Array Technologies, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of fluctuations in steel and aluminum prices and customer concentrations. We do not hold or issue financial instruments for trading purposes. Concentrations of Major Customers Our customer base consists primarily of solar contractors and utilities. We do not require collateral on our trade receivables. For the year ended December 31, 2021, our largest customer and five largest customers constituted 12.6% and 46.0% of total revenues, respectively. Two customers made up 22.7% of revenue and are the only customers greater than 10% of total revenue for the year ended December 31, 2021. For the year ended December 31, 2020, our largest customer and five largest customers constituted 11.2% and 40.9% of total revenues, respectively. Two customers made up 21.5% of revenue and are the only customers constituting greater than 10% of total revenue for the year ended December 31, 2020. The loss of any one of our top five customers could have a materially adverse effect on the revenues and profits of the Company. Further, our trade accounts receivable are from companies within the solar industry and, as such, the Company is exposed to normal industry credit risks. As of December 31, 2021, our largest customer and five largest customers constituted 17.6% and 44.6% of trade accounts receivable, respectively. As of December 31, 2019, our largest customer and five largest customers constituted 0.1% and 20.9% of trade accounts receivable, 58 Table of Contents respectively. We continually evaluate our reserves for potential credit losses and establishes reserves for such losses. Commodity Price Risk We are subject to risk from fluctuating market prices of certain commodity raw materials, including steel and aluminum, that are used in our products. Prices of these raw materials may be affected by supply restrictions or other market factors from time to time, and we do not enter into hedging arrangements to mitigate commodity risk. Significant price changes for these raw materials could reduce our operating margins if we are unable to recover such increases from our customers, and could harm our business, financial condition and results of operations. Interest Rate Risk As of December 31, 2021, our long-term debt totaled $711.0 million. We have interest rate exposure with respect to the $326.8 million balance due to the variable interest rate. A 50 basis point increase in interest rates would impact our expected annual interest expense for the next 12 months by approximately $1.6 million. Item 8. Financial Statements and Supplementary Data. The financial statements and supplementary data required by this item are included after the Signature page of this Annual Report on Form 10-K beginning on page F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.