Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements

Fair Value Measurements

3.   Fair Value Measurements

The Company has adopted accounting guidance regarding fair value measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

Level 1:  Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:  Inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3:  Unobservable inputs that reflect the reporting entity’s own assumptions.

The following table summarizes the basis used to measure certain financial assets and financial liabilities at fair value on a recurring basis in the balance sheet:

	Balance at September 30, 2011		Quoted Prices In Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Interest rate swap derivative financial instruments (included in accrued expenses and other current liabilities)	$	1,792	$	—	$	1,792	$	—
Interest rate swap derivative financial instruments (included in other liabilities)	$	800	$	—	$	800	$	—
Fuel commodity derivatives (included in accrued expenses and other current liabilities)	$	78	$	—	$	—	$	78
Fuel commodity derivatives (included in other liabilities)	$	55	$	—	$	—	$	55

The Company has entered into standard International Swaps and Derivatives Association (“ISDA”) interest rate swap agreements (“Swap Agreements”) to manage the interest rate associated with its debt. The interest rate Swap Agreements effectively convert a portion of the Company’s variable rate debt to a long-term fixed rate. Under these agreements the Company receives a variable rate of LIBOR plus a markup and pays a fixed rate.

The Company also entered into an interest rate swap agreement to manage the interest rate associated with its senior unsecured notes. This interest rate swap agreement converted a portion ($100 million) of our fixed rate senior unsecured notes to a variable rate. Under this interest rate swap agreement the Company received a fixed rate of 7.625% and paid a variable rate of LIBOR plus the applicable margin charged by the banks. This interest rate swap agreement had an associated call feature that allowed the counterparty to terminate this agreement at their option. On July 22, 2011 the counterparty exercised their right to terminate this agreement effective August 21, 2011. The Company received proceeds from this termination in the amount of $2,542.  This amount is reflected in the operating section of the Cash Flow Statement.

In December 2010 the Company entered into a fuel commodity derivative to manage the fuel cost of its fleet of vehicles. The derivative is effective April 1, 2011 and expires December 31, 2011.  The derivative has a monthly notional amount of 80 thousand gallons from April 1, 2011 through December 31, 2011 for a total notional amount of 720 thousand gallons.  The Company has a put price of $3.015 per gallon and a strike price of $3.50 per gallon. On September 23, 2011 the Company entered into additional fuel commodity derivative. This derivative has a monthly notional amount of 85 thousand gallons and is effective from January 1, 2012 through December 31, 2012 for a total notional amount of 1.02 million gallons. The Company has a put price of $3.205 per gallon and a strike price of $3.70 per gallon. The Company recognized a non-cash unrealized loss of $255 and $133 for the three and nine months ended September 30, 2011, respectively, on these fuel commodity derivatives as a result of the change in the fair value.

The fair value of these interest rate derivatives are based on quoted prices for similar instruments from a commercial bank and are considered a Level 2 item. The fuel commodity derivatives are based on market assumptions and a quoted price from the counter party and is considered a Level 3 item.

The fuel commodity derivative activity for the nine months ended September 30, 2011 is as follows:

Balance, December 31, 2010	$	—
Realized gains	103
Unrealized losses	(133		)
Settlements	(103		)
Balance, September 30, 2011	$	(133	)

One of the Company’s interest rate Swap Agreements qualifies as a cash flow hedge while the others do not. The change in the fair value of the interest rate Swap Agreements that do not qualify for hedge accounting treatment is recognized in the income statement in the period in which the change occurs. The effective portion of the interest rate Swap Agreement that qualifies for hedge accounting is included in Other Comprehensive Loss in the period in which the change occurs, while the ineffective portion, if any, is recognized in income in the period in which the change occurs.

During the first quarter of 2010 the Company no longer qualified for hedge accounting treatment for one of its interest rate swap agreements.  Accordingly, the amount included in Accumulated Other Comprehensive Loss at the time hedge accounting was lost must be reclassified as an earnings charge through the maturity date of the derivative.  This charge amounted to $100 and $371 for the three and nine months ended September 30, 2011, respectively, compared to $199 and $1,083 for the three and nine months ended September 30, 2010, respectively. The remaining balance of $230 associated with this interest rate swap and included in Accumulated Other Comprehensive Loss will be charged against income through the maturity date of the interest rate swap agreement on April 1, 2013.

