FORMFACTOR INC 10-K

Item 7A: Quantitative and Qualitative Disclosures about Market Risk Foreign Currency Exchange Risk We conduct certain operations in foreign currencies. We enter into currency forward exchange contracts to hedge a portion, but not all, of existing foreign currency denominated amounts. Gains and losses on these contracts are generally recognized in Other income (expense), net in our Consolidated Statements of Income. Because the effect of movements in currency exchange rates on the currency forward exchange contracts generally offsets the related effect on the underlying items being hedged, these financial instruments are not expected to subject us to risks that would otherwise result from changes in currency exchange rates as of December 30, 2023. We do not use derivative financial instruments for trading or speculative purposes. 37 We recognized a net gain from foreign exchange of $0.6 million, $1.1 million, and zero in fiscal 2023, 2022, and 2021, respectively. Interest Rate Sensitivity Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. We invest in a number of securities including U.S. treasuries, U.S. agency discount notes, money market funds, corporate bonds, and commercial paper. We attempt to maintain the safety and preservation of our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate default risk by investing in high grade investment securities. By policy, we limit the amount of credit exposure to an issuer, except U.S. treasuries and U.S. agencies. Our exposure to interest rate risk arising from our Term Loan (see Note 6, Debt , of Notes to Consolidated Financial Statements) is insignificant as a result of the interest-rate swap agreement (see Note 9, Derivative Financial Instruments , of Notes to Consolidated Financial Statements) that we entered into with Union Bank to hedge the interest payments on our Building Term Loan. We use interest rate derivative instruments to manage certain interest rate exposures. We do not use derivative instruments for trading or speculative purposes. The fair market value of our fixed rate securities may be adversely impacted by increases in interest rates while income earned on floating rate securities may decline as a result of decreases in interest rates. A hypothetical 100 basis-point (one percentage point) increase or decrease in interest rates compared to rates at December 30, 2023 and December 31, 2022 would have affected the fair value of our investment portfolio by $2.5 million and $2.1 million, respectively.