Abercrombie & Fitch Co. 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 30, 2005
OR
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o |
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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
ABERCROMBIE & FITCH CO.
(Exact name of registrant as specified in its charter)
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Delaware
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31-1469076 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer Identification No.) |
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6301 Fitch Path, New Albany, OH
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43054 |
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(Address of principal executive offices)
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(Zip Code) |
Registrants
telephone number, including area code (614) 283-6500
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes þ No o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No
þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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Class A Common Stock
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Outstanding at September 2, 2005 |
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$.01 Par Value
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87,534,480 Shares |
ABERCROMBIE & FITCH CO.
TABLE OF CONTENTS
2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABERCROMBIE & FITCH
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands, except per share data)
(Unaudited)
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Thirteen Weeks Ended |
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Twenty-Six Weeks Ended |
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July 30, 2005 |
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July 31, 2004 |
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July 30, 2005 |
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July 31, 2004 |
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NET SALES |
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$ |
571,591 |
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$ |
401,346 |
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$ |
1,118,401 |
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$ |
813,276 |
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Cost of Goods Sold |
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181,931 |
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120,429 |
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371,489 |
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264,435 |
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GROSS PROFIT |
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389,660 |
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280,917 |
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746,912 |
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548,841 |
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Stores and Distribution Expense |
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232,097 |
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160,515 |
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454,320 |
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326,030 |
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Marketing, General and Administrative Expense |
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67,884 |
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51,703 |
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135,030 |
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107,488 |
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Other Operating Income, Net |
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(1,408 |
) |
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(63 |
) |
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(1,814 |
) |
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(160 |
) |
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OPERATING INCOME |
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91,087 |
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68,762 |
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159,376 |
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115,483 |
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Interest Income, Net |
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(1,560 |
) |
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(1,358 |
) |
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(2,780 |
) |
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(2,344 |
) |
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INCOME BEFORE INCOME TAXES |
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92,647 |
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70,120 |
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162,156 |
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117,827 |
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Provision for Income Taxes |
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35,246 |
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27,232 |
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64,396 |
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45,622 |
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NET INCOME |
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$ |
57,401 |
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$ |
42,888 |
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$ |
97,760 |
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$ |
72,205 |
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NET INCOME PER SHARE: |
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BASIC |
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$ |
0.66 |
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$ |
0.45 |
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$ |
1.13 |
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$ |
0.76 |
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DILUTED |
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$ |
0.63 |
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$ |
0.44 |
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$ |
1.07 |
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$ |
0.74 |
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WEIGHTED-AVERAGE SHARES OUTSTANDING: |
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BASIC |
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86,951 |
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95,306 |
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86,577 |
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95,010 |
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DILUTED |
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91,501 |
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97,590 |
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90,946 |
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97,118 |
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DIVIDENDS DECLARED PER SHARE |
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$ |
0.00 |
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$ |
0.25 |
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$ |
0.25 |
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$ |
0.38 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ABERCROMBIE & FITCH
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands, except share data)
(Unaudited)
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July 30, 2005 |
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January 29, 2005 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and Equivalents |
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$ |
91,736 |
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$ |
350,368 |
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Marketable Securities |
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216,369 |
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Receivables |
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31,623 |
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26,127 |
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Inventories |
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363,985 |
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211,198 |
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Store Supplies |
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40,079 |
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36,536 |
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Deferred Income Taxes |
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|
51,121 |
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44,404 |
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Other |
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31,262 |
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28,048 |
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TOTAL CURRENT ASSETS |
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826,175 |
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696,681 |
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PROPERTY AND EQUIPMENT, NET |
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758,740 |
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687,011 |
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OTHER ASSETS |
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8,428 |
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8,413 |
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TOTAL ASSETS |
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$ |
1,593,343 |
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$ |
1,392,105 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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CURRENT LIABILITIES: |
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Accounts Payable and Outstanding Checks |
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$ |
180,625 |
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$ |
137,337 |
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Accrued Expenses |
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197,633 |
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194,729 |
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Deferred Lease Credits |
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31,112 |
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31,135 |
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Income Taxes Payable |
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18,083 |
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55,587 |
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TOTAL CURRENT LIABILITIES |
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427,453 |
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418,788 |
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LONG TERM LIABILITIES: |
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Deferred Income Taxes |
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50,216 |
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55,346 |
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Deferred Lease Credits, Net |
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192,971 |
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177,923 |
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Other Liabilities |
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80,590 |
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70,722 |
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TOTAL LONG TERM LIABILITIES |
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323,777 |
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303,991 |
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SHAREHOLDERS EQUITY: |
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Class A Common Stock $.01 par value: 150,000,000 shares
authorized and 103,300,000 shares issued at July 30, 2005
and January 29, 2005, respectively |
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1,033 |
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1,033 |
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Paid-In Capital |
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155,980 |
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140,251 |
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Retained Earnings |
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1,152,258 |
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1,076,023 |
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Treasury Stock, at Average Cost - 14,592,447 and
17,262,943
shares at July 30, 2005 and January 29, 2005, respectively |
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(467,158 |
) |
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(547,981 |
) |
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TOTAL SHAREHOLDERS EQUITY |
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842,113 |
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669,326 |
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
$ |
1,593,343 |
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$ |
1,392,105 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ABERCROMBIE & FITCH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
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Twenty-Six Weeks Ended |
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July 30, 2005 |
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July 31, 2004 |
|
OPERATING ACTIVITIES: |
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Net Income |
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$ |
97,760 |
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$ |
72,205 |
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Impact of Other Operating Activities on Cash Flows: |
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Depreciation and Amortization |
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60,528 |
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|
51,534 |
|
Amortization of Deferred Lease Credits |
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(15,655 |
) |
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|
(14,750 |
) |
Non-Cash Charge for Deferred Compensation |
|
|
9,793 |
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|
8,652 |
|
Deferred Taxes |
|
|
(11,847 |
) |
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|
3,641 |
|
Loss on Disposal of Assets |
|
|
2,058 |
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|
518 |
|
Changes in Assets and Liabilities: |
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Inventories |
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(146,680 |
) |
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(21,839 |
) |
Accounts Payable and Accrued Expenses |
|
|
17,305 |
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|
50,355 |
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Income Taxes |
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|
11,027 |
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(1,950 |
) |
Other Assets and Liabilities |
|
|
10,664 |
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(17,421 |
) |
Lessor Construction Allowances Received |
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15,845 |
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16,883 |
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NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
50,798 |
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|
147,828 |
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INVESTING ACTIVITIES: |
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Marketable Securities Activity: |
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Purchases |
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(372,209 |
) |
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(2,472,870 |
) |
Proceeds from Sales |
|
|
155,840 |
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|
2,421,870 |
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Net Marketable Securities Activity |
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(216,369 |
) |
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(51,000 |
) |
Capital Expenditures |
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(117,463 |
) |
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(83,345 |
) |
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NET CASH USED FOR INVESTING ACTIVITIES |
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(333,832 |
) |
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(134,345 |
) |
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FINANCING ACTIVITIES: |
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|
|
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Change in Cash Overdraft |
|
|
2,939 |
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|
|
8,326 |
|
Purchases of Treasury Stock |
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(26,904 |
) |
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|
(18,634 |
) |
Dividends Paid |
|
|
(21,564 |
) |
|
|
(23,726 |
) |
Stock Option Exercises and Other |
|
|
69,931 |
|
|
|
30,626 |
|
|
|
|
|
|
|
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|
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NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES |
|
|
24,402 |
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(3,408 |
) |
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|
|
|
|
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NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS |
|
|
(258,632 |
) |
|
|
10,075 |
|
Cash and Equivalents, Beginning of Year |
|
|
350,368 |
|
|
|
56,373 |
|
|
|
|
|
|
|
|
|
|
|
|
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CASH AND EQUIVALENTS, END OF PERIOD |
|
$ |
91,736 |
|
|
$ |
66,448 |
|
|
|
|
|
|
|
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SIGNIFICANT NON-CASH INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
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Change in Accrual for Construction in Progress |
|
$ |
16,630 |
|
|
|
($14,376 |
) |
|
|
|
|
|
|
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SIGNIFICANT NON-CASH FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Declaration of Dividend |
|
$ |
0 |
|
|
$ |
11,972 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ABERCROMBIE & FITCH
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. |
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BASIS OF PRESENTATION |
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|
Abercrombie & Fitch Co. (A&F), through its subsidiaries (collectively, A&F and its
subsidiaries are referred to as Abercrombie & Fitch or the Company), is a specialty
retailer of high quality, casual apparel for men, women, guys, girls and kids with an
active, youthful lifestyle. |
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|
The condensed consolidated financial statements include the accounts of A&F and all
subsidiaries that are more than 50 percent owned and controlled
by the Company. All intercompany balances
and transactions have been eliminated in consolidation. |
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Certain amounts have been reclassified to conform with the current year presentation.
