Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to interest rate changes, primarily as a result of our credit facility (as discussed in Note 3 to the Consolidated Financial Statements) which bears interest based on variable rates.

A 1% change in interest rates on our variable rate debt would have affected interest expense by approximately $1.1 million, $0.7 million, and $0.3 million in the fiscal years ended December 26, 2015, December 27, 2014, and December 28, 2013. On a prospective basis, a 1% change in interest rates on debt existing as of December 26, 2015, would result in interest expense fluctuating approximately $1.5 million per year.

Purchase Price Volatility

Although we cannot determine the full effect of inflation and deflation on our operations, we believe our sales and results of operations are affected by both. We are subject to market risk with respect to the pricing of certain products and services, which include, among other items, grain, corn, steel, petroleum, cotton and other commodities as well as transportation services. Therefore, we may experience both inflationary and deflationary pressure on product cost, which may impact consumer demand and, as a result, sales and gross margin. Our strategy is to reduce or mitigate the effects of purchase price volatility principally by taking advantage of vendor incentive programs, economies of scale from increased volume of purchases, adjusting retail prices and selectively buying from the most competitive vendors without sacrificing quality.

Index