Abercrombie & Fitch 2008 Annual Report Download - page 52

Table of Contents
outstanding letters of credit, under its unsecured credit agreement. Assuming no changes in the
Company’s financial structure, if market interest rates average an increase of 100 basis points over the
next fifty-two week period compared to the interest rates for the fifty-two week period ended January 31,
2009, interest expense for the fifty-two week period ended January 30, 2010 would increase by
approximately $1.0 million. This amount was determined by calculating the effect of the average
hypothetical interest rate increase on the Company’s variable rate unsecured credit agreement. This
hypothetical increase in interest rate for the fifty-two week period ended January 30, 2010 may be
different from the actual increase in interest expense from a 100 basis point increase in interest rates due
to varying interest rate reset dates under the Company’s unsecured credit agreement.
The irrevocable rabbi trust (the “Rabbi Trust”), established by the Company in the third quarter of
Fiscal 2006, is intended to be used as a source of funds to match respective funding obligations to
participants in the Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan (I), the
Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan (II) and the Chief
Executive Officer Supplemental Executive Retirement Plan. As of January 31, 2009, total assets held in
the Rabbi Trust were $51.8 million, which included $18.8 million of available-for-sale municipal notes
and bonds with maturities that ranged from three to five years, trust-owned life insurance policies with a
cash surrender value of $32.5 million and $0.5 million held in money market funds. The Rabbi Trust
assets are consolidated in accordance with Emerging Issues Task Force Issue No. 97-14, “Accounting for
Deferred Compensation Arrangements Where Amounts Earned are Held in a Rabbi Trust and Invested,”
and recorded at fair value, with the exception of the trust-owned life insurance policies which are recorded
at cash surrender value, in other assets on the Consolidated Balance Sheet and are restricted as to their use
as noted above. Net unrealized gains and losses related to the available-for-sale securities held in the
Rabbi Trust were not material for the thirteen and fifty-two week periods ended January 31, 2009 and
February 2, 2008, respectively. The change in cash surrender value of the trust-owned life insurance
policies held in the Rabbi Trust resulted in a realized gain of $0.2 million for the thirteen weeks ended
January 31, 2009 and a realized loss of $3.6 million for the fifty-two weeks ended January 31, 2009,
respectively. The change in cash surrender value of the trust-owned life insurance policies held in the
Rabbi Trust resulted in a realized loss of $0.2 million for the thirteen weeks ended February 2, 2008 and a
realized gain of $1.3 million for the fifty-two weeks ended February 2, 2008, respectively.
The Company has exposure to changes in currency exchange rates associated with foreign currency
transactions, including inter-company transactions. Such foreign currency transactions are denominated in
Euros, Canadian Dollars, Japanese Yen, Danish Krones, Swiss Francs, Hong Kong Dollars and British
Pounds. The Company has established a program that primarily utilizes foreign currency forward
contracts to partially offset the risks associated with the effects of certain foreign currency exposures.
Under this program, increases or decreases in foreign currency exposures are partially offset by gains or
losses on forward contracts, to mitigate the impact of foreign currency transaction gains or losses. The
Company does not use forward contracts to engage in currency speculation. All outstanding foreign
currency forward contracts are recorded at fair value at the end of each fiscal period.
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Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