FORM 10-K
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to __________
Commission file number 1-12107
Delaware 31-1469076
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6301 Fitch Path, New Albany, Ohio 43054
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(Address of principal executive offices) (Zip Code)
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Class A Common Stock, $.01 Par Value New York Stock Exchange, Inc. Series A Participating Cumulative Preferred Stock Purchase Rights New York Stock Exchange, Inc. |
Securities registered pursuant to Section 12(g) of the Act: None.
DOCUMENT INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on May 22, 2003 are incorporated by reference into
Part III of this Annual Report on Form 10-K.
PART I
ITEM 1. BUSINESS.
GENERAL.
Abercrombie & Fitch Co., a Delaware corporation ("A&F"), through its subsidiaries (collectively, A&F and its subsidiaries are referred to as "Abercrombie & Fitch" or the "Company"), is a specialty retailer which operates stores selling casual apparel, personal care and other accessories for men, women and kids under the Abercrombie & Fitch, abercrombie and Hollister Co. brands. As of February 1, 2003, the Company operated 597 stores in the United States.
A&F's Internet Web site is www.abercrombie.com (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate A&F's Web site into this Annual Report on Form 10-K). Since November 15, 2002, A&F has made available free of charge, on its Web site, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after A&F electronically files such material with, or furnishes it to, the Securities and Exchange Commission.
DESCRIPTION OF OPERATIONS.
General.
The Abercrombie & Fitch brand was established in 1892 and became well known as a supplier of rugged, high-quality outdoor gear. Famous for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the expeditions of Admiral Byrd to the North and South Poles, Abercrombie & Fitch goods were renowned for their durability and dependability - and Abercrombie & Fitch placed a premium on complete customer satisfaction with each item sold. In 1992, a new management team began repositioning Abercrombie & Fitch as a more fashion-oriented casual apparel business directed at men and women with a youthful lifestyle, targeted at 18 to 22-year-old college students. In reestablishing the Abercrombie & Fitch brand, the Company combined its historical image for quality with a new emphasis on casual American style and youthfulness.
In 1997, the Company introduced the A&F Quarterly (a catalogue/magazine), which is a lifestyle magazine focused on the college experience, and subsequently added a catalogue format. The Company launched a web-based store featuring lifestyle pieces, such as AFTV, located at its Internet Web site, www.abercrombie.com, in 1998. Products comparable to those carried at Abercrombie & Fitch stores can be purchased through the Quarterly, the catalogue, and on its Web site.
The Company launched abercrombie, which targets 7 to 14-year-old boys and girls, in 1998. These stores offer fashion-oriented casual apparel in the tradition of Abercrombie & Fitch style and quality. A lifestyle web-based store located at www.abercrombiekids.com (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate the Web site into this Annual Report on Form 10-K) was introduced in 2000, where products comparable to those carried at abercrombie can be purchased on-line.
The Hollister Co. brand was launched in 2000. Hollister Co. is a West Coast oriented lifestyle brand targeted at 14 to 17-year-old high school guys and girls, at lower price points than Abercrombie & Fitch. Hollister Co. has established a lifestyle Internet Web site at www.hollisterco.com (this uniform resource locator, or URL, is an inactive textual reference only and is not intended to incorporate the Web site into this Annual Report on Form
10-K) but, as yet, no merchandise is available through the Web site. Merchandise is planned to be available by July 2003.
At the end of fiscal year 2002, the Company operated 597 stores. The following table shows the changes in the number of retail stores operated by the Company for the past five fiscal years:
Fiscal Beginning Year of Year Opened Closed End of Year ---- ------- ------ ------ ----------- 1998 156 41 (1) 196 1999 196 54 - 250 2000 250 104 - 354 2001 354 138 (1) 491 2002 491 112 (6) 597 |
Financial Information about Segments.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related Information," the Company determined its operating segments on the same basis that is used internally to evaluate performance and allocate resources. The operating segments identified by the Company, Abercrombie & Fitch, abercrombie and Hollister Co., have been aggregated and are reported as one reportable segment. The Company aggregates the operating segments because they meet the aggregation criteria set forth in SFAS No. 131. Operating segments may be aggregated if they are similar in each of the following areas: economic characteristics, nature of products, nature of production processes, distribution method and nature of regulatory environment.
Further information on the reportable segment and operating segments of the Company may be found in ITEM 7-Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report on Form 10-K.
Suppliers.
During fiscal year 2002, the Company purchased merchandise from approximately 186 suppliers and factories located throughout the world. In fiscal year 2002, the Company sourced approximately 9% of its apparel through Koos Manufacturing, 8% through Direct Source Industries and 6% through Wooliston Garment, Inc. In addition to purchases from Koos Manufacturing, Direct Source Industries and Wooliston Garment, Inc., the Company purchased merchandise directly in foreign markets with other vendors. Additional merchandise was purchased in the domestic market, some of which is manufactured overseas. Excluding purchases from Koos Manufacturing, Direct Source Industries and Wooliston Garment, Inc., no more than 5% of the merchandise purchased by the Company originated from any single manufacturer. The Company pursues a global sourcing strategy that includes relationships with vendors in over 40 countries. Any event causing a sudden disruption in these sourcing operations, either political or financial, could have an adverse effect on the Company's operations. Substantially all of the Company's foreign purchases of merchandise are negotiated and paid for in U.S. dollars.
Distribution and Merchandise Inventory.
Most of the merchandise and related materials for the Company's stores are shipped to its distribution center in New Albany, Ohio where the merchandise is received and inspected. Merchandise and related materials are distributed to the Company's stores using contract carriers.
The Company's policy is to maintain sufficient quantities of inventory on hand in its retail stores and distribution center so that it can offer customers a full selection of current merchandise. The Company emphasizes rapid turnover and takes markdowns where required to keep merchandise fresh and current with fashion trends.
Seasonal Business.
The Company views the retail apparel market as having two principal selling seasons, Spring and Fall. As is generally the case in the apparel industry, the Company experiences its peak sales activity during the Fall season. This seasonal sales pattern results in increased inventory during the back-to-school and Christmas selling periods. During fiscal year 2002, the highest inventory level approximated $221.5 million at the November 2002 month-end and the lowest inventory level approximated $132.2 million at the February 2002 month-end.
Store Operations and Expansion.
The Company's stores and point-of-sale marketing are designed to convey the principal elements and personality of each brand. The store design, furniture, fixtures and music are all carefully planned and coordinated to create a shopping experience that is consistent with the Abercrombie & Fitch, abercrombie or Hollister lifestyle.
The Company's sales associates, or brand representatives, are a central element in creating the entertaining, yet comfortable, atmosphere of the stores. In addition to providing a high level of customer service, the brand representatives reflect the casual, energetic attitude of the brand and culture.
The Company maintains a uniform appearance throughout its store base, for each concept, in terms of merchandise display and location on the selling floor. Store managers receive detailed store plans that dictate fixture and merchandise placement to ensure uniform execution of the merchandising strategy at the store level. Standardization, by concept, of store design and merchandise presentation also creates a cost savings in store furnishings, maximizes usage and productivity of selling space and allows the Company to efficiently open new stores.
Trademarks.
The Abercrombie & Fitch, abercrombie and Hollister Co. trademarks, and certain other trademarks, either have been registered or are the subject of pending trademark applications with the United States Patent and Trademark Office and with registries of many foreign countries. The Company believes that its products are identified by its trademarks and, thus, its trademarks are of significant value. Each registered trademark has a duration of 20 years and is subject to an indefinite number of renewals for a like period upon appropriate application. The Company intends to continue the use of each of its trademarks and to renew each of its registered trademarks.
Other Information.
Additional information about the Company's business, including its revenues and profits for the last three years, plus gross square footage is set forth under the caption ITEM 7-Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report on Form 10-K.
COMPETITION.
The sale of apparel and personal care products through retail stores, catalogues and e-commerce is a highly competitive business with numerous competitors, including individual and chain fashion specialty stores and department stores. Fashion, price, service, store location, selection and quality are the principal competitive factors in retail store sales and on-line sales.
The Company is unable to estimate the number of competitors or its relative competitive position due to the large number of companies selling apparel and personal care products through retail stores, catalogues and e-commerce.
ASSOCIATE RELATIONS.
On March 28, 2003, the Company employed approximately 22,000 associates (none of whom were party to a collective bargaining agreement), approximately 18,700 of whom were part-time. In addition, temporary associates are hired during peak periods, such as the Holiday season.
The Company believes its relationship with associates is good.
ITEM 2. PROPERTIES.
The Company's headquarters and support functions (consisting of office, distribution and shipping facilities) are located in New Albany, Ohio and owned by the Company.
All of the retail stores operated by the Company are located in leased facilities, primarily in shopping centers throughout the continental United States. The leases expire at various dates principally between 2003 and 2015.
Typically, when space is leased for a retail store in a shopping center, all improvements, including interior walls, floors, ceilings, fixtures and decorations, are supplied by the tenant. In certain cases, the landlord of the property may provide a construction allowance to fund all or a portion of the cost of improvements. The cost of improvements varies widely, depending on the size and location of the store. Rental terms for new locations usually include a fixed minimum rent plus a percentage of sales in excess of a specified amount. Certain operating costs such as common area maintenance, utilities, insurance and taxes are typically paid by the tenant.
As of February 1, 2003, the Company's 597 stores were located in 48 states and the District of Columbia as follows:
Alabama - 13 Hawaii - 1 Massachusetts - 18 New Mexico - 2 South Dakota - 1 Arizona - 11 Idaho - 1 Michigan - 24 New York - 33 Tennessee - 15 Arkansas - 4 Illinois - 33 Minnesota - 11 North Carolina - 20 Texas - 43 California - 53 Indiana - 19 Mississippi - 5 North Dakota - 1 Utah - 4 Colorado - 11 Iowa - 3 Missouri - 15 Ohio - 30 Vermont - 2 Connecticut - 11 Kansas - 7 Montana - 2 Oklahoma - 8 Virginia - 15 Delaware - 1 Kentucky - 10 Nebraska - 4 Oregon - 4 Washington - 15 District of Columbia - 2 Louisiana - 11 Nevada - 4 Pennsylvania - 27 West Virginia - 1 Florida - 26 Maine - 3 New Hampshire - 4 Rhode Island - 3 Wisconsin - 13 Georgia - 22 Maryland - 7 New Jersey - 18 South Carolina - 6 |
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in lawsuits arising in the ordinary course of business.
On January 13, 1999, a complaint was filed against many national retailers in the United States District Court for the Central District of California. The complaint (1) purported to be filed on behalf of a class of unnamed garment workers, (2) related to labor practices allegedly employed on the island of Saipan, Commonwealth of the Northern Mariana Islands, by apparel manufacturers unrelated to the Company, some of which have sold goods to the Company, and (3) sought injunctive, unspecified monetary and other relief. On September 29, 1999, the action was transferred to the United States District Court for the District of Hawaii. Thereafter, the plaintiffs moved for leave to amend their complaint to add A&F and others as additional defendants. That motion was granted and, on April 28, 2000, an amended complaint was filed which added A&F and others as defendants, but did not otherwise substantively alter either the claims alleged or the relief sought by the plaintiffs. A&F joined with other retailer defendants in moving to dismiss the amended complaint. Certain of the other defendants also moved to transfer the action to Saipan. On June 23, 2000, the District Court of Hawaii ordered the case to be transferred to the United States District Court for the District of the Northern Mariana Islands. Plaintiffs filed a Petition for Writ of Mandamus challenging the transfer and on March 22, 2001, the Ninth Circuit Court of Appeals issued an order denying the Petition for Writ of Mandamus, thus allowing the case to be transferred to the United States District Court for the Northern Mariana Islands. The defendants' motion to dismiss the first amended complaint for failure to state a claim upon which relief can be granted was denied in part and granted in part on November 26, 2001. As to the partial granting of the motion, the Court also granted the plaintiffs leave to amend to cure any pleading defects in a second amended complaint. Plaintiffs filed their motion for class certification on December 13, 2001 and their second amended complaint, which added neither new parties nor claims but realleged claims previously dismissed, on December 17, 2001. The motion for class certification was heard on February 14, 2002. The motion for preliminary approval of settlement as to certain other retailer defendants was also heard the same date. A motion to dismiss the second amended complaint was heard on March 19, 2002. On May 10, 2002, the Court granted in part and denied in part the motion to dismiss the second amended complaint as to the remaining RICO claim and granted the motion to dismiss the second amended complaint as to the Common Law Peonage claim, the Anti-Peonage statutory claim, and the Alien Tort Claims Act claim. Plaintiffs were given leave to file a third amended complaint. The motions for class certification and preliminary approval of settlement as to certain other retailer defendants were also granted. A third amended complaint was filed on July 25, 2002. This case was recently submitted to the Court for approval of a settlement that includes A&F. The settlement does not involve any admission of wrongdoing and involves no payment by A&F. Conditional approval was granted on October 31,
2002 and the fairness hearing was on March 22, 2003. There has been no ruling on the fairness hearing as of the date of this Annual Report on Form 10-K.
A&F is aware of 20 actions that have been filed against A&F and certain of its officers and directors on behalf of a purported, but as yet uncertified, class of shareholders who purchased A&F's Class A Common Stock between October 8, 1999 and October 13, 1999. These 20 actions have been filed in the United States District Courts for the Southern District of New York and the Southern District of Ohio, Eastern Division alleging violations of the federal securities laws and seeking unspecified damages. On April 12, 2000, the Judicial Panel on Multidistrict Litigation issued a Transfer Order transferring the 20 pending actions to the Southern District of New York for consolidated pretrial proceedings under the caption In re Abercrombie & Fitch Securities Litigation. On November 16, 2000, the Court signed an Order appointing the Hicks Group, a group of seven unrelated investors in A&F's securities, as lead plaintiff, and appointing lead counsel in the consolidated action. On December 14, 2000, plaintiffs filed a Consolidated Amended Class Action Complaint (the "Amended Complaint") in which they did not name as defendants Lazard Freres & Co. and Todd Slater, who had formerly been named as defendants in certain of the 20 complaints. A&F and other defendants filed motions to dismiss the Amended Complaint on February 14, 2001.
A&F is aware of three actions that have been filed where a purported class of employees and former employees of the Company allege that the Company required its associates to wear a "uniform" which in two of the three actions is allegedly in violation of California law. These two complaints were served on February 4, 2003 and February 10, 2003 in the Superior Courts of San Francisco County and Los Angeles County, respectively. In the third action, which was filed in the United States District Court for the Western District of Pennsylvania on March 14, 2003, the "uniform," which when purchased, allegedly drove associates' wages below the federal minimum wage. In each claim, the plaintiff, on behalf of his or her class, seeks injunctive relief and economic, liquidated damages in an unspecified amount.
A&F believes that the actions against it are without merit and intends to defend vigorously against them. However, A&F does not believe it is feasible to predict the outcome of these proceedings. The timing of the final resolution of these proceedings is also uncertain.
In addition, the United States Securities and Exchange Commission (the "SEC") initiated a formal investigation regarding trading in the securities of A&F and the disclosure of sales forecasts in October 1999, and the Ohio Division of Securities requested information from A&F regarding these same matters. A&F was notified on April 3, 2003 that the SEC investigation has been terminated and no enforcement action has been recommended.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding the executive officers of A&F as of March 27, 2003.
Michael S. Jeffries, 58, has been Chairman and Chief Executive Officer of A&F since May 1998. From February 1992 to May 1998, Mr. Jeffries held the position of President and Chief Executive Officer of A&F. Mr. Jeffries has also been a director of A&F since 1996.
Seth R. Johnson, 49, has been Executive Vice President-Chief Operating Officer of A&F since February 2000. Prior thereto, Mr. Johnson had been Vice President-Chief Financial Officer of A&F since 1992. Mr. Johnson has been a director of A&F since 1998.
Diane Chang, 47, has been Senior Vice President-Sourcing of A&F since February 2000. Prior thereto, she held the position of Vice President-Sourcing of A&F from May 1998 to February 2000 and for six and one-half years prior thereto, Ms. Chang held the position of Senior Vice President-Manufacturing at J. Crew, Inc, a clothing retailer.
Leslee K. O'Neill, 42, has been Senior Vice President-Planning & Allocation of A&F since February 2000. Prior thereto, Ms. O'Neill held the position of Vice President-Planning & Allocation of A&F from February 1994 to February 2000.
Wesley S. McDonald, 40, has been Vice President-Chief Financial Officer of A&F since June 2000. Prior thereto, Mr. McDonald held a variety of positions in finance and distribution at Target Corporation, a general merchandise retailer, from 1988 to May 2000. His last position at Target Corporation was Director-Information Systems Finance and Administration.
The executive officers serve at the pleasure of the Board of Directors of A&F and, in the case of Messrs. Jeffries and Johnson, pursuant to employment agreements.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A&F's Class A Common Stock is traded on the New York Stock Exchange under the symbol "ANF." The following is a summary of the high and low sales prices of A&F's Class A Common Stock as reported on the New York Stock Exchange for the 2002 and 2001 fiscal years:
Sales Price
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High Low
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2002 Fiscal Year
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4th Quarter $27.84 $17.76
3rd Quarter $25.18 $15.92
2nd Quarter $33.00 $20.51
1st Quarter $33.30 $23.04
2001 Fiscal Year
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4th Quarter $30.40 $18.06
3rd Quarter $38.50 $16.21
2nd Quarter $47.50 $33.10
1st Quarter $37.90 $26.28
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A&F has not paid dividends on its shares of Class A Common Stock in the past and does not presently plan to pay dividends on the shares. It is presently anticipated that earnings will be retained and reinvested to support the growth of the Company's business. The payment of any future dividends on shares will be determined by the A&F Board of Directors in light of conditions then existing, including earnings, financial condition and capital requirements, restrictions in financing agreements, business conditions and other factors.
On March 27, 2003, there were approximately 5,000 shareholders of record. However, when including active associates who participate in A&F's stock purchase plan, associates who own shares through A&F-sponsored retirement plans and others holding shares in broker accounts under street name, A&F estimates the shareholder base at approximately 55,000.
ITEM 6. SELECTED FINANCIAL DATA.
