8. Derivative and Other Comprehensive Income
The Company enters into derivative instruments for risk management purposes only, including derivatives designated as a cash flow hedge under guidance for derivative instruments and hedging activities. The Company uses interest raterelated derivative instruments to manage its exposure to fluctuations in interest rates. By using these instruments, the Company exposes itself, from time to time, to credit risk and market risk. Credit risk is the failure of either party to the contract to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk for the Company. The Company minimizes the credit risk by entering into transactions with highquality counterparties whose credit rating is evaluated on a quarterly basis. The Company has one interest rate swap at December 25, 2011 and its counterparty is Rabobank International, Utrecht ("Rabobank"). Market risk, as it relates to the Company's interestrate derivative, is the adverse effect on the value of a financial instrument that results from changes in interest rates. The Company minimizes market risk by establishing and monitoring parameters that limit the types and degree of market risk that the Company takes.
In August 2011, the Company entered into a variabletofixed interest rate swap agreement with Rabobank to hedge the Company's floating interest rate on half of the remaining term loan that was then outstanding under the Company's amended and restated credit facility, or $73.1 million notional at December 25, 2011. The interest rate swap has an effective date of August 5, 2011, and $0.9 million of the initial $74.1 million expired on September 30, 2011, in accordance with its original terms. The notional amount of the hedge will decrease quarterly based on the required principal term loan payments in the original facility, and will expire on June 30, 2015 with a notional hedge amount of $50.6 million. The Company is required to make quarterly payments based on a fixed interest rate of 1.135%, calculated based on the remaining notional amount. In exchange, the Company receives interest on the notional amount at a variable rate that is based on the 3month spot LIBOR rate quarterly. The Company entered into this interest rate swap to offset the variability of its interest expense arising out of changes in the variable interest rate for the designated interest payments and designated the swap as a cash flow hedge. Accordingly, changes in fair value of the interest rate swap contract are recorded, net of taxes, as a component of accumulated other comprehensive loss ("AOCL") in the accompanying consolidated balance sheets. The Company reclassifies the effective gain or loss from AOCL, net of tax, on the Company's consolidated balance sheet to interest expense on the Company's consolidated statements of income as the interest expense is recognized on the related debt.
In March 2008, the Company entered into a variabletofixed interest rate swap agreement with SunTrust to hedge the Company's floating interest rate on an aggregate of up to $120 million of debt that was outstanding under the Company's amended and restated credit facility. The interest rate swap had an effective date of March 19, 2008, and $50 million of the initial $120 million expired on March 19, 2010, and the remaining $70 million expired on March 19, 2011, in accordance with its original terms. The Company was required to make payments based on a fixed interest rate of 2.7925%, calculated on the remaining notional amount of $70 million. In exchange, the Company received interest on $70 million of the notional amount at a variable rate that was based on the 3month LIBOR rate. The Company entered into this interest rate swap with the objective of offsetting the variability of its interest expense that arises because of changes in the variable interest rate for the designated interest payments and designated the swap as a cash flow hedge since its inception. Accordingly, changes in fair value of the interest rate swap contract were recorded, net of taxes, as a component of accumulated other comprehensive loss ("AOCL") in the accompanying consolidated balance sheets. The Company reclassified the effective gain or loss from AOCL, net of tax, on the Company's consolidated balance sheet to interest expense on the Company's consolidated statements of income as the interest expense was recognized on the related debt.
The following table summarizes the fair value and presentation in the consolidated balance sheets of the interest rate swap as hedging instruments as of December 25, 2011 and December 26, 2010 (in thousands):










Derivative Liability 

Balance Sheet Location


Fair value at
December 25,
2011 

Fair value at
December 26,
2010 

Accrued liabilities


$ 
449 

$ 
411 

Other noncurrent liabilities



85 


— 







Total derivatives


$ 
534 

$ 
411 







The following table summarizes the effect of the interest rate swap on the consolidated statements of income for the fiscal years ended December 25, 2011 and December 26, 2010 (in thousands):













2011 

2010 

2009 

Unrealized gain (loss) on swap in AOCL (pretax)


$ 
(774 
) 
$ 
(357 
) 
$ 
(1,630 
) 
Realized gain (loss) (pretax effective portion) recognized in interest expense


$ 
169 

$ 
(2,022 
) 
$ 
(2,284 
) 
As a result of this activity, AOCL decreased by $124,000 on a pretax basis or $129,000 on an after tax basis for the fiscal year ended December 25, 2011, decreased by $1.7 million on a pretax basis or $1.0 million on an after tax basis for the fiscal year ended December 26, 2010, and decreased by $812,000 on a pretax basis or $410,000 on an after tax basis for the fiscal year ended December 27, 2009. During 2011, the interest rate swap had no hedge ineffectiveness, and as a result, no gains or losses were reclassified into net earnings as a result of hedge ineffectiveness. The Company expects no ineffectiveness during the next twelve months of the swap. Additionally, the Company had no obligations at December 25, 2011 to post collateral under the terms of the Interest Rate Swap Agreement.
Comprehensive income consists of net income and other gains and losses affecting stockholders' equity that are excluded from net income. Comprehensive income consisted of (in thousands):













2011 

2010 

2009 

Net income


$ 
20,577 

$ 
7,299 

$ 
17,599 

Unrealized gain / (loss) on cash flow hedge, net of tax



(129 
) 

1,015 


410 









Total comprehensive income


$ 
20,448 

$ 
8,314 

$ 
18,009 









