QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: We are exposed to certain market risks from changes in foreign currency exchange rates, commodity steel pricing, commodity energy prices, and interest rates.
−Removed: Changes in these factors cause fluctuations in our earnings and cash flows.
+Added: We are exposed to certain market risks from changes in import shipping costs, commodity steel prices, commodity energy prices, foreign currency exchange rates, and interest rates as described in Item 1A above.
+Added: Changes in these factors cause fluctuations in our income and cash flows.
We evaluate and manage exposure to these market risks as follows:
−Removed: Import shipping costs – We import a significant quantity of our products, particularly fasteners and private label products, from foreign suppliers, primarily in Asia.
+Added: Import shipping costs – We import a significant quantity of our products from foreign suppliers, primarily in Asia.
+Added: These imports are both direct, where we procure directly from a foreign producer, and indirect, where we purchase from a domestic supplier that produces or supplies the product we purchase from foreign locations.
As a result, we incur costs related to shipping charges, duties, harbor fees, and sundry other expenses involved in the movement of product for sale in North America and our other global locations.
These costs are embedded in our product values, and significant fluctuations can affect our product gross profit depending on what mitigating actions might be taken.
−Removed: The most significant contributor to these fluctuations is the cost of overseas shipping containers.
−Removed: During 2023, the cost of overseas shipping containers was below the prior year.
−Removed: We estimate the effect on our net earnings related to import shipping costs was $23.0 to $28.0 in 2023.
+Added: The most significant contributor to these fluctuations is the cost of overseas shipping containers, although the timing of any impact can be affected by the length of our supply chain, contractually agreed upon rates, or differences in rates between routes.
+Added: We estimate the effect on our net income related to import shipping costs was a favorable $15.0 to $18.0 in 2024.
Commodity steel prices – We buy and sell various types of steel products;
−Removed: these produ cts consist primarily of different types of fasteners and related hardware.
+Added: these products consist primarily of different types of fasteners and related hardware.
We are exposed to the impacts of commodity steel pricing and our related ability to pass through the impacts to our end customers.
−Removed: During 2023, the price of steel as reflected in many market indexes has been below prior year levels, though in most cases price levels have stabilized in recent periods and the rate of decline is moderating.
+Added: During 2024, the price of steel as reflected in many market indexes most relevant to our business was lower than the prior year.
Due to our long supply chain, changes in the cost of steel can take a number of quarters to be reflected in our financial results.
−Removed: Further, the cost of the raw material is generally a small part of the total value of the steel products that we sell, which can also diminish the impact of cost changes for the raw material.
−Removed: We estimate the effect on our net earnings related to commodity steel prices was immaterial in 2023.
−Removed: Commodity energy prices – We have market risk for changes in prices of oil, gasoline, diesel fuel, natural gas, and electricity.
−Removed: As reflected in many market indexes, energy prices during 2023 were generally below prior year levels, which contributed to lower costs for fuel consumed in our vehicles and lower utility costs at our facilities.
−Removed: Total direct fuel consumption is a relatively minor cost to the company and, as a result, we estimate the effect on our net earnings related to commodity energy prices was immaterial in 2023.
+Added: Further, the cost of the raw material is generally a smaller part of the total value of the steel products that we sell, which can also diminish the impact of cost changes for the raw material.
+Added: We estimate the effect on our net income related to commodity steel prices was immaterial in 2024.
+Added: Commodity energy prices – We have market risk for changes in prices of oil, gasoline, diesel fuel, natural gas, and electricity, largely due to our consumption of fuel in our vehicles and utility costs at our facilities.
+Added: As reflected in many market indexes, energy prices during 2024 were below the prior year.
+Added: Total direct fuel consumption is a relatively smaller cost to us and, as a result, we estimate the effect on our net income related to commodity energy prices was immaterial in 2024.
Fossil fuels are also often a key feedstock for chemicals and plastics that comprise a key raw material for many products that we sell.
−Removed: During 2023, prices for fossil fuels were generally below prior year levels.
−Removed: The cost of the raw material is generally a small part of the total value of the products that we sell, which can diminish the impact of cost changes for the raw material.
−Removed: As a result, we estimate the effect on our net earnings related to materials for which fossil fuels are a feedstock was immaterial in 2023.
−Removed: Foreign currency exchange rates – Foreign currency fluctuations can affect our net investments, our operations in countries other than the U.S., and earnings denominated in foreign currencies.
−Removed: Historically, our primary exchange rate exposure has been with the Canadian dollar against the United States dollar.
−Removed: Our estimated net earnings exposure for foreign currency exchange rates was not material at year end.
−Removed: We have not historically hedged our foreign currency risk given that exposure to date has not been material.
−Removed: We estimate the effect on our sales and net earnings related to changes in foreign exchange rates was $18.7 and immaterial, respectively, in 2023.
+Added: During 2024, prices for fossil fuels were generally at or slightly below the prior year.
+Added: The cost of the raw material is generally a smaller part of the total value of the products that we sell, which can diminish the impact of cost changes for the raw material.
+Added: As a result, we estimate the effect on our net income related to materials for which fossil fuels are a feedstock was immaterial in 2024.
+Added: Foreign currency exchange rates – Foreign currency fluctuations can affect our operations in countries other than the U.S., and/or the value of income and assets denominated in foreign currencies.
+Added: Our primary currency exposures are the Canadian dollar and the Mexican peso against the U.S.
+Added: dollar, reflecting the scale of those operations relative to the size of our business.
+Added: Changes in foreign currency rates have not historically had a material effect on our results due to certain jurisdictions conducting some portion of their transactions in U.S.
+Added: dollars and our foreign operations typically having sales and expenses denominated in the applicable local currency.
+Added: As a result, we have not historically hedged our foreign currency risk.
+Added: The dollar strengthened in 2024 relative to other foreign currencies in which we operate.
+Added: However, the effect of these changes in foreign currencies to our net income was immaterial in 2024.
Interest rates - Loans under our Credit Facility bear interest at floating rates.
As a result, changes in such rates can affect our operating results and liquidity to the extent we do not have effective interest rate swap arrangements in place.
−Removed: We have not historically used interest rate swap arrangements to hedge the variable interest rates under our Credit Facility.
+Added: Our debt levels are relatively small;
+Added: therefore, we have not historically used interest rate swap arrangements to hedge the variable interest rates under our Credit Facility.
A one percentage point increase to our floating rate debt in 2024 would have resulted in approximately $0.3 of additional interest expense.
−Removed: A description of our Credit Facility is contained in Note 9 of the Notes to Condensed Consolidated Financial Statements.
+Added: A description of our Credit Facility is contained in Note 9 of the Notes to Consolidated Financial Statements.
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.