Abercrombie & Fitch 2009 Annual Report Download - page 46

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Investment Securities
The Company maintains its cash equivalents in financial instruments, primarily money market funds,
with original maturities of 90 days or less. The Company also holds investments in investment grade auction
rate securities (“ARS”) that have maturities ranging from 17 to 33 years. The par and fair values, and related
cumulative impairment charges for the Company’s marketable securities as of January 30, 2010 were as
follows:
Par
Value
Temporary
Impairment
Other-Than-Temporary-
Impairment (“OTTI”)
Fair
Value
(In thousands)
Trading securities:
Auction rate securities —
UBS — student loan
backed ................ $ 22,100 $ — $(2,051) $ 20,049
Auction rate securities —
UBS — municipal authority
bonds ................. 15,000 — (2,693) 12,307
Total trading securities .... 37,100 — (4,744) 32,356
Available-for-sale securities:
Auction rate securities —
student loan backed ...... 128,099 (9,709) — 118,390
Auction rate securities —
municipal authority bonds. . 28,575 (5,171) — 23,404
Total available-for-sale
securities ............ 156,674 (14,880) — 141,794
Total ................. $193,774 $(14,880) $(4,744) $174,150
As of January 30, 2010, approximately 70% of the Company’s ARS were “AAA” rated and approx-
imately 14% of the Company’s ARS were “AA” or “A” rated, with the remaining ARS having an “A⫺”or
“BBB+” rating, in each case as rated by one or more of the major credit rating agencies. The ratings take into
account insurance policies guaranteeing both the principal and accrued interest. Each investment in student
loans is insured by (1) the U.S. government under the Federal Family Education Loan Program, (2) a private
insurer or (3) a combination of both. The percentage coverage of the outstanding principal and interest of the
ARS varies by security. The credit ratings may change over time and would be an indicator of the default risk
associated with the ARS and could have a material effect on the value of the ARS. If the Company expects that
it will not recover the entire cost basis of the available-for-sale ARS, intends to sell the available-for-sale ARS
or it becomes more than likely that the Company will be required to sell the available-for-sale ARS before
recovery of their cost basis, which may be at maturity, the Company may be required to record an other-than-
temporary impairment or additional temporary impairment to write down the assets’ fair value. As of
January 30, 2010, the Company did not incur any credit losses on available-for-sale ARS. Furthermore, as of
January 30, 2010, the issuers continued to perform under the obligations, including making scheduled interest
payments, and the Company expects that this will continue going forward.
45