Amounts reclassified did not have an effect on the Companys results of operations or
shareholders equity. |
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|
The Companys consolidated statements of income reflect a reclassification of the Companys
income statement. In prior periods the Company included buying and occupancy costs as well
as certain home office expenses as part of the gross income calculation. The Company
believes that presenting gross profit as a function of sales reduced solely by cost of goods
sold, as well as presenting stores and distribution expense and marketing, general and
administrative expense as individual expense categories, provides a clearer and more
transparent representation of gross selling margin and operating expenses. Prior period
results have been reclassified accordingly. |
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|
The condensed consolidated financial statements as of July 30, 2005 and for the thirteen and
twenty-six week periods ended July 30, 2005 and July 31, 2004 are unaudited and are
presented pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, these condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto contained in A&Fs Annual
Report on Form 10-K for the fiscal year ended January 29, 2005 (the 2004 fiscal year). In
the opinion of management, the accompanying condensed consolidated financial statements
reflect all adjustments (which are of a normal recurring nature) necessary to present fairly
the financial position and results of operations and cash flows for the interim periods, but
are not necessarily indicative of the results of operations to be anticipated for the fiscal
year ending January 28, 2006 (the 2005 fiscal year). |
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|
|
The condensed consolidated financial statements as of July 30, 2005 and for the thirteen and
twenty-six week periods ended July 30, 2005 and July 31, 2004 included herein have been
reviewed by the independent registered public accounting firm of PricewaterhouseCoopers LLP
and the report of such firm follows the notes to the condensed consolidated financial
statements. PricewaterhouseCoopers LLPs report on the condensed consolidated financial
statements is not a report within the meaning of Sections 7 and 11 of the Securities Act
of 1933. |
6
2. |
|
STOCK-BASED COMPENSATION |
|
|
|
The Company reports stock-based compensation through the disclosure-only requirements of
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosurean Amendment of FASB Statement 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 recognizes compensation
expense
related to restricted stock unit awards. If compensation expense related to
options for the thirteen and twenty-six week periods ended July 30, 2005 and July 31, 2004,
respectively, had been determined based on the estimated fair value of options granted,
consistent with the methodology in SFAS No. 123, the pro forma effect on net income and net
income per weighted-average basic and diluted share would have been as follows: |
|
|
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|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
Twenty-Six Weeks Ended |
|
(Thousands except per share amounts) |
|
July 30, 2005 |
|
|
July 31, 2004 |
|
|
July 30, 2005 |
|
|
July 31, 2004 |
|
Net Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
57,401 |
|
|
$ |
42,888 |
|
|
$ |
97,760 |
|
|
$ |
72,205 |
|
Stock-based compensation expense included in
reported net income, net of tax |
|
|
2,774 |
|
|
|
2,015 |
|
|
|
5,001 |
|
|
|
3,161 |
|
Stock-based compensation expense determined
under fair value based method, net of tax(1) |
|
|
(8,247 |
) |
|
|
(7,407 |
) |
|
|
(15,858 |
) |
|
|
(13,843 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma |
|
$ |
51,928 |
|
|
$ |
37,496 |
|
|
$ |
86,903 |
|
|
$ |
61,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per weighted-average share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.66 |
|
|
$ |
0.45 |
|
|
$ |
1.13 |
|
|
$ |
0.76 |
|
Pro forma |
|
$ |
0.60 |
|
|
$ |
0.39 |
|
|
$ |
1.00 |
|
|
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income per weighted-average share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.63 |
|
|
$ |
0.44 |
|
|
$ |
1.07 |
|
|
$ |
0.74 |
|
Pro forma |
|
$ |
0.56 |
|
|
$ |
0.38 |
|
|
$ |
0.95 |
|
|
$ |
0.63 |
|
|
|
|
(1) |
|
Includes stock-based compensation expense related to
restricted stock unit awards actually recognized in net income in each period presented. |
|
|
The weighted-average fair value of options granted during the second quarter of the
2005 fiscal year and the second quarter of the 2004 fiscal year was $19.82 and $15.03, respectively. The
fair value of each option, which is included in the pro forma results above, was estimated
using the Black-Scholes option-pricing model. For purposes of the valuation, the following
weighted-average assumptions were used: |
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
July 30, 2005 |
July 31, 2004 |
Dividend Yield |
|
|
1.23 |
% |
|
|
1.36 |
% |
Price Volatility |
|
|
46 |
% |
|
|
58 |
% |
Risk-Free Interest Rate |
|
|
3.7 |
% |
|
|
3.5 |
% |
Estimated Forfeiture Rate |
|
|
23 |
% |
|
|
28 |
% |
Expected Life (Years) |
|
|
4 |
|
|
|
4 |
|
7
3. |
|
NET INCOME PER SHARE |
|
|
|
Weighted-Average Shares Outstanding (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
July 30, 2005 |
|
July 31, 2004 |
Shares of Class A Common Stock issued |
|
|
103,300 |
|
|
|
103,300 |
|
Treasury shares |
|
|
(16,349 |
) |
|
|
(7,994 |
) |
|
|
|
|
|
|
|
|
|
Basic shares |
|
|
86,951 |
|
|
|
95,306 |
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and
restricted stock units |
|
|
4,550 |
|
|
|
2,284 |
|
|
|
|
|
|
|
|
|
|
Diluted shares |
|
|
91,501 |
|
|
|
97,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended |
|
|
July 30, 2005 |
|
July 31, 2004 |
Shares of Class A Common Stock issued |
|
|
103,300 |
|
|
|
103,300 |
|
Treasury shares |
|
|
(16,723 |
) |
|
|
(8,290 |
) |
|
|
|
|
|
|
|
|
|
Basic shares |
|
|
86,577 |
|
|
|
95,010 |
|
|
|
|
|
|
|
|
|
|
Dilutive effect of stock options and
restricted stock units |
|
|
4,369 |
|
|
|
2,108 |
|
|
|
|
|
|
|
|
|
|
Diluted shares |
|
|
90,946 |
|
|
|
97,118 |
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase approximately 17,000 shares of Class A Common Stock during the
thirteen and twenty-six week periods ended July 30, 2005 and 5,481,984 and 5,631,984 shares
of Class A Common Stock during the thirteen and twenty-six week periods, ended July 31,
2004, respectively, were outstanding but not included in the computation of net income per
weighted-average diluted share because the options exercise prices were greater than the
average market price of the underlying shares. |
|
4. |
|
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 July 30, 2005, the Companys
investments in marketable securities consisted of investment grade municipal notes and bonds
and investment grade auction rate securities, all classified as available-for-sale and as a
result reported at fair value. |
|
|
|
During the 2005 fiscal year, the Company began investing in municipal notes and bonds with
maturities less than five years. As of July 30, 2005, there were no realized gains or
losses and net unrealized holding losses were not material. |
|
|
|
Interest rates for the Companys investments in auction rate securities are reset through an
auction process at predetermined periods ranging from one to 49 days. Despite the long-term
nature of their stated contractual maturities, there is a readily liquid market for these
securities and failed auctions rarely occur. Due to the reset feature, the investments are
carried at fair value and as a result, there are no gross realized and unrealized gains or
losses from these marketable securities. As of July 30, 2005, the Company held
approximately $216.4 million in marketable securities and at January 29, 2005, the Company
had no investments in marketable securities. |
8
5. |
|
INVENTORIES |
|
|
|
Inventories are principally valued at the lower of average cost or market, utilizing the
retail method. 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 fiscal year is comprised of two principal selling seasons: Spring (the first and second
quarters) and Fall (the third and fourth quarters). At fiscal quarter end, the Company
reduces inventory value by recording a markdown reserve that represents the estimated future
anticipated selling price decreases necessary to sell-through the current season inventory.
