NEOGEN CORP 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We have interest rate and foreign exchange rate risk exposure but no long-term fixed rate investments. Our primary interest rate risk is due to potential fluctuations of interest rates for our variable rate borrowings. Foreign exchange risk exposure arises because we market and sell our products throughout the world. Revenues in certain foreign countries as well as certain expenses related to those revenues are transacted in currencies other than the U.S. dollar. As such, our operating results are exposed to changes in exchange rates. When the U.S. dollar weakens against foreign currencies, the dollar value of revenues denominated in foreign currencies increases. When the U.S. dollar strengthens, the opposite situation occurs. Additionally, previously invoiced amounts can be positively or negatively affected by changes in exchange rates in the course of collection. We use derivative financial instruments to help manage the economic impact of fluctuations in certain currency exchange rates. These contracts are adjusted to fair value through earnings. Neogen has assets, liabilities, and operations outside of the U.S. Our investments in foreign subsidiaries are considered long-term. As discussed in ITEM 1A. RISK FACTORS, our financial condition and results of operations could be adversely affected by currency fluctuations. The following table sets forth the potential loss in future earnings or fair values, resulting from hypothetical changes in relevant market rates or prices: Risk Category Hypothetical Change May 31, 2023 Impact (dollars in thousands) Foreign Currency — Revenue 10% Decrease in exchange rates $ 39,844 Earnings Foreign Currency — Hedges 10% Decrease in exchange rates 1,550 Fair Value Interest Income 10% Decrease in interest rates 434 Earnings Interest Expense 10% Increase in interest rates 2,125 Earnings ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted in a separate section of this report starting on page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE—NONE