Abercrombie & Fitch 2011 Annual Report Download - page 61

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Investment Securities
The Company maintains its cash equivalents in financial instruments, primarily money market funds
and United States treasury bills, with original maturities of three months or less.
The Company also holds investments in investment grade auction rate securities (“ARS”) that have
maturities ranging from 16 to 31 years. The par and carrying values, and related cumulative other-than-
temporary impairment charges for the Company’s available-for-sale marketable securities as of January 28,
2012 were as follows:
Par
Value
Other-than-
Temporary
Impairment
Carrying
Value
(in thousands)
Available-for-sale securities:
Auction rate securities — student loan backed ........ $ 92,975 $ (8,325) $84,650
Auction rate securities — municipal authority bonds . . . 19,975 (5,117) 14,858
Total available-for-sale securities ................ $112,950 $(13,442) $99,508
As of January 28, 2012, approximately 46% of the Company’s ARS were “AAA” rated, approximately
16% of the Company’s ARS were “AA” rated, and approximately 38% of the Company’s ARS 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 of insurance 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.
During the fifty-two weeks ended January 28, 2012, the Company changed its intent regarding the sale
of its ARS, resulting in recognition of an other-than-temporary impairment of $13.4 million recognized in
other expense.
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 28, 2012, total assets held in the Rabbi Trust were $85.1 million and related to trust-owned life
insurance policies with a cash surrender value of $85.1 million and an immaterial amount of assets held in
money market funds. The trust-owned life insurance policies 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 realized and
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 28, 2012 and January 29, 2011. The change in cash surrender value of
the trust-owned life insurance policies held in the Rabbi Trust resulted in realized gains of $2.5 million and
$2.3 million for the fifty-two weeks ended January 28, 2012 and January 29, 2011, respectively.
Interest Rate Risks
As of January 28, 2012, the Company had no long-term debt outstanding under the Amended and
Restated Credit Agreement.
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