RadNet, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 55 Foreign Currency Exchange Risk. We generate substantially all of our revenues and incur substantially all of our expenses in United States dollars. As a result, our financial results are unlikely to be materially affected by changes in foreign currency exchange rates or weak economic conditions in foreign markets. We are exposed to foreign exchange risk with respect to revenues and expenses denominated in the Euro, Canadian Dollar, Hungarian Forint and Pound Sterling. We have AI operations in the Netherlands, radiology services in the United Kingdom, and maintain research and development centers in Canada and Hungary. At the present time, we do not have any foreign currency exchange contracts to mitigate this risk. At December 31, 2024, a hypothetical 1% decline in the currency exchange rates between the U.S. dollar against these currencies, would have resulted in an annual increase of approximately $0.4 million in operating expenses. Interest Rate Sensitivity. We pay interest on various types of debt instruments to our suppliers and lending institutions. The agreements entail either fixed or variable interest rates. Instruments which have fixed rates are mainly leases on radiology equipment. Variable rate interest obligations relate primarily to amounts borrowed under our outstanding credit facilities. Accordingly, our interest expense and consequently, our earnings, are affected by changes in short term interest rates. We purchased the 2019 swaps to mitigate interest rate risk on a portion of our outstanding term loan debt, as described below. We can elect SOFR or Alternative Base Rate interest rate options on amounts outstanding under the Barclay's term loan. At December 31, 2024, after giving effect to the $400 million notional amount of our 2019 swaps, we had $470.6 million outstanding subject to a SOFR election on our Barclay's term loan, at an effective rate plus applicable margin of 6.77%. A hypothetical 1% increase in the SOFR rates under the Barclay's credit facility would result in an increase of $4.7 million in annual interest expense and a corresponding decrease in income before taxes. We can elect SOFR or Base Rate interest rate options on amounts outstanding under the Truist credit facility. At December 31, 2024, we had $135.0 million outstanding subject to an adjusted SOFR election on our Trust term loan. At December 31, 2024, our effective SOFR rate plus applicable margin was 5.93%. A hypothetical 1% increase in the adjusted SOFR rates under the Truist credit facility would result in an increase of approximately $1.4 million in annual interest expense and a corresponding decrease in income before taxes. 56