Abercrombie & Fitch 2010 Annual Report Download - page 87

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Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Agreement and, as a result, revised the ratio requirements, as further discussed below, and also reduced the amount available from
$450 million to $350 million (as amended, the "Amended Credit Agreement"). As stated in the Amended Credit Agreement, the
primary purposes of the 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 defined Base
Rate, plus a margin based on the defined 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 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
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 29, 2011.
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 2.43 as of January 29, 2011. 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 1.75 to 1.00 at January 29, 2011. 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-consumer 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-consecutive-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-
consecutive-fiscal-quarter period. The Company's Coverage Ratio was 2.51 as of January 29, 2011. The Amended Credit Agreement
also limited the Company's consolidated capital expenditures to $325 million in Fiscal 2010, plus $99.5 million representing the
unused portion of the allowable capital expenditures from Fiscal 2009. The Company was in compliance with the applicable ratio
requirements and other covenants at January 29, 2011.
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