In addition, the inventory value is further reduced for estimates of lost or stolen items
based on historical trends. |
|
|
|
The inventory reserve for markdowns and valuations was $3.8 million, $6.6 million and $8.5
million at July 30, 2005, January 29, 2005 and July 31, 2004, respectively. The inventory
valuations at July 30, 2005 and July 31, 2004 reflect adjustments for inventory markdowns
for the end of the Spring season while the inventory valuations at January 29, 2005 reflect
adjustments for inventory markdowns for the end of the Fall season. The shrink reserve was
$5.9 million, $2.9 million and $4.3 million at July 30, 2005, January 29, 2005 and July 31,
2004, respectively. |
|
6. |
|
PROPERTY AND EQUIPMENT, NET |
|
|
|
Property and equipment, net, consisted of (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
July 30, 2005 |
|
|
January 29, 2005 |
|
Property and equipment, at cost |
|
$ |
1,182,623 |
|
|
$ |
1,073,412 |
|
Accumulated depreciation and
amortization |
|
|
(423,883 |
) |
|
|
(386,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
758,740 |
|
|
$ |
687,011 |
|
|
|
|
|
|
|
|
7. |
|
DEFERRED LEASE CREDITS |
|
|
|
Deferred lease credits are derived from payments received from landlords to partially offset
store construction costs. The amounts, which are amortized over the life of the related
leases, consisted of the following (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
July 30, 2005 |
|
|
January 29, 2005 |
|
Deferred lease credits |
|
$ |
363,329 |
|
|
$ |
334,175 |
|
Amortized deferred lease credits |
|
|
(139,246 |
) |
|
|
(125,117 |
) |
|
|
|
|
|
|
|
Total deferred lease credits, net |
|
$ |
224,083 |
|
|
$ |
209,058 |
|
|
|
|
|
|
|
|
9
8. |
|
INCOME TAXES |
|
|
|
The provision for income taxes is based on the current estimate of the annual effective tax
rate adjusted to reflect the tax impact of items discrete to the quarter. Income taxes paid
during the twenty-six weeks ended July 30, 2005 and July 31, 2004 approximated $65.1 million
and $44.0 million, respectively. |
|
9. |
|
LONG-TERM DEBT |
|
|
|
On December 15, 2004, the Company entered into an amended and restated $250 million
syndicated unsecured credit agreement (the Credit Agreement). The primary purposes of the
Credit Agreement are for trade and stand-by letters of credit and working capital. The
Credit Agreement has several borrowing options, including interest rates that are based on
the agent banks Alternate Base Rate. Facility fees payable under the Credit Agreement
will be based on the Companys ratio (the leverage ratio) of the sum of total debt plus
600% of forward minimum rent commitments to consolidated earnings before interest, taxes,
depreciation, amortization and rent (EBITDAR) for the trailing four-fiscal-quarter period,
and the facility fees are projected to accrue at .175% of the committed amounts per annum.
The Credit Agreement contains limitations on indebtedness, liens, sale-leaseback
transactions, significant corporate changes including mergers and acquisitions, investments,
restricted payments (including dividends and stock repurchases) and transactions with
affiliates, including investments in foreign subsidiaries. The Credit Agreement will mature
on December 15, 2009. Letters of credit totaling approximately $44.7 million and $58.0
million were outstanding under the Credit Agreement at July 30, 2005 and under the previous
credit agreement at July 31, 2004, respectively. No borrowings were outstanding under the
Credit Agreement at July 30, 2005 and or under the previous credit
agreement at July 31, 2004. |
|
10. |
|
RELATED PARTY TRANSACTIONS |
|
|
|
Shahid & Company, Inc. has provided advertising and design services for the Company since
1995. Sam N. Shahid, Jr., who served on A&Fs Board of Directors until June 15, 2005, has
been President and Creative Director of Shahid & Company, Inc. since 1993. Fees paid to
Shahid & Company, Inc. for services provided until June 15, 2005 for the thirteen and
twenty-six week periods ended July 30, 2005 were approximately $300 thousand and $863
thousand, respectively. For services provided during the thirteen and twenty-six week
periods ended July 31, 2004, the fees paid to Shahid & Company, Inc. were approximately $600
thousand and $1.2 million, respectively. The amounts do not include reimbursements to
Shahid & Company, Inc. for out-of-pocket expenses incurred while performing these services. |
10
11. |
|
CONTINGENCIES |
|
|
|
The Company is involved in a number of legal proceedings that arise out of, and are
incidental to, the conduct of its business. |
|
|
|
Shelby Port, et al. v. Abercrombie & Fitch Stores, Inc. was initially filed on or about July
18, 2003 in the Washington Superior Court of King County on behalf of a purported class of
employees and former employees of the Company alleging that the defendant required its
employees to purchase and wear specified clothes during specified times in violation of
Washington law and seeking, on behalf of the purported class, injunctive relief and
unspecified amounts of economic and liquidated damages. The defendant filed a motion to
dismiss the complaint in the Port case on September 5, 2003. The initial plaintiff filed an
amended complaint on or about August 9, 2004, adding three new named plaintiffs and
subsequently filed a second amended complaint on or about October 20, 2004. The defendant
filed its answer to the second amended complaint on or about November 19, 2004. The
plaintiffs filed, and the defendant opposed, a motion to certify a class of employees in the
State of Washington. The Washington Superior Court of King County granted the plaintiffs
motion and the defendant commenced a discretionary appeal thereof. The parties have agreed
to a settlement of this matter, which must be approved by the Washington Superior Court of
King County. The parties filed a joint motion for preliminary approval of the settlement on
or about June 6, 2005. The Washington Superior Court of King County preliminarily approved
the settlement on June 13, 2005 and a final approval hearing is scheduled for September 19,
2005. The Company believes that the impact of the proposed settlement will not have a
material effect on the Companys consolidated financial statements. |
|
|
|
Three actions have been filed against the Company involving overtime compensation. In each
action, the plaintiffs, on behalf of their respective purported class, seek injunctive
relief and unspecified amounts of economic and liquidated damages. In Bryan T. Kimbell,
Individually and on Behalf of All Others Similarly Situated and on Behalf of the Public v.
