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Interest Rate Risk
−Removed: 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.
−Removed: In connection with the refinancing, the 2018 Credit Agreement was terminated.
+Added: On July 27, 2022, we refinanced and entered into the 2022 Credit Agreement, which provides for a $150 million five-year senior secured revolving facility.
We are exposed to market risk from changes in interest rates on our debt, which bears interest at SOFR plus a margin between 1.25% and 2.25%.
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A 1.0% increase in the effective interest rate applied to our 2022 Revolver borrowings would result in a pre-tax interest expense increase of $0.7 million on an annualized basis.
−Removed: During the year ended December 27, 2023, we borrowed $18.0 million net of pay downs of $21.0 million on our 2022 Revolver and the outstanding balance as of December 27, 2023 was $84.0 million.
+Added: During the year ended December 25, 2024, we borrowed $14.0 million and paid down $27.0 million on our 2022 Revolver and the outstanding balance as of December 25, 2024 was $71.0 million.
Borrowings under the 2022 Credit Agreement (other than any swingline loans) bear interest, at the borrowers’ option, at rates based upon either SOFR or a base rate, plus, for each rate, a margin determined in accordance with a lease-adjusted consolidated leverage ratio-based pricing grid.
If future rates based upon SOFR are higher than SOFR rates as currently determined, 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: During the year ended December 28, 2022, in connection with our entry into the 2022 Credit Agreement, we terminated the interest rate swap previously used to hedge interest rate risk.
−Removed: In settlement of this swap, we received approximately $0.6 million.
−Removed: The remaining amount in AOCI related to the hedging relationship will be reclassified into earnings when the hedged forecasted transaction is reported in earnings.
−Removed: 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: 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.
+Added: Inflation has an impact on food, paper, construction, utility, labor and benefits and general and administrative costs, as well as other costs, all of which can materially impact our operations.
+Added: In general, we have been able to substantially offset cost increases thus far 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.
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Given the historical volatility of certain of our food product prices, including chicken, other proteins, grains, produce, dairy products, and cooking oil, these fluctuations can materially impact our food and beverage costs.
−Removed: While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as disease or inclement weather will not cause the prices of the commodities used in our restaurant operations to fluctuate.
+Added: While our purchasing commitments partially mitigate the risk of such fluctuations, there is no assurance that supply and demand factors such as diseases or inclement weather will not cause the prices of the commodities used in our restaurant operations to fluctuate.
In periods when the prices of commodities drop, we may pay higher prices under our purchasing commitments.
−Removed: In rapidly fluctuating commodities markets, it may prove difficult for us to adjust our menu prices in accordance with input price fluctuations.
+Added: In rapidly fluctuating commodities markets, it may prove difficult for us to adjust our menu prices in accordance with input price fluctuations due to trade tariffs, natural disasters and other world events.
Therefore, to the extent that we do not pass along cost increases to our customers, our results of operations may be adversely affected.
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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.