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We are exposed to market risk from changes in interest rates on our debt, which bears interest, at USD LIBOR plus a margin between 1.25% and 2.25%.
−Removed: As of March 30, 2022, we had outstanding borrowings of $40.0 million under our 2018 Revolver, $10.0 million of letters of credit in support of our insurance programs, and the applicable margin on outstanding borrowings under 2018 Revolver was 1.5%.
−Removed: In addition, certain tenors of LIBOR were phased out as of December 31, 2021 and the remaining tenors of LIBOR will be phased out as of June 30, 2023.
−Removed: Organizations are currently working on industry wide and company specific transition plans as it relates to financial and other derivative contracts exposed to LIBOR.
−Removed: Prior to LIBOR phasing out, we are likely to enter into an amendment to the 2018 Credit Agreement and we cannot predict what alternative index would be negotiated with our lenders.
−Removed: If future rates based upon a successor rate are higher than LIBOR rates as currently determined or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.
−Removed: After giving effect to the $40.0 million of interest rate swaps described below, we effectively did not have any long-term debt subject to variations in interest rates as of March 30, 2022 and as such, a one percent increase in the variable rate of interest would not result in a material increase in annual interest expense.
+Added: As of June 29, 2022, we had outstanding borrowings of $40.0 million under our 2018 Revolver, $10.0 million of letters of credit in support of our insurance programs, and the applicable margin on outstanding borrowings under 2018 Revolver was 1.5%.
+Added: After giving effect to the $40.0 million of interest rate swaps described below, we effectively did not have any long-term debt subject to variations in interest rates as of June 29, 2022 and as such, a one percent increase in the variable rate of interest would not result in a material increase in annual interest expense.
+Added: On July 27, 2022, we refinanced the 2018 Revolver and entered into the 2022 Credit Agreement, which provides for a $150 million five-year senior secured revolving facility.
+Added: In connection with the refinancing, the 2018 Credit Agreement was terminated.
+Added: On July 29, 2022, we made a $20.0 million payment to the 2022 Revolver and the outstanding balance as of August 4, 2022 was $20.0 million.
+Added: Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrowers’ option, at rates based upon either the secured overnight financing rate (“SOFR”) or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.
+Added: For more information regarding the 2022 Credit Agreement, see Note 1, “Basis of Presentation and Summary of Significant Accounting Policies – Subsequent Events.” If future rates based upon SOFR are higher than LIBOR rates as currently determined or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.
We manage our interest rate risk through normal operating and financing activities and, when determined appropriate, through the use of derivative financial instruments.
−Removed: To balance our portfolio, we entered into an interest rate swap during the year ended December 25, 2019 with a notional amount of $40.0 million, related to the outstanding borrowings under our 2018 Revolver.
−Removed: The interest rate swap was designated as a cash flow hedge and effectively converted a portion of our outstanding borrowings to a fixed rate of 1.31%, plus applicable margin, which was 1.5% for the thirteen weeks ended March 30, 2022.
+Added: To balance our portfolio, we entered into an interest rate swap during the year ended December 25, 2019 with a notional amount of $40.0 million, related to the then-outstanding borrowings under our 2018 Revolver.
+Added: The interest rate swap was designated as a cash flow hedge and effectively converted a portion of our outstanding borrowings to a fixed rate of 1.31%, plus applicable margin, which was 1.5% for the t wenty-six weeks ended June 29, 2022.
The interest rate swap matures in June 2023.
+Added: Subsequent to the quarter-end, in connection with our entry into the 2022 Credit Agreement, we terminated the interest rate swap previously used to hedge interest rate risk.
+Added: In settlement of this swap, we received approximately $0.6 million.
+Added: The remaining amount in AOCI related to the hedging relationship will be reclassified into earnings when the hedged forecasted transaction is reported in earnings.
Inflation has an impact on food, paper, construction, utility, labor and benefits, general and administrative, and other costs, all of which can materially impact our operations.
−Removed: We have a substantial number of hourly employees who are paid wage rates at or based on the applicable federal, state, or local minimum wage, and increases in the minimum wage will increase our labor costs.
In general, we have been able to substantially offset cost increases resulting from inflation by increasing menu prices, managing menu mix, improving productivity, or making other adjustments.
We may not be able to offset cost increases in the future.
+Added: In addition, we have a substantial number of hourly employees who are paid wage rates at or based on the applicable federal, state, or local minimum wage, and increases in the minimum wage will increase our labor costs.
Commodity Price Risk
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.