Abercrombie & Fitch Stores, Inc., which was filed on July 10, 2002 in the California
Superior Court for Los Angeles County, the plaintiffs allege that California general and
store managers were entitled to receive overtime pay as non-exempt employees under
California wage and hour laws. An answer was filed in the Kimbell case on September 4,
2002. The parties have agreed to a settlement of this matter, which must be approved by the
California Superior Court for Los Angeles County. The parties filed a joint motion for
preliminary approval of the settlement on August 26, 2005. The Company believes that the
impact of the proposed settlement will not have a material effect on the Companys
consolidated financial statements. |
11
|
|
In Melissa Mitchell, et al. v. Abercrombie & Fitch Co. and Abercrombie & Fitch Stores, Inc.,
which was filed on June 13, 2003 in the United States District Court for the Southern
District of Ohio, the plaintiffs allege that assistant managers and store managers were not
paid overtime compensation in violation of the Fair Labor Standards Act and Ohio law. The
defendants filed a motion to dismiss the Mitchell case on July 28, 2003. The case was
transferred from the Western Division to the Eastern Division of the Southern District of
Ohio on April 21, 2004. The plaintiffs filed an amended complaint to add Scott Oros as a
named plaintiff on October 28, 2004. The defendants subsequently renewed their motion to
dismiss, which was denied as to the two original plaintiffs. The state law claim of
plaintiff Oros was dismissed by the United States District Court for the Southern District
of Ohio on May 17, 2005 and his Fair Labor Standards Act claim remains pending. The
defendants filed an answer to plaintiffs October 28, 2004 amended complaint on May 23, 2005
and the parties have commenced discovery. In Casey Fuller, Individually and on Behalf of
All Others Similarly Situated v. Abercrombie & Fitch Stores, Inc., which was filed on
December 28, 2004 in the United States District Court for the Eastern District of Tennessee,
the plaintiff alleges that he and other similarly situated assistant managers and managers
in training were not paid properly calculated overtime during their employment and seeks
overtime pay under the Fair Labor Standards Act. The defendant filed an answer on February
7, 2005. Because of its similarities to the Mitchell case, the defendant filed, on April
19, 2005, a motion to stay the Fuller case pending the outcome of the Mitchell case or, in
the alternative, transfer the Fuller case to the United States District Court for the
Southern District of Ohio. On May 31, 2005, the United States District Court for the
Eastern District of Tennessee transferred the Fuller case to the United States District
Court for the Southern District of Ohio. On September 2, 2005, the Fuller case was
consolidated with the Mitchell case for all purposes. The Company does not believe it is
feasible to predict the outcome of the legal proceedings described in this paragraph and
intends to defend against them vigorously. The timing of the final resolution of these
legal proceedings is also uncertain. Accordingly, the Company cannot estimate a range of
potential loss, if any, for these legal proceedings. |
12
|
|
On June 16, 2003, Eduardo Gonzalez, et al. v. Abercrombie & Fitch Co. was filed in the
United States District Court for the Northern District of California on behalf of a
purported class alleged to be discriminated against in hiring or employment decisions due to
race and/or national origin. The plaintiffs subsequently amended their complaint to add A&F
California, LLC, Abercrombie & Fitch Stores, Inc. and A&F Ohio, Inc. as defendants. The
plaintiffs in the Gonzalez case sought, on behalf of their purported class, injunctive
relief and unspecified amounts of economic, compensatory and punitive damages. Two other
purported class action employment discrimination lawsuits were subsequently filed in the
United States District Court for the Northern District of California, both on November 8,
2004. In Elizabeth West, et al. v. Abercrombie & Fitch Stores, Inc., et al., the plaintiffs
alleged gender (female) discrimination in hiring or employment decisions and sought, on
behalf of their purported class, injunctive relief and unspecified amounts of economic,
compensatory and punitive damages. The other was brought by the Equal Employment
Opportunity Commission (the EEOC) alleging race, ethnicity and gender (female)
discrimination in hiring or employment decisions. The EEOC complaint sought injunctive
relief and, on behalf of the purported class, unspecified amounts of economic, compensatory
and punitive damages. On November 8, 2004, the defendants signed a consent decree settling
these three related class action discrimination lawsuits, subject to judicial review and
approval. The monetary terms of the consent decree provided that the defendants would set
aside $40.0 million to pay to the class, approximately $7.5 million for attorneys fees, and
approximately $2.5 million for monitoring and administrative costs to carry out the
settlement. As a result, the Company accrued a non-recurring charge of $32.9 million, which
was included in general, administrative and store operating expenses for the third quarter
of fiscal 2004. This was in addition to amounts accrued during the first quarter of fiscal
2004 when the Company recorded an $8.0 million charge (net of expected proceeds of $10
million from insurance) resulting from an increase in expected defense costs. The
preliminary approval order was signed by Judge Susan Illston of the United States District
Court for the Northern District of California on November 16, 2004 and, after a fairness
hearing, Judge Illston signed a final approval order on April 14, 2005. |
|
|
|
The Company accrues amounts related to legal matters if reasonably estimable and reviews
these amounts at least quarterly. |
|
|
|
The Company has standby letters of credit in the amount of $4.5 million that are set to
expire primarily during the fourth quarter of the fiscal year ending January 28, 2006 (the
2005 fiscal 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 indemnification agreements. |
13
12. |
|
SUBSEQUENT EVENTS |
|
|
|
On August 16, 2005, A&F announced that the Board of Directors authorized the Company to
repurchase an additional 6 million shares of A&F Class A Common Stock and that the Board of
Directors increased the dividend rate to $0.175 per share and declared a dividend payable on
September 20, 2005 to shareholders of record on August 30, 2005. |
|
|
|
On August 29, 2005, the Company announced that Robert S. Singer, President and Chief
Operating Officer, would be leaving the Company effective August 31, 2005. On August 31,
2005, the Company and Mr. Singer executed a separation agreement, setting forth the terms
and conditions of Mr. Singers separation from service with the Company. Pursuant to the
Separation Agreement the Company and Mr. Singer agreed that his termination of employment
would be pursuant to Section 11(e) of the Employment Agreement. Consequently, Mr. Singer
resigned his position as an officer of the Company and his membership on its Board of
Directors, effective August 31, 2005. The Company anticipates that the Separation Agreement
will result in a non-recurring charge of approximately $13.5 million to be included in
marketing, general and administrative expense in the third quarter of the 2005 fiscal year. |
|
|
|
On September 2, 2005, a purported class action lawsuit was filed against the Company and
certain of its officers in the United States District Court for the Southern District of
Ohio on behalf of a purported class of all persons who purchased or acquired securities of
Abercrombie & Fitch Co. between June 2, 2005 and August 16, 2005. Based on a preliminary
review and analysis of the complaint, the Company believes the suit has no merit and intends
to vigorously defend itself in court. |
|
|
|
The Company believes that additional purported class action lawsuits have been filed against
the Company and certain of its officers, which are believed to be similar to the aforesaid
lawsuit. |
14
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of Abercrombie & Fitch Co.:
We have reviewed the accompanying condensed consolidated balance sheet of Abercrombie & Fitch Co.
and its subsidiaries as of July 30, 2005, and the related condensed consolidated statements of
income for each of the thirteen and twenty-six week periods ended July 30, 2005 and July 31, 2004
and the condensed consolidated statements of cash flows for the twenty-six week periods ended July
30, 2005 and July 31, 2004. These interim financial statements are the responsibility of the
Companys management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight
Board (United States). A review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in accordance with
the standards of the Public Company Accounting Oversight Board, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the
accompanying condensed consolidated interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of America.
