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 international operations.
Raw Material Pricing Risk
The Company is exposed to market risk related to volatility in the price of the Company's principal raw materials of steel and aluminum, which are cyclical in nature and have been historically volatile. The Company generally manages exposure to commodity price fluctuations by aligning of the Company's materials costs with customer pricing, including passing increases in raw material costs through to customers when possible, and by maintaining inventory levels consistent with the Company's production requirements.
The Company 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. The Company cannot accurately calculate the pre-tax impact a one percent change in the commodity costs would have on the Company's 2025 operating results as the change in commodity costs would both impact the cost to purchase materials and the selling prices the Company offers to customers. The impact to the Company's operating results would significantly depend on the competitive environment and the costs of other alternative products, which could impact the Company's ability to pass commodity costs to customers.
Interest Rate Risk
The Company intends to utilize 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. 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.
The Company's available variable rate debt consisted of the revolving credit facility under the Company's 2022 Credit Agreement, of which there was no outstanding indebtedness as of December 31, 2025. During the year ended December 31, 2025, borrowings on the revolving credit facility were outstanding for approximately 30 days in April and early May, with daily outstanding balances ranging from $1.5 million to $16.0 million. No other debt outstanding as of and during the year ended December 31, 2025.
Borrowings under the 2022 Credit Agreement's revolving credit facility bear interest, at the Company's option, at a rate equal to an additional margin plus (a) a base rate, (b) a daily simple SOFR rate, (c) a term SOFR rate or (d) for certain foreign currencies, a foreign current rate. A hypothetical 1% increase or decrease in interest rates would not have had a material effect on the Company's financial position, results of operations or cash flows.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk as a result of the Company's international operations, primarily in Canada, and through sales to and purchases from foreign customers and vendors. Changes in the values of
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currencies of foreign countries affect the Company's 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.
The Company cannot accurately calculate the pre-tax impact that a one percent change in the exchange rates of foreign currencies would have on the Company's 2025 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 foreign customers.
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