Abercrombie & Fitch 2015 Annual Report Download - page 39

Table of Contents
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The Rabbi Trust assets are included in other assets on the Consolidated Balance Sheets as of January 30, 2016 and January 31,
2015, and are restricted in their use as noted above.
Interest Rate Risks
The Company has approximately $293.3 million in gross borrowings outstanding under its term loan facility (the "Term Loan
Facility") and no borrowings outstanding under its senior secured revolving credit facility (the "ABL Facility" and, together with
the Term Loan Facility, the "2014 Credit Facilities"). The 2014 Credit Facilities carry interest rates that are tied to LIBOR, or an
alternate base rate, plus a margin. The interest rate on the Term Loan Facility has a 100 basis point LIBOR floor, and assuming
no changes in the Company’s financial structure as it stands, an increase in market interest rates of 100 basis points would have
an effect on annual interest expense of approximately $1.9 million. This hypothetical analysis for Fiscal 2015 may differ from the
actual change in interest expense due to various conditions which may result in changes in interest rates under the Company’s
2014 Credit Facilities.
Foreign Exchange Rate Risk
A&F’s international subsidiaries generally operate with functional currencies other than the U.S. Dollar. Since the Company’s
Consolidated Financial Statements are presented in U.S. Dollars, 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. The potential impact of currency fluctuation increases as international expansion increases.
A&F and its subsidiaries have exposure to changes in foreign currency exchange rates associated with foreign currency transactions
and forecasted foreign currency transactions, including the sale of inventory between subsidiaries and foreign currency denominated
assets and liabilities. 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.
The fair value of outstanding foreign currency exchange forward contracts included in other current assets was $4.2 million and
$10.3 million as of January 30, 2016 and January 31, 2015, respectively. The fair value of outstanding foreign currency exchange
forward contracts included in other liabilities was insignificant as of January 30, 2016 and January 31, 2015. Foreign currency
exchange forward contracts are sensitive to changes in foreign currency exchange rates. The Company assessed the risk of loss
in fair values from the effect of a hypothetical 10% devaluation of the U.S. Dollar against the exchange rates for foreign currencies
under contract. The results would decrease derivative contract fair values by approximately $13.0 million. As the Company's
foreign currency exchange forward contracts are primarily designated as cash flow hedges of forecasted transactions, the
hypothetical change in fair value would be largely offset by the net change in fair values of the underlying hedged items.