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 cash and cash equivalents and restricted cash consist principally of money market securities which are short-term in nature. At September 30, 2022 and 2021, our aggregate short-term and long-term investments were $1.3 billion and $3.7 million, respectively, and consisted mostly of highly rated corporate debt securities and municipal securities. At September 30, 2022, the unrealized loss position on marketable securities was $14.7 million, which is included in “Accumulated other comprehensive income” in the Consolidated Balance Sheets. At September 30, 2021, the unrealized loss position on marketable securities was insignificant. A hypothetical 100 basis point change in interest rates would result in an $11.4 million annual change in interest income earned in fiscal year 2022.
On February 1, 2022, in connection with the completion of the sale of its semiconductor automation business, we used $49.7 million of the cash proceeds from the sale to extinguish the total remaining outstanding balance of our former term loan. We also closed our revolving credit facility of which had no borrowings. During fiscal year 2022, we incurred cash interest expense of $0.5 million on the term loan. The term loan had a variable interest rate which subjected us to interest rate risk. Our primary interest rate risk exposure resulted from changes in the short-term LIBOR rate, the federal funds effective rate and the prime rate.
Currency Rate Exposure
We have transactions and balances denominated in currencies other than the functional currency of the transacting entity. Most of these transactions carrying foreign exchange risk are in Germany, the United Kingdom, and China. Sales in currencies other than the U.S. dollar were 36% and 37%, respectively, of our total sales for fiscal years ended September 30, 2022 and 2021. These sales were made primarily by our foreign subsidiaries, which have cost structures that substantially align with the currency of sale.
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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 $80.4 million and $119.4 million, respectively, at September 30, 2022 and 2021, and relate to the foreign exchange risk in Germany, the United Kingdom, and China. 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 $1.7 million and $1.8 million, respectively, in fiscal years 2022 and 2021, which related to the currency fluctuation on these balances between the time the transaction occurred and the ultimate settlement of the transaction.
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