Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, our financial position and results of operations are subject to a variety of risks, including risks associated with commodity pricing, foreign currency exchange rates and, to a lesser extent, interest rates. There have been no material changes in our primary risk exposures or management of market risks since the prior year. We regularly assess these risks and have established policies and business practices designed to mitigate their effects. Refer to Part I, Item 1A, “Risk Factors,” within this Annual Report for further discussion of risks to our business and results of operations.

COMMODITY PRICE RISK

We are exposed to commodity price fluctuations associated with the cost of raw materials used in our manufacturing process, including sheepskin and sugarcane-derived EVA (collectively, commodities).

To manage price volatility and ensure availability for our commodities, we currently enter into fixed purchasing contracts with designated suppliers of sheepskin and, at times, sugarcane-derived EVA. Our fixed pricing agreements are non-cancellable and may be subject to fees, including certain sheepskin purchasing contracts requiring deposits when minimum volumes are not fully consumed. In the event of significant price increases for our commodities, we will likely not be able to adjust our selling prices sufficiently to eliminate the impact of such increases on our profitability. We continue to evaluate our firm pricing agreement strategy for our commodities, including other preferred materials.

Refer to the subsection titled “Contractual Obligations” under the section “Liquidity” within Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 7, “Commitments and Contingencies,” of our consolidated financial statements in Part IV within this Annual Report for further information on our minimum purchase obligations for commodities.

FOREIGN CURRENCY EXCHANGE RATE RISK

Although most of our sales and inventory purchases are denominated in US dollars, our global operations in the international markets where our products are sold and manufactured expose us to risk of foreign currency exchange rate fluctuations between the US dollar and primarily the currencies of Europe, Asia, Canada, and Latin America.

We are exposed to financial statement transaction gains and losses as a result of remeasuring our monetary assets and liabilities that are denominated in currencies other than our subsidiaries’ functional currencies. We hedge certain foreign currency exchange rate risks from existing assets and liabilities, as well as forecasted sales. As our international operations grow and we increase purchases and sales in foreign currencies, we will continue to evaluate our hedging strategy and may utilize additional derivative instruments to hedge our foreign currency exchange rate risk. We do not use foreign currency exchange rate forward contracts for speculative trading purposes.

Foreign currency exchange rate fluctuations affect our results of operations and can make comparisons from year to year more difficult. Foreign currency exchange rates, excluding the effect from derivative instruments, to remeasure monetary assets and liabilities using the exchange rate at the end of the reporting period, had a negative impact on our income from operations for the year ended March 31, 2025.

We use forward foreign exchange contracts to hedge material exposure to adverse changes in foreign currency exchange rates. A sensitivity analysis technique has been used to evaluate the effect that changes in the market value of foreign exchange currencies will have on our forward foreign exchange contracts. As of March 31, 2025, a hypothetical 10% foreign currency exchange rate fluctuation would have caused the fair value of our financial instruments to change by approximately $34,000. As of March 31, 2025, there are no known factors that we would expect to result in a material change in the near-term in the general nature of our primary foreign currency exchange rate risk exposure. Refer to the section titled “Summary of Significant Accounting Policies” in Note 1, “General,” and Note 9, “Derivative Instruments,” of our consolidated financial statements in Part IV within this Annual Report for further information on our use of derivative contracts and related accounting policies.

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INTEREST RATE RISK

Our exposure to market risk for interest rates relates to our cash and cash equivalents, including cash invested in highly rated money market funds, and our revolving credit facilities.

Cash and cash equivalents held by us are affected by variable, short-term interest rates. Using our average invested cash equivalents balance as of March 31, 2025, the hypothetical effect of a 100 basis point change in short-term interest rates would result in a change of approximately $14,700 to interest income recorded in our consolidated statements of comprehensive income, along with our operating cash flows, but would not impact the fair market value of the related underlying instruments. Refer to the section titled “Summary of Significant Accounting Policies” in Note 1, “General,” and Note 4, “Fair Value Measurements,” of our consolidated financial statements in Part IV within this Annual Report for further information on our cash and cash equivalents.

Our revolving credit facilities bear interest at variable rates. As a result, we are exposed to changes in market interest rates that could impact the cost of servicing debt. As there were no outstanding balances under our revolving credit facilities as of March 31, 2025, the hypothetical effect of a 100 basis point change in interest rates for borrowings made under our revolving credit facilities would have resulted in no change to interest expense recorded in our consolidated statements of comprehensive income during the year ended March 31, 2025. Refer to Note 6, “Revolving Credit Facilities,” of our consolidated financial statements in Part IV within this Annual Report for further information on our revolving credit facilities.