Abercrombie & Fitch 2009 Annual Report Download - page 67

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(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 par and fair values, and related cumulative impairment charges for the Company’s marketable
securities as of January 30, 2010 were as follows:
(In thousands) Par Value
Temporary
Impairment
Other-Than-Temporary
Impairment (“OTTI”) Fair Value
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
See Note 5, “Fair Value,” for further discussion on the valuation of the ARS.
The temporary impairment related to available-for-sale ARS was reduced by $13.3 million for the fifty-
two weeks ended January 30, 2010 due to redemptions and changes in fair value. An impairment is considered
to be other-than-temporary if an entity (i) intends to sell the security, (ii) more likely than not will be required
to sell the security before recovering its amortized cost basis, or (iii) does not expect to recover the security’s
entire amortized cost basis, even if there is no intent to sell the security. As of January 30, 2010, the Company
had not incurred any credit-related 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.
On November 13, 2008, the Company entered into an agreement (the “UBS Agreement”) with UBS AG
(“UBS”), a Swiss corporation, relating to ARS (“UBS ARS”) with a par value of $76.5 million, of which
$37.1 million, at par value, are still held as of January 30, 2010. By entering into the UBS Agreement, UBS
received the right to purchase these UBS ARS at par, at any time, commencing on November 13, 2008 and the
Company received the right to sell (“Put Option”) the UBS ARS back to UBS at par, commencing on June 30,
2010. Upon acceptance of the UBS Agreement, the Company no longer had the intent to hold the UBS ARS
until maturity. Therefore, the impairment could no longer be considered temporary. As a result, the Company
transferred the UBS ARS from available-for-sale securities to trading securities and recognized an
other-than-temporary impairment of $14.0 million in Other Operating (Income) Expense, Net in the
66
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)