LINDBLAD EXPEDITIONS HOLDINGS, INC. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   There have been no material changes in our exposure to market risks from the information set forth in the “Quantitative and Qualitative Disclosures About Market Risk” sections contained in our 2020 Annual Report.   We are exposed to a market risk for interest rates related to our variable rate debt instruments. We assess our market risks based on changes in interest rates utilizing a sensitivity analysis that measures the potential impact on earnings and cash flows based on a hypothetical 100 basis point change in interest rates. For additional information regarding our long-term borrowings see Note 5 to our Condensed Consolidated Financial Statements included herein. As of June 30, 2021, we had interest rate cap agreements to hedge a portion of our exposure to interest rate movements of our variable rate debt and to manage our interest expense. The notional amount of outstanding debt associated with interest rate cap agreements as of June 30, 2021 was $100.0 million. Based on our June 30, 2021 outstanding variable rate debt balance, a hypothetical 100 basis point increase in LIBOR interest rates related to our variable interest rate debt instruments would impact our annual interest expense by approximately $3.8 million.   As of June 30, 2021, we had foreign currency forward contracts to hedge our exposure to foreign currency exchange rate risk related to our ship construction contracts denominated in NOK. For the six months ended June 30, 2021, we recorded a loss of approximately $0.5 million in other comprehensive income related to these foreign exchange derivatives. During the six months ended June 30, 2021, we reclassified a loss of $0.1 million from other comprehensive income to a loss on foreign currency due to the maturity of a foreign exchange contract that was designated as a cash flow hedge. The strengthening of the NOK at June 30, 2021 by a hypothetical 10%, would result in an approximately $5.0 million gain being recorded in other comprehensive income. The weakening of the NOK at June 30, 2021 by a hypothetical 10%, would result in an approximately $4.1 million loss being recorded in other comprehensive income.