Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to our Annual Report on Form 10-K for the year ended June 30, 2019, for a complete discussion on the Company’s market risk.
We are subject to interest rate risk in connection with borrowings under our revolving credit facility and term loan, which bear interest at variable rates. At March 31, 2020, we had $118.8 million outstanding under our revolving credit facility and $75.0 million outstanding on our term loan. Borrowings under our revolving credit facility and term loan bear interest at our option of (i) the highest of the prime rate, the Federal Funds Rate plus 0.5%, or one-month LIBOR plus 1%, which is the Base Rate, or (ii) LIBOR, in each case plus an applicable margin ranging from 0.25% to 1.25% with respect to Base Rate borrowings and 1.25% to 2.25% with respect to LIBOR borrowings. Therefore, our income and cash flows will be exposed to changes in interest rates to the extent that we do not have effective hedging arrangements in place.
At March 31, 2020, the interest rate on our revolving credit facility and term loan was 2.24%. Based on a sensitivity analysis at March 31, 2020, assuming a 100 basis point increase in interest rates would increase our annual interest expense by approximately $1.9 million.
On July 1, 2015, we entered into a 5-year floating to fixed interest rate swap with a certain counterparty to the previously existing credit agreement to mitigate the risk of interest rate fluctuations associated with our variable rate long term debt. The swap has an effective start date of July 1, 2015 and is based on a one-month LIBOR rate versus a 1.52% fixed rate on a notional value of $39.3 million, which was equal to 50% of the outstanding balance of our term loan at the time of the swap arrangement. The swap matured on March 31, 2020. For the nine months ended March 31, 2020, we recorded a loss of $68,000 for the change in fair value of the interest rate swap, which is included in interest expense in the consolidated statements of operations and comprehensive income.
Other than with respect to our interest rate risk, there have been no material changes in market risk from those disclosed in the Company's Form 10-K for the year ended June 30, 2019.
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