Texas Roadhouse, Inc. and SubsidiariesNotes to Consolidated Financial Statements(Tabular amounts in thousands, except share and per share data)F-28
(17) Derivative and Hedging Activities
We enter into derivative instruments for risk management purposes only, including derivatives designated as
hedging instruments under FASB ASC 815, Derivatives and Hedging ("ASC 815"). We use interest rate-related
derivative instruments to manage our exposure to fluctuations of interest rates. By using these instruments, we expose
ourselves, from time to time, to credit risk and market risk. Credit risk is the failure of the counterparty to perform under
the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us,
which creates credit risk for us. We attempt to minimize the credit risk by entering into transactions with high-quality
counterparties whose credit rating is evaluated on a quarterly basis. Market risk is the adverse effect on the value of a
financial instrument that results from a change in interest rates. We attempt to minimize market risk by establishing and
monitoring parameters that limit the types and degree of market risk that may be taken.
The following table summarizes the effect of our interest rate swaps in the consolidated statements of income and
comprehensive income for the years ended December 25, 2018, December 26, 2017 and December 27, 2016,
respectively:
December 25, December 26, December 27,
2018 2017 2016
Gain recognized in AOCI, net of tax (effective portion) (1) ................. $ — $ — $ 27
Loss reclassified from AOCI to income (effective portion) (1) ............... $ — $ — $ 45
(1) The fiscal year ended December 27, 2016 included the effect of one interest rate swap which expired on January 7,
2016.
The loss reclassified from AOCI to income was recognized in interest expense on our consolidated statements of
income and comprehensive income. For each of the years ended December 25, 2018, December 26, 2017 and
December 27, 2016, we did not recognize any gain or loss due to hedge ineffectiveness related to the derivative
instruments in the consolidated statements of income and comprehensive income.
(18) Accumulated Other Comprehensive Loss
The components of the changes in accumulated other comprehensive loss for the years ended December 25, 2018
and December 26, 2017, all of which related to foreign currency translation adjustments, were as follows:
Accumulated Other
Comprehensive Loss
Balance as of December 27, 2016........... ...................... (194)
Other comprehensive loss ........................................ 252
Income taxes .................................................. (97)
Balance as of December 26, 2017........... ...................... $ (39)
Other comprehensive loss ........................................ (242)
Income taxes .................................................. 53
Balance as of December 25, 2018........... ...................... $ (228)(19) Related Party Transactions
As of December 25, 2018, we had nine franchise restaurants and one majority-owned company restaurant owned in
whole or part by certain of our officers, directors and 5% stockholders of the Company. As of December 26, 2017 and
December 27, 2016, we had 10 franchise restaurants owned in whole or part by certain of our officers, directors and 5%
stockholders of the Company. These franchise entities paid us fees of $2.1 million, $2.1 million and $2.0 million for the
years ended December 25, 2018, December 26, 2017 and December 27, 2016, respectively. As discussed in note 13, we
are contingently liable on leases which are related to two of these restaurants.