Abercrombie & Fitch 2010 Annual Report Download - page 58

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Table of Contents
the Company had $306.2 million available, less outstanding letters of credit, under its unsecured Amended Credit Agreement.
Assuming no changes in the Company's financial structure as it stood at January 29, 2011, if market interest rates average an increase
of 100 basis points over the fifty-two week period for Fiscal 2011 compared to the interest rates incurred during the fifty-two week
period ended January 29, 2011, there would be an immaterial change in interest expense. This amount was determined by calculating
the effect of the average hypothetical interest rate increase on the Company's variable rate unsecured Amended Credit Agreement.
This hypothetical increase in interest rate from the fifty-two week period ended January 29, 2011 may be different from the actual
change in interest expense due to varying interest rate reset dates under the Company's unsecured Amended Credit Agreement.
Foreign Exchange Rate Risk
A&F's international subsidiaries generally operate with functional currencies other than the U.S. dollar. The Company's
Consolidated Financial Statements are presented in U.S. dollars. Therefore, the Company must translate revenues, expenses, assets
and liabilities from functional currencies into U.S. dollars at exchange rates in effect during, or at the end of, the reporting period. The
fluctuation in the value of the U.S. dollar against other currencies affects the reported amounts of revenues, expenses, assets and
liabilities.
A&F and its subsidiaries have exposure to changes in currency exchange rates associated with foreign currency transactions and
forecasted foreign currency transactions, including the sale of inventory between subsidiaries and foreign denominated assets and
liabilities. Such transactions are denominated primarily in U.S. dollars, Euros, Canadian Dollars, Japanese Yen, Danish Kroner 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 transactions and forecasted transactions. 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 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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