Abercrombie & Fitch 2010 Annual Report Download - page 57

Table of Contents
As of January 29, 2011, approximately 73% of the Company's ARS were "AAA" rated, approximately 12% of the Company's
ARS were "AA" rated, and approximately 15% were "A−" rated, 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. The Company has not incurred any credit losses
on available-for-sale ARS, and furthermore, the issuers continued to perform under the obligations, including making scheduled
interest payments, and the Company expects that this will continue in the future.
The irrevocable rabbi trust (the "Rabbi Trust") is intended to be used as a source of funds to match respective funding obligations
to participants in the Abercrombie & Fitch Co. Nonqualified Savings and Supplemental Retirement Plan I, the Abercrombie & Fitch
Co. Nonqualified Savings and Supplemental Retirement Plan II and the Chief Executive Officer Supplemental Executive Retirement
Plan. As of January 29, 2011, total assets held in the Rabbi Trust were $82.5 million, which included $11.9 million of municipal notes
and bonds with maturities that ranged from 11 months to three years, trust-owned life insurance policies with a cash surrender value of
$70.3 million and $0.3 million held in money market funds. The Rabbi Trust assets are consolidated 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 or losses related to the municipal notes and bonds
held in the Rabbi Trust were not material for the fifty-two weeks ended January 29, 2011 and January 30, 2010. The change in cash
surrender value of the trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $2.3 million and
$5.3 million for the fifty-two weeks ended January 29, 2011 and January 30, 2010, respectively.
Interest Rate Risks
As of January 29, 2011, the Company had $43.8 million in long-term debt outstanding under the unsecured Amended Credit
Agreement. This borrowing and any future borrowings will bear interest at negotiated rates and would be subject to interest rate risk.
The unsecured Amended Credit Agreement has several borrowing options, including interest rates that are based on: (i) a defined Base
Rate, plus a margin based on a defined Leverage Ratio, payable quarterly; (ii) an Adjusted Eurodollar Rate (as defined in the
unsecured Amended Credit Agreement) plus a margin based on the Leverage 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; or (iii) an Adjusted Foreign Currency 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 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
unsecured Amended Credit Agreement) as then in effect plus 1/2 of 1.0%. The average interest rate was 2.7% for the fifty-two weeks
ended January 29, 2011. Additionally, as of January 29, 2011,
54