Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market risks include interest rate risk, equity risk, foreign currency exchange rate risk, commodity price risk, and other relevant market rate or price risks. Of these risks, interest rate risk, equity risk, and foreign currency exchange rate risk could have a significant impact on our results of operations.
Interest Rate Risk
On August 13, 2024, the Company entered into a New Credit Agreement, which is secured by substantially all of the personal property and certain material real property owned by ANI and our wholly-owned domestic subsidiaries, and obligations under the New Credit Agreement are guaranteed by certain of our wholly-owned domestic subsidiaries. The Term Loan A proceeds were used to finance the acquisition of Alimera, including fees, costs, and expenses incurred in connection with the acquisition. Proceeds from the TLA Revolver are expected to be used, subject to certain limitations, for working capital and other general corporate purposes.
As of December 31, 2024, the Company had approximately $323.0 million of debt outstanding under our New Credit Agreement, bearing interest at variable rates, tied to the Secured Overnight Financing Rate. Accordingly, our earnings and cash flows will be affected by changes in interest rates to the extent the principal balance is unhedged. Assuming no change in the amount of debt outstanding, a 100 basis point increase in the average interest rate under these borrowings would have increased the interest expense related to our variable rate debt by approximately $1.8 million based upon our unhedged portion of principal debt outstanding as of December 31, 2024. Actual results may vary due to changes in the amount of variable rate debt outstanding.
A commitment fee accrues on the unutilized commitments under the TLA Revolver and, from and after the date that is two months after the closing date of the New Credit Agreement, the TLA at a per annum rate equal between 0.25% and 0.40% depending on the Company’s first lien net leverage ratio.
The returns from certain of our cash and cash equivalents will vary as short-term interest rates change. A 100 basis-point adverse movement (decrease) in short-term interest rates would decrease the interest income earned on our cash balance in the year ended December 31, 2024 by approximately $1.4 million.
Foreign Currency Risk
In connection with our recent acquisition of Alimera, we have increased our international operations, exposing us to increased risk of foreign currency exchange fluctuations as compared to prior periods. In particular, we are now exposed to foreign currency fluctuations in British Pounds and Euros in addition to the Indian rupee. Changes in exchange rates can positively or negatively impact our revenue, income, assets, liabilities, and equity. We do not use foreign exchange contracts for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of changes in foreign exchange rates. We regularly review our hedging program and assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis. Currency exchange rates did not have a material impact on our revenue, income, assets, liabilities, or equity during the year ended December 31, 2024.
Equity Investment Risk
Our equity investment is held in the marketable equity security of one publicly traded company (CG Oncology, Inc.). As of December 31, 2024, the carrying value of our marketable equity security was approximately $6.3 million. This security is subject to a wide variety of market-related risks that could substantially reduce or increase the fair value of our holding. A decline in financial condition or operating results of this investment could result in a loss of all or a substantial part of our carrying value in this company.
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