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Note 5 - Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Text Block]
5.  
Derivative Financial Instruments

The Company enters into various fixed rate commodity swap contracts in an effort to manage its exposure to price volatility of diesel fuel.  Historically, fuel prices have been volatile because of supply and demand factors, worldwide political factors and general economic conditions.  The objective of the Company in executing the hedge is to mitigate the fuel price volatility that could adversely affect forecasted cash flows and earnings related to construction contracts.  Swaps are designed so that the Company receives or makes payments based on a differential between fixed and variable prices for off-road ultra-low sulfur diesel (“ULSD”).  The Company has designated its commodity derivative contracts as cash flow hedges designed to achieve more predictable cash flows, as well as to reduce its exposure to price volatility.  While the use of derivative instruments limits the downside risk of adverse price movements, they also limit future benefits from reductions in costs as a result of favorable market price movements.

All of the Company’s outstanding derivative financial instruments are recognized on the balance sheet at their fair values.  The Company has a master netting arrangement with the counterparty; however, amounts are recorded gross on the balance sheet.  All changes in the fair value of outstanding derivatives, except any ineffective portion, are recorded in accumulated other comprehensive income (loss) until earnings are impacted by the hedged transaction.  Amounts in accumulated other comprehensive income (loss) are reclassified to earnings when the related hedged items affect earnings or the anticipated transactions are no longer probable.  All items included in accumulated other comprehensive income (loss) are at the corporate level, and no portion is attributable to noncontrolling interests.

At March 31, 2013, accumulated other comprehensive income (loss) consisted of unrecognized gains of $51,000, less the associated taxes of $18,000, representing the unrealized change in mark-to-market value of the effective portion of the Company’s commodity contracts, designated as cash flow hedges, as of the balance sheet date.  For the three months ended March 31, 2013, the Company recognized a pre-tax net realized cash settlement gain on commodity contracts of $26,000.

At March 31, 2013, the Company had hedged its exposure to the variability in future cash flows from forecasted diesel fuel purchases totaling 965,000 gallons.  The monthly volumes hedged range from 10,000 gallons to 20,000 gallons over the period from April 2013 to December 2014 at fixed prices per gallon ranging from $2.79 to $3.24.  During April 2013, the Company entered into commodity contracts to hedge 1.2 million gallons of forecasted diesel fuel purchases for the period from May 1, 2013 to August 31, 2015 at an average price of $2.75.

The derivative instruments are recorded on the consolidated balance sheet at fair value as follows (amounts in thousands):

Balance Sheet Location
 
March 31,
2013
   
December 31,
2012
 
Derivative assets:
               
Deposits and other current assets
 
$
 27
   
$
7
 
Other assets, net
   
 24
     
1
 
   
$
 51
   
$
8
 
Derivative liabilities:
               
Other current liabilities
 
$
--
   
$
--
 
Other long-term liabilities
   
--
     
--
 
   
$
--
   
$
--
 

The following table summarizes the effects of commodity derivative instruments on the consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2013 and 2012 (amounts in thousands):

   
March 31,
2013
   
March 31,
2012
 
Increase in fair value of derivatives included in other comprehensive income (loss) - effective portion
  $ 43     $ 249  
Realized gain (loss) included in cost of revenues - effective portion
    26       (3 )
Increase (decrease) in fair value of derivatives included in cost of revenues - ineffective portion
    --       --  

The Company’s derivative instruments contain certain credit-risk-related contingent features which apply both to the Company and to the counterparties.  The counterparty to the Company’s derivative contracts is a high credit quality financial institution.

Fair Value

The Company’s swaps are valued based on a discounted future cash flow model.  The primary input for the model is the forecasted prices for ULSD.  The Company’s model is validated by the counterparty’s mark-to-market statements.  The swaps are designated as Level 2 within the valuation hierarchy.  Refer to Note 2 for a description of the inputs used to value the information shown above.

At March 31, 2013 and December 31, 2012, the Company did not have any derivative assets or liabilities measured at fair value on a recurring basis that meet the definition of Level 1 or Level 3.