The table below outlines the details of each remaining interest rate Swap Agreement:

			Notional	Notional
	Original		Amount	Amount
Date of	Notional		Fixed/	September 30,		Expiration	Fixed
Origin	Amount		Amortizing	2011		Date	Rate
May 8, 2008	$	45,000	Amortizing	$	30,000	Apr 1, 2013	3.78	%
May 8, 2008	$	40,000	Amortizing	$	26,000	Apr 1, 2013	3.78	%

In accordance with the interest rate Swap Agreements and on a quarterly basis, interest expense is calculated based on the floating 90-day LIBOR and the fixed rate. With regard to the Company’s floating to fixed rate interest rate swap agreements, if interest expense, as calculated, is greater based on the 90-day LIBOR, the financial institution pays the difference to the Company.  If interest expense, as calculated, is greater based on the fixed rate, the Company pays the difference to the financial institution. With regard to the Company’s fixed to floating rate interest rate swap agreement, if interest expense, as calculated, is greater based on the 90-day LIBOR, the Company pays the difference to the financial institution.  If interest expense, as calculated, is greater based on the fixed rate, the financial institution pays the difference to the Company.

Depending on fluctuations in the LIBOR, the Company’s interest rate exposure and its related impact on interest expense and net cash flow may increase or decrease. The counterparty to the interest rate Swap Agreements expose the Company to credit loss in the event of non-performance; however, nonperformance is not anticipated.

The tables below display the impact the Company’s derivative instruments had on the Condensed Consolidated Balance Sheets as of December 31, 2010 and September 30, 2011 and the Condensed Consolidated Income Statements for the three months ended September 30, 2010 and 2011.

Fair Values of Derivative Instruments

	Liability Derivatives
	December 31, 2010				September 30, 2011
	Balance Sheet Location	Fair Value			Balance Sheet Location	Fair Value
Derivatives designated as hedging instruments:
Interest rate contracts	Accrued expenses	$	(1,015	)	Accrued expenses	$	(987	)
Interest rate contracts	Other liabilites	(931		)	Other liabilites	(449		)
Derivatives not designated as hedging instruments:
Interest rate contracts	Accrued expenses	532			Accrued expenses	(805		)
Interest rate contracts	Other liabilites	(4		)	Other liabilities	(351		)
Fuel commodity derivatives	Accrued expenses	—			Accrued expenses	(78		)
Fuel commodity derivatives	Other liabilites	—			Other liabilites	(55		)
Total derivatives		$	(1,418	)		$	(2,725	)

	The Effect of Derivative Instruments on the Condensed Consolidated Income Statements
	for the three months ended September 30, 2010 and 2011
Derivatives in Net Investment Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain or (Loss)Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)						Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
	September 30,			September 30,				September 30,			September 30,					September 30,		September 30,
	2010			2011				2010			2011					2010		2011
Interest rate contracts	$	(454	)	$	(41	)	Interest expense, including the change in the fair value of non-hedged derivative instruments	$	(531	)	$	(371	)	Interest rate contracts	Interest expense, including the change in the fair value of non-hedged derivative instruments	$	1,391	$	279
Fuel commodity derivatives	$	—		$	—		Cost of revenue	$	—		$	—		Fuel commodity derivatives	Cost of revenue	$	—	$	(223	)

	The Effect of Derivative Instruments on the Condensed Consolidated Income Statements
	for the nine months ended September 30, 2010 and 2011
Derivatives in Net Investment Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)						Location of Gain or (Loss)Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Loss Reclassified from Accumulated OCI into Income (Effective Portion)						Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative
	September 30,			September 30,				September 30,			September 30,					September 30,		September 30,
	2010			2011				2010			2011					2010		2011
Interest rate contracts	$	(2,103	)	$	(286	)	Interest expense, including the change in the fair value of non-hedged derivative instruments	$	(2,282	)	$	(1,166	)	Interest rate contracts	Interest expense, including the change in the fair value of non-hedged derivative instruments	$	4,282	$	1,847
Fuel commodity derivatives	$	—		$	—		Cost of revenue	$	—		$	—		Fuel commodity derivatives	Cost of revenue	$	—	$	(30	)