Grocery Outlet Holding Corp. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rate Risk Our operating results are subject to market risk from interest rate fluctuations on our credit facilities, which bear variable interest rates. As of January 1, 2022, our outstanding credit facilities includ ed a $460.0 million senior term loan under the First Lien Credit Agreement. As of January 1, 2022, the interest rate on the senior term loan was 2.85% (See NOTE 6—Long-term Debt to our Consolidated Financial Statements for additional information). Based on the outstanding balance and interest rate of our senior term loan as of January 1, 2022, a hypothetical 10% relative increase or decrease in the effective interest rate would cause an increase or decrease in interest expense of approxima tely $1.3 million over t he next 12 months. We do not use derivative financial instruments for speculative or trading purposes, but this does not preclude our adoption of specific hedging strategies in the future. Impact of Inflation Our results of operations and financial condition are presented based on historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, we have experienced varying levels of inflation, resulting in part from various supply disruptions, increased shipping and transportation costs, increased commodity costs, increased labor costs in the supply chain and other disruptions caused by the COVID‐19 pandemic and the uncertain economic environment. However, because of the flexibility of our unique buying model and our ability to price our products frequently, we were able to partially offset the impact of inflation on our business during fiscal 2021 through selective price increases. We cannot be assured that our results of operations and financial condition will not be materially impacted by inflation in the future. 60 Table of Contents