ABERCROMBIE & FITCH
FINANCIAL SUMMARY
(Thousands except per share and per square foot amounts, ratios and store and associate data)
FISCAL YEAR 2002 2001 2000* 1999 1998 -------------------------------------------------------------------------------------------------------------------- SUMMARY OF OPERATIONS Net Sales $1,595,757 $1,364,853 $1,237,604 $1,030,858 $805,180 -------------------------------------------------------------------------------------------------------------------- Gross Income $656,049 $558,034 $509,375 $450,383 $331,354 -------------------------------------------------------------------------------------------------------------------- Operating Income $312,617 $271,458 $253,652 $242,064 $166,958 -------------------------------------------------------------------------------------------------------------------- Operating Income as a Percentage of Net Sales 19.6% 19.9% 20.5% 23.5% 20.7% -------------------------------------------------------------------------------------------------------------------- Net Income $194,935 $168,672 $158,133 $149,604 $102,062 -------------------------------------------------------------------------------------------------------------------- Net Income as a Percentage of Net Sales 12.2% 12.4% 12.8% 14.5% 12.7% -------------------------------------------------------------------------------------------------------------------- PER SHARE RESULTS (1) Net Income Per Basic Share $1.99 $1.70 $1.58 $1.45 $.99 -------------------------------------------------------------------------------------------------------------------- Net Income Per Diluted Share $1.94 $1.65 $1.55 $1.39 $.96 -------------------------------------------------------------------------------------------------------------------- Weighted Average Diluted Shares Outstanding 100,631 102,524 102,156 107,641 106,202 -------------------------------------------------------------------------------------------------------------------- OTHER FINANCIAL INFORMATION Total Assets $994,822 $770,546 $589,577 $458,166 $319,161 -------------------------------------------------------------------------------------------------------------------- Return on Average Assets 22% 25% 30% 38% 41% -------------------------------------------------------------------------------------------------------------------- Capital Expenditures $92,976 $126,515 $153,481 $73,377 $37,483 -------------------------------------------------------------------------------------------------------------------- Long-Term Debt - - - - - -------------------------------------------------------------------------------------------------------------------- Shareholders' Equity $749,527 $595,434 $422,700 $311,094 $186,105 -------------------------------------------------------------------------------------------------------------------- Return on Average Shareholders' Equity 29% 33% 43% 60% 83% -------------------------------------------------------------------------------------------------------------------- Comparable Store Sales Increase (Decrease) (5%) (9%) (7%) 10% 35% -------------------------------------------------------------------------------------------------------------------- Retail Sales Per Average Gross Square Foot $379 $401 $474 $505 $476 -------------------------------------------------------------------------------------------------------------------- STORES AND ASSOCIATES AT END OF YEAR Total Number of Stores Open 597 491 354 250 196 -------------------------------------------------------------------------------------------------------------------- Gross Square Feet 4,358,000 3,673,000 2,849,000 2,174,000 1,791,000 -------------------------------------------------------------------------------------------------------------------- Number of Associates 22,000 16,700 13,900 11,300 9,500 -------------------------------------------------------------------------------------------------------------------- |
*Fifty-three week fiscal year.
(1) Per share amounts have been restated to reflect the two-for-one stock split on A&F's Class A Common Stock, distributed on June 15, 1999.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net sales for the fourth quarter of the 2002 fiscal year were $534.5 million, an increase of 15% from $466.6 million for the fourth quarter of 2001. Operating income for the fourth quarter of 2002 was $149.6 million compared to $128.6 million in 2001. A&F recorded its 42nd consecutive comparable quarter of record earnings as net income increased to $92.8 million in the fourth quarter of 2002 as compared to $79.2 million in 2001. Earnings per diluted share for the fourth quarter of 2002 were $.93, up 19% from $.78 in 2001.
Net sales for the 2002 fiscal year reached $1.6 billion, an increase of 17% over fiscal 2001 net sales of $1.4 billion. Operating income for the 2002 fiscal year increased 15% to $312.6 million from $271.5 million in fiscal 2001. Net income per diluted share was $1.94 for the 2002 fiscal year compared to $1.65 in 2001, an increase of 18%.
The following data represent the Company's consolidated statements of income for the last 3 fiscal years expressed as a percentage of net sales:
2002 2001 2000
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NET SALES 100.0% 100.0% 100.0%
Cost of Goods Sold, Occupancy and Buying
Costs 58.9 59.1 58.8
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GROSS INCOME 41.1 40.9 41.2
General, Administrative and Store Operating
Expenses 21.5 21.0 20.7
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OPERATING INCOME 19.6 19.9 20.5
Interest Income, Net (0.2) (0.4) (0.6)
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INCOME BEFORE INCOME TAXES 19.8 20.3 21.1
Provision for Income Taxes 7.6 7.9 8.3
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NET INCOME 12.2 12.4 12.8
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FINANCIAL SUMMARY
The following summarized financial data compares the 2002 fiscal year to the comparable periods for 2001 and 2000:
% Change
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2002 2001 2000 2001-2002 2000-2001
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Net sales (millions) $1,595.8 $1,364.9 $1,237.6 17% 10%
Decrease in comparable
store sales (5%) (9%) (7%)
Retail sales increase attributable
to new and remodeled stores,
magazine, catalogue and Web sites 22% 19% 27%
Retail sales per average gross
square foot $379 $401 $474 (5%) (15%)
Retail sales per average store
(thousands) $2,797 $3,095 $3,944 (10%) (22%)
Average store size at year-end
(gross square feet) 7,300 7,480 8,047 (2%) (7%)
Gross square feet at year-end
(thousands) 4,358 3,673 2,849 19% 29%
Number of stores and gross square feet by concept:
Abercrombie & Fitch:
Stores at beginning of period 309 265 215
Opened 33 45 50
Closed (2) (1) -
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Stores at end of period 340 309 265
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Gross square feet (thousands) 3,036 2,798 2,443
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abercrombie:
Stores at beginning of period 148 84 35
Opened 19 64 49
Closed (3) - -
------------ ----------- ----------
Stores at end of period 164 148 84
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Gross square feet (thousands) 727 662 375
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Hollister Co.:
Stores at beginning of period 34 5 -
Opened 60 29 5
Closed (1) - -
------------ ----------- ----------
Stores at end of period 93 34 5
============ =========== ==========
Gross square feet (thousands) 595 213 31
============ =========== ==========
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NET SALES
Fourth Quarter 2002
Net sales for the fourth quarter of fiscal 2002 were $534.5 million, up 15% over 2001's fourth quarter net sales of $466.6 million. Comparable store sales decreased 4% for the quarter.
By merchandise concept, comparable store sales ("comps"), defined as sales in stores that have been open for at least one year, for the quarter were as follows: Abercrombie & Fitch's comps declined in the mid-single digits, with womens posting a positive comp and mens a negative comp. Comps for the kids' business, abercrombie, were similar to the adult business with girls posting a positive comp increase during the quarter and boys a negative comp. Comps in Hollister were positive in double digits.
By regions, comps were strongest in the West and weakest in the Midwest.
Given continued uncertainty in the economy, the Company entered the fourth quarter of fiscal 2002 with an approach designed to protect both the bottom line and the aspirational quality of the brands. The Company continued to strategically use direct mail and bounce-back promotions, but, overall, a much less aggressive approach to promotions was undertaken compared to 2001.
The pre-Christmas selling environment was very challenging and, as expected, comp store sales were negative for the fourth quarter prior to Christmas. Comps improved significantly after Christmas, resulting in a flat comp for December 2002. January 2003 comps were positive 3%, which reflected strong sales of winter clearance, and positive results from the initial spring assortment.
From a merchandising standpoint, womens continued to outperform mens. Key classifications in womens during the quarter included woven shirts, knit tops, outerwear, pants, sweats and underwear. Mens continued to be difficult and there remained no solid trend industry-wide. However, knit tops and woven shirts performed well during the quarter.
As for the kids' business, knit tops, sweats, woven tops, pants and outerwear performed very well in girls. In boys, denim and sweats performed best. As in the adult business, boys continued to be difficult.
In Hollister, girls continued to be more significant than guys, representing approximately 65% of the overall business. For the quarter, the best performing girls classifications were woven shirts, knit tops, sweats, skirts and denim. In guys, denim, knit tops, graphic t-shirts, sweatshirts and accessories performed best.
Sales in the e-commerce business grew by over 25% during the fourth quarter of fiscal 2002 as compared to 2001. The Company remains on track to add a Hollister e-commerce business for back-to-school 2003. The direct business (which includes the Company's catalogue, the A&F Quarterly (a catalogue/magazine) and the Company's Web sites) accounted for 5.0% of net sales in the fourth quarter of 2002 as compared to 4.5% in 2001.
Fourth Quarter 2001
Fourth quarter 2001 net sales increased 6% to $466.6 million from $439.4 million in 2000. The increase was due to the addition of new stores offset by a 9% decline in comps as compared with the previous year's 13-week period ended February 3, 2001. The fourth quarter of 2001 was highly promotional and a number of
promotional strategies, including direct mail, bouncebacks and selective price point reductions, were employed to improve the sales trend from the third quarter 2001.
By merchandise concept, Abercrombie & Fitch's comps declined in the high-single digits with women's comps roughly flat for the quarter while men's comps were negative double digits. Comps for our kids' business followed a similar trend to the adult business with girls' comps much stronger than boys' comps.
By regions, comps were strongest in the Northeast and the West Coast and weakest in the Southeast and Midwest.
From a merchandising standpoint, womens outperformed mens and generated strong comp increases in denim, graphic tees and skirts. Newer women's classifications, such as gymwear and lingerie performed well. Mens was difficult with no solid industry-wide trend. Similar to womens, men's denim consistently performed well and comps were strong through Christmas. However, men's outerwear and sweater classifications had significant decreases.
In the kids' business, strong girls' categories were denim, skirts, knits and accessories while sweaters and outerwear classifications were weak. Boys' strong classifications were knits and denim.
In the adult e-commerce business, sales grew by over 27% during the fourth quarter of 2001 compared to 2000. The Company's catalogue, the A&F Quarterly and the Company's Web sites accounted for 4.5% of net sales in the fourth quarter of 2001 as compared to 5.0% in 2000. The decrease is primarily due to the Company not producing an A&F Quarterly in the fourth quarter of 2001.
Fiscal 2002
Net sales for fiscal year 2002 reached $1.6 billion, up 17% over fiscal year 2001. The sales increase was attributable to the net addition of 106 stores offset by a 5% comparable store sales decrease. The decline in comps was primarily due to the weak performance in both the mens and boys. Men's comps decreased in low-double digits for fiscal year 2002 while boys' comps decreased in the mid-teens. For Spring 2003, the Company continues to maintain a cautious approach in mens, focusing on delivering more new items more frequently. The men's assortment for spring features a "vintage look" which is emphasized in washes, colors and marketing. As in mens, a cautious approach will be maintained in boys.
Overall, the women's and girls' businesses continued to increase in share of the total business and accounted for greater than 57% of the adult and kids' businesses, respectively, in fiscal year 2002. For the year, women's comps were negative low-single digits while girls' comps were positive mid-single digits. The Company will continue to focus on providing more frequent newness in both womens and girls in 2003. Items will flow into the stores faster and remain in stores for a shorter time period. This strategy gives the customer more new items without an increase in inventory investment.
Hollister continued to perform well. For fiscal year 2002, sales per square foot in Hollister stores were approximately 86% of the sales per square foot in Abercrombie & Fitch stores in the same malls.
The Company's catalogue, the A&F Quarterly and the Company's Web sites represented 4.7% of 2002 net sales compared to 4.2% in 2001.
Fiscal 2001
Net sales for the 2001 fiscal year increased 10% to $1.36 billion from $1.24 billion in 2000. The sales increase was attributable to the net addition of 137 stores offset by a 9% comparable store sales decrease. The decline in comps was largely due to continued weakness in mens. Men's comps decreased in the high-teens for the year; however, denim, knits and gymwear performed well.
Comps were up in the mid-single digits in womens for the 2001 fiscal year. The strongest performing categories were denim, knits, skirts, gymwear and women's accessories. Overall, womens increased as a percentage of the overall business. In fiscal 2001, womens accounted for 55% of the total adult business.
In 2001, the kids' business had a mid-teen decline in comparable store sales for the year with girls performing better than boys. As in the adult business, girls outperformed boys.
For the 2001 fiscal year, sales per square foot in Hollister stores were approximately 75% of the sales per square foot in Abercrombie & Fitch stores in the same malls.
The Company's catalogue, the A&F Quarterly and the Company's Web sites represented 4.2% of fiscal 2001 net sales compared to 3.8% of 2000 net sales. Operating improvements in e-commerce fulfillment helped reduce the number of backorders, increasing sales by improving in-stocks. The Company produced only three A&F Quarterly's in fiscal 2001 versus four in 2000, dampening the increase over the prior year in the direct business.
GROSS INCOME
Fourth Quarter 2002
The gross income rate (gross income divided by net sales) for the fourth quarter of fiscal year 2002 was 45.5%, up 80 basis points from last year's rate of 44.7%. The increase in gross income rate resulted largely from an increase in initial markup (IMU), partially offset by an increase in buying and occupancy costs, as a percent of sales.
Continued progress in sourcing has been an important factor in improving the IMU in all three concepts. The Company continued to make progress increasing the IMU in Hollister, where IMU improved over 700 basis points versus the fourth quarter of 2001.
Additionally, the Company's less aggressive approach to promotions during the fourth quarter of fiscal 2002 resulted in selling at higher average retail prices compared to the fourth quarter of 2001.
The increase in buying and occupancy costs, as a percent of sales, reflected the inability to leverage fixed costs such as rent, depreciation and other real estate related charges with a comp store decrease.
The Company ended the fourth quarter of 2002 with inventories up 12% per gross square foot versus the fourth quarter of 2001 at cost.
Fourth Quarter 2001
The gross income rate during the fourth quarter of 2001 was 44.7%, down from 46.2% for the same period in 2000. The decrease was primarily due to an increase in the markdown rate, attributable to the expected higher level of promotional business. The planned promotional strategies for the quarter resulted in selling at lower average retail prices. For the quarter, average unit retail prices decreased in the low-double digits.
Additionally, buying and occupancy costs, expressed as a percentage of net sales, increased as a result of the inability to leverage fixed expenses with lower sales volume per average store. These decreases were partially offset by higher IMU and tight control of inventory. The increase in IMU was a result of continued improvement in the sourcing of merchandise, particularly in womens.
The tight control of inventory resulted in inventories being down 30% per gross square foot at year-end 2001 as compared with year-end 2000. These low levels of inventory provided downside profit protection as season-end merchandise was significantly lower on a per square foot basis in the fourth quarter of 2001 as compared to the same period in 2000.
Fiscal 2002
For fiscal 2002, the gross income rate was 41.1% versus 40.9% in 2001. The increase was driven by improvements in IMU that were almost fully offset by increased buying and occupancy costs, as a percentage of sales.
Tight control of inventory also protected gross income as the Company chased inventory through most of the first half of 2002.
Fiscal 2001
For the 2001 fiscal year, the gross income rate decreased to 40.9% from 41.2% in 2000. The decrease was primarily attributable to higher buying and occupancy costs. Buying and occupancy costs increased, as a percentage of net sales, due to the deleveraging created by the decrease in comparable store sales. The decrease was almost entirely offset by higher IMU as a result of continued improvements in sourcing merchandise that reduced costs. The other factors in protecting gross income were tight control of inventory, which resulted in disciplined markdown control, and lower inventory shrinkage as a result of the Company's continued emphasis on in-store operational controls.
GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES
Fourth Quarter 2002
The fourth quarter 2002 general, administrative and store operating expense rate (general, administrative and store operating expenses divided by net sales) was 17.5% compared to 17.1% in the fourth quarter of 2001. The increase in rate versus 2001 resulted primarily from an increase in home office expenses, largely due to higher bonuses resulting from improved financial performance.
During the fourth quarter of 2002, store payroll hours were reduced by 9% per average Abercrombie & Fitch adult store and 3% per average kids store. Store hours are managed on a weekly basis in order to match hours with sales volume. The control of payroll hours helped mitigate the effect of negative comps on the store expense rate.
Efficiencies were also recognized in the distribution center and in the direct business. During the fourth quarter of fiscal 2002, productivity, as measured in units processed per labor hour, was 39% higher than the fourth quarter of 2001. For the quarter, more units were processed than the comparable period in 2001 with 20% fewer labor hours.
In the fourth quarter of 2002, fulfillment costs per order in the direct business were down by over 19% compared to the fourth quarter of 2001.
Fourth Quarter 2001
The fourth quarter 2001 general, administrative and store operating expense rate improved to 17.1% as compared to 17.9% in the fourth quarter of 2000. The Company continued to tightly control expenses in both the stores and the home office. These cost controls included limiting headcount additions, reducing home office travel and store payroll hours, and decreasing relocation and recruiting expenses.
Savings were also recognized in the new distribution center and in the direct business. During the fourth quarter 2001, productivity in the distribution center, as measured in units processed per labor hour, was over 50% higher than fourth quarter 2000. In the direct business, fulfillment costs per order were down by over 10%. These savings in general, administrative and store operating expenses were partially offset by marketing costs incurred as part of the promotional strategy implemented during the fourth quarter of 2001.
Fourth quarter 2000's general, administrative and store operating expenses were unfavorably affected by one-time expenses related to the move to the new distribution center and home office and the inclusion of a 14th week in the fourth quarter of 2000.
Fiscal 2002
The full year general, administrative and store operating expense rate in 2002 was 21.5% versus 21.0% in 2001. The 2002 rate increase resulted from an increase in store expenses, as a percentage of sales, due to the inability to leverage fixed costs on a comp store sales decrease, as well as higher legal and incentive compensation expenses.
Fiscal 2001
The full year general, administrative and store operating expense rate in 2001 was 21.0% versus 20.7% in 2000. The rate increase in 2001 was primarily due to the inability to leverage fixed expenses as a result of the decrease in sales volume per average store. The increase was partially offset by the Company's focus on discretionary expense controls.
OPERATING INCOME
Fourth Quarter 2002
The operating income rate (operating income divided by net sales) was 28.0% for the fourth quarter of fiscal 2002 compared to 27.6% for the same period in 2001. Less aggressive promotional activities and higher average selling prices increased the gross income rate in the current year's fourth quarter. This improvement was offset somewhat by a higher general, administrative and store operating expense rate.
Fiscal 2002
The operating income rate for the fiscal year 2002 was 19.6% versus 19.9% in fiscal year 2001. The decline was attributable to a higher general, administrative and store operating expense rate due to the inability to leverage fixed costs on a comp store decrease. The increased expense rate was partially offset by a gross income rate increase.
Fourth Quarter 2001 and Fiscal 2001
The operating income rate was 27.6% and 19.9% for the fourth quarter and fiscal year of 2001, respectively, compared to 28.2% and 20.5% for the same periods in 2000. The decline in operating income rate in these periods was primarily due to lower gross income percentages resulting from planned promotional strategies executed in the fourth quarter of 2001. Lower general, administrative and store operating expenses, expressed as a percentage of net sales, partially offset the lower gross income rate in the fourth quarter of 2001. For the year, higher general, administrative and store operating expenses, expressed as a percentage of net sales, added to the decrease in operating income rate.
INTEREST INCOME AND INCOME TAXES
Fourth quarter and year-to-date net interest income were $1.3 and $3.8 million in 2002 as compared with net interest income of $1.2 and $5.1 million for the comparable periods in 2001. The decrease in net interest income in the year-to-date period was a result of the Company's strategy at the beginning of 2002 to invest cash in tax-free securities due to the decline in short-term market interest rates. Previously, the Company primarily invested in the commercial paper market.
The tax-free investments contributed to a lower effective tax rate of 38.5% and 38.4% for the fourth quarter and year-to-date periods of 2002 as compared to 39.0% for both of 2001's comparable periods.
Net interest income was $1.2 million in the fourth quarter of 2001 and $5.1 million for the 2001 fiscal year compared with net interest income of $2.5 million and $7.8 million for the corresponding periods in 2000. The decrease in net interest income for both the quarter and the year was due to the decline in market interest rates. Net interest income in 2001 and 2000 was primarily from short-term investments.
