The Company accounts for derivatives and hedging activities in accordance with ASC 815, “Derivatives and Hedging” (ASC 815). As required by ASC 815, the Company records all derivatives on the balance sheet at fair value and adjusts to market on a quarterly basis. In addition, to comply with the provisions of ASC 820, “Fair Value Measurements” (ASC 820), credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In accordance with ASC 820, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio. There is no impact of netting, because the Company has only one derivative. The Company classifies its derivative valuations in Level 2 of the fair value hierarchy.

On September 27, 2024, the Company terminated the previous $450 million interest rate swap, and entered into a new interest rate swap in the notional amount of $500 million with a blended interest rate of 2.83%. On this same date, the Company also entered into a new interest rate swap for $300 million with an interest rate of 3.37%. These interest rate swap agreements are designated as cash flow hedges.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of May 3, 2025, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:


Interest Rate Derivative	Number of Instruments	Notional Aggregate Principal Amount	Interest Swap Rate	Maturity Date
Interest rate swap contract	Two	$800.0 million	2.83% - 3.37%	September 24, 2031

The table below presents the fair value of the Company’s derivative financial instruments on a gross basis as well as their classification on the Company’s Condensed Consolidated Balance Sheets:

          
         (in thousands)

          
         Fair Values of Derivative Instruments

          
         May 3, 2025

         February 1, 2025

         May 4, 2024

         Derivatives Designated as Hedging Instruments

         Balance
Sheet
Location

         Fair
Value

         Balance
Sheet
Location

         Fair
Value

         Balance
Sheet
Location

         Fair
Value

Interest rate swap contracts

Other assets

26,079

Other assets

45,699

Other assets

36,079

The following table presents the unrealized gains and losses deferred to accumulated other comprehensive income resulting from the Company’s derivative financial instruments for each of the reporting periods.


	(in thousands)
	Three Months Ended
Interest Rate Derivatives:	May 3, 2025			May 4, 2024
Unrealized (losses) gains, before taxes	$	(17,071	)	$	10,573
Income tax benefit (expense)		4,539			(2,838	)
Unrealized (losses) gains, net of taxes	$	(12,532	)	$	7,735

The following table presents information about the reclassification of gains and losses from accumulated other comprehensive income into earnings related to the Company’s derivative instruments for each of the reporting periods.


	(in thousands)
	Three Months Ended
Component of Earnings:	May 3, 2025			May 4, 2024
Interest benefit	$	(4,064	)	$	(4,563	)
Income tax expense		1,083			1,220
Net reclassification into earnings	$	(2,981	)	$	(3,343	)

The Company estimates that approximately $12.2 million will be reclassified from accumulated other comprehensive income as a reduction to interest expense during the next twelve months.