The Gap 2014 Annual Report Download - page 62

50
The intangible assets subject to amortization consist of customer relationships and non-compete agreements
related to Athleta and Intermix of $15 million and $3 million, respectively. Athleta's intangible assets subject to
amortization were fully amortized by the end of fiscal 2012. Intermix's non-compete agreements were fully
amortized by the end of fiscal 2013 and its customer relationships are being amortized over a period of four years.
There was no material amortization expense for intangible assets subject to amortization recorded in operating
expenses in the Consolidated Statements of Income for fiscal 2014 and 2013.
Note 5. Long-Term Debt
Long-term debt consists of the following:
($ in millions) January 31,
2015 February 1, 2014
Notes $ 1,247 $ 1,247
Term loan 106 147
Total long-term debt 1,353 1,394
Less: Current portion (21) (25)
Total long-term debt, less current portion $ 1,332 $ 1,369
We have $1.25 billion aggregate principal amount of 5.95 percent notes (the "Notes") due April 2021. Interest is
payable semi-annually on April 12 and October 12 of each year, and 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 January 31,
2015 and February 1, 2014, the estimated fair value of the Notes was $1.44 billion and $1.39 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 ($128 million as of January 31, 2015), four-year,
unsecured term loan ("Japan Term Loan") due January 2018. Repayments of 2.5 billion Japanese yen ($21
million as of January 31, 2015) are payable on January 15 of each year, and commenced 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 the Tokyo Interbank Offered Rate plus a fixed margin. The
average interest rate for fiscal 2014 was 1 percent. The carrying amount of the Japan Term Loan as of
January 31, 2015 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 January 31, 2015, 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 expires in May 2018.
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 January 31, 2015, there were no borrowings and no outstanding standby letters of credit under the
Facility.
As of January 31, 2015, Standard & Poor's, Moody’s, and Fitch rate us at BBB-, Baa3, and BBB-, respectively.
Any future change in the Standard & Poor’s or Moody’s ratings could change any future interest expense if we
were to draw on the Facility.