REGIS CORP 10-K

Item 7A. Quantitative and Qualitative Disclosures about Market Risk The primary market risk exposure of the Company relates to changes in interest rates in connection with its credit agreement, which bears interest at variable rates based on SOFR plus an applicable borrowing margin. Additionally, the Company is exposed to foreign currency translation risk related to changes in the Canadian dollar, and to a lesser extent, the British pound. The Company has established policies and procedures that govern the management of these exposures through the use of derivative financial instrument contracts. By policy, the Company does not enter into such contracts for the purpose of speculation. The following details the Company's policies and use of financial instruments. Interest Rate Risk: The Company's interest payments are based on the SOFR, such that a hypothetical 100 basis point increase or decrease in the SOFR will have an impact on our annual cash flows of approximately $1.0 million annually. As of June 30, 2024, the Company had outstanding variable rate debt of $115.3 million, and the Company did not have any outstanding interest rate swaps. SOFR variability does not impact our letters of credit, which are charged at a fixed rate of 5.25%. Foreign Currency Exchange Risk: Over 90% of the Company's operations are transacted in U.S. dollars. However, because a portion of the Company's operations consist of activities outside of the U.S., the Company has transactions in other currencies, primarily the Canadian dollar, and to a lesser extent, the British pound. In preparing the Consolidated Financial Statements, the Company is required to translate the financial statements of its foreign subsidiaries from the currency in which they keep their accounting records, generally the local currency, into U.S. dollars. Different exchange rates from period to period impact the amounts of reported income and the amount of foreign currency translation recorded in accumulated other comprehensive income (AOCI). As part of its risk management strategy, the Company frequently evaluates its foreign currency exchange risk by monitoring market data and external factors that may influence exchange rate fluctuations. As a result, the Company may engage in transactions involving various derivative instruments to hedge assets, liabilities and purchases denominated in foreign currencies. As of June 30, 2024, the Company did not have any derivative instruments to manage its foreign currency risk. During fiscal years 2024, 2023, and 2022, the Company recorded foreign currency losses of $0.5 million, $0.3 million, and $0.6 million in income (loss) from continuing operations, respectively, in the Consolidated Financial Statements. 44 Table of Contents