Banana Republic 2014 Annual Report Download - page 43

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31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Derivative Financial Instruments
Certain financial information about the Company's derivative financial instruments is set forth under the heading
"Derivative Financial Instruments" in Note 8 of Notes to Consolidated Financial Statements included in Part II,
Item 8 of this Form 10-K.
We have performed a sensitivity analysis as of January 31, 2015 based on a model that measures the impact of a
hypothetical 10 percent adverse change in foreign currency exchange rates to U.S. dollars (with all other
variables held constant) on our underlying estimated major foreign currency exposures, net of derivative financial
instruments. The foreign currency exchange rates used in the model were based on the spot rates in effect as of
January 31, 2015. The sensitivity analysis indicated that a hypothetical 10 percent adverse movement in foreign
currency exchange rates would have an unfavorable impact on the underlying cash flow exposure, net of our
foreign exchange derivative financial instruments, of $31 million as of January 31, 2015.
Long-Term Debt
Certain financial information about the Company's long-term debt is set forth under the heading "Long-Term Debt"
in Note 5 of Notes to Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
Our $1.25 billion aggregate principal amount of 5.95 percent notes due April 2021 are not subject to interest rate
risk as they have a fixed interest rate.
Our interest rate risk associated with a 15 billion Japanese yen ($128 million as of January 31, 2015), four-year,
unsecured term loan as of January 31, 2015 is as follows:
Expected Maturity Date (Fiscal Year)
(¥ in billions) 2015 2016 2017 2018 Total Fair Value (1)
Principal payments ¥ 2.5 ¥ 2.5 ¥ 7.5 ¥ — ¥ 12.5 ¥ 12.5
Average interest rate (2) 1% 1% 1% —% 1%
__________
(1) The carrying amount of the Japan Term Loan approximates its fair value as the interest rate varies depending on market rates.
(2) The average interest rate for all periods presented was calculated based on the Tokyo Interbank Offered Rate plus a fixed margin as of
January 31, 2015. As the interest rate for the term loan is variable, it is subject to change for all periods presented.
Cash Equivalents
We have highly liquid fixed and variable income investments classified as cash equivalents, 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. The value of our investments is
not subject to material interest rate risk. However, changes in interest rates would impact the interest income
derived from our investments. We earned interest income of $5 million in fiscal 2014.