Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and cash equivalents, restricted cash and short-term and long-term investments and fluctuations in foreign currency exchange rates.
Interest Rate Exposure
Our term loan bears variable interest rates which subjects us to interest rate risk. Our primary interest rate risk exposure results from changes in the short-term LIBOR rate, the federal funds effective rate and the prime rate. As of September 30, 2021, the weighted average stated interest rate on our debt was 2.8%. At September 30, 2021, the outstanding term loan principal balance was $49.7 million, excluding unamortized deferred financing costs of $0.3 million. During fiscal year 2021, we incurred aggregate interest expense of $1.7 million on all of our term loans. A hypothetical 100 basis point change in interest rates would result in a $0.5 million change in interest expense incurred during fiscal year 2021.
Our cash and cash equivalents and restricted cash consist principally of money market securities which are short-term in nature. At September 30, 2021 and 2020, our aggregate short-term and long-term investments were $3.7 million and $3.2 million, respectively, and consisted mostly of highly rated corporate debt securities and municipal securities. At September 30, 2021 and 2020, the unrealized loss position on marketable securities was insignificant, which is included in “Accumulated other comprehensive income” in the Consolidated Balance Sheets. A hypothetical 100 basis point change in interest rates would result in an insignificant annual change in interest income earned in fiscal year 2021.
Currency Rate Exposure
We have transactions and balances denominated in currencies other than the U.S. dollar. Most of these transactions or balances are denominated in Euros, British Pounds and a variety of Asian currencies. Sales in currencies other than the U.S. dollar were 37% and 33%, respectively, of our total sales for fiscal years ended September 30, 2021 and 2020. These sales were made primarily by our foreign subsidiaries, which have cost structures that substantially align with the currency of sale.
In the normal course of our business, we have liquid assets denominated in non-functional currencies which include cash, short-term advances between our legal entities and accounts receivable which are subject to foreign currency exposure. Such balances were approximately $119.4 million and $142.9 million, respectively, at September 30, 2021 and 2020, and related to the Euro, British Pound and a variety of Asian currencies. We mitigate the impact of potential currency translation losses on these short-term intercompany advances by the timely settlement of each transaction, generally within 30 days. We also utilize forward contracts to mitigate our exposures to currency movement. We incurred foreign currency losses of $1.8 million and $3.4 million, respectively, in fiscal years 2021 and 2020, which related to the currency fluctuation on these balances between the time the transaction occurred and the ultimate settlement of the transaction. A hypothetical 10% change in foreign exchange rates would result in a change of $3.7 million and $1.4 million, respectively, in our net income during fiscal years 2021 and 2020.
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