OPEN TEXT CORP 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk We are primarily exposed to market risks associated with fluctuations in interest rates on our term loans, revolving loans and foreign currency exchange rates. Interest rate risk Our exposure to interest rate fluctuations relate primarily to our Term Loan B and the Revolver. 59 As of September 30, 2021, we had an outstanding balance of $965.0 million on Term Loan B. Term Loan B bears a floating interest rate of 1.75% plus LIBOR. As of September 30, 2021, an adverse change of one percent on the interest rate would have the effect of increasing our annual interest payment on Term Loan B by approximately $9.7 million, assuming that the loan balance as of September 30, 2021 is outstanding for the entire period (June 30, 2021—$9.7 million). As of September 30, 2021, we had no outstanding balance under the Revolver. Borrowings under the Revolver bear interest per annum at a floating rate of LIBOR plus a fixed rate that is dependent on our consolidated net leverage ratio ranging from 1.25% to 1.75%. As of September 30, 2021, with no outstanding balance on the Revolver, an adverse change of one percent on the interest rate would have no effect on our annual interest payment (June 30, 2021—nil). For more information regarding the impact of LIBOR, see "Stress in the global financial system may adversely affect our finances and operations in ways that may be hard to predict or to defend against" included within Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for Fiscal 2021. Foreign currency risk Foreign currency transaction risk We transact business in various foreign currencies. Our foreign currency exposures typically arise from intercompany fees, intercompany loans and other intercompany transactions that are expected to be cash settled in the near term and are transacted in non-functional currency. We expect that we will continue to realize gains or losses with respect to our foreign currency exposures. Our ultimate realized gain or loss with respect to foreign currency exposures will generally depend on the size and type of cross-currency transactions that we enter into, the currency exchange rates associated with these exposures and changes in those rates. Additionally, we have hedged certain of our Canadian dollar foreign currency exposures relating to our payroll expenses in Canada. Based on the foreign exchange forward contracts outstanding as of September 30, 2021, a one cent change in the Canadian dollar to U.S. dollar exchange rate would have caused a change of $0.7 million in the mark to market on our existing foreign exchange forward contracts (June 30, 2021—$0.7 million). Foreign currency translation risk Our reporting currency is the U.S. dollar. Fluctuations in foreign currencies impact the amount of total assets and liabilities that we report for our foreign subsidiaries upon the translation of these amounts into U.S. dollars. In particular, the amount of cash and cash equivalents that we report in U.S. dollars for a significant portion of the cash held by these subsidiaries is subject to translation variance caused by changes in foreign currency exchange rates as of the end of each respective reporting period (the offset to which is recorded to accumulated other comprehensive income on our Condensed Consolidated Balance Sheets). The following table shows our cash and cash equivalents denominated in certain major foreign currencies as of September 30, 2021 (equivalent in U.S. dollar): (In thousands) U.S. Dollar Equivalent at September 30, 2021 U.S. Dollar Equivalent at June 30, 2021 Euro $ 316,965 $ 331,974 British Pound 74,409 78,140 Canadian Dollar 19,237 26,632 Swiss Franc 39,464 44,900 Other foreign currencies 123,148 128,879 Total cash and cash equivalents denominated in foreign currencies 573,223 610,525 U.S. Dollar 1,162,042 996,781 Total cash and cash equivalents $ 1,735,265 $ 1,607,306 If overall foreign currency exchange rates in comparison to the U.S. dollar uniformly weakened by 10%, the amount of cash and cash equivalents we would report in equivalent U.S. dollars would decrease by $57.3 million (June 30, 2021—$61.1 million), assuming we have not entered into any derivatives discussed above under "Foreign Currency Transaction Risk". 60