ANGIODYNAMICS INC 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. Foreign Currency Exchange Rate Risk We are exposed to market risk from changes in currency exchange rates, as well as interest rate fluctuations on our Credit Agreement and investments that could impact our results of operations and financial position. We transact sales in currencies other than the U.S. Dollar, particularly the Euro, British Pound and Canadian Dollar. For the three months ended August 31, 2022, approximately 6% of our sales were denominated in foreign currencies. We do not have expenses denominated in foreign currencies at the level of our sales and as a result, our profitability is exposed to currency fluctuations. When the U.S. Dollar strengthens, our sales and gross profit will be negatively impacted. In addition, we have assets and liabilities denominated in non-functional currencies which are remeasured at each reporting period, with the offset to changes presented as a component of Other (Expenses) Income. Significant non-functional balances include accounts receivable due from a sub-section of our international customers. Interest Rate Risk The Credit Agreement provides for a $75.0 million Revolving Facility and a $30.0 million Delayed Draw Term Loan. Interest on the Revolving Facility and Delayed Draw Term Loan will be based, at the Company's option, on a rate equal to (i) the SOFR plus 0.10% (subject to a floor of 0%), or (ii) if the Company elects to treat a borrowing as an ABR Borrowing, an alternate base rate based on SOFR, plus, in each case an applicable margin of 1.25%, 1.50% or 1.75%, depending on the leverage ratio. If any amount is not paid when due, the interest rate may be increased by 2.0%. As of August 31, 2022, there was $25.0 million outstanding on the Delayed Draw Term Loan and $25.0 million outstanding on the Revolving Facility and the interest rate at August 31, 2022 was 4.06%. Concentration of Credit Risk Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist primarily of cash and cash equivalents, our Credit Facility and trade accounts receivable. The Company maintains cash and cash equivalents at various institutions and performs periodic evaluations of the relative credit standings of these financial institutions to ensure their credit worthiness. In addition, the Credit Agreement is structured across three above investment grade banks. The Company has the ability to draw amongst the three banks which limits the concentration of credit risk of one institution. Concentration of credit risk with respect to trade accounts receivable is limited due to the large number of customers that purchase products from the Company. No single customer represents more than 10% of total sales. The Company monitors the creditworthiness of its customers. As the Company’s standard payment terms are 30 to 90 days from invoicing, the Company does not provide any significant financing to its customers. Although the Company does not currently foresee a significant credit risk associated with the outstanding accounts receivable, repayment is dependent upon the financial stability of our customers. 30 Table of Contents