FINANCIAL CONDITION
The Company's continuing growth in net income affords it financial strength and flexibility. A more detailed discussion of liquidity, capital resources and capital requirements follows.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities provides the resources to support operations, including projected growth, seasonal requirements and capital expenditures. A summary of the Company's working capital position and capitalization follows (in thousands):
2002 2001 2000
--------------- --------------- -------------
Working capital $389,686 $241,616 $146,939
=============== =============== =============
Capitalization
Shareholders' equity $749,527 $595,434 $422,700
=============== =============== =============
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The Company considers the following to be measures of liquidity and capital resources:
2002 2001 2000
-------------- --------------- --------------
Current ratio (current assets divided by current 2.84 2.48 1.94
liabilities)
Operating cash flow (in thousands) $293,146 $233,202 $151,189
============== =============== ==============
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Net cash provided by operating activities is the Company's primary source of liquidity and has grown steadily the past three years from $151.2 million in 2000 to $233.2 million in 2001 to $293.1 million in 2002. Current year net income adjusted for depreciation and amortization was the primary source of cash.
Additionally, in 2002, cash was provided from increases in accounts payable and accrued expenses and income taxes payable.
Accounts payable increased in 2002 due to both the increased level of inventory and timing of payments versus 2001.
Accrued expenses increased in 2002 due to the following: higher incentive compensation expenses, resulting from the Company's improved financial performance; higher store expenses and gift card liability, consistent with the increase in store openings; and higher legal expenses.
The increase in income taxes payable in the current year was due primarily to a change in the methodology being used to make estimated tax payments throughout 2002. This methodology was modified to more closely reflect interim liabilities under the annualization method. In addition, the favorable impact of the Company's stock-based compensation was significantly reduced reflecting the lower stock prices during 2002 as compared to 2001.
Net deferred income taxes increased in 2002 primarily as a result of increasing differences between book and tax depreciation methods due to the accelerated growth of store openings the past few years and "bonus" accelerated depreciation allowed under the Job Creation and Worker Assistance Act of 2002.
Inventories increased $35.3 million during 2002 and represented the primary use of cash. Inventories at fiscal 2002 year-end were 12% higher on a gross square foot basis versus fiscal 2001 year-end.
Other uses of cash were directly related to store growth and primarily consisted of increases in capitalized store supplies and prepaid rent related to stores (classified in other current assets).
The Company's operations are seasonal in nature and typically peak during the back-to-school and Christmas selling periods. Accordingly, cash requirements for inventory expenditures are highest during these periods.
Cash outflows related to investing activities were primarily for capital expenditures (see the discussion in the "Capital Expenditures" section below) related to new stores (net of construction allowances) with approximately $20 million invested in information technology and distribution center projects. Investing activities also included purchases and maturities of marketable securities. As of February 1, 2003, the Company held marketable securities with original maturities of three to five months. The decrease in note receivable resulted from the repayment of a promissory note by the Chairman (see Note 9 to the Consolidated Financial Statements).
Financing activities during 2002, 2001 and 2000 consisted primarily of the repurchase of 1,850,000 shares, 600,000 shares, and 3,550,000 shares, respectively, of A&F's Class A Common Stock pursuant to previously authorized stock repurchase programs.
The 2002 repurchase completed a previously authorized 6,000,000 share repurchase program. At its August 2002 Board meeting, the Board of Directors authorized the repurchase of an additional 5,000,000 shares of the Company's Class A Common Stock. As of February 1, 2003, the total number of shares authorized and available for repurchase was 5,000,000. In addition to stock repurchases, financing activities also consisted of stock option exercises and restricted stock issuances.
During the first nine months of 2002, the Company had available a $150 million syndicated unsecured credit agreement. The Company also had a $75 million facility for trade letters of credit. The trade letters of credit were issued to numerous overseas suppliers and served as guarantees to the suppliers.
Effective November 14, 2002, the Company entered into a new $250 million syndicated unsecured credit agreement (the "New Credit Agreement"), which replaced both the then existing credit agreement (the "Old Credit Agreement") and the trade letter of credit facility. Additional details regarding the New Credit Agreement can be found in the Notes to Consolidated Financial Statements (see Note 8).
Letters of credit totaling approximately $41.8 million were outstanding under the New Credit Agreement at February 1, 2003. Letters of credit totaling approximately $49.9 million were outstanding under the trade letter of credit facility at February 2, 2002. No borrowings were outstanding under the New Credit Agreement at February 1, 2003 or under the Old Credit Agreement at February 2, 2002.
The Company has standby letters of credit in the amount of $4.7 million that expire in one year. The beneficiary, a merchandise supplier, has the right to draw upon the standby letters of credit if the Company has authorized or filed a voluntary petition in bankruptcy. To date, the beneficiary has not drawn upon the standby letters of credit.
As of February 1, 2003, the Company was committed to noncancelable leases with remaining terms of one to fourteen years. These commitments include store leases with initial terms ranging primarily from ten to fifteen years. A summary of minimum rent commitments under noncancelable leases follows (dollars in thousands):
Payments Due by Period
----------------------
Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years
----- ---------------- --------- --------- -------------
$889,328 $120,313 $352,910 $186,434 $229,671
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STORES AND GROSS SQUARE FEET
Store count and gross square footage by concept were as follows:
February 1, 2003 February 2, 2002
---------------- ----------------
Number of Gross Square Number of Gross Square
Stores Feet (millions) Stores Feet (millions)
------ --------------- ------ ---------------
Abercrombie & Fitch 340 3,036 309 2,798
abercrombie 164 727 148 662
Hollister Co. 93 595 34 213
----- ------ ----- ------
Total 597 4,358 491 3,673
----- ------ ----- ------
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CAPITAL EXPENDITURES
Capital expenditures, net of construction allowances, totaled $93.0 million, $126.5 million and $153.5 million for 2002, 2001 and 2000, respectively. Additionally, the noncash accrual for construction in progress decreased $12.7 million in 2002 and increased $1.0 million and $9.5 million in 2001 and 2000, respectively. Capital expenditures in 2002 related to new store construction with approximately $20 million invested in information technology and distribution center projects. Capital expenditures in 2001 and 2000 related to the construction of a new office and distribution center, including the noncash accrual for construction in progress, accounted for approximately $17 million and $92 million of total capital expenditures in 2001 and 2000, respectively. The office and distribution center were completed in 2001. The balance of capital expenditures related primarily to new stores.
The Company anticipates spending $120 to $130 million in 2003 for capital expenditures, of which $70 to $80 million will be for new stores construction. The balance of expenditures primarily relates to improving the in-store information technology structure, which should be complete for back-to-school, and distribution center expansion. In addition, the Company has begun construction planning for additional home office space to accommodate the growth of Hollister.
The Company intends to add approximately 726,000 gross square feet for the three concepts in 2003, which will represent a 17% increase over year-end 2002. It is anticipated the increase will result from the addition of approximately 30 new Abercrombie & Fitch stores, 10 new abercrombie stores and 70 new Hollister Co. stores. Additionally, the Company plans to remodel 10 Abercrombie & Fitch stores.
The Company estimates that the average cost for leasehold improvements and furniture and fixtures for Abercrombie & Fitch stores opened in 2003 will approximate $630,000 per store, after giving effect to landlord allowances. In addition, inventory purchases are expected to average approximately $330,000 per store.
The Company estimates that the average cost for leasehold improvements and furniture and fixtures for abercrombie stores opened in 2003 will approximate $485,000 per store, after giving effect to landlord allowances. In addition, inventory purchases are expected to average approximately $130,000 per store.
The Company estimates that the average cost for leasehold improvements and furniture and fixtures for Hollister Co. stores opened in 2003 will approximate $650,000 per store, after giving effect to landlord allowances. In addition, inventory purchases are expected to average approximately $230,000 per store.
The Company expects that substantially all future capital expenditures will be funded with cash from operations. In addition, the Company has $250 million available (less outstanding letters of credit) under its credit agreement to support operations.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available.
The Company's significant accounting policies can be found in the Notes to Consolidated Financial Statements (see Note 2). The Company believes that the following policies are most critical to the portrayal of the Company's financial condition and results of operations.
Revenue Recognition - The Company recognizes retail sales at the time the customer takes possession of the merchandise and purchases are paid for, primarily with either cash or credit card. Catalogue and e-commerce sales are recorded upon customer receipt of merchandise. Amounts relating to shipping and handling billed to customers in a sale transaction are classified as revenue and the related costs are classified as cost of goods sold. Employee discounts are classified as a reduction of revenue. The Company reserves for sales returns through estimates based on historical experience and various other assumptions that management believes to be reasonable.
Inventory Valuation - Inventories are principally valued at the lower of average cost or market, on a first-in first-out basis, utilizing the retail method. The retail method of inventory valuation is an averaging technique applied to different categories of inventory. At A&F, the averaging is determined at the stock keeping unit (SKU) level by averaging all costs for each SKU. An initial markup is applied to inventory at cost in order to establish a cost-to-retail ratio. Permanent markdowns, when taken, reduce both the retail and cost components of inventory on hand so as to maintain the already established cost-to-retail relationship. The use of the retail method and the recording of markdowns effectively values inventory at the lower of cost or market. The Company further reduces inventory by recording an additional markdown reserve using the retail carrying value of inventory from the season just passed. Markdowns on this carryover inventory represent estimated future anticipated selling price declines. Additionally, as part of inventory valuation, an inventory shrinkage estimate is made each period that reduces the value of inventory for lost or stolen items. Inherent in the retail method calculation are certain significant judgments and estimates including, among others, initial markup, markdowns and shrinkage, which could significantly impact the ending inventory valuation at cost as well as the resulting gross margins. Management believes that this inventory valuation method provides a conservative inventory valuation as it preserves the cost-to-retail relationship in ending inventory.
Property and Equipment - Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line basis, using service lives ranging principally from 10-15 years for leasehold improvements and 3-10 years for other property and equipment. Beneficial leaseholds represent the present value of the excess of fair market rent over contractual rent of existing stores at the 1988 purchase of the Abercrombie & Fitch business by The Limited, Inc. (now known as Limited Brands, Inc., "The Limited") and are being amortized over the lives of the related leases. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend service lives are capitalized. Long-lived assets are reviewed at the store level at least annually for impairment or whenever events or changes in circumstances indicate that full recoverability is questionable. Factors used in the evaluation include, but are not limited to, management's plans for future operations, recent operating results and projected cash flows.
Income Taxes - Income taxes are calculated in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use of the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax law and published guidance with respect to applicability to the Company's operations. Significant examples of this concept include capitalization policies for various tangible and intangible costs, income and expense recognition and inventory valuation methods. No valuation allowance has been provided for deferred tax assets because management believes the full amount of the net deferred tax assets will be realized in the future. The effective tax rate utilized by the Company reflects management's judgment of the expected tax liabilities within the various taxing jurisdictions.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." The standard was effective February 3, 2002 for the Company. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. It also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The adoption of SFAS No. 142 did not have an impact on the Company's results of operations or its financial position in 2002.
SFAS No. 143, "Accounting for Asset Retirement Obligations," was effective February 2, 2003 for the Company. The standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related obligation for its recorded amount or the entity incurs a gain or loss upon settlement. Because costs associated with exiting leased properties at the end of lease terms are minimal, management anticipates that the adoption of SFAS No. 143 will not have a significant effect on the Company's results of operations or its financial position.
SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," was effective February 3, 2002 for the Company. The standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS No. 144 did not have a material impact on the Company's results of operations or its financial position in 2002.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, including indirect guarantees of indebtedness of others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34," that requires recognition of a liability (at fair value) for guarantee contracts that have any of the following characteristics:
- Contracts that contingently require the guarantor to make payments
based on changes in an underlying, as defined by SFAS No. 133;
- Contracts that contingently require the guarantor to make payments
based on another entity's failure to perform under an obligating
agreement;
- Indemnification agreements;
- Indirect guarantees of the indebtedness of others.
In addition to the disclosures required by current GAAP related to guarantees, this interpretation requires additional disclosures including:
- Details about the nature of the guarantee;
- The maximum potential amount of future payments (undiscounted);
- The current carrying amount of the liability for guarantor's obligation
under the guarantee;
- The nature of any recourse provisions.
Guarantees issued or modified after December 31, 2002 must follow the new accounting. The disclosure requirements were effective for the 2002 financial statements and did not have an impact on the Company's results of operations or its financial position in 2002. The recognition provisions will be adopted by the Company in 2003 and are not expected to have a significant impact on the Company's financial statements.
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," was effective February 2, 2003 for the Company. The standard rescinds FASB Statements No. 4 and 64 that deal with issues relating to the extinguishment of debt. The standard also rescinds FASB Statement No. 44 that deals with intangible assets of motor carriers. The standard modifies FASB Statement No. 13, "Accounting for Leases," so that certain capital lease modifications must be accounted for by lessees as sale-leaseback transactions. Additionally, the standard identifies amendments that should have been made to previously existing pronouncements and formally amends the appropriate pronouncements. The provisions of this standard related to the rescission of SFAS No. 4 are in effect in 2003. The remaining provisions of the statement were adopted by the Company for transactions occurring after May 15, 2002.
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. The provisions of the standard are effective for exit or disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a significant impact on the Company's financial statements.
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an Amendment to FASB No. 123," was issued on December 31, 2002. Pursuant to this standard, companies that choose to adopt the accounting provisions of FASB No. 123, "Accounting for Stock-Based Compensation," will be permitted to select from three transition methods (prospective, modified prospective, and retroactive restatement).
Companies that choose not to adopt the accounting provisions of FASB No. 123 will be affected by the new disclosure requirements of FASB No. 148. The new disclosures include tabular presentation of the following information for all periods presented:
1. Net income and EPS (basic and diluted), as reported;
2. Compensation expense (if any), net of tax, included in reported net
income;
3. Compensation expense that would have been included in net income had
the company adopted the accounting provisions of FASB No. 123 for all
awards granted, modified or settled since December 15, 1994;
4. Pro forma net income and earnings per share.
The transition and annual disclosure provisions of FASB No. 148 are effective for the 2002 financial statements. The new interim disclosure provisions are effective in the first quarter of 2003.
Emerging Issues Task Force ("EITF") Issue 02-16, "Accounting by a Customer (Including a Reseller) For Cash Consideration Received from a Vendor," addresses the accounting treatment for cash vendor allowances received. The adoption of EITF Issue 02-16 in 2003 did not have an impact on the Company's financial position or results of operations.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented based upon historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, the Company believes that the effects of inflation, if any, on its results of operations and financial condition have been minor.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
A&F cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Form 10-K or made by management of A&F involve risks and uncertainties and are subject to change based on various important factors. The following factors, among others, in some cases have affected and in the future could affect the Company's financial performance and actual results and could cause actual results for 2003 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this Form 10-K or otherwise made by management: changes in consumer spending patterns and consumer preferences; the effects of political and economic events and conditions domestically and in foreign jurisdictions in which the Company operates, including, but not limited to, acts of terrorism or war; the impact of competition and pricing; changes in weather patterns; market price of key raw materials; ability to source product from its global supplier base; political stability; currency and exchange risks and changes in existing or potential duties, tariffs or quotas; availability of suitable store locations at appropriate terms; ability to develop new merchandise; and ability to hire, train and retain associates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company maintains its cash and equivalents in financial instruments with original maturities of 90 days or less. The Company also holds marketable securities with original maturities of three to five months. These financial instruments bear interest at fixed rates and are subject to interest rate risk through lost income should interest rates increase. The Company does not enter into financial instruments for trading purposes.
As of February 1, 2003, the Company had no long-term debt outstanding. Future borrowings would bear interest at negotiated rates and would be subject to interest rate risk. The Company does not believe that a hypothetical adverse change of 10% in interest rates would have a material affect on the Company's financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ABERCROMBIE & FITCH
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
2002 2001 2000
------------- ------------- -------------
NET SALES $1,595,757 $1,364,853 $1,237,604
Cost of Goods Sold, Occupancy and Buying Costs 939,708 806,819 728,229
------------- ------------- -------------
GROSS INCOME 656,049 558,034 509,375
General, Administrative and Store Operating Expenses 343,432 286,576 255,723
------------- ------------- -------------
OPERATING INCOME 312,617 271,458 253,652
Interest Income, Net (3,768) (5,064) (7,801)
------------- ------------- -------------
INCOME BEFORE INCOME TAXES 316,385 276,522 261,453
Provision for Income Taxes 121,450 107,850 103,320
------------- ------------- -------------
NET INCOME $194,935 $168,672 $158,133
============= ============= =============
NET INCOME PER SHARE:
BASIC $1.99 $1.70 $1.58
============= ============= =============
DILUTED $1.94 $1.65 $1.55
============= ============= =============
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The accompanying Notes are an integral part of these Consolidated Financial Statements.
ABERCROMBIE & FITCH
CONSOLIDATED BALANCE SHEETS
(Thousands)
February 1, February 2,
2003 2002
---------------- ----------------
ASSETS
CURRENT ASSETS:
Cash and Equivalents $391,035 $167,664
Marketable Securities 10,000 71,220
Receivables 10,462 20,456
Inventories 144,218 108,876
Store Supplies 25,671 21,524
Other 19,770 15,455
---------------- ----------------
TOTAL CURRENT ASSETS 601,156 405,195
PROPERTY AND EQUIPMENT, NET 392,941 365,112
OTHER ASSETS 725 239
---------------- ----------------
TOTAL ASSETS $994,822 $770,546
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $50,153 $31,897
Accrued Expenses 120,438 109,586
Income Taxes Payable 40,879 22,096
---------------- ----------------
TOTAL CURRENT LIABILITIES 211,470 163,579
DEFERRED INCOME TAXES 20,781 1,165
OTHER LONG-TERM LIABILITIES 13,044 10,368
SHAREHOLDERS' EQUITY:
Common Stock - $.01 par value: 150,000,000 shares authorized, 97,268,877
and 98,871,478 shares outstanding at February 1, 2003 and February 2,
2002, respectively 1,033 1,033
Paid-In Capital 142,577 141,394
Retained Earnings 714,475 519,540
---------------- ----------------
858,085 661,967
Less: Treasury Stock, at Average Cost (108,558) (66,533)
---------------- ----------------
TOTAL SHAREHOLDERS' EQUITY 749,527 595,434
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $994,822 $770,546
================ ================
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The accompanying Notes are an integral part of these Consolidated Financial Statements.
