Abercrombie & Fitch 2010 Annual Report Download - page 88

Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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 operation and conduct of the business of A&F and its subsidiaries. Upon an
event of default, the lenders will not be obligated to make loans or other extensions of credit and may, among other things, terminate
their commitments to the Company, and declare any then outstanding loans due and payable immediately.
The Amended Credit Agreement will mature on April 12, 2013. There were no trade letters of credit outstanding at January 29,
2011. Trade letters of credit totaling approximately $35.9 million were outstanding on January 30, 2010. Stand-by letters of credit
totaling approximately $3.0 million and $14.1 million were outstanding on January 29, 2011 and January 30, 2010, respectively. The
stand-by letters of credit are set to expire primarily during the third quarter of Fiscal 2011. To date, no beneficiary has drawn upon the
stand-by letters of credit.
The Company had $43.8 million and $50.9 million outstanding under the Amended Credit Agreement as of January 29, 2011,
and January 30, 2010, respectively. The amounts outstanding under the Amended Credit Agreement as of January 29, 2011 and
January 30, 2010 were denominated in Japanese Yen. As of January 29, 2011 and January 30, 2010, the Company also had
$24.8 million and $20.3 million, respectively, of long-term debt related to the landlord financing obligation for certain leases where
the Company is deemed the owner of the project for accounting purposes, as substantially all of the risk of ownership during
construction of a leased property is held by the Company. The landlord financing obligation is amortized over the life of the related
lease.
As of January 29, 2011, the carrying value of the Company's long-term debt approximated fair value. Total interest expense was
$7.8 million, $6.6 million and $3.4 million for Fiscal 2010, Fiscal 2009 and Fiscal 2008, respectively. The average interest rate for the
long-term debt recorded under the Amended Credit Agreement was 2.7% for the fifty-two weeks ended January 29, 2011.
On March 6, 2009, the Company entered a secured, uncommitted demand line of credit (the "UBS Credit Line"). The amount
available under the UBS Credit Line was subject to adjustment from time-to-time based on the market value of the Company's UBS
ARS as determined by UBS. As a result of UBS acquiring the remaining UBS ARS originally purchased by the Company through
UBS and described further in Note 5, "Investments", the UBS Credit Line was terminated during the fifty-two weeks ended
January 29, 2011.
15. DERIVATIVES
The Company is exposed to risks associated with changes in foreign currency exchange rates and uses derivatives, primarily
forward contracts, to manage the financial impacts of these exposures. The Company does not use forward contracts to engage in
currency speculation and does not enter into derivative financial instruments for trading purposes.
In order to qualify for hedge accounting treatment, a derivative must be considered highly effective at offsetting changes in either
the hedged item's cash flows or fair value. Additionally, the hedge relationship must be documented to include the risk management
objective and strategy, the hedging instrument, the hedged item, the risk exposure, and how hedge effectiveness will be assessed
prospectively and
85