HAEMONETICS CORP 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposures relative to market risk are 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 no t use the financial instruments for speculative or trading activities. In October 2023, we entered into a foreign currency option contract in connection with the pending OpSens transaction to mitigate the risk of foreign currency fluctuations. The foreign currency option contract is for the purchase of CAD $345.0 million at a protection rate of CAD $1.3570 to USD $1.00 and expires on January 10, 2024. We estimate the change in the fair value of all forward con tracts assuming both a 10% strengthening and weakening of the U.S. Dollar relative to all other major cu rrencies. As of September 30, 2023, 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 $2.9 million increase in the fair value of the forward contracts, whereas a 10% weakening of the U.S. Dollar would result in a $3.4 million decr ease in 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 Revised Credit Facilities as of September 30, 2023 was $269.5 million with an effective interest rate of 6.7% based on prevailing Term SOFR rates. An increase of 100 basis points in Term SOFR rates would result in additional annual interest expense of $0.5 million . As of September 30, 2023 , the notional amount on our two active in terest rate swap agreements to effectively convert borrowings under our Credit Facilities from a variable rate to a fixed rate were $217 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.