ABERCROMBIE & FITCH
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Thousands)
Common Stock
-------------------------
Treasury Total
Shares Par Paid-In Retained Stock, at Shareholders'
Outstanding Value Capital Earnings Average Cost Equity
--------------- --------- ------------ ------------- ------------- ----------------
Balance, January 29, 2000 102,004 $1,033 $147,305 $192,735 $(29,979) $311,094
Purchase of Treasury Stock (3,550) - - - (43,929) (43,929)
Net Income - - - 158,133 - 158,133
Tax Benefit from Exercise of Stock
Options and Vesting of Restricted
Stock - - 462 - - 462
Stock Options, Restricted Stock
and Other 342 - (11,277) - 8,217 (3,060)
--------------- --------- ------------ ------------- ------------- ----------------
Balance, February 3, 2001 98,796 $1,033 $136,490 $350,868 $(65,691) $422,700
Purchase of Treasury Stock (600) - - - (11,069) (11,069)
Net Income - - - 168,672 - 168,672
Tax Benefit from Exercise of Stock
Options and Vesting of Restricted
Stock - - 5,056 - - 5,056
Stock Options, Restricted Stock
and Other 677 - (152) - 10,227 10,075
--------------- --------- ------------ ------------- ------------- ----------------
Balance, February 2, 2002 98,873 $1,033 $141,394 $519,540 $(66,533) $595,434
Purchase of Treasury Stock (1,850) - - - (42,691) (42,691)
Net Income - - - 194,935 - 194,935
Tax Benefit from Exercise of Stock
Options and Vesting of Restricted
Stock - - 164 - - 164
Stock Options, Restricted Stock
and Other 246 - 1,019 - 666 1,685
--------------- --------- ------------ ------------- ------------- ----------------
Balance, February 1, 2003 97,269 $1,033 $142,577 $714,475 $(108,558) $749,527
=============== ========= ============ ============= ============= ================
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ABERCROMBIE & FITCH
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
2002 2001 2000
---------- ----------- ---------
OPERATING ACTIVITIES:
Net income $194,935 $168,672 $158,133
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 56,925 41,155 30,731
Noncash Charge for Deferred Compensation 2,295 3,936 4,340
Changes in Assets and Liabilities:
Inventories (35,342) 12,121 (45,735)
Accounts Payable and Accrued Expenses 41,766 5,272 21,626
Income Taxes 38,235 13,787 (8,420)
Other Assets and Liabilities (5,668) (11,741) (9,486)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 293,146 233,202 151,189
--------- --------- ---------
INVESTING ACTIVITIES:
Capital Expenditures (92,976) (126,515) (153,481)
Proceeds from Maturities of Marketable Securities 61,220 - 45,601
Purchase of Marketable Securities - (71,220) -
Collection (Issuances) of Note Receivable 4,954 (454) (3,000)
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (26,802) (198,189) (110,880)
--------- --------- ---------
FINANCING ACTIVITIES:
Purchase of Treasury Stock (42,691) (11,069) (43,929)
Other Changes in Shareholders' Equity (282) 6,139 (6,707)
--------- --------- ---------
NET CASH USED FOR FINANCING ACTIVITIES (42,973) (4,930) (50,636)
--------- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS 223,371 30,083 (10,327)
Cash and Equivalents, Beginning of Year 167,664 137,581 147,908
--------- --------- ---------
CASH AND EQUIVALENTS, END OF YEAR $391,035 $167,664 $137,581
========= ========= =========
SIGNIFICANT NONCASH INVESTING ACTIVITIES:
Construction Allowance Receivables $8,778 $14,030 $8,668
========= ========= =========
Accrual for Construction in Progress $12,680 $25,338 $24,371
========= ========= =========
|
The accompanying Notes are an integral part of these Consolidated Financial Statements.
ABERCROMBIE & FITCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Abercrombie & Fitch Co. ("A&F"), through its wholly-owned subsidiaries (collectively, A&F and its wholly-owned subsidiaries are referred to as "Abercrombie & Fitch" or the "Company"), is a specialty retailer of high quality, casual apparel for men, women and kids with an active, youthful lifestyle. The business was established in 1892.
The accompanying consolidated financial statements include the historical financial statements of, and transactions applicable to, A&F and its wholly-owned subsidiaries and reflect the assets, liabilities, results of operations and cash flows on a historical cost basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of A&F. All significant intercompany balances and transactions have been eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the financial statements and notes by the calendar year in which the fiscal year commences. The results for fiscal years 2002 and 2001 represent the fifty-two week periods ended February 1, 2003 and February 2, 2002. The results for fiscal year 2000 represent the fifty-three week period ended February 3, 2001.
CASH AND EQUIVALENTS
Cash and equivalents include amounts on deposit with financial institutions and investments with original maturities of less than 90 days.
MARKETABLE SECURITIES
All investments with original maturities of greater than 90 days are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company determines the appropriate classification at the time of purchase. At February 1, 2003, the Company held investments in marketable securities that were classified as held to maturity based on the Company's positive intent and ability to hold the securities to maturity. Primarily all securities held by the Company at February 1, 2003 were municipal debt securities that mature within one year and are stated at amortized cost that approximates market value.
INVENTORIES
Inventories are principally valued at the lower of average cost or market, on a first-in first-out basis, utilizing the retail method.
STORE SUPPLIES
The initial inventory of supplies for new stores including, but not limited to, hangers, signage, security tags and point-of-sale supplies are capitalized at the store opening date. Subsequent shipments are expensed except for new merchandise presentation programs, which are capitalized.
PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line basis, using service lives ranging principally from 10-15 years for leasehold improvements and 3-10 years for other property and equipment. Beneficial leaseholds represent the present value of the excess of fair market rent over contractual rent of existing stores as of the 1988 purchase of the Abercrombie & Fitch business by The Limited, Inc. (now known as Limited Brands, Inc. "The Limited") and are being amortized over the lives of the related leases. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend service lives are capitalized. Long-lived assets are reviewed at the store level at least annually for impairment or whenever events or changes in circumstances indicate that full recoverability of net assets through future cash flows is in question. Factors used in the evaluation include, but are not limited to, management's plans for future operations, recent operating results and projected cash flows.
INCOME TAXES
Income taxes are calculated in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use of the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. Under SFAS No. 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.
SHAREHOLDERS' EQUITY
At February 1, 2003 and February 2, 2002, there were 150 million shares of $.01 par value Class A Common Stock authorized, of which 97.3 million and 98.9 million shares were outstanding at February 1, 2003 and February 2, 2002, respectively, and 106.4 million shares of $.01 par value Class B Common Stock authorized, none of which were outstanding at February 1, 2003 or February 2, 2002. In addition, 15 million shares of $.01 par value Preferred Stock were authorized, none of which have been issued. See Note 13 for information about Preferred Stock Purchase Rights.
Holders of Class A Common Stock generally have identical rights to holders of Class B Common Stock, except that holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to three votes per share on all matters submitted to a vote of shareholders.
REVENUE RECOGNITION
The Company recognizes retail sales at the time the customer takes possession of the merchandise and purchases are paid for, primarily with either cash or credit card. Catalogue and e-commerce sales are recorded upon customer receipt of merchandise. Amounts relating to shipping and handling billed to customers in a sale transaction are classified as revenue and the related costs are classified as cost of goods sold. Employee discounts are classified as a reduction of revenue. The Company reserves for sales returns through estimates based on historical experience and various other assumptions that management believes to be reasonable.
CATALOGUE AND ADVERTISING COSTS
Costs related to the A&F Quarterly, a catalogue/magazine, primarily consist of catalogue production and mailing costs and are expensed as incurred. Advertising costs consist of in-store photographs and advertising in selected national publications and are expensed when the photographs or publications first appear. Catalogue and advertising costs amounted to $33.4 million in 2002, $30.7 million in 2001 and $30.4 million in 2000.
STORE PREOPENING EXPENSES
Preopening expenses related to new store openings are charged to operations as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded values of current assets and current liabilities, including receivables, marketable securities and accounts payable, approximate fair value due to the short maturity and because the average interest rate approximates current market origination rates.
STOCK-BASED COMPENSATION
The Company reports stock-based compensation through the disclosure-only requirements of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an Amendment to FASB No. 123," but elects to measure compensation expense using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation expense for options has been recognized as all options are granted at fair market value at the grant date. The Company does recognize compensation expense related to restricted share awards. If compensation expense related to options had been determined based on the estimated fair value of options granted in 2002, 2001 and 2000, consistent with the methodology in SFAS No. 123, the pro forma effect on net income and net income per basic and diluted share would have been as follows:
(Thousands except per share amounts)
--------------- --------------- ---------------
2002 2001 2000
--------------- --------------- ---------------
Net income:
As reported $194,935 $168,672 $158,133
Stock-based compensation expense included in
reported net income, net of tax 1,414 2,401 2,626
Stock-based compensation expense determined under
fair value based method, net of tax(1)
(25,979) (22,453) (21,706)
--------------- --------------- ---------------
Pro forma $170,370 $148,620 $139,053
=============== =============== ===============
Basic earnings per share:
As reported $1.99 $1.70 $1.58
Pro forma $1.74 $1.50 $1.39
Diluted earnings per share:
As reported $1.94 $1.65 $1.55
Pro forma $1.73 $1.48 $1.38
|
(1) Includes stock-based compensation expense related to restricted share awards actually recognized in earnings in each period presented.
The pro forma effect on net income for 2002, 2001 and 2000 is not representative of the pro forma effect on net income in future years because it takes into consideration pro forma compensation expense related only to those grants made subsequent to May 19, 1998.
The weighted-average fair value of all options granted during fiscal 2002, 2001 and 2000 was $12.07, $14.96 and $8.90, respectively. The fair value of each option was estimated using the Black-Scholes option-pricing model, which are included in the pro forma results above. For purposes of the valuation the following weighted-average assumptions were used: no expected dividends in 2002, 2001 and 2000; price volatility of 53% in 2002, 54% in 2001 and 50% in 2000; risk-free interest rates of 4.3%, 4.7% and 6.2% in 2002, 2001 and 2000, respectively; assumed forfeiture rates of 15% in 2002 and 2001 and 10% in 2000; and expected lives of 5 years in 2002, 2001 and 2000.
EARNINGS PER SHARE
Net income per share is computed in accordance with SFAS No. 128, "Earnings Per Share." Net income per basic share is computed based on the weighted-average number of outstanding shares of common stock. Net income per diluted share includes the weighted-average effect of dilutive stock options and restricted shares.
Weighted-Average Shares Outstanding (thousands):
2002 2001 2000
---------- ----------- ----------
Shares of common stock issued 103,300 103,300 103,300
Treasury shares (5,129) (4,198) (3,239)
---------- ----------- ----------
Basic shares 98,171 99,102 100,061
Dilutive effect of options and restricted shares 2,460 3,422 2,095
---------- ----------- ----------
Diluted shares 100,631 102,524 102,156
========== =========== ==========
|
Options to purchase 9,218,000, 5,630,000 and 9,100,000 shares of Class A Common Stock were outstanding at year-end 2002, 2001 and 2000, respectively, but were not included in the computation of net income per diluted share because the options' exercise prices were greater than the average market price of the underlying shares.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available.
RECLASSIFICATIONS
Certain amounts have been reclassified to conform to current year presentation. The amounts reclassified did not have an effect on the Company's results of operations or shareholders' equity.
3. ISSUANCES OF ACCOUNTING STANDARDS
The Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets." The standard was effective February 3, 2002 for the Company. SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. It also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The adoption of SFAS No. 142 did not have an impact on the Company's results of operations or its financial position in 2002.
SFAS No. 143, "Accounting for Asset Retirement Obligations," was effective February 2, 2003 for the Company. The standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related obligation for its recorded amount or the entity incurs a gain or loss upon settlement. Because costs associated with exiting leased properties at the end of lease terms are minimal, management anticipates that the adoption of SFAS No. 143 will not have a significant effect on the Company's results of operations or its financial position.
SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," was effective February 3, 2002 for the Company. The standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The adoption of SFAS No. 144 did not have an impact on the Company's results of operations or its financial position in 2002.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, including indirect guarantees of indebtedness of others, an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34," that requires recognition of a liability (at fair value) for guarantee contracts that have any of the following characteristics:
- Contracts that contingently require the guarantor to make payments
based on changes in an underlying, as defined by SFAS No. 133;
- Contracts that contingently require the guarantor to make payments
based on another entity's failure to perform under an obligating
agreement;
- Indemnification agreements;
- Indirect guarantees of the indebtedness of others.
In addition to the disclosures required by current GAAP related to guarantees, this interpretation requires additional disclosures including:
- Details about the nature of the guarantee;
- The maximum potential amount of future payments (undiscounted);
- The current carrying amount of the liability for the guarantor's
obligation under the guarantee;
- The nature of any recourse provisions.
Guarantees issued or modified after December 31, 2002 must follow the new accounting. The disclosure requirements were effective for the 2002 financial statements and did not have an impact on the Company's results of operations or its financial position in 2002. The recognition provisions will be adopted by the Company in 2003 and are not expected to have a significant impact on the Company's financial statements.
SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections," was effective February 2, 2003 for the Company. The standard rescinds FASB Statements No. 4 and 64 that deal with issues relating to the extinguishment of debt. The standard also rescinds FASB Statement No. 44 that deals with intangible assets of motor carriers. The standard modifies FASB Statement No. 13, "Accounting for Leases," so that certain capital lease modifications must be accounted for by lessees as sale-leaseback transactions. Additionally, the standard identifies amendments that should have been made to previously existing pronouncements and formally amends the appropriate pronouncements. The provisions of this standard related to the rescission of SFAS No. 4 are in effect in 2003. The remaining provisions of the statement were adopted by the Company for transactions occurring after May 15, 2002.
SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," requires that a liability for a cost associated with an exit or disposal activity be recognized and measured initially at fair value when the liability is incurred. The provisions of the standard are effective for exit or
disposal activities initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a significant impact on the Company's financial statements.
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure-an Amendment to FASB No. 123," was issued on December 31, 2002. Pursuant to this standard, companies that choose to adopt the accounting provisions of FASB No. 123, "Accounting for Stock-Based Compensation," will be permitted to select from three transition methods (prospective, modified prospective, and retroactive restatement).
Companies that choose not to adopt the accounting provisions of FASB No. 123 will be affected by the new disclosure requirements of FASB No. 148. The new disclosures include tabular presentation of the following information for all periods presented:
1. Net income and earnings per share (basic and diluted),
as reported;
2. Compensation expense (if any), net of tax, included in reported
net income;
3. Compensation expense that would have been included in net income
had the Company adopted the accounting provisions of FASB No.
123 for all awards granted, modified or settled since December
15, 1994;
4. Pro forma net income and earnings per share.
The transition and annual disclosure provisions of FASB No. 148 are effective for the 2002 financial statements. The new interim disclosure provisions are effective in the first quarter of 2003.
Emerging Issues Task Force ("EITF") Issue 02-16, "Accounting by a Customer (Including a Reseller) For Cash Consideration Received from a Vendor," addresses the accounting treatment for cash vendor allowances received. The adoption of EITF Issue 02-16 in 2003 did not have an impact on the Company's financial position or results of operations.
4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of (thousands):
2002 2001
---------------- -------------
Land $15,450 $15,414
Building 92,680 91,531
Furniture, fixtures and equipment 386,289 316,035
Beneficial leaseholds 7,349 7,349
Leasehold improvements 46,969 42,273
Construction in progress 36,905 28,721
---------------- -------------
Total $585,642 $501,323
Less: Accumulated depreciation and amortization 192,701 136,211
---------------- -------------
Property and equipment, net $392,941 $365,112
================ =============
|
5. LEASED FACILITIES AND COMMITMENTS
Annual store rent is comprised of a fixed minimum amount, plus contingent rent based on a percentage of sales exceeding a stipulated amount. Store lease terms generally require additional payments covering taxes, common area costs and certain other expenses.
A summary of rent expense follows (thousands):
2002 2001 2000
------------------- ----------------- -------------------
Store rent:
Fixed minimum $105,751 $83,608 $65,716
Contingent 4,886 4,897 7,079
------------------- ----------------- -------------------
Total store rent $110,637 $88,505 $72,795
Buildings, equipment and other 1,133 1,566 2,777
------------------- ----------------- -------------------
Total rent expense $111,770 $90,071 $75,572
=================== ================= ===================
|
At February 1, 2003, the Company was committed to noncancelable leases with remaining terms of one to fourteen years. These commitments include store leases with initial terms ranging primarily from ten to fifteen years. A summary of minimum rent commitments under noncancelable leases follows (thousands):
2003 $120,313
2004 121,316
2005 118,695
2006 112,899
2007 99,381
Thereafter 316,724
6. ACCRUED EXPENSES
|
Accrued expenses consisted of the following (thousands):
2002 2001
--------------- -------------
Unredeemed gift card revenue $23,454 $17,031
Rent and landlord charges 18,465 16,247
Compensation and benefits 15,857 9,492
Accrual for construction in progress 12,680 25,338
Catalogue and advertising costs 9,701 11,178
Taxes, other than income 5,512 3,552
Other 34,769 26,748
--------------- -------------
Total $120,438 $109,586
=============== =============
|
7. INCOME TAXES
The provision for income taxes consisted of (thousands):
2002 2001 2000
------------------- ----------------- ------------------
Currently Payable:
Federal $90,069 $80,126 $80,856
State 12,034 14,567 18,403
------------------- ----------------- ------------------
$102,103 $94,693 $99,259
------------------- ----------------- ------------------
Deferred:
Federal 17,699 11,133 2,814
State 1,648 2,024 1,247
------------------- ----------------- ------------------
$19,347 $13,157 $4,061
------------------- ----------------- ------------------
Total provision $121,450 $107,850 $103,320
=================== ================= ==================
|
A reconciliation between the statutory Federal income tax rate and the effective income tax rate follows:
2002 2001 2000
------------------ --------------- ----------------
Federal income tax rate 35.0% 35.0% 35.0%
State income tax, net of Federal income
tax effect 3.5% 3.9% 4.1%
Other items, net (0.1)% 0.1% 0.4%
------------------ --------------- ----------------
Total 38.4% 39.0% 39.5%
================== =============== ================
|
Income taxes payable included net current deferred tax assets of $6.0 million and $4.9 million at February 1, 2003 and February 2, 2002, respectively.
Under a tax sharing arrangement with The Limited, who owned 84.2% of the outstanding Common Stock through May 19, 1998, the Company was responsible for and paid to The Limited its proportionate share of income taxes calculated upon its separate taxable income at the estimated annual effective tax rate for periods prior to May 19, 1998. Amounts paid to The Limited totaled $1.4 million, $20 thousand and $829 thousand in 2002, 2001 and 2000, respectively. Amounts paid directly to taxing authorities were $82.3 million, $94.3 million and $111.7 million in 2002, 2001 and 2000, respectively. The amount paid to The Limited during 2002 constituted a final tax sharing payment pursuant to an agreement to terminate the tax sharing agreement entered into with The Limited as of May 19, 1998. As a result, the Company has been indemnified by the Limited for any federal, state or local income taxes asserted with respect to The Limited for all periods prior to May 19, 1998.
The effect of temporary differences which give rise to deferred income tax assets (liabilities) was as follows (thousands):
2002 2001
------------ ------------
Deferred tax assets:
Deferred compensation $8,113 $8,833
Accrued expenses 6,754 7,216
Inventory 2,960 1,747
Rent 1,314 1,525
Other 124 139
------------ ------------
Total deferred tax assets 19,265 19,460
------------ ------------
Deferred tax liabilities:
Property and equipment (25,954) (8,307)
Store supplies (8,061) (7,417)
------------ ------------
Total deferred tax liabilities (34,015) (15,724)
------------ ------------
Net deferred income tax assets
(liabilities) $(14,750) $3,736
============ ============
|
No valuation allowance has been provided for deferred tax assets because management believes that it is more likely than not that the full amount of the net deferred tax assets will be realized in the future.
