Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk.
Our market risk is the potential loss arising from adverse changes in interest rates. All our available credit and accounts receivable sales programs bear interest at rates tied to LIBOR or alternative discount rates. Under the terms of our credit agreement, a change in either the lender’s base rate or, LIBOR would affect the rate at which we could borrow funds thereunder. A one percentage point increase in LIBOR or base rate would have increased our interest expense on our variable rate debt under our credit agreement by approximately $1.1 million in fiscal 2021.
Under the terms of our customer sponsored programs to sell accounts receivable, a change in either LIBOR or the discount rates would affect the amount of financing costs we incur, and the amount of cash we receive upon the sales of accounts receivable under these programs. A one percentage point increase in LIBOR or the discount rates on the accounts receivable sales programs would have increased our financing costs by approximately $6.7 million, $5.1 million and $4.4 million in fiscal 2021, fiscal 2020 and fiscal 2019, respectively.
These estimates assume that our variable rate debt balance and the level of sales of accounts receivable remains constant for an annual period and the interest rate change occurs at the beginning of the period. The hypothetical changes and assumptions may be different from what actually occurs in the future. See ITEM 1A, “Risk Factors – Risks Related to Our Capital Structure and Finances” for information regarding the risks relating to our indebtedness, our accounts receivable sales agreements and LIBOR.
Historically we have not used, and currently do not intend to use, derivative financial instruments for trading or to speculate on changes in interest rates or commodity prices. We are not exposed to any significant market risks, foreign currency exchange risks, or interest rate risks from the use of derivative instruments. We did not hold any derivative instruments at December 25, 2021.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.