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The base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, and (c) LIBOR for an Interest Period of one month plus 1%.
−Removed: Additionally, increased pricing is required by the Second Amendment.
+Added: Additionally, increased pricing is required by the Third Amendment.
As of December 26, 2021, we had $176.1 million of borrowings subject to variable interest rates.
A 1.0% change in the effective interest rate applied to these loans would have resulted in pre-tax interest expense fluctuation of $1.7 million on an annualized basis.
−Removed: LIBOR is set to terminate in December 2021;
−Removed: however, we anticipate an amended credit agreement will be executed at the new applicable reference rate.
−Removed: Federal Reserve is considering replacing the U.S.
−Removed: dollar LIBOR with the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S.
+Added: LIBOR is set to terminate on December 31, 2021;
+Added: however, the Third Amendment to our credit facility included certain amendments to the credit facility to address LIBOR transition matters.
+Added: These include specifics related to benchmark replacement, which reference the Secured Overnight Financing Rate ("SOFR"), a new index calculated by short-term repurchase agreements and backed by U.S.
Treasury securities.
−Removed: However, there is no definitive information regarding the future use of LIBOR, any particular replace rate, or the market acceptance of any potential change.
−Removed: Any such change may have an adverse effect on the cost of our borrowings.
+Added: The Third Amendment outlines its definition of a SOFR transition event as well as new base rates and provisions to take effect upon completion of such an event.
+Added: Through the end of our fiscal year ended December 26, 2021, the Company's credit facility continued to reference LIBOR.
+Added: The Company refinanced its credit facility on March 4, 2022, the new facility references SOFR or the Alternate Base Rate ("ABR"), which represents the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% per annum, or (c) one-month term SOFR plus 1.00% per annum.
We continue to monitor our interest rate risk on an ongoing basis and may use interest rate swaps or similar instruments in the future to manage our exposure to interest rate changes related to our borrowings as the Company deems appropriate.
Commodity Price Risks
−Removed: The Company's restaurant menus are highly dependent upon a few select commodities, including ground beef, steak fries, poultry, and produce.
−Removed: We may or may not have the ability to increase menu prices, or vary menu items, in response to food commodity price increases.
−Removed: A 1.0% increase in food costs would negatively impact cost of sales by approximately $2.0 million on an annualized basis.
+Added: The Company's restaurant menus are highly dependent upon a few select commodities, including ground beef, poultry, potatoes, and restaurant supplies.
+Added: We purchase food, supplies and other commodities for use in our operations based on prices established with our suppliers.
+Added: Many of the commodities purchased by us are subject to volatility due to market supply and demand factors outside of our control, including the price of other commodities, weather, seasonality, production, trade policy, and other factors.
+Added: As a result of the COVID-19 pandemic, we have experienced and expect to continue to experience distribution disruptions, commodity cost inflation, and certain food and supply shortages.
+Added: To manage this risk in part, we enter into fixed-price purchase commitments for certain commodities;
+Added: however, it may not be possible for us to enter into fixed-price purchase commitments for certain commodities, or we may choose not to enter into fixed-price contracts for certain commodities.
+Added: We believe that substantially all of our food and supplies meeting our specifications are available from alternate sources, which we have identified to diversify our supply chain to mitigate our overall commodity risk.
+Added: We may or may not have the ability to increase menu prices, or vary menu items, in response to commodity price increases.
+Added: A 1.0% increase in food and beverage costs would negatively impact cost of sales by approximately $2.6 million on an annualized basis.
Many of the food products we purchase are affected by changes in weather, production, availability, seasonality, and other factors outside our control.
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In addition, we believe that almost all of our food and supplies are available from several sources, which helps to reduce or mitigate these risks.
−Removed: Tabl e of Contents
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.