8. LONG-TERM DEBT
The Company entered into a $250 million syndicated unsecured credit agreement (the "New Credit Agreement") on November 14, 2002 to replace both a $150 million syndicated unsecured credit agreement (the "Old Credit Agreement") and a separate $75 million facility for the issuance of trade letters of credit. The primary purposes of the New Credit Agreement are for trade and stand-by letters of credit and working capital. The New Credit Agreement is due to expire on November 14, 2005. The New Credit Agreement has several borrowing options, including interest rates that are based on the agent bank's "Alternate Base Rate," or a LIBO Rate. Facility fees payable under the New Credit Agreement are based on the Company's ratio (the "leverage ratio") of the sum of total debt plus 800% of forward minimum rent commitments to EBITDAR for the trailing four-fiscal-quarter period and currently accrues at .225% of the committed amounts per annum. The New Credit Agreement contains limitations on indebtedness, liens, sale-leaseback transactions, significant corporate changes including mergers and acquisitions with third parties, investments, restricted payments (including dividends and stock repurchases), hedging transactions and transactions with affiliates. The New Credit Agreement also contains financial covenants requiring a minimum ratio of EBITDAR for the trailing four-fiscal-quarter period to the sum of interest expense and minimum rent for such period, as well as a maximum leverage ratio. Letters of credit totaling approximately $41.8 million were outstanding under the New Credit Agreement at February 1, 2003. Letters of credit totaling approximately $49.9 million were outstanding under the $75 million facility for the issuance of trade letters of credit at February 2, 2002. No borrowings were outstanding under the New Credit Agreement at February 1, 2003 or under the Old Credit Agreement at February 2, 2002.
9. RELATED PARTY TRANSACTIONS
Shahid & Company, Inc. has provided advertising and design services for the Company since 1995. Sam N. Shahid Jr., who serves on A&F's Board of Directors, has been President and Creative Director of Shahid & Company, Inc. since 1993. Fees paid to Shahid & Company, Inc. for services provided during fiscal years 2002, 2001 and 2000 were approximately $1.9 million, $1.8 million and $1.7 million, respectively. These amounts do not include reimbursements to Shahid & Company, Inc. for expense incurred while performing these services.
On January 1, 2002, A&F loaned the amount of $4,953,833 to its Chairman, a major shareholder of A&F, pursuant to the terms of a replacement promissory note, which provided that such amount was due and payable on December 31, 2002. The outstanding principal under the note did not bear interest as the net sales threshold, per the terms of the note, was met. This note was paid in full by the Chairman on December 31, 2002.
This note constituted a replacement of, and substitute for, several promissory notes dated from November 17, 1999 through May 18, 2001.
10. STOCK OPTIONS AND RESTRICTED SHARES
Under A&F's stock plans, associates and non-associate directors may be granted up to a total of 21.4 million restricted shares and options to purchase A&F's common stock at the market price on the date of grant. In 2002, associates of the Company were granted options covering approximately 3.5 million shares, with vesting periods from four to five years. Options covering a total of 44,000 shares were granted to non-associate directors in 2002, all of which vest over four years. All options have a maximum term of ten years.
Options Outstanding at February 1, 2003
Options Outstanding Options Exercisable
----------------------------------------------------------------------- ---------------------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercisable
Prices Outstanding Life Price Exercisable Price
----------------- --------------- --------------- ------------- --------------- --------------
$8 - $23 4,304,000 5.2 $12.98 2,575,000 $12.01
$23 - $38 6,596,000 7.7 $26.40 1,713,000 $26.29
$38 - $52 5,159,000 6.5 $43.54 268,000 $41.19
----------------- --------------- --------------- ------------- --------------- --------------
$8 - $52 16,059,000 6.6 $28.31 4,556,000 $19.10
================= =============== =============== ============= =============== ==============
|
A summary of option activity for 2002, 2001 and 2000 follows:
---------------------------- ---------------------------- -----------------------------
2002 2001 2000
---------------------------- ---------------------------- -----------------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Option Price Shares Option Price Shares Option Price
-------------- ------------- -------------- ------------- -------------- -------------
Outstanding at beginning of year 12,961,000 $28.65 12,994,000 $28.01 12,809,000 $28.03
Granted 3,583,000 26.53 648,000 29.38 1,414,000 17.25
Exercised (93,000) 16.44 (521,000) 15.00 (193,000) 14.57
Canceled (392,000) 26.31 (160,000) 24.09 (1,036,000) 16.06
-------------- ------------ -------------- ------------ -------------- -------------
Outstanding at end of year 16,059,000 $28.31 12,961,000 $28.65 12,994,000 $28.01
============== ============ ============== ============ ============== =============
Options exercisable at year-end 4,556,000 $19.10 3,065,000 $18.49 2,164,000 $16.13
============== ============ ============== ============ ============== =============
|
A total of 1,046,000, 19,000 and 102,000 restricted shares were granted in 2002, 2001 and 2000, respectively, with a total market value at grant date of $28.0 million, $.6 million and $2.3 million, respectively. Of the restricted shares granted in 2002, 1,000,000 shares were awarded to the Company's Chairman, which become vested on December 31, 2008 provided the Chairman remains continuously employed by the Company through such date. The remaining restricted share grants generally vest either on a graduated scale over four years or 100% at the end of a fixed vesting period, principally five years. The market value of restricted shares is being amortized as compensation expense over the vesting period, generally four to five years. Compensation expenses related to restricted share awards amounted to $2.3 million, $3.9 million and $4.3 million in 2002, 2001 and 2000, respectively.
11. RETIREMENT BENEFITS
The Company participates in a qualified defined contribution retirement plan and a nonqualified supplemental retirement plan. Participation in the qualified plan is available to all associates who have completed 1,000 or more hours of service with the Company during certain 12-month periods and attained the age of 21. Participation in the nonqualified plan is subject to service and compensation requirements. The Company's contributions to these plans are based on a percentage of associates' eligible annual compensation. The cost of these plans was $5.6 million in 2002, $3.9 million in 2001 and $3.0 million in 2000.
Effective February 2, 2003, the Company established a Supplemental Executive Retirement Plan to provide additional retirement income to its Chairman. Subject to service requirements, the Chairman will receive a monthly prorated share of his final average compensation (as defined in the Plan) for life.
12. CONTINGENCIES
The Company is involved in a number of legal proceedings. Although it is not possible to predict with any certainty the eventual outcome of any legal proceedings, it is the opinion of management that the ultimate resolution of these matters will not have a material impact on the Company's results of operations, cash flows or financial position.
The Company has standby letters of credit in the amount of $4.7 million that expire in 1 year. The beneficiary, a merchandise supplier, has the right to draw upon the standby letters of credit if the Company has authorized or filed a voluntary petition in bankruptcy. To date, the beneficiary has not drawn upon the standby letters of credit.
The Company enters into agreements with professional services firms, in the ordinary course of business and, in most agreements, indemnifies these firms from any harm. There is no financial impact on the Company related to these indemnifications.
13. PREFERRED STOCK PURCHASE RIGHTS
On July 16, 1998, A&F's Board of Directors declared a dividend of .50 of a Series A Participating Cumulative Preferred Stock Purchase Right (Right) for each outstanding share of Class A Common Stock, par value $.01 per share (Common Stock), of A&F. The dividend was paid to shareholders of record on July 28, 1998. Shares of Common Stock issued after July 28, 1998 and prior to the Distribution Date described below will be issued with a Right attached. Under certain conditions, each whole Right may be exercised to purchase one one-thousandth of a share of Series A Participating Cumulative Preferred Stock at an initial price of $250. The Rights initially will be attached to the shares of Common Stock. The Rights will separate from the Common Stock and a Distribution Date will occur upon the earlier of 10 business days after a public announcement that a person or group has acquired beneficial ownership of 20% or more of A&F's outstanding shares of Common Stock and become an "Acquiring Person" (Share Acquisition Date) or 10 business days (or such later date as the Board shall determine before any person has become an Acquiring Person) after commencement of a tender or exchange offer which would result in a person or group beneficially owning 20% or more of A&F's outstanding Common Stock. The Rights are not exercisable until the Distribution Date.
In the event that any person becomes an Acquiring Person, each holder of a Right (other than the Acquiring Person and certain affiliated persons) will be entitled to purchase, upon exercise of the Right, shares of Common Stock having a market value two times the exercise price of the Right. At any time after any person becomes an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the outstanding shares), A&F's Board of Directors may exchange all or part of the Rights (other than Rights beneficially owned by an Acquiring Person and certain affiliated persons) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right. In the event that, at any time following the Share Acquisition Date, A&F is acquired in a merger or other business combination transaction in which A&F is not the surviving corporation, the Common Stock is exchanged for other securities or assets or 50% or more of A&F's assets or earning power is sold or transferred, the holder of a Right will be entitled to buy, for the exercise price of the Rights, the number of shares of Common Stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right.
The Rights, which do not have any voting rights, expire on July 16, 2008, and may be redeemed by A&F at a price of $.01 per whole Right at any time before a person becomes an Acquiring Person.
Rights holders have no rights as a shareholder of A&F, including the right to vote and to receive dividends.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial results for 2002 and 2001 follow (thousands except per share amounts):
2002 Quarter First Second Third Fourth ------------------------------------- ------------- -------------- -------------- -------------- Net sales $312,792 $329,154 $419,329 $534,482 Gross income 114,429 131,874 166,736 243,010 Net income 23,289 31,141 47,687 92,818 Net income per basic share $.24 $.32 $.49 $.95 Net income per diluted share $.23 $.31 $.48 $.93 |
2001 Quarter First Second Third Fourth ------------------------------------- ------------- -------------- -------------- -------------- Net sales $263,680 $280,116 $354,473 $466,584 Gross income 97,840 108,327 143,403 208,464 Net income 20,603 25,038 43,863 79,168 Net income per basic share $.21 $.25 $.44 $.80 Net income per diluted share $.20 $.24 $.43 $.78 |
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Abercrombie & Fitch Co:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Abercrombie & Fitch Co. and its subsidiaries at February 1, 2003 and February 2, 2002, and the results of their operations and their cash flows for each of the three years in the period ended February 1, 2003 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 18, 2003
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of A&F is set forth under the captions "ELECTION OF DIRECTORS - Nominees and Directors", "- Business Experience", "- Information Concerning the Board of Directors" and "- Security Ownership of Directors and Management" and "EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with Certain Executive Officers" in A&F's definitive proxy statement for the Annual Meeting of Stockholders to be held on May 22, 2003 (the "Proxy Statement") and is incorporated herein by reference. Information regarding executive officers of A&F is set forth under the captions "ELECTION OF DIRECTORS - Business Experience", " - Executive Officers", and "- Security Ownership of Directors and Management" and "EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with Certain Executive Officers" in the Proxy Statement and is incorporated herein by reference. In addition, information regarding executive officers of A&F is included in this Annual Report on Form 10-K under the caption "SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I and is incorporated herein by reference. No disclosure is required to be made under Item 405 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is set forth under the captions "EXECUTIVE COMPENSATION" and "ELECTION OF DIRECTORS - Compensation Committee Interlocks and Insider Participation" in the Proxy Statement and is incorporated herein by reference. Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
Information regarding the security ownership of certain beneficial owners and management is set forth under the captions "PRINCIPAL HOLDERS OF SHARES" and "ELECTION OF DIRECTORS - Security Ownership of Directors and Management" in the Proxy Statement and is incorporated herein by reference.
Abercrombie & Fitch Co. ("A&F") has three equity compensation plans under which its shares of Class A Common Stock, $0.01 par value ("Common Stock"), are authorized for issuance to eligible directors, officers and employees in exchange for consideration in the form of goods or services: (i) the 1996 Stock Option and Performance Incentive Plan (1998 Restatement) (the "1998 Associates Plan"); (ii) the 1996 Stock Plan for Non-Associate Directors (1998 Restatement) (the "Non-Associate Directors Plan"); and (iii) the 2002 Stock Option Plan for Associates (the "2002 Associates Plan"). The 1998 Associates Plan and the Non-Associate Directors Plan have been approved by the stockholders of A&F while the 2002 Associates Plan has not.
The following table summarizes equity compensation plan information for the 1998 Associates Plan and the Non-Associate Directors Plan as a group and for the 2002 Associates Plan, in each case as of February 1, 2003.
NUMBER OF SHARES OF
COMMON STOCK
REMAINING AVAILABLE
NUMBER OF SHARES OF FOR FUTURE ISSUANCE
COMMON STOCK UNDER EQUITY
TO BE ISSUED UPON WEIGHTED-AVERAGE COMPENSATION PLANS
EXERCISE OF EXERCISE PRICE OF (EXCLUDING SHARES
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, REFLECTED IN
WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN (a))
(a)* (b)* (c)*
-------------------- --------------------- --------------------
PLAN CATEGORY
Equity compensation plans approved by
stockholders 13,656,546(1) $28.80(2) 549,783(3)
Equity compensation plans not approved by
stockholders 3,488,053 $26.53 1,511,947
Total 17,144,599 $28.34 2,061,730
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*Reflects adjustments for changes in A&F's capitalization.
(1) Includes 12,321,376 shares of Common Stock issuable upon exercise of
options granted under the 1998 Associates Plan, 69,489 shares of Common
Stock issuable upon vesting of awards of restricted shares of Common Stock
granted under the 1998 Associates Plan, 250,000 shares of Common Stock
issuable upon exercise of options granted under the Non-Associate Directors
Plan and 15,681 shares of Common Stock reflecting share equivalents
attributable to compensation deferred by non-associate directors
participating in A&F's Directors' Deferred Compensation Plan and
distributable in the form of shares of Common Stock under the Non-Associate
Directors Plan. Also includes the right of Michael S. Jeffries to receive
1,000,000 shares of Common Stock as a career share award under the 1998
Associates Plan in accordance with the terms of his amended and restated
employment agreement dated as of January 30, 2003. This award vests
December 31, 2008 if Mr. Jeffries remains employed with A&F. A pro rata
portion of the award may vest earlier upon Mr. Jeffries' death or permanent
and total disability or termination of his employment by A&F without cause
or by Mr. Jeffries with good reason and will vest in full upon a change of
control of A&F. Mr. Jeffries will not receive any of the shares of Common
Stock subject to the career share award until after the award has vested
and the delivery date specified in the amended and restated employment
agreement occurred.
(2) Represents weighted-average exercise price of options outstanding under the
1998 Associates Plan and the Non-Associate Directors Plan.
(3) Includes 491,902 shares of Common Stock remaining available for future
issuance under the 1998 Associates Plan (no more than 189,172 of which may
be the subject of awards which are not options or stock appreciation
rights) and 57,881 shares of Common Stock remaining available for future
issuance under the Non-Associate Directors Plan, in each case excluding the
shares of Common Stock shown in footnote (1).
2002 STOCK OPTION PLAN FOR ASSOCIATES
In January 2002, the Board of Directors of A&F adopted the 2002 Associates Plan, which is administered by the Compensation Committee. The 2002 Associates Plan reserves for issuance up to 5,000,000 shares of Common Stock of A&F upon the exercise of non-qualified stock options ("NSOs") granted and to be granted under the 2002 Associates Plan. Shares of Common Stock issuable upon the exercise of NSOs
will be made available from shares currently held or subsequently acquired by A&F as treasury shares. The number of shares of Common Stock authorized for issuance under the 2002 Associates Plan and the number of shares subject to previously granted but unexercised NSOs will be subject to adjustment for any future stock splits, stock dividends or other changes in A&F's corporate structure affecting the shares of Common Stock.
Eligibility for Participation
Associates of A&F and its subsidiaries who are selected by the Compensation Committee are eligible to participate in the 2002 Associates Plan. No NSOs may be granted under the 2002 Associates Plan to outside directors.
Terms of NSOs
The exercise price of NSOs granted under the 2002 Associates Plan has been and will be equal to 100% of the fair market value of A&F's Common Stock on the grant date. Payment of the exercise price may be made in cash, or at the discretion of the Compensation Committee, shares of Common Stock already owned by the option holder. Each NSO has and will have a term of ten years from its grant date. The Compensation Committee will determine the vesting schedule for each NSO at the time of grant and may accelerate the exercisability of any NSO at any time. The NSOs become fully exercisable in the event of defined changes of control of A&F. If an option holder's employment is terminated by reason of total disability, the NSOs may thereafter be exercised in full for the first nine months that the option holder receives benefits under A&F's long-term disability program, subject to their stated term. If an option holder's employment is terminated by reason of death, the NSOs may thereafter be exercised in full for a period of one year after the date of the option holder's death or any other period which the Compensation Committee determines, subject to their stated term. If an option holder's employment is terminated for any other reason, any exercisable NSOs held by the option holder at the date of termination may be exercised for the period specified in the option agreement or as otherwise determined by the Compensation Committee. At the discretion of the Compensation Committee, the NSOs may have a tax withholding feature.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is set forth under the captions "ELECTION OF DIRECTORS - Business Experience" "- Compensation Committee Interlocks and Insider Participation" and "EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with Certain Executive Officers" in the Proxy Statement and is incorporated herein by reference.
ITEM 14. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this report, A&F management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as defined in Exchange Act Rule 13a-14(c) under the Securities Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the date of that evaluation to ensure that material information relating to the Company is made known to them, particularly during the period for which this Annual Report on Form 10-K has been prepared. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) List of Financial Statements.
The following consolidated financial statements of Abercrombie & Fitch and the related notes are filed as a part of this report pursuant to ITEM 8:
Consolidated Statements of Income for the fiscal years ended February 1, 2003, February 2, 2002 and February 3, 2001.
Consolidated Balance Sheets as of February 1, 2003 and February 2, 2002.
Consolidated Statements of Shareholders' Equity for the fiscal years ended February 1, 2003, February 2, 2002 and February 3, 2001.
Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2003, February 2, 2002 and February 3, 2001.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) List of Financial Statement Schedules.
All schedules are omitted because the required information is either presented in the consolidated financial statements or notes thereto, or is not applicable, required or material.
(a)(3) List of Exhibits.
3. Certificate of Incorporation and Bylaws
3.1 Amended and Restated Certificate of Incorporation of A&F as
filed with the Delaware Secretary of State on August 27, 1996,
incorporated herein by reference to Exhibit 3.1 to A&F's
Quarterly Report on Form 10-Q for the quarter ended November
2, 1996. (File No. 1-12107)
3.2 Certificate of Designation of Series A Participating
Cumulative Preferred Stock of A&F as filed with the Delaware
Secretary of State on July 21, 1998, incorporated herein by
reference to Exhibit 3.2 to A&F's Annual Report on Form 10-K
for the year ended January 30, 1999. (File No. 1-12107)
3.3 Certificate of Decrease of Shares Designated as Class B Common
Stock as filed with the Delaware Secretary of State on July
30, 1999, incorporated herein by reference to Exhibit 3.3 to
A&F's Quarterly Report on Form 10-Q for the quarter ended July
31, 1999. (File No. 1-12107)
3.4 Amended and Restated Bylaws of A&F, effective January 31,
2002, incorporated herein by reference to Exhibit 3.4 to A&F's
Annual Report on Form 10-K for the year ended February 2,
2002. (File No. 1-12107)
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4. Instruments Defining the Rights of Security Holders.
4.1 Credit Agreement, dated as of November 14, 2002, among
Abercrombie & Fitch Management Co., as Borrower, Abercrombie &
Fitch Co., as Guarantor, the Lenders party thereto, and
National City Bank, as Administrative Agent and Lead Arranger
(the "Credit Agreement"), incorporated herein by reference to
Exhibit 4.1 to A&F's Current Report on Form 8-K dated November
26, 2002. (File No. 1-12107)
4.2 Guarantee Agreement, dated as of November 14, 2002, among
Abercrombie & Fitch Co., each direct and indirect domestic
subsidiary of Abercrombie & Fitch Co. other than Abercrombie &
Fitch Management Co., and National City Bank, as
administrative agent for the Lenders party to the Credit
Agreement, incorporated herein by reference to Exhibit 4.2 to
A&F's Current Report on Form 8-K dated November 26, 2002.
