
Bonds	34.6		—		34.6		—
Fuel hedges - other current assets	1.6		—		1.6		—
Commodity hedges - other current assets	1.4		—		1.4		—
Total assets	$	138.4	$	100.8	$	37.6	$	—
Liabilities:
Fuel hedges - other accrued liabilities	$	4.7	$	—	$	4.7	$	—
Commodity hedges - other accrued liabilities	0.7		—		0.7		—
Total liabilities	$	5.4	$	—	$	5.4	$	—