HAEMONETICS CORP 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure relative to market risk is due to foreign exchange risk and interest rate risk. Foreign Exchange Risk See the section above entitled Foreign Exchange for a discussion of how foreign currency affects our business. It is our policy to minimize, for a period of time, the unforeseen impact on our financial results of fluctuations in foreign exchange rates by using derivative financial instruments known as forward contracts to hedge anticipated cash flows from forecasted foreign currency denominated sales and costs. We do not use the financial instruments for speculative or trading activities. 28 We estimate the change in the fair value of all forward contracts assuming both a 10% strengthening and weakening of the U.S. Dollar relative to all other major cu rrencies. As of July 2, 2022, in the event of a 10% strengthening of the U.S. Dollar, the change in fair value of all forward contracts would result in a $4.1 million increase in the fair value of the forward contracts; whereas a 10% weakening of the U.S. Dollar would result in a $4.7 million decr ease of the fair value of the forward contracts. Interest Rate Risk Our exposure to changes in interest rates is associated with borrowings under our Credit Facilities, all of which is variable rate debt. Total outstanding debt under our Credit Facilities as of July 2, 2022 was $280.0 million with an interest rate of 3.4% based on prevailing LIBOR rates. An increase of 100 basis points in LIBOR rates would result in additional annual interest expense of $0.9 million. On July 26, 2022, we entered into an amended and restated credit agreement to refinance the 2018 Credit Facilities and extend the applicable maturity date to June 15, 2025. As of July 26, 2022, total outstanding debt under our Revised Credit Facilities was $280.0 million with an interest rate of 4.2% based on prevailing Term SOFR rates and as otherwise specified under the terms of the amended and restated credit agreement. An increase of 100 basis points in Term SOFR rates would result in an additional annual interest expense of $1.6 million. As of July 2, 2022, the notional amount on our two interest rate swap agreements to effectively convert borrowings under our 2018 Credit Facilities from a variable rate to a fixed rate were $196.0 million. These interest rate swaps are intended to mitigate the exposure to fluctuations in interest rates and qualify for hedge accounting treatment as cash flow hedges and expire in June 2023. In connection with the Company’s entry in the Revised Credit Facilities, the Company is in the process of evaluating additional interest rate swap protection that would extend beyond June 2023.