V2X, Inc. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Earnings, cash flows and financial position are exposed to market risks relating to fluctuations in interest rates and foreign currency exchange rates. All potential changes noted below are based on information available at September 29, 2023. Interest Rate Risk Each one percentage point change associated with the variable rate Vertex First Lien Credit Agreement would result in a $8.2 million change in the related annual cash interest expenses. Assuming the 2023 Revolver was fully drawn to a principal amount equal to $500.0 million, each one percentage point change in interest rates would result in a $5.1 million change in annual cash interest expense. 33 Table of Contents As of September 29, 2023, the notional value of the Company's interest rate swap agreements totaled $346.9 million. The difference to be paid or received under the terms of the interest rate swap agreements is accrued as interest rates change and recognized as an adjustment to interest expense for the related debt in the period incurred. Changes in the variable interest rates to be paid pursuant to the terms of the interest rate swap agreements will have a corresponding effect on future cash flows. Refer to Note 7, Derivative Instruments in the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for additional information regarding the Company's interest rate swaps. Foreign Currency Exchange Risk The majority of the Company's business is conducted in U.S. dollars. However, the Company is required to transact in foreign currencies for some of its contracts, resulting in some assets and liabilities denominated in foreign currencies. As a result, earnings may experience volatility related to movements in foreign currency exchange rates. In the past, the Company entered into forward foreign exchange contracts to buy or sell various foreign currencies to selectively protect against volatility in the value of non-functional currency denominated monetary assets and liabilities. The impact of the related contracts on the Condensed Consolidated Statements of Loss and Condensed Consolidated Balance Sheets was not material and related hedging was discontinued. The Company's forward contracts expired in January 2022 and no such contracts are outstanding as of September 29, 2023.