We previously audited in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheet as of January 29, 2005, and the related
consolidated statements of income, of shareholders equity, and of cash flows for the year then
ended, managements assessment of the effectiveness of the Companys internal control over
financial reporting as of January 29, 2005 and the effectiveness of the Companys internal control
over financial reporting as of January 29, 2005; and in our report dated April 11, 2005 we
expressed (i) an unqualified opinion on those consolidated financial statements, (ii) an
unqualified opinion on managements assessment of the effectiveness of the Companys internal
control over financial reporting, and (iii) an adverse opinion on the effectiveness of the
Companys internal control over financial reporting. The consolidated financial statements and
managements assessment of the effectiveness of internal control over financial reporting referred
to above are not presented herein. In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of January 29, 2005, is fairly stated in all material
respects in relation to the consolidated balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
Columbus, Ohio
September 6, 2005
15
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company operates four brands: Abercrombie & Fitch, a fashion-oriented, casual apparel brand
directed at men and women with a youthful lifestyle, targeted at 18 to 22 year-old college
students; abercrombie, a fashion-oriented, casual apparel brand in the tradition of Abercrombie &
Fitch style and quality, targeted at 7 to 14 year-old boys and girls; Hollister, a West
Coast-oriented lifestyle brand targeted at 14 to 18 year-old high school guys and girls, at lower
price points than Abercrombie & Fitch; and RUEHL, a fashion-oriented mix of business casual and
trend fashion displaying high quality clothing, leather goods and lifestyle accessories, targeted
at 22 to 35 year-old modern-minded, post-college consumers. In addition to predominantly
mall-based store locations, Abercrombie & Fitch, abercrombie and Hollister also offer web sites
where products comparable to those carried at the corresponding stores can be purchased.
RESULTS OF OPERATIONS
The Companys consolidated statements of income reflect a reclassification of the Companys income
statement. In prior periods the Company included buying and occupancy costs as well as certain home
office expenses as part of the gross income calculation. The Company believes that presenting gross
profit as a function of sales reduced solely by cost of goods sold, as well as presenting stores
and distribution expense and marketing, general and administrative expense as individual expense
categories, provides a clearer and more transparent representation of gross selling margin and
operating expenses. Prior period results have been reclassified accordingly.
During the second quarter of the 2005 fiscal year, net sales increased 42% to $571.6 million from
$401.3 million in the second quarter of the 2004 fiscal year. Operating income increased to $91.1
million in the second quarter of the 2005 fiscal year from $68.8 million in the second quarter of
the 2004 fiscal year. Net income increased to $57.4 million in the second quarter of the 2005
fiscal year compared to $42.9 million in the second quarter of the 2004 fiscal year. Net income
per diluted weighted-average share was $0.63 in the second quarter of the 2005 fiscal year compared
to $0.44 in the second quarter of the 2004 fiscal year.
16
The following data represent the amounts shown in the Companys condensed consolidated statements
of income for the thirteen and twenty-six week periods ended July 30, 2005 and July 31, 2004,
expressed as a percentage of net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Twenty-Six Weeks Ended |
|
|
July 30, 2005 |
|
July 31, 2004 |
|
July 30, 2005 |
|
July 31, 2004 |
NET SALES |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
|
31.8 |
|
|
|
30.0 |
|
|
|
33.2 |
|
|
|
32.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT |
|
|
68.2 |
|
|
|
70.0 |
|
|
|
66.8 |
|
|
|
67.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stores and Distribution Expense |
|
|
40.6 |
|
|
|
40.0 |
|
|
|
40.6 |
|
|
|
40.1 |
|
Marketing, General and Administrative Expense |
|
|
11.9 |
|
|
|
12.9 |
|
|
|
12.1 |
|
|
|
13.2 |
|
Other Operating Income, Net |
|
|
(0.2 |
) |
|
|
0.0 |
|
|
|
(0.2 |
) |
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME |
|
|
15.9 |
|
|
|
17.1 |
|
|
|
14.3 |
|
|
|
14.2 |
|
Interest Income, Net |
|
|
(0.3 |
) |
|
|
(0.3 |
) |
|
|
(0.2 |
) |
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
|
16.2 |
|
|
|
17.5 |
|
|
|
14.5 |
|
|
|
14.5 |
|
Provision for Income Taxes |
|
|
6.2 |
|
|
|
6.8 |
|
|
|
5.8 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
|
|
10.0 |
% |
|
|
10.7 |
% |
|
|
8.7 |
% |
|
|
8.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Financial Summary
The following summarized financial and statistical data compare the thirteen and twenty-six week
periods ended July 30, 2005 to the comparable periods of the 2004 fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
|
|
|
Twenty-Six Weeks Ended |
|
|
|
|
|
|
July 30, 2005 |
|
|
July 31, 2004 |
|
|
% Change |
|
July 30, 2005 |
|
|
July 31, 2004 |
|
|
% Change |
Net sales (thousands) |
|
$ |
571,591 |
|
|
$ |
401,346 |
|
|
|
42% |
|
|
$ |
1,118,401 |
|
|
$ |
813,276 |
|
|
|
38% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by brand (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
$ |
305,587 |
|
|
$ |
249,787 |
|
|
|
22% |
|
|
$ |
607,718 |
|
|
$ |
510,178 |
|
|
|
19% |
|
abercrombie |
|
$ |
63,323 |
|
|
$ |
41,547 |
|
|
|
52% |
|
|
$ |
126,334 |
|
|
$ |
87,975 |
|
|
|
44% |
|
Hollister |
|
$ |
199,811 |
|
|
$ |
110,012 |
|
|
|
82% |
|
|
$ |
379,055 |
|
|
$ |
215,123 |
|
|
|
76% |
|
RUEHL |
|
$ |
2,870 |
|
|
|
n/a |
|
|
|
n/a |
|
|
$ |
5,294 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net retail sales per average store (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
$ |
829 |
|
|
$ |
648 |
|
|
|
28% |
|
|
$ |
1,618 |
|
|
$ |
1,322 |
|
|
|
22% |
|
abercrombie |
|
$ |
369 |
|
|
$ |
228 |
|
|
|
62% |
|
|
$ |
717 |
|
|
$ |
482 |
|
|
|
49% |
|
Hollister |
|
$ |
713 |
|
|
$ |
565 |
|
|
|
26% |
|
|
$ |
1,384 |
|
|
$ |
1,141 |
|
|
|
21% |
|
RUEHL |
|
$ |
574 |
|
|
|
n/a |
|
|
|
n/a |
|
|
$ |
1,151 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in comparable store sales* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
|
26 |
% |
|
|
(6 |
)% |
|
|
|
|
|
|
20 |
% |
|
|
(4 |
)% |
|
|
|
|
abercrombie |
|
|
57 |
% |
|
|
(10 |
)% |
|
|
|
|
|
|
44 |
% |
|
|
(5 |
)% |
|
|
|
|
Hollister |
|
|
29 |
% |
|
|
4 |
% |
|
|
|
|
|
|
25 |
% |
|
|
