Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
In the ordinary course of business, the Company is exposed to various market risk factors, including changes in general economic conditions, competition, and raw materials pricing and availability. In addition, the Company is exposed to other financial market risks, primarily related to its long-term debt and foreign operations.
Raw Material Pricing Risk
We are subject to market risk exposure related to volatility in the price of our principal raw materials of steel, aluminum and resins, which are cyclical in nature and have been historically volatile. Exposure to commodity price fluctuations are generally managed through alignment of our materials costs with pricing to customers by passing increases in raw material costs through to our customers and maintaining inventory levels not in excess of our production requirements. We may experience unfavorable cost-price alignment if increases in these raw material costs cannot be partially or fully passed on to customers, or if the timing of price increases lags behind the raw material cost increases.
We cannot accurately calculate the pre-tax impact a one percent change in the commodity costs would have on our 2021 operating results as the change in commodity costs would both impact the cost to purchase materials and the selling prices we offer our customers. The impact to our operating results would significantly depend on the competitive environment and the costs of other alternative products, which could impact our ability to pass commodity costs to our customers.
Interest Rate Risk
Given the relatively low borrowing levels, the Company currently utilizes variable interest rate debt to manage interest rate risk, and would consider utilizing fixed rate debt if borrowings were expected to be outstanding for an extended period of time. As of December 31, 2021, our variable rate debt consists of borrowings under our revolving credit facility of $ 24.5 million and was the only debt that remained outstanding at year end. In order to manage interest rate risk, the Company will continue to monitor changes in its debt levels and access to capital ensuring interest rate risk is appropriately managed.
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At December 31, 2021, our available variable rate debt consisted primarily of the revolving credit facility under the Company's Sixth Amended and Restated Credit Agreement (the "Senior Credit Agreement"), of which $ 24.5 million was outstanding on the revolving credit facility as of December 31, 2021. Borrowings under the revolving credit facility bore interest at a variable interest rate based upon the LIBOR plus an additional margin. A hypothetical 1% increase or decrease in interest rates would have changed the 2021 interest expense by $0.5 million.
The interest rate on our borrowings under the Senior Credit Agreement is based on LIBOR which will be entirely discontinued after June 30, 2023. We do not expect a material change in interest expense as a result of any future discontinuation and transition from LIBOR.
Foreign Exchange Risk
The Company has foreign exchange risk due to our international operations, primarily in Canada and Asia, and through sales to and purchases from foreign customers and vendors. Changes in the values of currencies of foreign countries affect our financial position and cash flows when translated into U.S. dollars. The Company principally manages its exposures to many of these foreign exchange rate risks solely through management of its core business activities. We cannot accurately calculate the pre-tax impact that a one percent change in the exchange rates of foreign currencies would have on our 2021 operating results as the changes in exchange rates would impact the cost of materials, the U.S. dollar revenue equivalents, and potentially the prices offered to our overseas customers.
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