Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Management is actively involved in monitoring exposure to market risk and continues to develop and utilize appropriate risk management techniques. Our exposure to significant market risks includes fluctuations in labor costs and commodity prices for copper, aluminum, steel and fuel. We are exposed to market price volatility as the fair value of our investments in marketable securities may fluctuate in response to changes in market value of such securities. We are also exposed to interest rate risk with respect to any debt obligations we may incur on our credit facility. For additional information see “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
Commodity Risk
Our exposure to significant market risks includes fluctuations in commodity prices including, but not limited to, copper, aluminum, steel, electrical components, fuel, and certain plastics. Commodity price risks may have an impact on our results of operations due to the fixed nature of many of our contracts. Over the long term, we expect to be able to pass along a portion of these costs to our customers, as market conditions in the construction industry will allow.
Investment Risk
We are exposed to market price volatility for our investments in marketable securities which are carried at fair value measured using market prices, with gains and losses included in Other income, net on our Consolidated Statements of Comprehensive Income. Changes in the market value of these investments could create volatility in our reported earnings from period to period, and a decline in value of our investments could have an adverse impact on our reported earnings. Changes in market value of investments measured at fair value resulted in an unrealized gain of $7.5 million in the year ended September 30, 2025. As of September 30, 2025, we had investments in marketable securities with a fair value of $104.6 million, and a 10% change in the market value of these investments would cause a $10.5 million impact to our pre-tax income.
Interest Rate Risk
Floating rate debt, where the interest rate fluctuates periodically, exposes us to short-term changes in market interest rates. Any borrowings under our revolving credit facility is structured on floating rate terms. We currently do not maintain any hedging contracts that would limit our exposure to variable rates of interest when we have outstanding borrowings under our revolving credit facility. The Amended Credit Agreement uses SOFR as the benchmark for establishing the interest rate charged on our borrowings. If SOFR were to increase, our interest payment obligations on any then-outstanding borrowings would increase, having a negative effect on our cash flow and financial condition. We had no borrowings outstanding under our revolving credit facility as of September 30, 2025.
38