Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates. We do not hold or issue financial instruments for trading purposes.

Interest rate sensitivity

We are exposed to interest rate risks primarily through borrowing under our credit facility. Interest on our borrowings is based upon variable rates. On January 31, 2007, we entered into an interest rate swap agreement with a notional amount of $25,000 that qualified as a cash flow hedge to obtain a fixed interest rate on variable rate debt and reduce certain exposures to interest rate fluctuations. The swap resulted in fixed rate payments at an interest rate of 5.11% for a term of three years, ending on January 31, 2010.

As of January 30, 2010 and January 31, 2009, the interest rate swap had a negative fair value of zero and $1.0 million, respectively, and is included in accrued liabilities. The change in market value during fiscal 2009 and 2008 related to the effective portion of the cash flow hedge was recorded as an unrecognized gain or loss

in the accumulated other comprehensive loss section of stockholders’ equity in the balance sheets. Amounts related to any ineffectiveness, which are insignificant, are recorded as interest expense.

Our weighted average debt for fiscal 2009 was $37.6 million, adjusted to exclude the $25.0 million hedged amount. A hypothetical 1% increase or decrease in interest rates would have resulted in a $0.4 million change to our interest expense for fiscal 2009.