The Company is exposed to certain market risks during the normal course of its business arising from adverse changes in interest rates. The Company’s exposure to interest rate risk results primarily from its variable-rate borrowings. The Company may selectively use derivative financial instruments to manage the risks from fluctuations in interest rates. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

In August 2021, the Company entered into an interest rate swap agreement with U.S. Bank N.A., which has a $200 million notional value with an effective date of October 26, 2023 and a maturity date of October 26, 2025. Beginning in January 2024, the Company receives 1-month, 3-month or 6-month LIBOR, at the Company's election, subject to a 0.75% floor, and pays a fixed rate of interest of 1.44% per annum on a quarterly basis. In connection with the execution of the interest rate swap agreement, no cash was exchanged between the Company and the counterparty. In June 2023, an amendment replaced LIBOR as the floating rate option under the swap agreement with the forward-looking term rate based on SOFR. The fair value of the interest rate swap as of October 28, 2023 was $13.8 million.

In May 2022, the Company entered into a second interest rate swap agreement with U.S. Bank N.A., which has a $250 million notional value with an effective date of July 26, 2023 and a maturity date of January 26, 2026. Beginning in October 2023, the Company receives 1-month, 3-month or 6-month LIBOR, at the Company's election, subject to a 0.75% floor, and pays a fixed rate of interest of 3.37% per annum on a quarterly basis. In connection with the execution of the interest rate swap agreement, no cash was exchanged between the Company and the counterparty. In June 2023, an amendment replaced LIBOR as the floating rate option under the swap agreement with the forward-looking term rate based on SOFR. The fair value of the interest rate swap as of October 28, 2023 was $8.6 million.

All of the Company's derivative financial instruments are eligible for netting arrangements that allow the Company and its counterparties to net settle amounts owed to each other. Derivative assets and liabilities that can be net settled under these arrangements have been presented in the Company's Consolidated Balance Sheet on a net basis. As of October 28, 2023, none of the netting arrangements involved collateral. The net fair value of the interest rate swaps as of October 28, 2023 was $22.4 million.

The Company designated its interest rate swaps as cash flow hedges and structured them to be highly effective. Unrealized gains and losses related to the fair value of the interest rate swaps are recorded to accumulated other comprehensive income (loss), net of tax. In the event of early termination of the interest rate swaps, the Company will receive from or pay to the counterparty the fair value of the interest rate swap agreements, and the unrealized gain or loss outstanding will be recognized in earnings.

The impacts of the Company’s derivative instruments on the accompanying Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022 are presented in the table below:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	October 28, 2023		October 29, 2022		October 28, 2023		October 29, 2022
	(In millions)
Interest rate swap - $200M notional amount	$	1.2	$	5.4	$	5.3	$	7.7
Interest rate swap - $250M notional amount		0.4		8.5		6.0		5.3
Gain recognized in other comprehensive income (loss), gross of income taxes	$	1.6	$	13.9	$	11.3	$	13.0

The components of interest expense, including the amount of gains and losses on derivative instruments and related hedged items, as reported on the Consolidated Statements of Comprehensive Income (Loss) for the thirteen and thirty-nine weeks ended October 28, 2023 and October 29, 2022 are presented in the table below:


	Thirteen Weeks Ended					Thirty-Nine Weeks Ended
	October 28, 2023			October 29, 2022		October 28, 2023			October 29, 2022
	(In millions)
Interest expense on debt	$	29.8		$	18.1	$	81.9		$	42.5
Interest (income) of derivatives		(1.4	)		—		(1.4	)		—
Interest expense on debt and derivatives	$	28.4		$	18.1	$	80.5		$	42.5