6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail sales increase attributable to new
and remodeled stores, catalogue and web
sites |
|
|
12 |
% |
|
|
18 |
% |
|
|
|
|
|
|
14 |
% |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net retail sales per average gross square foot |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
$ |
95 |
|
|
$ |
73 |
|
|
|
30% |
|
|
$ |
184 |
|
|
$ |
150 |
|
|
|
23% |
|
abercrombie |
|
$ |
84 |
|
|
$ |
52 |
|
|
|
62% |
|
|
$ |
163 |
|
|
$ |
109 |
|
|
|
50% |
|
Hollister |
|
$ |
110 |
|
|
$ |
87 |
|
|
|
26% |
|
|
$ |
213 |
|
|
$ |
177 |
|
|
|
20% |
|
RUEHL |
|
$ |
61 |
|
|
|
n/a |
|
|
|
n/a |
|
|
$ |
122 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transactions per average store |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
|
12,413 |
|
|
|
10,694 |
|
|
|
16% |
|
|
|
23,195 |
|
|
|
21,658 |
|
|
|
7% |
|
abercrombie |
|
|
6,641 |
|
|
|
4,570 |
|
|
|
45% |
|
|
|
12,258 |
|
|
|
9,474 |
|
|
|
29% |
|
Hollister |
|
|
15,391 |
|
|
|
12,938 |
|
|
|
19% |
|
|
|
28,885 |
|
|
|
26,074 |
|
|
|
11% |
|
RUEHL |
|
|
6,475 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
11,919 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average transaction value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
$ |
66.81 |
|
|
$ |
60.60 |
|
|
|
10% |
|
|
$ |
69.78 |
|
|
$ |
61.03 |
|
|
|
14% |
|
abercrombie |
|
$ |
55.58 |
|
|
$ |
49.94 |
|
|
|
11% |
|
|
$ |
58.45 |
|
|
$ |
50.87 |
|
|
|
15% |
|
Hollister |
|
$ |
46.32 |
|
|
$ |
43.64 |
|
|
|
6% |
|
|
$ |
47.92 |
|
|
$ |
43.75 |
|
|
|
10% |
|
RUEHL |
|
$ |
88.65 |
|
|
|
n/a |
|
|
|
n/a |
|
|
$ |
96.58 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average units per transaction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
|
2.21 |
|
|
|
2.27 |
|
|
|
(3)% |
|
|
|
2.22 |
|
|
|
2.30 |
|
|
|
(3)% |
|
abercrombie |
|
|
2.73 |
|
|
|
2.73 |
|
|
|
n/a |
|
|
|
2.69 |
|
|
|
2.73 |
|
|
|
(1)% |
|
Hollister |
|
|
2.22 |
|
|
|
2.17 |
|
|
|
2% |
|
|
|
2.18 |
|
|
|
2.23 |
|
|
|
(2)% |
|
RUEHL |
|
|
2.30 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
2.33 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average unit retail sold |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abercrombie & Fitch |
|
$ |
30.23 |
|
|
$ |
26.70 |
|
|
|
13% |
|
|
$ |
31.43 |
|
|
$ |
26.53 |
|
|
|
18% |
|
abercrombie |
|
$ |
20.36 |
|
|
$ |
18.29 |
|
|
|
11% |
|
|
$ |
21.73 |
|
|
$ |
18.63 |
|
|
|
17% |
|
Hollister |
|
$ |
20.86 |
|
|
$ |
20.11 |
|
|
|
4% |
|
|
$ |
21.98 |
|
|
$ |
19.62 |
|
|
|
12% |
|
RUEHL |
|
$ |
38.54 |
|
|
|
n/a |
|
|
|
n/a |
|
|
$ |
41.45 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
* |
|
A store is included in comparable store sales when it has been open as the same brand at
least one year and its square footage has not been expanded or reduced by more than 20%. |
18
CURRENT TRENDS AND OUTLOOK
Overall, management was pleased with the results the Company achieved during the second quarter of
the 2005 fiscal year. Management believes that the key to the Companys current and future success
is to continue its strategy to build, maintain and manage the aspirational position of its brands
and concentrate on each of the brands values focus on casual apparel, aspiration, youth and
sexiness. Complementing the brands values is managements focus on three strategic areas: leading
fashion merchandise; quality of presentation; and in-store experience.
The Companys
three mature brands delivered strong comparable store sales results over the previous year.
abercrombie, the kids business, had the best comparable store sales performance, up 57%, as it has
benefited greatly from the integration of the merchandising organization, which has allowed it to
deliver trend-right merchandise to this age group based on the same trends seen in the adult
business.
The Company is encouraged by the progress at RUEHL. The brand is in the midst of integrating its
merchandising organization into the product-oriented structure used by the other brands. This
format should provide the brand with greater expertise at the product category level while creating
leverage with its supplier base. The brand is still in its early development and as such the
Company expects RUEHL to sustain operating losses until sometime in 2007.
At the home office, management continues to develop and strengthen the merchandising and design
teams to support the brands. The Company believes it can now begin the process of managing these
expenditures to achieve greater efficiencies. Internationally, while the Company is solidifying
its plans to expand into Canada and the United Kingdom, its entry into other foreign markets will
be at a more deliberate pace.
19
SECOND QUARTER RESULTS
Net Sales
Net sales for the second quarter of the 2005 fiscal year were $571.6 million, a 42% increase over
last fiscal years second quarter net sales of $401.3 million. The net sales increase was
attributable to the combination of a 30% comparable store sales increase and the net addition of 77
stores.
The Company believes comparable store sales growth was driven by the store investment program,
which included increased store inventory levels and a renewed focus on the customers in-store
experience; a higher average unit retail price across all brands compared to the second quarter of
the 2004 fiscal year as a result of higher quality inventory and an increase in unit sales of
higher priced items such as denim.
By brand, comparable store sales for the quarter versus the same quarter last fiscal year were as
follows: Abercrombie & Fitch increased 26% with mens realizing comparable store sales in the
high-twenties and womens posting comparable store sales in the mid-twenties. In abercrombie,
comparable store sales increased 57% with girls achieving comparable store sales in the
high-sixties and boys attaining comparable store sales in the mid-thirties. In Hollister,
comparable store sales increased 29% with girls posting a comparable store sales increase in the
mid-thirties and guys attaining a high-teens increase for the quarter.
Comparable store sales were in the mid-twenties to mid-thirties range across all the regions. On a
regional basis, comparable store sales were strongest in the West and Northeast and weakest in the
Midwest and South. Stores located in New York, California and in Austin, Texas had the
best comparable store sales performance during the second quarter.
At Abercrombie & Fitch, mens achieved positive comparable store sales during the quarter driven by
strong results in polos, graphic tees and denim, which more than
offset a decrease in shorts. Womens
had comparable store sales increases in denim, knits and accessories and decreases in non-denim
bottoms when compared to the second quarter of the 2004 fiscal year.
