The Gap 2013 Annual Report Download - page 76

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There was no material amortization expense for intangible assets subject to amortization recorded in operating
expenses in the Consolidated Statements of Income for fiscal 2013, 2012, and 2011.
Note 5. Long-Term Debt
Long-term debt consists of the following:
($ in millions) February 1,
2014 February 2, 2013
Notes $ 1,247 $ 1,246
Term loan 147 —
Total long-term debt 1,394 1,246
Less: Current portion (25) —
Total long-term debt, less current portion $ 1,369 $ 1,246
In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent Notes due April 2021 and
received proceeds of $1.24 billion in cash, net of underwriting and other fees of $11 million. Interest is payable
semi-annually on April 12 and October 12 of each year and commenced on October 12, 2011. We have an option
to call the Notes in whole or in part at any time, subject to a make-whole premium. The Notes agreement is
unsecured and does not contain any financial covenants. The amount recorded in long-term debt in the
Consolidated Balance Sheets for the Notes is equal to the aggregate principal amount of the Notes, net of the
unamortized discount. As of February 1, 2014 and February 2, 2013, the estimated fair value of the Notes was
$1.39 billion and $1.41 billion, respectively, and was based on the quoted market price of the Notes (level 1
inputs) as of the last business day of the respective fiscal year.
In January 2014, we entered into a 15 billion Japanese yen ($147 million as of February 1, 2014), four-year,
unsecured Japan Term Loan due January 2018. Repayments of 2.5 billion Japanese yen ($25 million as of
February 1, 2014) are payable on January 15 of each year, commencing on January 15, 2015, with a final
repayment of 7.5 billion Japanese yen due on January 15, 2018. In addition, interest is payable at least quarterly
based on an interest rate equal to TIBOR plus a fixed margin. The average interest rate for fiscal 2013 was 1
percent. The carrying amount of the Japan Term Loan as of February 1, 2014 approximated its fair value, as the
interest rate varies depending on quoted market rates (level 1 inputs). The Japan Term Loan agreement contains
certain requirements, including that the covenants in our $500 million, five-year, unsecured revolving credit facility
are upheld. As of February 1, 2014, we were in compliance with all such covenants. Violation of these covenants
would result in a default under the Japan Term Loan agreement, which, at the bank's discretion, could require the
immediate repayment of outstanding amounts.
Note 6. Credit Facilities
We have a $500 million, five-year, unsecured revolving credit facility (the "Facility"), which was set to expire in
April 2016. On May 1, 2013, the Facility was amended to extend the expiration date to May 2018 and to improve
the pricing structure. The Facility is available for general corporate purposes including working capital, trade
letters of credit, and standby letters of credit. The Facility fees fluctuate based on our long-term senior unsecured
credit ratings and our leverage ratio. If we were to draw on the Facility, interest would be a base rate (typically
LIBOR) plus a margin based on our long-term senior unsecured credit ratings and our leverage ratio on the
unpaid principal amount. To maintain availability of funds under the Facility, we pay a facility fee on the full facility
amount, regardless of usage. As of February 1, 2014, there were no borrowings under the Facility. The net
availability of the Facility, reflecting $23 million of outstanding standby letters of credit, was $477 million as of
February 1, 2014.
In conjunction with our financings in April 2011 as discussed in Note 5 of Notes to Consolidated Financial
Statements, we obtained long-term senior unsecured credit ratings from Moody’s and Fitch. Moody’s assigned a
rating of Baa3, and Fitch assigned a rating of BBB-. In fiscal 2013, Standard & Poor’s raised its rating of us to
BBB- from BB+. As of February 1, 2014, there were no updates in these credit ratings. Any future change in the
Moody’s or Standard & Poor’s ratings would change any future interest expense if we were to draw on the Facility.