Derivative Financial Instruments

12 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

As of December 31, 2012, the Company had four interest rate swap agreements (the “Swap Agreements”) in the aggregate notional amount of $100.0 million. These Swap Agreements were canceled in October 2013 (see discussion below). The Company had designated these interest rate swaps as hedges against changes in the fair value of a designated portion of the 7 ³/4% Senior Notes due 2017 (“7 ³/4% Senior Notes”) due to changes in underlying interest rates. The Swap Agreements, which had payment, expiration dates and call provisions that mirrored the terms of the 7 ³/4% Senior Notes, effectively converted $100.0 million of the 7 ³/4% Senior Notes into variable rate obligations. Each of the swaps had a termination clause that gave the counterparty the right to terminate the interest rate swaps at fair market value, under certain circumstances. In addition to the termination clause, the Swap Agreements also had call provisions which specified that the lender could elect to settle the swaps for the call option price. Under the Swap Agreements, the Company received a fixed interest rate payment from the financial counterparties to the agreements equal to 7 ³/4% per year calculated on the notional $100.0 million amount, while it made a variable interest rate payment to the same counterparties equal to the three-month LIBOR plus a fixed margin, also calculated on the notional $100.0 million amount. Changes in the fair value of the interest rate swaps were recorded in earnings along with related designated changes in the value of the 7 ³/4% Senior Notes. Total net gains (losses), entirely offset by a corresponding increase (decrease) in the fair value of the variable rate portion of the 7 ³/4% Senior Notes, recognized and recorded in earnings related to these fair value hedges was $(1.2) million and $4.1 million in the fiscal years ended December 31, 2012 and January 1, 2012, respectively. As of December 31, 2012 and January 1, 2012, the fair value of the swap assets was $6.2 million and $7.4 million, respectively. There was no material ineffectiveness of these interest rate swaps during the fiscal periods ended December 31, 2012 and January 1, 2012. The fair value of the swap agreements are recorded in other non-current assets in the accompanying December 31, 2012 Consolidated Balance Sheet.

In October 2013, the Company received proceeds of $5.1 million, including accrued interest of $1.1 million, for the settlement of the Swap Agreements with an aggregate notional amount of $100.0 million discussed above. The lenders to those Swap Agreements elected to prepay their obligations at the call option price which equaled the fair value at the respective call dates. Also on October 3, 2013, the Company completed the purchase of $209.1 million in aggregate principal amount of its 7¾% Senior Notes validly tendered in connection with the Company's tender offer and consent solicitation on or prior to the consent payment deadline. On November 4, 2013, the Company completed the redemption of the remaining 7¾% Senior Notes in connection with the terms of the notice of redemption delivered to the noteholders pursuant to the terms of the indenture governing the 7¾% Senior Notes. Refer to Note 14 - Debt.

The Company’s Australian subsidiary is a party to an interest rate swap agreement to fix the interest rate on the variable rate non-recourse debt to 9.7%. The Company has determined the swap, which has a notional amount of $50.9 million, payment and expiration dates, and call provisions that coincide with the terms of the non-recourse debt, to be an effective cash flow hedge. Accordingly, the Company records the change in the value of the interest rate swap in accumulated other comprehensive income, net of applicable income taxes. Total net unrealized loss recognized in the periods and recorded in accumulated other comprehensive income (loss), net of tax, related to this cash flow hedge was $(0.5) million and $(1.2) million for the fiscal years ended December 31, 2012 and January 1, 2012, respectively. The net unrealized gain (loss) for the year ended December 31, 2013 was not significant. The total value of the swap liability as of December 31, 2013 and 2012 was $0.4 million and $0.7 million, respectively, and is recorded as a component of other liabilities in the accompanying consolidated balance sheets. There was no material ineffectiveness of this interest rate swap for the periods presented. The Company does not expect to enter into any transactions during the next twelve months which would result in the reclassification into earnings or losses associated with this swap currently reported in accumulated other comprehensive income (loss).