Note

Derivative Instruments

We engage in activities that expose us to market risks, including the effects of changes in fuel prices and in interest rates. Financial expos

ures are evaluated as an integral part of our risk management program, which seeks, from time-to-time, to reduce the potentially adverse effects that the volatility of fuel markets and interest rate risk

may

have on operating results.

In an effort to se

ek to reduce the variability of the ultimate cash flows associated with fluctuations in diesel fuel prices, we periodically enter into various derivative instruments, including forward futures swap contracts (which we refer to as "fuel hedge contracts"). Under these contracts, we pay a fixed rate per gallon of ultra-low sulfur diesel ("ULSD") and receive the monthly average price of Gulf Coast ULSD. The retrospective and prospective regression analyses provided that changes in the prices of ULSD were deemed to be highly effective based on the relevant authoritative guidance

We do

not

engage in speculative transactions, nor do we hold or issue financial instruments for trading purposes.

August 2015,

we entered into an interest rate swap agreement w

ith a notional amount of

$28.0

million, which was designated as a hedge against the variability in future interest payments due on the debt associated with the purchase of our corporate headquarters as described in Note

The terms of the swap agreement effectively convert the variable rate interest payments on this note to a fixed rate of

4.2%

through maturity on

August 1, 2035.

2016

and

2017,

we also entered into several interest rate swaps, which were designated to hedge against the variability in future interest rate payments associated with the purchase of certain trailers. Because the critical terms of the swaps and hedged items coincide, in accordance with the requirements of ASC

815,

the changes in the fair value of the derivatives are expected to exactly offset changes in the expected cash flows due to fluctuations in the LIBOR rate over the term of the debt instruments, and therefore

ongoing assessments of effectiveness are required. The fair value of all interest rate swap agreements that were in effect at

September 30, 2017,

of approximately

$0.7

million, is included in other short and long-term assets and other short and long-term liabilities, as appropriate, based upon each swap agreement's position, in the condensed consolidated balance sheet, and is included in accumulated other comprehensive loss, net of tax. Additionally,

$0.1

million and

$0.3

million was reclassified from accumulated other comprehensive loss into our results of operations as additional interest expense for the

three

and

nine

months ended

September 30, 2017,

respectively, related to changes in interest rates during such period. Based on the amounts in accumulated other comprehensive loss as of

September 30, 2017,

we expect to reclassify losses of approximately

$0.2

million, net of tax, on derivative instruments from accumulated other comprehensive loss into our results of operations during the next

twelve

months due to changes in interest rates. The amounts actually realized will depend on the fair values as of the date of settlement.

We recognize all derivative instruments at fair value on our

condensed consolidated balance sheets. Our derivative instruments are designated as cash flow hedges, thus the effective portion of the gain or loss on the derivatives is reported as a component of accumulated other comprehensive loss and will be reclassified into earnings in the same period during which the hedged transaction affects earnings. The effective portion of the derivative represents the change in fair value of the hedge that offsets the change in fair value of the hedged item. To the extent the change in the fair value of the hedge does

not

perfectly offset the change in the fair value of the hedged item, the ineffective portion of the hedge is immediately recognized in our condensed consolidated statements of operations. Ineffectiveness is calculated using the cumulative dollar offset method as an estimate of the difference in the expected cash flows of the respective fuel hedge contracts compared to the changes in the all-in cash outflows required for the diesel fuel purchases

September 30, 2017,

we had fuel hedge contracts on approximately

3.0

million gallons for the remainder of

2017

or approximately

25.1%

of our projected remaining

2017

fuel requirements, approximately

7.6

million gallons for

2018,

or approximately

15.7%

of our projected

2018

fuel requirements

The fair value of the

fuel hedge contracts that were in effect at

September 30, 2017,

of approximately

$1.6

million is included in other short and long-term liabilities, as appropriate, in the consolidated balance sheet and is included in accumulated other comprehensive loss, net of tax. Changes in the fair values of these instruments can vary dramatically based on changes in the underlying commodity prices. For example, during the

third

quarter in

2017,

market "spot" prices for ULSD peaked at a high of approximately

$1.83

per gallon and hit a low price of approximately

$1.41

per gallon. During the same

2016

quarter, market "spot" prices ranged from a high of

$1.52

per gallon to a low of

$1.20

per gallon. Market price changes can be driven by factors such as supply and demand, inventory levels, weather events, refinery capacity, political agendas, the value of the U.S. dollar, geopolitical events, and general economic conditions, among other items.

Additionally, $

1.0

million and

$3.7

million were reclassified from accumulated other comprehensive loss into our results of operations as additional fuel expense for the

three

and

nine

months ended

September 30, 2017

respectively, related to losses on fuel hedge contracts that expired. Based on the amounts in accumulated other comprehensive loss as of

September 30, 2017

and the expected timing of the purchases of the diesel hedged, we expect to reclassify losses of approximately

$0.8

million, net of tax, on derivative instruments from accumulated other comprehensive loss into our results of operations during the next

twelve

months due to the actual diesel fuel purchases. The amounts actually realized will be dependent on the fair values as of the date of settlement.

We perform both a prospective and retrospective assessment of the effectiveness of our

fuel hedge contracts at inception and quarterly, including assessing the possibility of counterparty default. If we determine that a derivative is

longer expected to be highly effective, we discontinue hedge accounting prospectively and recognize subsequent changes in the fair value of the hedge in earnings. As a result of our effectiveness assessment at inception and at

September 30, 2017

we believe our hedge contracts have been and will continue to be highly effective in offsetting changes in cash flows attributable to the hedged risk.

Outstanding financial derivative instruments expose us to credit loss in the event of nonperformance by the counterpa

rties to the agreements. We do

not

expect any of the counterparties to fail to meet their obligations. Our credit exposure related to these financial instruments is represented by the fair value of contracts reported as assets. To manage credit risk, we review each counterparty's audited financial statements, credit ratings

and obtain references as we deem necessary.