Turning Point Brands, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk Foreign Currency Sensitivity Our inventory purchases from RTI are denominated in euros. Accordingly, we have exposure to potentially adverse movements in the euro exchange rate. In addition, RTI provides a contractual hedge against catastrophic currency fluctuation in our agreement. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that offsets the effects of changes in foreign exchange rates. We regularly review our foreign currency risk and hedging programs and may as part of that review determine at any time to change our hedging policy. During 2025, we did not execute any foreign exchange contracts. During 2024, we executed various foreign exchange contracts for the purchase of €3.6 million and sale of €3.6 million with maturity dates ranging from October 2024 to June 2025. At December 31, 2025, we had no foreign currency contracts outstanding. A 10% change in the euro to U.S. dollars exchange rate would change our pre-tax income by approximately $1.7 million per year. Credit Risk At December 31, 2025 and 2024, we had bank deposits, including MSA escrows, in excess of federally insured limits of approximately $221.8 million and $47.4 million, respectively. The Company has chosen to invest a portion of the MSA escrows, from time to time, in U.S. Government securities including Treasury notes and Treasury bonds. We sell our products to distributors, retail establishments, and individual consumers throughout the U.S. and also have sales of Zig-Zag ® premium cigarette papers in Canada. In 2025, we had no customers that accounted for more than 10% of our net sales. In 2024 we had one customer that accounted for more than 10% of our net sales and in 2023 we had no customers that accounted for more than 10% of our net sales. We perform periodic credit evaluations of our customers and generally do not require collateral on trade receivables. Historically, we have not experienced significant losses due to customer credit issues. Interest Rate Sensitivity In February 2025, we issued the 2032 Notes in an aggregate principal amount of $300 million. We carry the 2032 Notes at face value. Since the 2032 Notes bear interest at a fixed rate, we have no financial statement risk associated with increases in interest rates. However, the fair value of the 2032 Notes changes when the market price of our stock fluctuates, or interest rates change. Our remaining debt instrument is the 2023 ABL Facility, which has no borrowing outstanding. The 2023 ABL Facility is subject to a floating rate. Accordingly, if we make borrowings under the 2023 ABL Facility, we will be exposed to fluctuations in interest rates. 51 Table of Contents