Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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MARKET RISKS

The Company is exposed to market risks arising from adverse changes in foreign currency exchange rates and interest rates. In the normal course of business, the Company uses certain techniques and derivative financial instruments as part of its overall risk management strategy, primarily focused on its exposure to the Japanese Yen, Chinese Renminbi, and the Swiss Franc. No significant changes have occurred in the techniques and instruments used other than those described below.

Foreign Exchange Risks

In the normal course of business, the Company enters into foreign currency forward exchange contracts with its financial institutions. The purpose of these contracts is to hedge ordinary business risks regarding foreign currencies on product sales and other transactions denominated in currencies other than the U.S. dollar. Foreign currency forward exchange contracts are used to limit transactional exposure to changes in currency rates.

Japanese Yen

The Company enters into foreign currency forward contracts that permit it to sell specified amounts of Japanese Yen expected to be received from its export sales for pre-established U.S. dollar amounts at specified dates. The forward contracts are denominated in the same foreign currencies in which export sales are denominated. These contracts provide the Company with an economic hedge in which settlement will occur in future periods, thereby limiting the Company’s exposure. These contracts had a total notional amount of $17.0 million and $12.0 million at June 30, 2019 and 2018, respectively.

A 10% change in the yen to U.S. dollar exchange rate would have changed revenues in the range from a decrease of approximately $10.0 million to an increase of approximately $12.2 million for the year ended June 30, 2019.

Chinese Renminbi

The Company enters into month-to-month forward contracts to limit exposure to the Chinese Renminbi. During the year ended June 30, 2019, the Company recorded a loss of $2.0 million with respect to these forward contracts.

Swiss Franc

The Company enters into month-to-month forward contracts to limit exposure to the Swiss Franc. During the year ended June 30, 2019, the Company recorded an immaterial loss with respect to these forward contracts.

Interest Rate Risks

As of June 30, 2019, the Company’s total borrowings of $467 million consisted of $162.8 million variable rate debt borrowings from a line of credit of $115.0 million denominated in U.S. dollars, a term loan denominated in U.S. dollars of $45.0 million, and a line of credit borrowing of $2.8 million denominated in Japanese yen. As such, the Company is exposed to changes in interest rates. A change in the interest rate of 100 basis points on these variable rate borrowings would have resulted in additional interest expense of $1.8 million for the fiscal year ended June 30, 2019.