American Home Shield 2009 Annual Report Download - page 126

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Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 21. Fair Value of Financial Instruments (Continued)
The effect of derivative instruments on the Consolidated Statements of Operations and other comprehensive income for the years ended December 31,
2009 and 2008, respectively, is presented as follows:
Effective Portion of
Gain (Loss)
Recognized in
Accumulated Other
Comprehensive
Income (Loss)
Effective Portion of
Gain (Loss) Reclassified from
Accumulated Other
Comprehensive Income
(AOCI) into Income
(In thousands)
Derivatives designated as
Cash Flow Hedge
Relationships
Location of
Gain (Loss)
included in
Income
Year ended December 31, 2009
Fuel swap contracts $ 31,840 $ (25,305)Cost of
services
rendered
and
products
sold
Interest rate swap contracts $ 5,732 $ (50,704)Interest
expense
Effective Portion
of
Gain (Loss)
Recognized in
Accumulated
Other
Comprehensive
Loss
Effective Portion of Gain (Loss)
Reclassified from AOCI
into Income
Derivatives designated as
Cash Flow Hedge
Relationships
Location
of Gain
(Loss)
included in
Income
Year ended December 31, 2008
Fuel swap contracts $ (24,924) $ 5,103 Cost of
services
rendered
and
products
sold
Interest rate swap contracts $ (43,295) $ (15,135)Interest
expense
Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedge relationships were insignificant
during the year ended December 31, 2009. As of December 31, 2009, the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate
notional amount of $54.0 million, maturing through 2010. Under the terms of its fuel swap contracts, the Company is required to post collateral in the event
that the fair value of the contracts exceeds a certain agreed upon liability level. As of December 31, 2009, the Company had posted $2.5 million in letters of
credit as collateral for these contracts, none of which were posted under the Company's Revolving Credit Facility. As of December 31, 2009, the Company
had interest rate swap contracts to pay fixed rates for interest on long-term debt with an aggregate notional amount of $1.430 billion, maturing through 2012.
The effective portion of the gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments is recorded in other
comprehensive income. These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement
or the fuel settlement affects earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses
related to open fuel hedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains
and losses in accumulated other comprehensive income expected to be recognized in earnings is a loss of $20.6 million, net of tax, at December 31, 2009. The
amounts that are ultimately reclassified into earnings will be based on actual interest rates and fuel prices at the time the positions are settled and may differ
materially from the amount noted above.
117