(File No. 1-12107)
4.3 Rights Agreement, dated as of July 16, 1998, between A&F and
First Chicago Trust Company of New York, as Rights Agent,
incorporated herein by reference to Exhibit 1 to A&F's
Registration Statement on Form 8-A dated July 21, 1998. (File
No. 1-12107)
4.4 Amendment No. 1 to Rights Agreement, dated as of April 21,
1999, between A&F and First Chicago Trust Company of New York,
as Rights Agent, incorporated herein by reference to Exhibit 2
to A&F's Amendment No. 1 to Form 8-A dated April 23, 1999.
(File No. 1-12107)
4.5 Certificate of adjustment of number of Rights associated with
each share of Class A Common Stock, dated May 27, 1999,
incorporated herein by reference to Exhibit 4.6 to A&F's
Quarterly Report on Form 10-Q for the quarter ended July 31,
1999. (File No. 1-12107)
4.6 Appointment and Acceptance of Successor Rights Agent,
effective as of the opening of business on October 8, 2001,
between A&F and National City Bank, incorporated herein by
reference to Exhibit 4.6 to A&F's Quarterly Report on Form
10-Q for the quarter ended August 4, 2001. (File No. 1-12107)
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10. Material Contracts.
10.1 Abercrombie & Fitch Co. Incentive Compensation Performance Plan, incorporated herein by reference to Exhibit 10.1 to A&F's Quarterly Report on Form 10-Q for the quarter ended May 4, 2002. (File No. 1-12107)
10.2 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive Plan (reflects amendments through December 7, 1999 and the two-for-one stock split distributed June 15, 1999 to stockholders of record on May 25, 1999), incorporated herein by reference to Exhibit 10.2 to A&F's Annual Report on Form 10-K for the year ended January 29, 2000. (File No. 1-12107)
10.3 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors (reflects amendments through January 30, 2003 and the two-for-one stock split distributed June 15, 1999 to stockholders of record on May 25, 1999).
10.4 Abercrombie & Fitch Co. 2002 Stock Option Plan for Associates, incorporated herein by reference to Exhibit 10.4 to A&F's Annual Report on Form 10-K for the
year ended February 2, 2002. (File No. 1-12107)
10.5 Amended and Restated Employment Agreement, dated as of January
30, 2003, by and between Abercrombie & Fitch Co. and Michael
S. Jeffries, including as Exhibit A thereto the Supplemental
Executive Retirement Plan effective February 2, 2003,
incorporated herein by reference to Exhibit 10.1 to A&F's
Current Report on Form 8-K dated February 11, 2003. (File No.
1-12107)
10.6 Employment Agreement by and between A&F and Seth R. Johnson
dated as of December 5, 1997, incorporated herein by reference
to Exhibit 10.10 to A&F's Amendment No. 4 to Form S-4
Registration Statement filed on April 14, 1998 (Registration
No. 333-46423).
10.7 Abercrombie & Fitch, Inc. Directors' Deferred Compensation
Plan, incorporated herein by reference to Exhibit 10.14 to
A&F's Annual Report on Form 10-K for the year ended January
30, 1999. (File No. 1-12107)
10.8 Replacement Promissory Note, dated January 1, 2002, issued by
Michael S. Jeffries to A&F, incorporated herein by reference
to Exhibit 10.9 to A&F's Annual Report on Form 10-K for the
year ended February 2, 2002. (File No. 1-12107)
10.9 Abercrombie & Fitch Nonqualified Savings and Supplemental
Retirement Plan (formerly know as the Abercrombie & Fitch Co.
Supplemental Retirement Plan), as amended and restated
effective January 1, 2001.
21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
24. Powers of Attorney.
99.1 Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to Title 18, United States Code, Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
On November 27, 2002, A&F filed a Current Report on Form 8-K dated
November 26, 2002, reporting under "Item 5. Other Events and Regulation
FD Disclosure," that A&F and its subsidiary Abercrombie & Fitch
Management Co. ("A&F Management") had entered into a new Credit Agreement
on November 14, 2002, among A&F Management, as Borrower, A&F as
Guarantor, the Lenders party thereto, and National City Bank, as
Administrative Agent and Lead Arranger.
On February 12, 2003, A&F filed a Current Report on Form 8-K dated
February 11, 2003, reporting under "Item 9. Regulation FD Disclosure,"
that, on January 30, 2003, A&F had entered into an Amended and Restated
Employment Agreement with Michael S. Jeffries, the Chairman and Chief
Executive Officer of A&F.
(c) Exhibits.
The exhibits to this report are listed in section (a)(3) of Item 14
above.
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(d) Financial Statement Schedules.
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: April 17, 2003
ABERCROMBIE & FITCH CO.
By /s/ WESLEY S. MCDONALD
-------------------------------
Wesley S. McDonald,
Vice President - Chief Financial Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 9, 2003.
Signature Title
--------- -----
/s/ MICHAEL S. JEFFRIES* Chairman, Chief Executive Officer and Director
------------------------------------
Michael S. Jeffries
/s/ SETH R. JOHNSON Executive Vice President - Chief Operating Officer
------------------------------------ and Director
Seth R. Johnson
/s/ RUSSELL M. GERTMENIAN* Director
--------------------------
Russell M. Gertmenian
/s/ JOHN A. GOLDEN* Director
------------------------------------
John A. Golden
/s/ ARCHIE M. GRIFFIN* Director
------------------------------------
Archie M. Griffin
/s/ JOHN W. KESSLER* Director
------------------------------------
John W. Kessler
/s/ SAM N. SHAHID* Director
------------------------------------
Sam N. Shahid, Jr.
/s/ KATHRYN D. SULLIVAN, Ph.D.* Director
-------------------------------
Kathryn D. Sullivan, Ph.D.
/s/ WESLEY S. MCDONALD Vice President - Chief Financial Officer (Principal
------------------------------------ Financial and Accounting Officer)
Wesley S. McDonald
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*The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-indicated directors and executive officers of the registrant pursuant to powers of attorney executed by such directors and executive officers.
By /s/ WESLEY S. MCDONALD
----------------------
Wesley S. McDonald
Attorney-in-fact
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CERTIFICATIONS
I, Michael S. Jeffries, certify that:
1. I have reviewed this annual report on Form 10-K of Abercrombie & Fitch Co.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: April 17, 2003 /s/ Michael S. Jeffries
-------------------------------------------------
Printed Name: Michael S. Jeffries
Title: Chairman and Chief Executive Officer
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CERTIFICATIONS
I, Wesley S. McDonald, certify that:
1. I have reviewed this annual report on Form 10-K of Abercrombie & Fitch Co.;
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
Date: April 17, 2003 /s/ Wesley S. McDonald
---------------------------------------------------
Printed Name: Wesley S. McDonald
Title: Vice President and Chief Financial Officer
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 1, 2003
ABERCROMBIE & FITCH CO.
(Exact name of registrant as specified in its charter)
EXHIBITS
EXHIBIT INDEX
Exhibit No. Document
----------- ----------------------------------------------------------------
10.3 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate
Directors (reflects amendments through January 30, 2003 and the two-for-one stock split
distributed June 15, 1999 to stockholders of record on May 25, 1999).
10.9 Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan (formerly
known as the Abercrombie & Fitch Co. Supplemental Retirement Plan), as amended and
restated effective January 1, 2001.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Powers of Attorney.
99.1 Certificate of Chief Executive Officer and Chief Financial Officer Pursuant to
Title 18, United States Code, Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
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EXHIBIT 10.3
ABERCROMBIE & FITCH CO.
1996 STOCK PLAN FOR NON-ASSOCIATE DIRECTORS
(1998 RESTATEMENT)
[REFLECTS AMENDMENTS THROUGH JANUARY 30, 2003 AND
TWO-FOR-ONE STOCK SPLIT DISTRIBUTED JUNE 15, 1999
TO STOCKHOLDERS OF RECORD ON MAY 25, 1999]
1. PURPOSE
The purpose of the Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors (1998 Restatement) (the "Plan") is to promote the interests of Abercrombie & Fitch Co. (the "Company") and its stockholders by increasing the proprietary interest of non-associate directors in the growth and performance of the Company by granting such directors options to purchase shares of Class A Common Stock, par value $.01 per share (the "Shares") of the Company, by awarding Shares to such directors in respect of a portion of the Retainer (as defined in Section 6(a)) payable to such directors and by issuing and distributing Shares to such directors in respect of the portion of the Eligible Compensation (as defined in Section 6(b)) of such directors deferred into the Company's Directors' Deferred Compensation Plan.
2. ADMINISTRATION
The Plan shall be administered by the Company's Board of Directors (the "Board"). Subject to the provisions of the Plan, the Board shall be authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan and to make all determinations necessary or advisable for the administration of the Plan; provided, however, that the Board shall have no discretion with respect to the selection of directors to receive options, the number of Shares subject to any such options, the purchase price thereunder or the timing of grants of options under the Plan. The determinations of the Board in the administration of the Plan, as described herein, shall be final and conclusive. The Secretary of the Company shall be authorized to implement the Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware.
3. ELIGIBILITY
The class of individuals eligible to receive under the Plan grants of options, awards of Shares in respect of the Retainer and issuances and distributions of Shares in respect of Eligible Compensation deferred into the Company's Directors' Deferred Compensation Plan, shall be directors of the Company who are not associates of the Company or its affiliates ("Eligible Directors"). Any holder of an option or Shares granted, issued or distributed hereunder shall hereinafter be referred to as a "Participant".
4. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 7, an aggregate of 400,000 Shares shall be available for issuance under the Plan. The Shares deliverable upon the exercise of options, in respect of the Retainer or in respect of Eligible Compensation deferred into the Company's Directors' Deferred Compensation Plan, may be made available from authorized but unissued Shares or treasury Shares. If
any option granted under the Plan shall terminate for any reason without having been exercised, the Shares subject to, but not delivered under, such option shall be available for issuance under the Plan.
5. GRANT, TERMS AND CONDITIONS OF OPTIONS
(a) Each individual first elected as an Eligible Director prior to July 16, 1998 was granted, on July 16, 1998, an option to purchase 10,000 Shares. Each Eligible Director first elected to the Board on or after July 16, 1998 and prior to October 26, 2000, was granted, on the date the Eligible Director was first elected to the Board, an option to purchase 10,000 Shares. Any Eligible Director who is first elected to the Board on or after October 26, 2000 shall be granted, on the date the Eligible Director is first elected to the Board, an option to purchase 20,000 Shares.
(b)(i) On the first business day of each fiscal year of the
Company, beginning after July 16, 1998 and prior to October 26, 2000,
each individual then serving as an Eligible Director was granted an
option to purchase 2,000 Shares. On the first business day of each fiscal
year of the Company beginning after October 26, 2000, each individual
then serving as an Eligible Director will be granted an option to
purchase 4,000 Shares.
(ii) On November 15, 2001, each individual then serving as an
Eligible Director who has continuously served as an Eligible Director
for at least three years since the date of the individual's first
election or appointment as an Eligible Director will automatically be
granted an option to purchase 20,000 Shares. After November 15, 2001,
each individual who is then serving as an Eligible Director will
automatically be granted an option to purchase 20,000 Shares on (A) the
first business day immediately following the third anniversary of the
date of his or her first election or appointment as an Eligible
Director and (B) the first business day immediately following each
subsequent anniversary thereof which is a multiple of three.
(c) The options granted will be nonstatutory stock options not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and shall have the following terms and conditions:
(i) Price. The purchase price per Share deliverable upon the exercise of each option shall be 100% of the Fair Market Value per Share on the date the option is granted. For purposes of the Plan, Fair Market Value shall be the closing price of the Shares as reported on the principal exchange on which the Shares are listed for the date in question, or if there were no sales on such date, the most recent prior date on which there were sales.
(ii) Payment. Options may be exercised only upon payment of the purchase price thereof in full. Such payment shall be made in cash.
(iii) Exercisability and Term of Options. Each option granted prior to November 1, 2001 shall vest and become exercisable in four equal annual installments commencing on the first anniversary of the date of grant, provided the holder of such option is an Eligible Director on each such anniversary. Each option granted on and after November 1, 2001 shall vest and become exercisable in four equal annual installments commencing on the date of grant, provided the holder of such option is an Eligible Director on each anniversary of the date of grant. Options shall be exercisable until the earlier of ten years from the date of grant and the expiration of the one year period provided in paragraph (iv) below.
(iv) Termination of Service as Eligible Director. Upon termination of a Participant's service as a director of the Company for any reason, all outstanding options held by such Eligible Director, to the extent then exercisable, shall be exercisable in whole or in part for
a period of one year from the date upon which the Participant ceases to be a Director, provided that in no event shall the options be exercisable beyond the period provided for in paragraph (iii) above.
(v) Nontransferability of Options. No option may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or the laws of descent and distribution, and during the lifetime of the Participant to whom an option is granted it may be exercised only by the Participant or by the Participant's guardian or legal representative. Notwithstanding the foregoing, options may be transferred pursuant to a qualified domestic relations order.
(vi) Option Agreement. Each option granted hereunder shall be evidenced by an agreement with the Company which shall contain the terms and provisions set forth herein and shall otherwise be consistent with the provisions of the Plan.
(d) Death of Eligible Director. Notwithstanding the provisions of paragraphs (iii) and (iv) of Section 5(c) of this Plan, if an Eligible Director shall die while serving as a director of the Company, all outstanding options held by such Eligible Director (whether or not then exercisable by their terms) shall become immediately exercisable in full by the Eligible Director's estate or by the person who acquires the right to exercise such options upon the Eligible Director's death by bequest or inheritance. Such exercise may occur at any time within one year after the date of the Eligible Director's death provided that in no event shall the options of a deceased Eligible Director be exercisable beyond the period provided for in paragraph (iii) of Section 5(c) of this Plan.
(e) Total Disability. Notwithstanding the provisions of paragraphs
(iii) and (iv) of Section 5(c) of this Plan, if an Eligible Director's service
as a director of the Company ceases as a result of his becoming totally
disabled, all outstanding options held by such Eligible Director (whether or not
then exercisable by their terms) shall become immediately exercisable in full.
Such exercise may occur at any time within nine months after the Eligible
Director has been determined to be totally disabled; provided that, in no event
shall the options of a totally disabled Eligible Director be exercisable beyond
the period provided for in paragraph (iii) of Section 5(c) of this Plan. An
Eligible Director shall be considered to be totally disabled if he has been
unable, by reason of a medically determinable physical or mental impairment, to
engage in any substantial gainful activity, for a period of 180 days after its
commencement and such condition, in the opinion of a physician selected by the
Company and reasonably acceptable to the Eligible Director or his legal
representative, is total and permanent.
(f) Change of Control. Upon the occurrence of a Change of Control, all outstanding options held by Eligible Directors shall be fully exercisable. For purposes of this Plan, the term "Change of Control" shall mean an occurrence of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A issued under the Securities Exchange Act of 1934 (the "Act"). Without limiting the inclusiveness of the definition in the preceding sentence, a Change of Control of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (a) any person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of
the Company's then outstanding securities and such person would be deemed an "Acquiring Person" for purposes of the Rights Agreement dated as of July 16, 1998, as amended, between the Company and First Chicago Trust Company of New York (the "Rights Agreement"); or (b) any of the following occur: (i) any merger or consolidation of the Company, other than a merger or consolidation in which the voting securities of the Company immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) 80% or more of the combined voting power of the Company or surviving entity immediately after the merger or consolidation with another entity; (ii) any sale, exchange, lease, mortgage, pledge, transfer or other disposition (in a single transaction or a series of related transactions) of assets or earning power aggregating more than 50% of the assets or earning power of the Company on a consolidated basis; (iii) any complete liquidation or dissolution of the Company; (iv) any reorganization, reverse stock split or recapitalization of the Company that would result in a Change of Control as otherwise defined in this Plan; or (v) any transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing.
6. GRANT OF SHARES
(a) From and after July 16, 1998 and until December 31, 2002, 50% of the Retainer of each Eligible Director shall be paid in a number of Shares equal to the quotient of (i) 50% of the Retainer divided by (ii) the Fair Market Value on the Retainer Payment Date. Cash shall be paid to an Eligible Director in lieu of a fractional Share. For purposes of this Section 6(a), "Retainer" shall mean the annual retainer payable to an Eligible Director for any fiscal quarter of the Company and "Retainer Payment Date" shall mean the first business day of the Company's calendar quarter.
(b) In respect of any calendar year beginning after December 31, 2002,
each Eligible Director may elect to defer the payment of all or a portion of
such Eligible Director's Eligible Compensation payable for and during the
calendar year into and subject to the Company's Directors' Deferred Compensation
Plan, under which the amounts so deferred would be distributed in Shares plus
cash representing the Fair Market Value of fractional Shares; provided, that (i)
any Shares so distributed under the terms of the Directors' Deferred
Compensation Plan shall be deemed to have been issued pursuant to this Plan and
(ii) no Eligible Compensation shall be paid in the form of Shares pursuant to
this Plan other than under the terms of an election to defer Eligible
Compensation into the Directors' Deferred Compensation Plan. Any portion of an
Eligible Director's Eligible Compensation that such Eligible Director elects not
to defer pursuant to the preceding sentence shall be paid to such Eligible
Director in cash. For purposes of this Section 6(b), "Eligible Compensation"
shall have the meaning ascribed to that term in the Company's Directors'
Deferred Compensation Plan.
7. ADJUSTMENT AND CHANGES IN SHARES
In the event of a stock split, stock dividend, extraordinary cash dividend, subdivision or combination of the Shares or other change in corporate structure affecting the Shares, (a) the number of Shares authorized by the Plan shall be increased or decreased proportionately, as the case may be, (b) the number of Shares subject to any outstanding option shall be increased or decreased proportionately, as the case may be, and (c) the number of Shares subject to each option granted on or after October 26, 2000 pursuant to Section 5 of the Plan shall be increased or decreased proportionately, as the case may be, in each case with an appropriate corresponding adjustment in the purchase price per Share thereunder.
8. NO RIGHTS OF SHAREHOLDERS
Neither a Participant or a Participant's legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company in respect of any Shares purchasable upon the exercise of any option, in whole or in part, unless and until certificates for such Shares shall have been issued.
9. PLAN AMENDMENTS
The Plan may be amended by the Board as it shall deem advisable or to conform to any change in any law or regulation applicable thereto; provided, that the Board may not, without the authorization
and approval of shareholders of the Company: (i) increase the aggregate
number of Shares which may be purchased pursuant to options hereunder, except as
permitted by Section 7, (ii) change the requirement of Section 5(c) that option
grants be priced at Fair Market Value, except as permitted by Section 7, or
(iii) modify in any respect the class of individuals who constitute Eligible
Directors.
10. LISTING AND REGISTRATION
Each Share shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Shares, no such Share may be disposed of unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Board.
11. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective on the date of the approval of the Plan by the Company's stockholders ("Effective Date"). The Plan shall terminate the day following the tenth Annual Shareholders Meeting at which Directors are elected succeeding the Effective Date unless the Plan is extended or terminated at an earlier date by Shareholders or is terminated by exhaustion of the Shares available for issuance hereunder.
EXHIBIT 10.9
ABERCROMBIE & FITCH CO.
