CULP INC 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Interest Rates We are exposed to market risk from changes in interest rates with regards to our revolving credit agreements. Effective June 24, 2022, we entered into an amended and restated U.S. revolving credit agreement (“Amended Agreement”) that required interest to be charged at a rate (applicable interest rate of 2.88% as of July 31, 2022) calculated using an applicable margin over the Federal Reserve Bank of New York’s secured overnight fund rate (SOFR) as defined in the Amended Agreement. As of July 31, 2022, there were no outstanding borrowings under the Amended Agreement. Our revolving credit lines associated with our operations located in China bear interest at a rate determined by the Chinese government at the time of borrowing. As of July 31, 2022, there were no borrowings outstanding under our revolving credit agreements associated with our operations located in China Foreign Currency We are exposed to market risk from changes in the value of foreign currencies for our subsidiaries domiciled in Canada and China. We try to maintain a natural hedge by keeping a balance of our assets and liabilities denominated in the local currency of our subsidiaries domiciled in Canada and China. However, there is no assurance that we will be able to continually maintain this natural hedge. Our foreign subsidiaries use the United States dollar as their functional currency. A substantial portion of the company’s imports purchased outside the United States are denominated in U.S. dollars. A 10% change in the above exchange rates as of July 31, 2022, would not have materially affected our results of operations or financial position.