Banana Republic 2012 Annual Report Download - page 67

49
Trade letters of credit represent a payment undertaking guaranteed by a bank on our behalf to pay a vendor a given
amount of money upon presentation of specific documents demonstrating that merchandise has shipped. Vendor
payables are recorded in the Consolidated Balance Sheets at the time of merchandise title transfer, although the letters of
credit are generally issued prior to the title transfer. As of February 2, 2013, we had a $50 million, two-year, unsecured
letter of credit agreement with an expiration date of September 2014. As of February 2, 2013, we had no material trade
letters of credit issued under this letter of credit agreement.
The Facility and letter of credit agreement contain financial and other covenants including, but not limited to, limitations on
liens and subsidiary debt, as well as the maintenance of two financial ratios—a minimum annual fixed charge coverage
ratio of 2.00 and a maximum annual leverage ratio of 2.25. As of February 2, 2013, we were in compliance with all such
covenants. Violation of these covenants could result in a default under the Facility and letter of credit agreement, which
would permit the participating banks to terminate our ability to access the Facility for letters of credit and advances,
terminate our ability to request letters of credit under the letter of credit agreement, require the immediate repayment of
any outstanding advances under the Facility, and require the immediate posting of cash collateral in support of any
outstanding letters of credit under the letter of credit agreement.
Note 7. Fair Value Measurements
There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during fiscal 2012
or 2011. There were no transfers into or out of level 1 and level 2 during fiscal 2012 or 2011.
Financial Assets and Liabilities
Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents and short-term
investments held at amortized cost are as follows:
Fair Value Measurements at Reporting Date Using
($ in millions) February 2, 2013
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents $ 518 $ 189 $ 329 $ —
Short-term investments 50 — 50 —
Derivative financial instruments 51 — 51 —
Deferred compensation plan assets 27 27 — —
Total $ 646 $ 216 $ 430 $ —
Liabilities:
Derivative financial instruments $ 14 $ — $ 14 $ —
Fair Value Measurements at Reporting Date Using
($ in millions) January 28, 2012
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Cash equivalents $ 1,009 $ 224 $ 785 $ —
Short-term investments — — — —
Derivative financial instruments 13 — 13 —
Deferred compensation plan assets 22 22 — —
Total $ 1,044 $ 246 $ 798 $ —
Liabilities:
Derivative financial instruments $ 14 $ — $ 14 $ —
We have highly liquid investments classified as cash equivalents and short-term investments, which are placed primarily
in money market funds, time deposits, and commercial paper. These investments are classified as held-to-maturity based
on our positive intent and ability to hold the securities to maturity. We value these investments at their original purchase
prices plus interest that has accrued at the stated rate.
Table of Contents