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Many of the ingredients we use to prepare our food, as well as our packaging materials, are commodities or are affected by the price of other commodities.
−Removed: Factors that affect the price of commodities are generally outside of our control and include foreign currency exchange rates, foreign and domestic supply and demand, inflation, weather, and seasonality.
−Removed: For the majority of our major ingredients, we enter into supply contracts, obligating us to purchase specified quantities.
−Removed: However, the prices associated with these supply contracts are generally not fixed and are typically pegged to a commodity market price and, therefore, fluctuate with the market.
−Removed: Significant increases in the price of commodities could have a material impact on our operating results to the extent that such increases cannot be offset by menu price increases or other operating efficiencies.
+Added: Factors that affect the price of commodities are generally outside of our control and include raw material inputs, geopolitical events, weather conditions, currency markets and global supply and demand dynamics, among other items.
+Added: In order to minimize the impact of fluctuations in price and availability, we monitor the primary commodities we purchase and may enter into purchasing contracts and pricing arrangements when considered to be advantageous.
+Added: St ructured programs within our organization exist to mitigate adverse impacts and proactively direct risk management strategies across our portfolio of key products, services and energy platforms.
Interest Rate Risk
3 unchanged sentences
Based on the amount outstanding under our credit facilities as of December 25, 2022, a change of one hundred basis points in the applicable interest rate would cause an increase or decrease in interest expense of approximately $3.3 million on an annual basis.
+Added: On February 2, 2023 (the “Closing Date”), Holdings, the Borrower, the other Guarantors party thereto from time to time, each lender party thereto from time to time and Fifth Third Bank, National Association, as Administrative Agent, L/C Issuer and Swing Line Lender entered into a Credit Agreement (“New Credit Agreement”) which provides for a Term Loan in an initial aggregate principal amount of $300.0 million and initial Revolving Credit Commitments in an initial aggregate principal amount of $100.0 million (the “New Revolver Facility”).
+Added: As of the Closing Date, the Term Loan and the New Revolver Facility will accrue interest at the forward-looking secured overnight financing rate plus an applicable rate determined upon the total net rent to adjusted leverage ratio, subject to a floor of 0.00% (plus a credit spread adjustment of 0.10% per annum for 1-month interest periods and 0.15% for 3-month interest periods).
+Added: The interest rate applicable to borrowings under the New Credit Agreement may subsequently be adjusted on periodic measurement dates provided for under the New Credit Agreement based on the type of loans borrowed by the Borrower and the total net rent to adjusted leverage ratio of the Borrower at such time.
Effects of Inflation
−Removed: Inflation impacts all our restaurant operating expenses.
−Removed: While we have been able to partially offset inflation and other changes in operating expenses by gradually increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future.
−Removed: From time to time, competitive conditions could limit our menu pricing flexibility.
−Removed: In addition, macroeconomic conditions could make additional menu price increases imprudent.
−Removed: There can be no assurance that future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed without any resulting change to their visit frequencies or purchasing patterns.
−Removed: In addition, there can be no assurance that we will generate same-restaurant sales growth in an amount sufficient to offset inflationary or other cost pressures.
−Removed: The restaurant industry and we typically attempt to offset the effect of inflation, at least in part, through periodic menu price increases and various cost reduction programs.
−Removed: A portion of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales.
+Added: Inflation has the potential to impact restaurant operating expenses at all levels.
+Added: Whether that pressure originates from commodity costs, labor expenses, energy or transportation this can have a material influence on restaurant margins.
+Added: Several strategies are employed to combat the ongoing inflationary pressures, including improvement to restaurant operating efficiencies, strategic menu price increases and supplier partner engagement via pricing programs.
+Added: A well-balanced portfolio of varying risk management approaches related to supply partner management assists in ensuring varying degrees of cost mitigation.
+Added: These platforms vary from long term, fixed price agreements to commodity market based indexed pricing programs.
+Added: While we have historically been able to partially offset inflation and other changes in operating expenses through productivity improvements, strategic menu prices increases and more efficient sourcing practices, there can be no assurance that we will be able to continue to do so in the future.
+Added: In addition, a portion of the leases for our restaurants provide for contingent rent obligations based on a percentage of sales.
As a result, an increase in occupancy and related expenses will offset a proportionate share of any menu price increases at our restaurants.
−Removed: Wages paid in our restaurants are impacted by changes in federal and state hourly minimum wage rates.
−Removed: Accordingly, changes in the federal and state hourly minimum wage rates directly affect our labor costs.
−Removed: Wages and benefits are also affected by supply and demand forces in specific regions.
+Added: Increases in minimum wage, health care and other benefit costs may have a material adverse effect on our labor costs.
+Added: We operate in many states and localities where the minimum wage is significantly higher than the federal minimum wage.
Portillo's Inc.
Form 10-K | 48
+Added: The market for labor in the United States is competitive and has resulted in pressure on wages and may continue to do so in the future.
+Added: Increases in minimum wage and market pressure may also result in increases in the wage rates paid for non-minimum wage positions.
+Added: Many states and localities are also passing laws regulating employment practices and working conditions which could have a material adverse effect on our labor costs in those areas.
+Added: Portillo's Inc.
+Added: Form 10-K | 49
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.