Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate sensitivity
We are exposed to market risk in the normal course of our business operations due to our ongoing investing and financing activities. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We established policies and procedures governing our management of market risks and the use of financial instruments to manage exposure to such risks. As of January 2, 2026, we had $680.8 million of interest-bearing indebtedness outstanding under our Amended Credit Agreement. Based on the $180.8 million of variable interest rate indebtedness that was outstanding as of January 2, 2026, after giving effect to our interest rate swaps, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $1.8 million increase or decrease in interest expense for the year ended January 2, 2026. As of January 2, 2026, our supplier-financed chassis on hand through the floor plan arrangements were $20.7 million. A hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $0.2 million increase or decrease in interest expense for the year ended January 2, 2026.
Exchange rate sensitivity
As of January 2, 2026, we are exposed to changes in foreign currency exchange rates. While historically this exposure to changes in foreign currency exchange rates has not had a material effect on our financial condition or results of operations, foreign currency fluctuations could have an adverse effect on our business and results of operations in the future. Historically, our primary exposure has been related to transactions denominated in the Euro, New Taiwanese Dollar, and Canadian Dollar. The majority of our sales, both domestically and internationally, are denominated in U.S. Dollars. Historically, the majority of our expenses have also been in U.S. Dollars, and we have been somewhat insulated from currency fluctuations. However, we may be exposed to greater exchange rate sensitivity in the future. At times, we enter into short-term foreign currency swap contracts to mitigate our foreign currency exposure; however, we may consider strategies to mitigate our foreign currency exposure further in the future if deemed necessary.
Credit and other risks
We are exposed to credit risk associated with cash and cash equivalents, interest rate swap agreements and trade receivables. As of January 2, 2026, the majority of our cash and cash equivalents consisted of cash balances in non-interest bearing checking accounts which significantly exceed the insurance coverage provided on such deposits. We do not believe that our cash equivalents and interest rate swap agreements present significant credit risks because the counterparties to the instruments consist of major financial institutions. Substantially all trade receivable balances of our businesses are unsecured. The credit risk with respect to trade receivables is concentrated by the number of significant customers that we have in our customer base and a prolonged economic downturn could increase our exposure to credit risk on our trade receivables. To manage our exposure to such risks, we perform ongoing credit evaluations of our customers and maintain an allowance for potential credit losses.
We do not currently hedge our exposure to increases in the prices for our primary raw materials.
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