Derivative Instruments

6 Months Ended

Jun. 30, 2011

Derivative Instruments [Abstract]

DERIVATIVE INSTRUMENTS

NOTE 6: DERIVATIVE INSTRUMENTS

During the normal course of operations, we are exposed to market risks including fluctuations in interest rates, fluctuations in foreign currency exchange rates and commodity pricing. From time to time, and consistent with our risk management policies, we use derivative instruments to hedge against these market risks. We do not utilize derivative instruments for trading or other speculative purposes.

The accounting for gains and losses that result from changes in the fair value of derivative instruments depends on whether the derivatives have been designated and qualify as hedging instruments and the type of hedging relationship. The interest rate swap agreements described below were designated as either fair value hedges or cash flow hedges. The changes in fair value of our interest rate swap fair value hedges are recorded as interest expense consistent with the change in the fair value of the hedged items attributable to the risk being hedged. The changes in fair value of our interest rate swap cash flow hedges are recorded in accumulated other comprehensive income (AOCI) and are reclassified into interest expense in the same period the hedged items affect earnings.

Derivative instruments are recognized at fair value in the accompanying Condensed Consolidated Balance Sheets. Fair values of derivative instruments designated as hedging instruments are as follows:

		Fair Value1
		June 30		December 31		June 30
in thousands	Balance Sheet Location	2011		2010		2010
Liabilities
Interest rate swaps	Other current liabilities		$0		$0		$5,614
Interest rate swaps	Other noncurrent liabilities		7,419		0		0
Total hedging instrument liabilities			$7,419		$0		$5,614

   ¹ See Note 7 for further discussion of the fair value determination.

We use interest rate swap agreements designated as cash flow hedges to minimize the variability in cash flows of liabilities or forecasted transactions caused by fluctuations in interest rates. In December 2007, we issued $325,000,000 of 3-year floating-rate notes that bore interest at 3-month London Interbank Offered Rate (LIBOR) plus 1.25% per annum. Concurrently, we entered into a 3-year interest rate swap agreement in the stated amount of $325,000,000. Under this agreement, we paid a fixed interest rate of 5.25% and received 3-month LIBOR plus 1.25% per annum. Concurrent with each quarterly interest payment, the portion of this swap related to that interest payment was settled and the associated realized gain or loss was recognized. This swap agreement terminated December 15, 2010, coinciding with the maturity of the 3-year notes.

Additionally, during 2007, we entered into fifteen forward starting interest rate swap agreements for a total stated amount of $1,500,000,000. Upon the 2007 and 2008 issuances of the related fixed-rate debt, we terminated and settled these forward starting swaps for cash payments of $89,777,000. Amounts accumulated in other comprehensive loss are being amortized to interest expense over the term of the related debt. For the twelve month period ending June 30, 2012, we estimate that $6,247,000 of the pretax loss accumulated in other comprehensive income (OCI) will be reclassified to earnings.

The effects of changes in the fair values of derivatives designed as cash flow hedges on the accompanying Condensed Consolidated Statements of Comprehensive Income are as follows:

		Three Months Ended						Six Months Ended
	Location on	June 30						June 30
in thousands	Statements	2011			2010			2011			2010
Cash Flow Hedges
Gain (loss) recognized in OCI (effective portion)	OCI		$0			$234			$0			($574	)
Gain (loss) reclassified from
Accumulated OCI	Interest
(effective portion)	expense		(6,678	)		(4,997	)		(8,672	)		(9,895)

We use interest rate swap agreements designated as fair value hedges to minimize exposure to changes in the fair value of fixed-rate debt that results from fluctuations in the benchmark interest rates for such debt. In June 2011, we issued $500,000,000 of 6.50% fixed-rate debt maturing on December 1, 2016. Concurrently, we entered into interest rate swap agreements in the stated amount of $500,000,000. Under these agreements, we pay 6-month LIBOR plus a spread of approximately 4.05% and receive a fixed interest rate of 6.50%. Additionally, in June 2011, we entered into interest rate swap agreements on our $150,000,000 fixed-rate 10.125% 7-year notes issued in 2009. Under these agreements, we pay 6-month LIBOR plus a spread of approximately 8.03% and receive a fixed interest rate of 10.125%.

The effects of changes in the fair value of derivatives designated as fair value hedges on the accompanying Condensed Consolidated Statements of Comprehensive Income are as follows:

		Three Months Ended					Six Months Ended
	Location on	June 30					June 30
in thousands	Statements	2011			2010		2011			2010
Fair Value Hedges
Gain (loss) recognized in income	Interest
- Interest rate swaps	expense		($7,419	)		$0		($7,419	)		$0
Gain (loss) recognized in income	Interest
- Fixed rate debt	expense		7,419			0		7,419			0