At abercrombie, girls comparable store sales increased during the second quarter of the 2005 fiscal
year compared to the same quarter last fiscal year across all categories, especially in knits,
denim and graphic tees. Boys achieved comparable store sales increases across the majority of
categories. Increases in boys knits, conversation tees and denim more than offset a marginal
decrease in pants.
At Hollister, girls comparable store sales increased during the second quarter of the 2005 fiscal
year compared to the same quarter last fiscal year with increases in denim and knits offset by
marginal decreases in skirts and pants. In guys, increases in knits, denim and conversation tees
offset decreases in shorts.
The impact of the five RUEHL stores was immaterial to the Companys total net sales for the second
quarter of the 2005 fiscal year.
20
Net direct-to-consumer merchandise sales through the Companys web sites and catalogue for the
second quarter of the 2005 fiscal year were $20.6 million, an increase of 3% over last fiscal
years second quarter net sales of $19.9 million. Shipping and handling revenue for the
corresponding periods was $3.2 million in the 2005 fiscal year and $2.8 million in the 2004 fiscal
year. The direct-to-consumer business accounted for 4.2% of net sales in the second quarter of the
2005 fiscal year compared to 5.7% in the second quarter of the 2004 fiscal year. The decrease was
due to store retail sales increasing at a higher growth rate than the direct-to-consumer sales for
the period.
Gross Profit
Gross profit for the second quarter of the 2005 fiscal year was $389.7 million compared to $280.9
million for the comparable period during the 2004 fiscal year. The gross profit rate (gross profit
divided by net sales) for the second quarter of the 2005 fiscal year was 68.2%, down 180 basis
points from last fiscal years rate of 70.0%.
Overall initial markup (IMU) increased slightly at Abercrombie & Fitch, abercrombie and Hollister
compared to last fiscal year as a result of higher unit pricing, which was partially offset by
higher initial costs related to the overall increased quality of the merchandise.
The decrease in the gross profit rate was primarily due to increased markdowns of Spring fashion
merchandise during the second quarter of the 2005 fiscal year in order to enter the back-half of
the year positioned with less transitional merchandise and to the impact of RUEHLs lower initial
margins as the brand is still in its start-up phase and the Company continues to develop its
vision of the brand.
The Company ended the second quarter of the 2005 fiscal year with an approximate 29% unit increase
in inventories per gross square foot versus the second quarter of the 2004 fiscal year. This
increase translated into an inventory increase, at cost, per gross square foot of 67%. The unit
inventory increase was the result of the Companys strategic investment in the denim business and
other basics categories like polos, knits and appliqué logo shirts. Since these categories are not
considered fashion merchandise, the Company believes that there is very little, if any, markdown
risk to them.
21
Stores and Distribution Expense
Stores and distribution expense for the second quarter of the 2005 fiscal year was $232.1 million
compared to $160.5 million for the comparable period in the 2004 fiscal year. For the second
quarter of the 2005 fiscal year, the stores and distribution expense rate (stores and distribution
expense divided by net sales) was 40.6% compared to 40.0% in the second quarter of the 2004 fiscal
year. Stores and distribution expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
|
July 30, 2005 |
|
|
July 31, 2004 |
|
|
|
(in millions) |
|
|
% of sales |
|
|
(in millions) |
|
|
% of sales |
|
Store Payroll Expense |
|
$ |
95.0 |
|
|
|
16.6 |
% |
|
$ |
53.7 |
|
|
|
13.4 |
% |
Rent, Utilities and Other Landlord
Expense |
|
|
66.8 |
|
|
|
11.7 |
% |
|
|
55.2 |
|
|
|
13.8 |
% |
Depreciation and Amortization |
|
|
26.7 |
|
|
|
4.7 |
% |
|
|
21.6 |
|
|
|
5.4 |
% |
Repairs and Maintenance Expense |
|
|
8.7 |
|
|
|
1.5 |
% |
|
|
7.4 |
|
|
|
1.8 |
% |
Other Store Expense |
|
|
21.5 |
|
|
|
3.8 |
% |
|
|
12.4 |
|
|
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stores Expense |
|
$ |
218.7 |
|
|
|
38.3 |
% |
|
$ |
150.3 |
|
|
|
37.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct-to-Consumer Expense |
|
|
6.7 |
|
|
|
1.2 |
% |
|
|
5.9 |
|
|
|
1.5 |
% |
Distribution Center Expense |
|
|
6.7 |
|
|
|
1.2 |
% |
|
|
4.3 |
|
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stores and Distribution Expense |
|
$ |
232.1 |
|
|
|
40.6 |
% |
|
$ |
160.5 |
|
|
|
40.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The primary driver of the rate increase has been the Companys continued focus on the store
investment program to improve the quality of presentation, in-store environment and customer
experience. As a result, store payroll expense and other store expense grew at a higher rate than
sales, but were partially offset by leverage achieved against relatively fixed store costs such as
rent, utilities, landlord charges and depreciation and amortization.
The distribution center productivity levels during the second quarter of the 2005 fiscal year
decreased versus the comparable period during 2004. Productivity, as measured in units processed
per labor hour (UPH), was 8% lower than the second quarter of the 2004 fiscal year. The UPH rate
decreased as a result of the change in product mix during the current year compared to the prior
year. Increases primarily in denim and fleece inventory during the second quarter of the 2005
fiscal year compared to the second of the 2004 fiscal year resulted in a lower productivity rate
due to the increased handling and size of the merchandise.
22
Marketing, General and Administrative Expense
Marketing, general and administrative expense during the second quarter of the 2005 fiscal year was
$67.9 million compared to $51.7 million during the same period in the 2004 fiscal year. For the
second quarter of the 2005 fiscal year, the marketing, general and administrative expense rate
(marketing, general and administrative expense divided by net sales) was 11.9% compared to 12.9% in
the second quarter of the 2004 fiscal year. Excluding last years non-recurring expense related to
the retirement of an executive officer, marketing, general and administrative expense was
relatively flat as a percentage of sales, representing increased travel, outside services, and
legal costs offset by leverage on sales.
Other Operating Income, Net
Second quarter other operating income for the 2005 fiscal year was $1.4 million compared to $63
thousand for the second quarter of the fiscal 2004 year. The increase was related to the
quarterly unredeemed gift certificate adjustment and lease buyout payments from landlords.
Operating Income
Operating income for the second quarter of the 2005 fiscal year increased to $91.1 million from
$68.8 million in the second quarter of the 2004 fiscal year, an increase of 32.4%. The operating
income rate (operating income divided by net sales) was 15.9% for the second quarter of the 2005
fiscal year compared to 17.1% for the second quarter of the 2004 fiscal year. The decrease in the
operating income rate during the quarter was a result of a lower gross profit rate and a slight
increase in the stores and distribution expense rate offset by a lower marketing, general and
administrative expense rate during the quarter.
Interest Income and Income Tax Expense
Second quarter net interest income was $1.6 million in 2005 compared to $1.4 million in the second
quarter of the 2004 fiscal year. The increase in net interest income was due to higher interest
rates during the second quarter of the 2005 fiscal year compared to the same period in the prior
fiscal year. The effective tax rate for the second quarter was 38.0% as compared to 38.8% for the
2004 fiscal year comparable period. The decrease in the rate was primarily due to a lower annual
estimated effective tax rate as a result of a corporate realignment and the phase out of the Ohio
corporate income tax which was enacted on June 30, 2005.
