Item 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to changes in interest rates results from our
borrowing activities. In the event interest rates were to move by 1%, our yearly interest expense would increase or decrease by approximately
$0.2 million assuming our average borrowing levels remained constant. As of March 26, 2022, $80.0 million was available under our revolving
credit facility, of which $39.9 million was outstanding and included in long-term debt on the Consolidated Balance Sheets. As described
above under “Liquidity and Capital Resources,” we also have a $15.0 million (original principal) term loan. The 2018 Term
Loan is considered a fixed interest rate loan. As of March 26, 2022, $8.5 million was outstanding on the 2018 Term Loan and was included
in long-term debt and current portion of long-term debt on the Consolidated Balance Sheets. The 2018 Term Loan requires total (principal
and interest) repayments of $0.2 million per month.
At our option, we borrow from our revolving credit facility
at the variable one-month LIBOR or at a fixed rate for a designated period at the LIBOR (subject to a 1% floor during the first quarter
of fiscal year 2022 and a 0.25% floor for subsequent periods) corresponding to such period, in each case, plus a margin. Our interest
rate margin is determined on a quarterly basis based upon our calculated leverage ratio. Our interest rate during fiscal year 2022 for
our revolving credit facility ranged from 1.0% to 2.2%. Interest on outstanding borrowings on the 2018 Term Loan accrued at a fixed rate
of 4.15% over the term of the loan during the first quarter of fiscal year 2022 and 3.90% over the term of the loan for subsequent periods.
Our revolving credit facility includes a mechanism for adoption of a different benchmark rate upon the discontinuation of LIBOR. On March
26, 2022, we had no hedging arrangements in place for our revolving credit facility to limit our exposure to upward movements in interest
rates.
FOREIGN CURRENCY
Approximately 90% of our total revenues for each of fiscal
years 2022 and 2021 were denominated in U.S. dollars, with the remainder denominated in Canadian dollars and Euros. A 10% change in the
value of the Canadian dollar to the U.S. dollar and the Euro to the U.S. dollar would impact our revenue by approximately 1%. We monitor
the relationship between the U.S. and Canadian currencies and the U.S. and Euro currencies on a monthly basis and adjust sales prices
for products and services sold in Canadian dollars or Euros as we believe to be appropriate.
We continually utilize short-term foreign exchange forward
contracts to reduce the risk that future earnings denominated in Canadian dollars would be adversely affected by changes in currency exchange
rates. We do not apply hedge accounting and therefore the net change in the fair value of the contracts, which totaled a loss of less
than $0.1 million during each of fiscal year 2022 and fiscal year 2021, was recognized as a component of other expense in the Consolidated
Statements of Income. The change in the fair value of the contracts is offset by the change in fair value on the underlying accounts receivables
denominated in Canadian dollars being hedged. On March 26, 2022, we had a foreign exchange contract, which matured in April 2022, outstanding
in the notional amount of $3.3 million. The foreign exchange contract was renewed in April 2022 and continues to be in place. We do not
use hedging arrangements for speculative purposes.
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