ABERCROMBIE & FITCH NONQUALIFIED
SAVINGS AND SUPPLEMENTAL RETIREMENT PLAN
FORMERLY KNOWN AS THE
ABERCROMBIE & FITCH CO. SUPPLEMENTAL RETIREMENT PLAN
Effective July 1, 1998
As Amended and Restated Effective January 1, 2001
ABERCROMBIE & FITCH NONQUALIFIED
SAVINGS AND SUPPLEMENTAL RETIREMENT PLAN
(January 1, 2001 Restatement)
TABLE OF CONTENTS
ARTICLE PAGE ARTICLE I INTRODUCTION...........................................................................2 ARTICLE II DEFINITIONS............................................................................2 ARTICLE III PARTICIPATION..........................................................................4 ARTICLE IV ACCOUNT................................................................................5 ARTICLE V DEFERRAL CREDITS.......................................................................5 ARTICLE VI MATCHING CREDITS.......................................................................7 ARTICLE VII EMPLOYER CREDITS.......................................................................8 ARTICLE VIII EARNINGS CREDITS.......................................................................8 ARTICLE IX VESTING................................................................................9 ARTICLE X HARDSHIP WITHDRAWALS...................................................................9 ARTICLE XI RETIREMENT BENEFIT....................................................................10 ARTICLE XII RETIREMENT PAYMENT FORM...............................................................10 ARTICLE XIII PRE-RETIREMENT TERMINATION............................................................10 ARTICLE XIV PLAN FUNDING..........................................................................11 ARTICLE XV CHANGE OF CONTROL.....................................................................11 ARTICLE XVI GENERAL BENEFIT PROVISIONS............................................................12 ARTICLE XVII PLAN ADMINISTRATION...................................................................13 ARTICLE XVIII CONSTRUCTION..........................................................................14 ARTICLE XIX AMENDMENT AND TERMINATION.............................................................14 ARTICLE XX MISCELLANEOUS.........................................................................15 |
ABERCROMBIE & FITCH NONQUALIFIED
SAVINGS AND SUPPLEMENTAL RETIREMENT PLAN
(January 1, 2001 Restatement)
ARTICLE I
INTRODUCTION
1.1. Effective Date. Abercrombie & Fitch Co., a Delaware corporation (the "Company"), adopted the Abercrombie & Fitch Co. Supplemental Retirement Plan (the "Plan") effective July 1, 1998.
1.2. Restatement. Effective January 1, 2001, the Company hereby amends and restates the Plan. The Company also renames the Plan as the "Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan."
1.3. ERISA Top Hat Plan. The Company intends the Plan to be an unfunded deferred compensation plan for a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
ARTICLE II
DEFINITIONS
2.1. "Account" means the account maintained for a Participant under Article IV, consisting of the following sub-Accounts: Deferral Account, Matching Account, Retirement Account, Discretionary Account and Limited Account.
2.2. "Affiliate" means (i) any corporation that is a member of a controlled group of corporations, as defined in Section 414(b) of the Code, of which the Company is a member, (ii) any other trade or business (whether or not incorporated) that is under common control, as defined in Section 414(c) of the Code, with the Company and (iii) any business that is a member of an affiliated service group, as defined in Section 414(m) of the Code, of which the Company is a member.
2.3. "Beneficiary" means the person(s) designated by a Participant on a form prescribed by the Committee to receive his Account upon his death (or, if none, his beneficiary(ies) under the SARP). A Participant may change his Beneficiary in accordance with procedures established by the Committee from time to time.
2.4. "Bonus" means the semi-annual performance bonus (payable in August and February) which may be payable to a Participant by an Employer.
2.5. "Code" means the Internal Revenue Code of 1986, as amended.
2.6. "Committee" means the Administrative Committee under the SARP. The Committee is the "administrator" of the Plan for purposes of ERISA.
2.7. "Company" means Abercrombie & Fitch Co., a Delaware corporation, and any successor.
2.8. "Compensation Committee" means (i) the Compensation Committee of the Company's Board of Directors or (ii) if none exists, the Company's Board of Directors.
2.9. "Deferral Account" means the Participant's sub-Account consisting of (i) his Deferral Credits and attributable Earnings Credits and (ii) the balance of his Deferral Account under the Plan immediately before the Restatement Effective Date.
2.10. "Deferral Agreement" means an agreement with an Employer under which a Participant (i) makes a Deferral Election, (ii) elects a Retirement Payment Form and (iii) provides any other information required by the Committee.
2.11. "Deferral Credits" means the Participant's deferred amounts of Salary or Bonus under Article V.
2.12. "Deferral Election" means the Participant's election to defer Salary or Bonus under Article V.
2.13. "Disability" or "Disabled" means that a Participant has become disabled under the terms of his Employer's long-term disability program, or if none, as determined by the Committee.
2.14. "Discretionary Account" means the Participant's sub-Account consisting of (i) his Discretionary Credits and attributable Earnings Credits and (ii) the balance of his Discretionary Account under the Plan immediately before the Restatement Effective Date.
2.15. "Discretionary Credits" means the employer amounts described in
Section 7.2.
2.16. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
2.17. "Earnings Credits" means the earnings amounts described in Article VIII.
2.18. "Effective Date" means July 1, 1998, the original effective date of the Plan.
2.19. "Eligible Employee" means each associate of an Employer who is
(i) among a select group of management or highly compensated employees of the
Employer, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of
ERISA and (ii) designated by the Committee for participation in the Plan.
2.20. "Employer" means the Company and each Affiliate that is a participating employer under the SARP and elects to participate in the Plan by action of its board of directors.
2.21. "Enrollment Period" means the period, preceding a Plan Year, that is specified from time to time by the Committee.
2.22. "Limited Account" means the Participant's sub-Account consisting of the amounts transferred to the Plan for him from The Limited Supplemental Retirement Plan and/or The Limited Deferred Compensation Plan as of June 30, 1998.
2.23. "Matching Account" means the Participant's sub-Account consisting of his (i) Matching Credits and attributable Earnings Credits and (ii) the balance of his Matching Account under the Plan immediately before the Restatement Effective Date.
2.24. "Matching Credits" means the various matching amounts described in Article VI, consisting of his Base, Additional and Lost SARP Matching Credits thereunder.
2.25. "Participant" means an associate of an Employer who becomes a Participant of the Plan under Article III.
2.26. "Participation Date" means, as specified by the Committee, (i) a Participant's hire date or (ii) the first day of an Enrollment Period.
2.27. "Plan" means the Abercrombie & Fitch Nonqualified Savings and Supplemental Retirement Plan, as set forth herein, and any amendments hereto.
2.28. "Plan Credits" means the Deferral Credits, Matching Credits, Retirement Credits and Discretionary Credits.
2.29. "Plan Year" means the calendar year.
2.30. "Restatement Effective Date" means January 1, 2001, the effective date of the Plan as set forth herein.
2.31. "Retirement Account" means the Participant's sub-Account
consisting of (i) his Retirement Credits and attributable Earnings Credits and
(ii) the balance of his Supplementary Account (if any) under the Plan
immediately before the Restatement Effective Date.
2.32. "Retirement Credits" means the employer amounts described in
Section 7.1.
2.33. "Retirement Payment Form" means the form of payment elected by the Participant under Article XII (or otherwise provided thereunder) for the payment of his retirement benefit under Article XI.
2.34. "SARP" means The Abercrombie & Fitch Co. Savings and Retirement Plan.
2.35. "SARP Entry Date" means the Participant's entry date under the SARP.
2.36. "Salary" means the base salary payable to a Participant by an Employer.
2.37. "Termination of Employment" or "Terminates Employment" means that the Participant has ceased to be a common law employee with the Company and all Affiliates.
ARTICLE III
PARTICIPATION
3.1. Existing Participant. Each associate of an Employer who was a participant of the Plan immediately prior to the Restatement Effective Date shall become a Participant of the Plan effective as of the Restatement Effective Date.
3.2. New Participant. On and after the Restatement Effective Date, each Eligible Employee shall become a Participant of the Plan effective on the Participation Date designated for him by the Committee.
3.3. Active Participation. Upon becoming a Participant, he shall be eligible for Plan Credits and attributable Earnings Credits thereon, subject to the terms hereof.
3.4. Suspension of Active Participation. A Participant shall cease to be eligible for Plan Credits effective on the date (i) the Committee revokes his status as an Eligible Employee under the Plan,
(ii) he otherwise ceases to be among a select group of management or highly compensated employees of an Employer, as determined by the Committee in its sole discretion, or (iii) of his Termination of Employment. The Participant shall continue to receive attributable Earnings Credits under the Plan until his Account has been distributed or forfeited under the terms of the Plan, provided, however, that the Account of any Participant described in Section 3.4(ii) may be distributed as soon as administratively practicable after such determination by the Committee.
3.5. Participant Status. A Participant shall continue to be a Participant of the Plan until his Account has been distributed or forfeited under the terms of the Plan.
ARTICLE IV
ACCOUNT
4.1. Account. Upon becoming a Participant, the Committee shall establish and maintain for him an Account under the Plan, with sub-Accounts for applicable Plan Credits.
4.2. Maintenance. Effective at the times provided under the Plan (or otherwise determined by the Committee), the Committee shall (i) credit the Participant's sub-Accounts with applicable Plan Credits and attributable Earnings Credits thereon and (ii) reduce his Account by any withdrawals, distributions, forfeitures and Plan administration expenses.
4.3. Participant Statements. From time to time, and upon the request of any Participant, the Committee shall furnish each Participant a written statement of his Account.
ARTICLE V
DEFERRAL CREDITS
5.1. Deferral Credits. A Participant shall receive "Deferral Credits" under the Plan equal to the deferred amounts of his Salary or Bonus under this Article.
5.2. Deferral Election--Initial Plan Eligibility. A Participant may make a Deferral Election upon initial eligibility under the Plan as follows:
(a) Existing Participant: 2001 Plan Year. An existing Participant under Section 3.1 may make a Deferral Election during the period from November 1, 2000 through December 22, 2000 to defer any percentage of (i) his Salary (up to 75%) for each payroll period of his services rendered on and after January 1, 2001 through December 31, 2001 or (ii) his Bonus (up to 100%) payable in February 2001 or August 2001.
(b) New Hire Date Participant. A new Participant under Section
3.2 whose Participation Date is his hire date may make a Deferral
Election within 30 days after his hire date to defer any percentage of
(i) his Salary (up to 75%) for each payroll period of his services
rendered after the 30th day following his hire date through the last
day of the Plan Year or (ii) his Bonus (up to 100%) payable at least
six months following his hire date.
(c) New Enrollment Period Participant. A new Participant under
Section 3.2 whose Participation Date is the first day of an Enrollment
Period may make a Deferral Election during such Enrollment Period to
defer any percentage of (i) his Salary (up to 75%) for each payroll
period of his services rendered on and after the January 1 after the
Enrollment Period through the
last day of the Plan Year or (ii) his Bonus (up to 100%) payable in the August after the Enrollment Period or in the next following February.
5.3. Deferral Election--Subsequent Enrollment Periods. After a Participant's initial eligibility under Section 5.2, he may make a Deferral Election during each Enrollment Period thereafter to defer any percentage of (i) his Salary (up to 75%) for each payroll period of his services rendered on and after the January 1 after the Enrollment Period through the last day of the Plan Year or (ii) his Bonus (up to 100%) payable in the August after the Enrollment Period or in the next following February.
5.4. Deferral Election--Mid-Year Changes. During the Plan Year, a Participant may make a change regarding a Deferral Election as follows:
(a) Modification. Once during the Plan Year, a Participant who has made a Deferral Election of his Salary or Bonus for the Plan Year may modify the deferral percentage thereof, provided that the new percentage (i) of his Salary does not exceed 75% and applies only to Salary for those pay periods of his services rendered after the date of the modification through the last day of the Plan Year and (ii) of his Bonus does not exceed 100% and applies only to a Bonus payable at least six months after the modification, i.e., a modification made by February 1 will apply to the Bonus payable in the following August and a modification made by August 1 will apply to the Bonus payable in the following February.
(b) New Election. Once during the Plan Year, a Participant who
has not made a Deferral Election of his Salary or Bonus for the Plan
Year may make a Deferral Election for the Plan Year hereunder, provided
that the deferral percentage (i) of his Salary does not exceed 75% and
applies only to Salary for those pay periods of his services rendered
after the date of the Deferral Election through the last day of the
Plan Year and (ii) of his Bonus does not exceed 100% and applies only
to a Bonus payable at least six months after the Deferral Election,
i.e., a Deferral Election hereunder made by February 1 will apply to
the Bonus payable in the following August and a Deferral Election
hereunder made by August 1 will apply to the Bonus payable in the
following February.
(c) Suspension. At any time during the Plan Year, a Participant who has made a Deferral Election of his Salary or Bonus for the Plan Year may suspend his Deferral Election, provided that the suspension applies only (i) to Salary for those pay periods of his services rendered after the suspension through the last day of the Plan Year and (ii) to a Bonus payable at least six months after the suspension, i.e., a suspension made by February 1 will apply to the Bonus payable in the following August and a suspension made by August 1 will apply to the Bonus payable in the following February. Further, the Participant cannot make another Deferral Election until the next Enrollment Period under Section 5.3.
5.5. Deferral Agreement. A Participant shall (i) make each Deferral Election of Salary or Bonus pursuant a Deferral Agreement, (ii) elect a Retirement Payment Form thereunder and (ii) file the Deferral Agreement with his Employer by the end of the applicable election period prescribed under Section 5.2 or 5.3 or as permitted under Section 5.4(b). A Participant shall change or suspend a Deferral Election under Section 5.4(a) or (c) pursuant to a change in his current Deferral Agreement.
5.6. Evergreen Election. A Participant's Deferral Election (or modification or suspension thereof) under this Article shall continue to apply to Salary and Bonus in future Plan Years until the Participant makes a subsequent Deferral Election under Section 5.3 or otherwise makes a change regarding his Deferral Election under Section 5.4.
5.7. Deferral Account. A Participant's Deferral Credits of Salary or Bonus shall be credited to his Deferral Account effective as of the pay period or date the Salary or Bonus would have been paid to him (or at such later date as determined by the Committee).
ARTICLE VI
MATCHING CREDITS
6.1. Base Matching Credit. For each payroll period, a Participant who has a Deferral Election of Salary or Bonus in effect for the payroll period shall receive a "Base Matching Credit" under the Plan equal to 100% of his Deferral Credits for the payroll period with respect to the first 3% of his Salary and Bonus.
6.2. Additional Matching Credit. For each Plan Year, a Qualifying SARP Participant shall receive an "Additional Matching Credit" under the Plan equal to 3% of his Excess Compensation for the Plan Year. For purposes hereof:
(a) "Qualifying SARP Participant" is a Participant who (i) is a participant of the SARP during the Plan Year and (ii) has a Deferral Election of Salary in effect under the Plan equal to at least 3% of his "gross" Salary (i.e., before reduction by his Deferral Credits) for the entire Plan Year (or the portion thereof following his Participation Date).
(b) "Excess Compensation" for a Plan Year means (i) a Participant's "gross" Salary and Bonus (i.e., before reduction by his Deferral Credits) for the Plan Year (or the portion thereof following his SARP Entry Date), over (ii) his Adjusted Compensation for the Plan Year.
(c) "Adjusted Compensation" means the lesser of (i) the annual maximum compensation limit in effect under Section 401(a)(17) of the Code or (ii) the Participant's "net" Salary and Bonus (i.e., after reduction by his Deferral Credits) for the Plan Year (or the portion thereof following his SARP Entry Date).
6.3. Lost SARP Matching Credit. At the discretion of the Committee, for each Plan Year, a Qualifying SARP Participant shall receive a "Lost SARP Matching Credit" under the Plan equal to the Forfeited SARP Matching Contributions (including any attributable earnings thereon). For purposes hereof:
(a) For purposes of this Section 6.3, "Qualifying SARP Participant" is a Participant who (i) is a participant of the SARP during the Plan Year and (ii) some or all of whose matching contributions under the SARP were forfeited as a result of the SARP nondiscrimination tests described in Section 6.3(b).
(b) "Forfeited SARP Matching Contributions" means the sum of
any (i) non-vested matching contributions under the SARP which have
been forfeited as a result of the ACP or multiple use tests under
Section 401(m) of the Code and (ii) vested or non-vested matching
contributions under the SARP which have been forfeited as a result of
being attributable to excess deferrals, excess contributions, excess
aggregate contributions or excess annual additions under Sections
402(g), 401(k)(3), 40l(m)(2), 415(c) or otherwise as required under
Section 401(a)(4) of the Code. The Forfeited SARP Matching
Contributions, therefore, do not include vested matching contributions
under the SARP which have been paid to a Participant as a result of the
foregoing SARP nondiscrimination tests and limitations.
6.4. Matching Account. A Participant's Base Matching Credits shall be credited to his Matching Account effective as of each payroll period (or such later date as determined by the Committee). A Participant's Additional and Lost SARP Matching Credits shall be credited to his Matching Account effective as of the last day of the Plan Year (or such later date as determined by the Committee).
ARTICLE VII
EMPLOYER CREDITS
7.1. Retirement Credit. For each Plan Year, a Qualifying SARP Participant shall receive a "Retirement Credit" under the Plan equal to his Excess SARP Retirement Contribution for the Plan Year. For purposes hereof:
(a) For purposes of this Section 7.1, "Qualifying SARP
Participant" is a Participant who (i) is a participant of the SARP and
(ii) received a SARP Retirement Contribution for the Plan Year.
(b) "Excess SARP Retirement Contribution" for a Plan Year means the (i) the SARP Retirement Contribution he would have received under the SARP based on his "gross" Salary and Bonus (i.e., before reduction by his Deferral Credits thereof) for the Plan Year (or the portion thereof following his SARP Entry Date), calculated without regard to the maximum compensation limit under Section 401(a)( 17) of the Code and the maximum annual addition limits under Section 415 of the Code, reduced by (ii) his actual SARP Retirement Contribution for the Plan Year.
(c) "SARP Retirement Contribution" means the Company Retirement Contribution, as defined and provided under the SARP, or such other or successor non-elective employer contribution under the SARP as specified by the Committee.
7.2. Discretionary Credit. For each Plan Year, the Compensation Committee may award any particular Participant a "Discretionary Credit" under the Plan equal to the amount determined by the Compensation Committee in its sole discretion.
7.3. Retirement, Discretionary Accounts. A Participant's Retirement Credit shall be credited to his Retirement Account effective as of the last day of the Plan Year (or such other date as determined by the Committee). A Participant's Discretionary Credit shall be credited to his Discretionary Account effective as of the last day of the Plan Year (or such other date as determined by the Compensation Committee).
ARTICLE VIII
EARNINGS CREDITS
8.1. Earnings Credits. The Committee shall calculate "Earnings Credits" under the Plan for each sub-Account based on the (i) applicable Plan Earnings Rate for the sub-Account, Employer or period of time and (ii) methods and procedures as prescribed by the Committee from time to time.
8.2. Plan Earnings Rate. For purposes of this Article, the "Plan Earnings Rate" means one or more fixed rates of interest established by the Committee in its discretion. The Committee, therefore, may base a Plan Earnings Rate on factors or indicia as it deems appropriate, including but not limited to an Employer's cost of funds or borrowing.
8.3. Credit to Account. The Participant's Earnings Credits shall be credited to his respective sub-Account effective as of the dates determined by the Committee.
