Abercrombie & Fitch 2009 Annual Report Download - page 77

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primary purposes of the Amended Credit Agreement are for trade and stand-by letters of credit in the ordinary
course of business, as well as to fund working capital, capital expenditures, acquisitions and investments, and
other general corporate purposes.
The Amended Credit Agreement has several borrowing options, including interest rates that are based
on: (i) a Base Rate, plus a margin based on the Leverage Ratio, payable quarterly; (ii) an Adjusted Eurodollar
Rate (as defined in the Amended Credit Agreement) plus a margin based on the Leverage Ratio, payable at the
end of the applicable interest period for the borrowing; or (iii) an Adjusted Foreign Currency Rate (as defined
in the Amended Credit Agreement) plus a margin based on the Coverage Ratio, payable at the end of the
applicable interest period for the borrowing and, for interest periods in excess of three months, on the date that
is three months after the commencement of the interest period. The Base Rate represents a rate per annum
equal to the higher of (a) PNC Bank’s then publicly announced prime rate or (b) the Federal Funds Effective
Rate (as defined in the Amended Credit Agreement) as then in effect plus 1/2 of 1.0%. The facility fees
payable under the Amended Credit Agreement are based on the Company’s Leverage Ratio (i.e., the ratio, on
a consolidated basis, of (a) the sum of total debt (excluding trade letters of credit) plus 600% of forward
minimum rent commitments to (b) consolidated earnings before interest, taxes, depreciation, amortization
and rent with the further adjustments to be discussed in the following paragraphs (“Consolidated EBITDAR”)
for the trailing four-consecutive-fiscal-quarter periods. The facility fees accrue at a rate of 0.25% to 0.625%
per annum based on the Leverage Ratio for the most recent determination date. The Amended Credit
Agreement did not have a utilization fee as of January 30, 2010. The Amended Credit Agreement requires that
the Leverage Ratio not be greater than 3.75 to 1.00 at the end of each testing period. The Company’s Leverage
Ratio was 2.95 as of January 30, 2010. The Amended Credit Agreement also required that the Coverage Ratio
for A&F and its subsidiaries on a consolidated basis of (i) Consolidated EBITDAR for the trailing four-
consecutive-fiscal-quarter period to (ii) the sum of, without duplication, (x) net interest expense for such
period, (y) scheduled payments of long-term debt due within twelve months of the date of determination and
(z) the sum of minimum rent and contingent store rent, not be less than 1.65 to 1.00 at January 30, 2010. The
minimum Coverage Ratio varies over time based on the terms set forth in the Amended Credit Agreement.
The Amended Credit Agreement amended the definition of Consolidated EBITDAR to add back the
following items, among others: (a) recognized losses arising from investments in certain ARS to the extent
such losses do not exceed a defined level of impairments for those investments; (b) non-cash charges in an
amount not to exceed $50 million related to the closure of RUEHL branded stores and related direct-to-con-
sumer operations; (c) non-recurring cash charges in an aggregate amount not to exceed $61 million related to
the closure of RUEHL branded stores and related direct-to-consumer operations; (d) additional non-recurring
non-cash charges in an amount not to exceed $20 million in the aggregate over the trailing four fiscal quarter
period; and (e) other non-recurring cash charges in an amount not to exceed $10 million in the aggregate over
the trailing four fiscal quarter period. The Company’s Coverage Ratio was 2.10 as of January 30, 2010. The
Amended Credit Agreement also limits the Company’s consolidated capital expenditures to $275 million in
Fiscal 2009, and to $325 million in Fiscal 2010 plus any unused portion from Fiscal 2009. The Company was
in compliance with the applicable ratio requirements and other covenants at January 30, 2010.
The terms of the Amended Credit Agreement include customary events of default such as payment
defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency, the occurrence of a
defined change in control, or the failure to observe the negative covenants and other covenants related to the
76
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)