Item 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our quantitative and qualitative market risks since August 02, 2024. For a discussion of the Company’s exposure to market risk, refer to the Company’s market risk disclosures set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” of the 2024 Form 10-K.
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Interest Rate Risk . We have interest rate risk relative to our outstanding borrowings under our revolving credit facility. At November 01, 2024, our outstanding borrowings totaled $230,000 under our 2022 Revolving Credit Facility (see Note 4 to the Condensed Consolidated Financial Statements). In accordance with the 2022 Revolving Credit Facility, outstanding borrowings bear interest, at our election, either at (1) the Term Secured Overnight Financing Rate (SOFR) or (2) a base rate equal to the greatest of (i) the prime rate, (ii) a rate that is 0.5% in excess of the Federal Funds Rate, and (iii) Term SOFR plus 1.0%, in each case plus an applicable margin based on the Company’s consolidated total leverage ratio. Our policy has been to manage interest cost using a mix of fixed and variable rate debt (see Note 4 to our Condensed Consolidated Financial Statements). Additionally, the Notes bear interest at a fixed rate of 0.625% per annum.
The impact of a one-percentage point increase or decrease in the $230,000 of our outstanding borrowings under our revolving credit facility is approximately $2,326 on a pre-tax annualized basis.
Credit Risk. In the fourth quarter of 2021, the Company issued the Notes and entered into the Convertible Note Hedge Transactions and the Warrant Transactions with the Hedge Counterparties. Subject to the changes in the market price of the Company’s common stock price, the Company could be exposed to credit risk arising out of the net settlement of the Convertible Note Hedge Transactions and the Warrant Transactions in its favor. Based on the Company’s review of the possible net settlements and the creditworthiness of the Hedge Counterparties and their affiliates, the Company believes it does not have a material exposure to credit risk as a result of these transactions at this time.
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