ARTICLE IX
VESTING
9.1. Deferral, Limited Accounts. A Participant shall at all times be 100% vested in his Deferral Account and Limited Account.
9.2. Matching, Retirement Accounts. A Participant shall have a vested interest in his Matching Account and Retirement Account equal to the balances thereof multiplied by the vesting percentage applicable to him under the vesting schedule in effect under the SARP, based on his years of service thereunder, or such greater vesting percentage as may be determined by the Committee.
9.3. Discretionary Account. A Participant shall have a vested interest in his Discretionary Account in accordance with the vesting schedule as shall be adopted by the Compensation Committee, in its sole discretion, in connection with any Discretionary Credits under the Plan.
9.4. Forfeiture. Upon a Participant's Termination of Employment, the non-vested portion of his Matching Account, Retirement Account and Discretionary Account shall be immediately forfeited effective as of the date of his Termination of Employment.
ARTICLE X
HARDSHIP WITHDRAWALS
10.1. Hardship Withdrawals. If a Participant incurs a Hardship before his Termination of Employment, he may request a withdrawal from his Account of an amount up to the amount to the extent reasonably needed to satisfy the Hardship, increased for applicable taxes. The Hardship withdrawal shall be taken from his sub-Accounts as determined by the Committee.
10.2. Hardship. For purposes of this Article, a "Hardship" means an unforeseeable emergency, within the meaning of Treasury Regulation Section 1.457-2(h)(4), defined as (i) a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or his dependent (as defined in Section 152(a) of the Code), (ii) the loss of the Participant's property due to casualty or (iii) other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. Hardship, therefore, does not include education or home acquisition costs.
10.3. Other Resources. A Hardship withdrawal shall not be allowed to the extent that the Hardship may be relieved (i) through reimbursement or compensation by insurance or otherwise, (ii) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship or (iii) by cessation of Deferral Credits under the Plan.
10.4. Committee Approval. The Committee shall have the sole discretion to determine (i) whether the Participant has incurred a Hardship and (ii) the amount of the Hardship withdrawal and applicable taxes.
ARTICLE XI
RETIREMENT BENEFIT
11.1. Normal Retirement. If a Participant Terminates Employment on or after his 62nd birthday, the Plan shall pay him his Account in his Retirement Payment Form as soon as practicable after the first day of the Plan Year following his Termination of Employment.
11.2. Early Retirement. If a Participant Terminates Employment on or after his 55th birthday and he has five years of service under the SARP, the Plan shall pay him his Account in his Retirement Payment Form as soon as practicable after the first day of the Plan Year following his Termination of Employment.
11.3. Disability Retirement. If a Participant Terminates Employment due to Disability, the Plan shall pay him his Account in his Retirement Payment Form as soon as practicable after his benefit payments (if any) expire under his Employer's long-term disability program.
11.4. Small Benefit. Notwithstanding the preceding Sections, if the Participant's Account is less than $20,000 as of his Termination of Employment, the Plan shall pay him his Account in a lump sum payment as soon as practicable after his Termination of Employment.
11.5. Post-Retirement Death. If a Participant receives a normal, early or disability retirement benefit in the Retirement Payment Form of five or ten annual installments, and he dies prior to the expiration of the installments, the Plan shall pay his Beneficiary the remaining installment payments at the same time and manner as would be paid to the Participant.
ARTICLE XII
RETIREMENT PAYMENT FORM
12.1. Payment Form Election. A Participant shall elect in his Deferral
Agreement (or such other form prescribed by the Committee) the "Retirement
Payment Form" of his normal, early or disability retirement benefit under
Article XI from among the following payment options: (i) a lump sum payment,
(ii) five annual installments or (iii) ten annual installments. If a Participant
does not make an election, his Retirement Payment Form shall be ten annual
installments.
12.2. Election Change. Notwithstanding Section 12.1, a Participant may subsequently elect an alternative payment option available under Section 12.1, provided the subsequent election is made at least eighteen months prior to the scheduled date of payment or commencement of his normal, early or disability retirement benefit under Article XI.
12.3. Installment Calculation. If a Participant elects five or ten annual installments, the amount of each installment payment thereof shall be equal to (i) the balance of the Participant's Account as of the last day of the applicable Plan Year, divided by (ii) the number of remaining annual installments (including the installment being paid).
ARTICLE XIII
PRE-RETIREMENT TERMINATION
13.1. Termination of Employment. If a Participant Terminates Employment before his normal, early or disability retirement under Article XI, the Plan shall pay him the vested portion of his Account in a lump sum payment as soon as practicable after his Termination of Employment.
13.2. Death. If a Participant dies before his normal, early or disability retirement under Article XI, the Plan shall pay his Beneficiary the vested portion of his Account in a lump sum payment as soon as practicable after his death.
ARTICLE XIV
PLAN FUNDING
14.1. Unfunded Plan. The Plan shall be entirely unfunded. No Employer shall segregate any of its assets for the payment of benefits under the Plan. The right of a Participant or Beneficiary to a benefit under the Plan shall at all times be an unsecured claim against the general assets of his Employer. Neither the Participant nor any Beneficiary shall have any right in, or against, specific assets of any Employer.
14.2. Employer Books, Records. Each Employer shall maintain on its books and records the Account of every Participant who is its employee or former employee. Each Employer shall (i) reflect the Accounts of its Participants in its financial statements as an unfunded and unsecured promise to pay amounts thereof in future to the Participant or his Beneficiary and (ii) pay from its general assets all amounts required to be paid from its Accounts under the terms of the Plan.
14.3. Company Guarantee. Notwithstanding Section 14.1 and 14.2, the Company shall pay the benefits for such periods that an Employer is unable to pay benefits. The foregoing guarantee by the Company shall constitute no more than an unfunded and unsecured promise of payment and performance of the Company, consistent with obligation of the Employer under the Plan.
ARTICLE XV
CHANGE OF CONTROL
15.1. Effect of Change of Control. As soon as possible and in no event later than ten (10) days after a Change of Control, an Employer shall either (i) pay each Participant or Beneficiary who is determined by the Committee to be affected by the Change of Control the vested portion of his Account as of the date of such Change of Control or (ii) irrevocably contribute to a grantor trust described under Section 15.3 such amounts as sufficient to pay the benefits to which such Participants and Beneficiaries are entitled as of the date of such Change of Control. However, neither foregoing action shall occur if the Committee, in its sole discretion, determines that the action is not necessary to protect the affected Plan Participants and Beneficiaries against loss of their Plan benefits.
15.2. Change of Control. For purposes of this Article, a "Change in Control" means any of the following events: (i) the purchase or other acquisition by any person, entity or group of persons, within the meaning of section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "Act"), or any comparable successor provisions, of beneficial ownership (within the meaning of Rules 13d-3 promulgated under the Act) of thirty (30) percent or more of either the outstanding shares of common stock or the combined voting power of an Employer's then outstanding voting securities, (ii) the approval by the stockholders of an Employer of a reorganization, merger, or consolidation, if immediately following such reorganization, merger or consolidation, persons who were stockholders of the Employer immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than fifty (50) percent of the reorganized, merged or consolidated corporation's then outstanding voting securities or (iii) the liquidation or dissolution of an Employer or the sale of all or substantially all of an Employer's assets.
15.3. Grantor Trust. The trust for purposes of Section 15.1(ii) shall be a trust for the payment of benefits under the Plan. The trust shall (i) have a trustee independent of the Company, any Employer, the purchaser of the stock or assets of the Employer or any affiliate of such persons, (ii) segregate assets under the trust for the respective Employers of its Participants and Beneficiaries, (iii) provide that segregated assets of an Employer thereunder shall at all times be subject to the claims of the general creditors of the Employer, (iv) provide that no Participant or Beneficiary shall have any ownership rights in or to any assets of the trust and (v) contain such other terms and conditions to prevent current taxation to Participants and Beneficiaries of any amounts held thereunder.
15.4. Sale of Stock. In the event of the sale of stock of an Employer, or the merger or consolidation of the Company or any Employer into or with any other corporation or other entity, the Plan or portion thereof of the affected Employer shall continue after such sale, merger or consolidation as an obligation of the transferee, purchaser or successor entity.
15.5. Sale of Assets. In the event of the sale of assets of an Employer, the Compensation Committee may in its sole discretion direct the Employer to transfer assets equal to the Accounts of the affected Participants and Beneficiaries to the purchaser thereof to be held under a nonqualified deferred compensation plan of the purchaser or associated grantor trust therefor. In such case, (i) the transferred Accounts shall become payable under the terms of the recipient plan and (ii) a Participant who continues in employment with the purchaser shall not be considered to have Terminated Employment for purposes of the payment of benefits under the Plan. Any such transfer shall be approved by the Compensation Committee and evidenced by an amendment to the Plan therefor.
ARTICLE XVI
GENERAL BENEFIT PROVISIONS
16.1. Committee Discretion. The Committee has the unilateral right, at any time and under any circumstances, to change the time or form of distribution of any benefit or payment under the Plan.
16.2. Special Taxability Distributions. In the event any amount of a Participant's Account becomes taxable to him or his Beneficiary, such taxable amount shall be paid to him or his Beneficiary upon his written request or as otherwise provided by the Committee. The amount paid shall be charged against his Account.
16.3. Payment Withholding. Each Employer shall have the right to withhold from any payments due under the Plan any required federal, state or local taxes. If a trust is established pursuant to Section 15.1 (ii) upon a Change in Control, the trustee of the trust shall provide for any such withholding.
16.4. Employer Offset Right. If the Employer determines that a Participant is for any reason indebted to the Employer or any Affiliate, the Employer may offset such indebtedness, including any interest accruing thereon, against payments otherwise due under the Plan to him or his Beneficiary. The foregoing offset right also shall apply if a trust under Section 15.3 is established upon a Change in Control.
16.5. Payments to Minors. Any amount payable to or for the benefit of a minor, an incompetent person or any other person incapable of receipting therefor may be paid to such person's guardian, to any trustee or guardian holding assets for the benefit of such person, or to any person providing, or reasonably appearing to provide, for the care of such person, and such payment shall fully discharge the Plan and Employer with respect thereto.
16.6. Suspension of Payments in Event of Dispute. If the Committee is in doubt concerning the entitlement of any person to any payment claimed to be due under the Plan, the Committee may direct the Employer to suspend any such payment until satisfied as to the entitlement of such person to such payment. The Committee or the Employer may file or cause to be filed in any court of competent jurisdiction an appropriate legal action or process in such form as the Committee or the Employer deems appropriate, including an interpleader action or an action for declaratory judgment, for a legal determination of the entitlement of any person to any payment claimed to be due under the Plan. The Committee and the Employer shall comply with any final order of the court in any such suit, subject to appellate review, and the Participant and Beneficiaries shall be similarly bound thereby.
16.7. Nonalienation of Benefits. None of the payments, benefits, or rights of any Participant or Beneficiary shall be subject to any claim of any creditor of such Participant or Beneficiary and, to the fullest extent permitted by law, all such payments, benefits and rights shall be free from attachment, garnishment or any other legal or equitable process available to any creditor of such Participant or Beneficiary. No Participant or Beneficiary shall have the right to alienate, commute, pledge, encumber or assign any of the benefits or payments which the Participant or Beneficiary may expect to receive, contingent or otherwise, under the Plan, except the right of a Participant to designate a Beneficiary.
ARTICLE XVII
PLAN ADMINISTRATION
17.1. SARP Administrative Procedures. The Committee shall operate under the same rules and procedures as the administrative committee under the SARP. The provisions of the SARP related to its administrative committee, administrative procedures and claims procedures are hereby incorporated by reference in this Plan.
17.2. Administrative Authority, Responsibility. The Committee shall have, in addition to the powers and responsibilities specifically provided for in the Plan, all of the powers and responsibilities granted to the administrative committee under the SARP that are applicable to the administration and operation of this Plan, including the discretionary authority to interpret and construe the Plan, including without limitation the authority to make all determinations of eligibility and benefits under the Plan, to adopt and revise rules and regulations relating to the Plan, and to make any other determinations (including factual determinations) which it believes to be necessary or advisable for the administration of the Plan.
17.3. Binding Decisions. The determinations and decisions by the Committee shall be final and binding on associates, Participants and all other persons except that denied claims for benefits shall be subject to review pursuant to Section 17.4. Any determination under the SARP that is relevant to the administration of this Plan shall be effective under this Plan as well as under the SARP.
17.4. Claims Procedures. All claims for benefits must be made under the rules and procedures then if effect under the SARP, including the SARP's procedures with respect to review of denied claims.
17.5. Indemnity. The Company and each Employer shall indemnify to the fullest extent by law each member of the Committee, Compensation Committee and Board of Directors of the Company, and each officer and employee of the Company and each Employer, in connection with the Plan.
17.6. Administration Expenses. The Committee, in its sole discretion, may charge the Accounts with any administration expenses of the Plan.
ARTICLE XVIII
CONSTRUCTION
18.1. General. All Section references hereunder are to the Plan, unless otherwise indicated. All pronouns apply without gender distinction. The headings and captions apply for convenience and not for construction of the Plan.
18.2. Entire Agreement. The Plan, any subsequent amendments and any elections thereunder shall constitute the entire agreement or contract between an Employer and its Participants and Beneficiaries regarding the Plan. No contrary written or oral statement regarding the Plan may be relied upon by any Participant or Beneficiary.
18.3. Severability. If any term or provision of the Plan shall be held invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect the remaining terms and provisions of the Plan, and the Plan shall be construed and enforced as if such provision had not been included.
18.4. Limitation of Liability. The liability of the Company, any Employer, the Committee and Compensation Committee under the Plan shall be limited to the obligations expressly set forth in the Plan. No term or provision of the Plan may be construed to impose any further or additional duties, obligations or costs on the foregoing persons not expressly set forth in the Plan.
18.5. Third Parties. Nothing expressed or implied in this Plan is intended or may be construed to give any person other than Participants and Beneficiaries any rights or remedies under the Plan.
18.6. Governing Law. The laws of the State of Ohio applicable to agreements to be performed in the State of Ohio shall apply in determining the construction and validity of the Plan and all rights and obligations under the Plan, except to the extent such laws are preempted by federal law.
ARTICLE XIX
AMENDMENT AND TERMINATION
19.1. Amendment. The Company at any time may amend or modify the Plan. However, no amendment shall reduce the balance in a Participant's Account.
19.2. Amendment Authority. The Committee shall have the authority to
approve any amendment. However, the Committee shall not approve any amendment
(i) which represents a major change in policy or involves significant financial
cost, (ii) to transfer amounts under the Plan to another nonqualified deferred
compensation plan under Section 15.5 or (iii) to suspend or terminate the Plan.
Each amendment shall be adopted by a proper officer of the Company.
19.3. Suspension. The Compensation Committee at any time may suspend Deferral Credits or other Plan Credits under the Plan, either in whole or in part with respect to any group of Participants. Upon suspension, all Accounts shall continue to be credited with Earnings Credits and be maintained under the Plan without distribution until otherwise permitted by the Plan.
19.4. Termination. The Compensation Committee may terminate the Plan, either in whole or in part with respect to any group of Participants. Upon termination, the Compensation Committee may, in its discretion, direct early payment of the vested portion of any or all Accounts.
ARTICLE XX
MISCELLANEOUS
20.1. Tax Effects. Neither the Company, any Employer, Committee nor any other person represents or guarantees that any particular federal, state or local tax consequences shall occur as a result of any Participant's participation in this Plan. Each Participant is encouraged to consult with his own advisors regarding the tax consequences of participation in the Plan.
20.2. No Contract of Employment. The establishment of the Plan, any modification thereof, the creation of an Account, and/or the making of any payments under the Plan, shall not give any associate the right to remain in the service of any Employer. All Participants and other associates shall remain subject to discharge to the same extent as if the Plan had never been adopted.
20.3. Notices. Notices under the Plan shall be deemed to be sufficiently given if sent by first class, registered or certified mail addressed (i) to a Participant or Beneficiary at such person's last known address as set forth in the books and records of the Employer or (i) to the Company, any Employer, the Committee or Compensation Committee at the principal offices of the Company.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officers as of the 26th day of Feb , 2000.
ABERCROMBIE & FITCH CO.
By: /s/ Wesley S. McDonald
-----------------------------------
Its: VP-CFO
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|
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
Subsidiaries (a) of Incorporation
---------------- ----------------
Abercrombie & Fitch Holding Corporation (b) Delaware
Abercrombie & Fitch Management Co. (c) Delaware
Abercrombie & Fitch Stores, Inc. (d) Delaware
A&F Trademark, Inc. (d) Delaware
|
(a) The names of certain subsidiaries are omitted since such unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of February 1, 2003.
(b) Wholly-owned subsidiary of the registrant.
(c) Wholly-owned subsidiary of Abercrombie & Fitch Holding Corporation.
(d) Wholly-owned subsidiary of Abercrombie & Fitch Management Co.
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8, Registration Nos. 333-15941, 333-15943, 333-15945, 333-60189, 333-60203, 333-81373 and 333-100079 of Abercrombie & Fitch Co. of our report dated February 18, 2003 relating to the consolidated financial statements, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Columbus, Ohio
April 17, 2003
EXHIBIT 24
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH CO.
The undersigned officer and director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ MICHAEL S. JEFFRIES ------------------------------ Michael S. Jeffries |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH CO.
The undersigned officer and director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ SETH R. JOHNSON ------------------------------ Seth R. Johnson |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH CO.
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ RUSSELL M. GERTMENIAN ------------------------------ Russell M. Gertmenian |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH CO.
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ JOHN A. GOLDEN ------------------------------ John A. Golden |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH CO.
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ ARCHIE M. GRIFFIN ------------------------------ Archie M. Griffin |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH, CO.
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ JOHN W. KESSLER ------------------------------ John W. Kessler |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH, CO.
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ SAM N. SHAHID, JR. ------------------------------ Sam N. Shahid, Jr. |
POWER OF ATTORNEY
OFFICERS AND DIRECTORS OF
ABERCROMBIE & FITCH, CO.
The undersigned director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for the fiscal year ended February 1, 2003 under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries, Seth R. Johnson and Wesley S. McDonald, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that each said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof.
EXECUTED as of the 9th day of April, 2003.
/s/ KATHRYN D. SULLIVAN, Ph.D. ------------------------------ Kathryn D. Sullivan, Ph.D. |
EXHIBIT 99.1
CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND
CHIEF FINANCIAL OFFICER PURSUANT TO TITLE 18, UNITED
STATES CODE, SECTION 1350, AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Abercrombie & Fitch Co. (the "Company") on Form 10-K for the period ended February 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael S. Jeffries, Chairman and Chief Executive Officer of the Company, certify, pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Michael S. Jeffries * ------------------------------ Print Name: Michael S. Jeffries Title: Chairman and Chief Executive Officer Date: April 17, 2003 |
In connection with the Annual Report of Abercrombie & Fitch Co. (the "Company") on Form 10-K for the period ended February 1, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Wesley S. McDonald, Vice President - Chief Financial Officer of the Company, certify, pursuant to Title 18, United States Code, Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Wesley S. McDonald * ------------------------------------------------ Print Name: Wesley S. McDonald Title: Vice President - Chief Financial Officer Date: April 17, 2003 |
* A signed original of this written statement required by Section 906 has been provided to Abercrombie & Fitch Co. and will be retained by Abercrombie & Fitch Co. and furnished to the Securities and Exchange Commission or its staff upon request.