Derivative Financial Instruments

3 Months Ended

Oct. 01, 2011

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

All derivative financial instruments are recognized at fair value and are recorded in the “Other current assets” or “Accrued expenses” line items in the Consolidated Condensed Balance Sheets. The accounting for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as a hedging relationship and on the type of the hedging relationship. For those derivative financial instruments that are designated and qualify as hedging instruments, we designate the hedging instrument (based on the exposure being hedged) as cash flow hedges. We do not have any derivative financial instruments that have been designated as either a fair value hedge or a hedge of a net investment in a foreign operation. Cash flows associated with derivative financial instruments are classified in the same category as the cash flows hedged in the Consolidated Condensed Statements of Cash Flows.

In the ordinary course of business, we are exposed to market risks. We utilize derivative financial instruments to manage interest rate risk, and periodically energy cost price risk and foreign exchange risk. Interest rate swap contracts are entered into to manage interest rate risk associated with our variable rate debt. Futures contracts on energy commodities are periodically entered into to manage the price risk associated with forecasted purchases of gasoline and diesel fuel used in our rental operations.

For derivative financial instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative financial instrument is reported as a component of “Accumulated other comprehensive income” and reclassified into the Consolidated Condensed Statements of Operations in the same line item associated with the forecasted transaction and in the same period as the expenses from the cash flows of the hedged items are recognized. We perform an assessment at the inception of the hedge and on a quarterly basis thereafter, to determine whether our derivatives are highly effective in offsetting changes in the value of the hedged items. Any change in the fair value resulting from hedge ineffectiveness is immediately recognized as income or expense.

We use interest rate swap contracts to limit exposure to changes in interest rates and manage the total debt that is subject to variable and fixed interest rates. The interest rate swap contracts we utilize modify our exposure to interest rate risk by converting variable rate debt to a fixed rate without an exchange of the underlying principal amount. Approximately 44% of our outstanding variable rate debt had its interest payments modified using interest rate swap contracts at October 1, 2011.

As of October 1, 2011, none of our anticipated gasoline and diesel fuel purchases are hedged.

We do not engage in speculative transactions or fair value hedging nor do we hold or issue financial instruments for trading purposes.

The following table summarizes the classification and fair value of the interest rate swap agreements, which have been designated as cash flow hedging instruments:


		Liability Derivatives Fair Value
		October 1,		July 2,
Relationship:	Balance Sheet Classification:	2011		2011
Interest rate swap contracts	Accrued expenses	$	1.6	$	2.1

Total derivatives designated as cash flow hedging instruments		$	1.6	$	2.1

As of October 1, 2011 and July 2, 2011, all derivative financial instruments were designated as hedging instruments.

For our interest rate swap contracts that qualify for cash flow hedge designation, the related gains or losses on the contracts are deferred as a component of accumulated other comprehensive income or loss (net of related income taxes) until the interest expense on the related debt is recognized. As the interest expense on the hedged debt is recognized, the other comprehensive income or loss is reclassified to the “Interest expense” line item in our Consolidated Condensed Statements of Operations. Of the $1.1 million net loss deferred in accumulated other comprehensive income as of October 1, 2011, a $0.8 million loss is expected to be reclassified to interest expense in the next twelve months.

As of October 1, 2011, we had interest rate swap contracts to pay fixed rates of interest and to receive variable rates of interest based on the three-month London Interbank Offered Rate (“LIBOR”) on $115.0 million notional amount, $75.0 million of which are forward starting interest rate swap contracts. Of the $115.0 million notional amount, $25.0 million matures in the next 12 months, $15.0 million matures in 13-24 months and $75.0 million matures in 37-48 months. The average rate on the $115.0 million of interest rate swap contracts was 2.2% as of October 1, 2011. These interest rate swap contracts are highly effective cash flow hedges and accordingly, gains or losses on any ineffectiveness were not material to any period.

The following tables summarize the amount of gain or loss recognized in accumulated other comprehensive income or loss and the classification and amount of gains or losses reclassified from accumulated other comprehensive income or loss into the Consolidated Condensed Statements of Operations for the three months ended October 1, 2011 and October 2, 2010 related to derivative financial instruments used in cash flow hedging relationships:


	Amount of Loss Recognized in Accumulated Other
	Comprehensive Income/(Loss)
	Three Months Ended
Relationship:	October 1, 2011		October 2, 2010
Interest rate swap contracts	$	—	$	(0.5	)

Total derivatives designated as cash flow hedging instruments	$	—	$	(0.5	)


		Amount of Loss Reclassified From Accumulated
		Other Comprehensive Income/(Loss) to
		Consolidated Statements of Operations
	Statement of Operations	Three Months Ended
Relationship:	Classification:	October 1, 2011			October 2, 2010
Interest rate swap contracts	Interest expense	$	(0.4	)	$	(0.7	)
Fuel commodity futures contracts	Cost of rental operations		—			(0.1	)

Total derivatives designated as cash flow hedging instruments		$	(0.4	)	$	(0.8	)