23
YEAR-TO-DATE RESULTS
Net Sales
Year-to-date net sales in fiscal 2005 were $1.118 billion, an increase of 38% over last years net
sales of $813.3 million for the same period. The net sales increase was attributable to the
combination of a 24% comparable store sales increase and the net addition of 77 stores.
Year-to-date comparable store sales by brand were as follows: Abercrombie & Fitch increased 20%,
abercrombie increased 44% and Hollister posted a 25% increase. The womens business in each
concept continued to be more significant than mens. Year-to-date, womens and girls represented over
60% of net sales for each of the brands. abercrombie girls achieved a low-fifties comparable
stores sales increase, Hollister girls had a low-thirties comparable store sales increase and
Abercrombie & Fitch womens posted an increase in the low-twenties.
For the year-to-date period, Hollister continued to gain in productivity relative to Abercrombie &
Fitch. For the 2005 year-to-date period, sales per gross square foot in Hollister stores were
approximately 140% of the sales per gross square foot of Abercrombie & Fitch stores in the same
malls compared to 133% for the 2004 year-to-date period.
Net direct-to-consumer merchandise sales through the Companys web sites and catalogue for the
year-to-date period for the 2005 fiscal year were $48.1 million, an increase of 12% over last years
comparable period net sales of $42.9 million. Shipping and handling revenue for the corresponding
periods was $7.5 million in the 2005 fiscal year and $6.1 million in the 2004 fiscal year. The
direct-to-consumer business accounted for 5.0% of net sales for the fiscal 2005 year-to-date period
compared to 6.0% in the fiscal 2004 year-to-date period. The decrease was due to store retail sales
increasing at a higher growth rate than the direct-to-consumer sales for the period.
Gross Profit
Year-to-date gross profit the 2005 fiscal year was $746.9 million compared to $548.8 million in the
comparable period during the 2004 fiscal year. The gross profit rate for the year-to-date period
of the 2005 fiscal year was 66.8%, down 70 basis points from last fiscal years rate of 67.5%.
Overall IMU increases across Abercrombie & Fitch, abercrombie and Hollister compared to last year
were offset by the impact of increased markdowns of Spring fashion merchandise during the second
quarter of the 2005 fiscal year and the impact of RUEHLs lower initial margins.
24
Stores and Distribution Expense
Stores and distribution expense for the 2005 fiscal year-to-date period was $454.3 million compared
to $326.0 million for the comparable period in the 2004 fiscal year. The stores and distribution
expense rate was 40.6% compared to 40.1% in the corresponding period of the 2004 fiscal year.
Stores and distribution expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twenty-Six Weeks Ended |
|
|
|
July 30, 2005 |
|
|
July 31, 2004 |
|
|
|
(in millions) |
|
|
% of sales |
|
|
(in millions) |
|
|
% of sales |
|
Store Payroll Expense |
|
$ |
174.1 |
|
|
|
15.6 |
% |
|
$ |
103.2 |
|
|
|
12.7 |
% |
Rent, Utilities and Other Landlord Expense |
|
|
132.2 |
|
|
|
11.8 |
% |
|
|
109.7 |
|
|
|
13.5 |
% |
Depreciation and Amortization |
|
|
54.2 |
|
|
|
4.8 |
% |
|
|
44.8 |
|
|
|
5.5 |
% |
Repairs and Maintenance Expense |
|
|
24.6 |
|
|
|
2.2 |
% |
|
|
16.5 |
|
|
|
2.0 |
% |
Other Store Expense |
|
|
41.7 |
|
|
|
3.7 |
% |
|
|
29.2 |
|
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stores Expense |
|
$ |
426.8 |
|
|
|
38.2 |
% |
|
$ |
303.4 |
|
|
|
37.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct-to-Consumer Expense |
|
|
15.1 |
|
|
|
1.4 |
% |
|
|
13.7 |
|
|
|
1.7 |
% |
Distribution Center Expenses |
|
|
12.5 |
|
|
|
1.1 |
% |
|
|
9.0 |
|
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stores and Distribution Expense |
|
$ |
454.3 |
|
|
|
40.6 |
% |
|
$ |
326.0 |
|
|
|
40.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The primary driver of the rate increase was the Companys continued focus on the store
investment program to improve the quality of presentation, in-store environment and customer
experience. As a result, store payroll expense and repairs and maintenance expense grew at a
higher rate than sales, but were offset by leverage achieved against relatively fixed store costs
such as rent, utilities, landlord charges and depreciation and amortization.
Marketing, General and Administrative Expense
Marketing, general and administrative expense for the 2005 fiscal year-to-date period was $135.0
million compared to $107.5 million during the same period in the 2004 fiscal year. The marketing,
general and administrative expense rate was 12.1% compared to 13.2% for the year-to-date period of
the 2004 fiscal year. The decrease in rate versus the 2004 fiscal year comparable period was
primarily due to the leverage gained on home office payroll and outside services as a result of
higher sales.
Other Operating Income, Net
Year-to-date other operating income for the 2005 fiscal year was $1.8 million compared to $160
thousand for the second quarter of the fiscal 2004 year. The increase was related to the
unredeemed gift certificate adjustments and lease buyout payments from landlords.
25
Operating Income
For the 2005 fiscal year-to-date period, operating income was $159.4 million compared to $115.5
million for the 2004 fiscal year comparable period, an increase of 38.0%. The operating income
rate for the 2005 fiscal year-to-date period was 14.3% versus 14.2% for the 2004 fiscal
year-to-date period. The operating income rate for the year-to-date period remained relatively
flat to the comparable period last year as a result of a lower gross profit rate and a slight
increase in the stores and distribution expense rate offset by a lower marketing, general and
administrative expense and other operating income rates.
Interest Income and Income Tax Expense
Year-to-date net interest income for the 2005 fiscal year was $2.8 million compared to $2.3 million
for the comparable period in 2004. The effective tax rate for the 2005 year-to-date period was
39.7% compared to 38.7% for the 2004 comparable period. The Company estimates that the full year
effective tax rate for the 2005 fiscal year will be approximately 39%.
FINANCIAL CONDITION
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 Companys
working capital position and capitalization follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
July 30, 2005 |
|
|
January 29, 2005 |
|
Working capital |
|
$ |
398,722 |
|
|
$ |
277,893 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalization: |
|
|
|
|
|
|
|
|
Shareholders equity |
|
$ |
842,113 |
|
|
$ |
669,326 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities, the Companys primary source of liquidity, totaled
$50.8 million for the twenty-six weeks ended July 30, 2005 versus $147.8 million in the comparable
period of the 2004 fiscal year. Cash was provided primarily by current year net income adjusted
for depreciation and amortization, lessor construction allowances received and changes in accounts
payable and accrued expenses. Uses of cash primarily consisted of increases in inventories and the
change in deferred taxes.
The net income increase was a result of sales growth during the second quarter of the 2005 fiscal
year. The adjustment for depreciation, amortization and lessor construction allowances was part of
the normal course of business. The change in accounts payable and accrued expenses was due to
increased payables as a result of inventory purchases.
Inventories increased as a result of the program to increase store inventory levels combined with a
cost per unit increase, as previously discussed. Deferred taxes increased as a result of lower tax
depreciation, insurance reimbursement of legal fees and changes in accruals.
26
The Companys operations are seasonal in nature with sales typically peaking during the
Back-to-School and Holiday selling periods. Accordingly, cash requirements for inventory
expenditures are highest leading up to those periods.
Cash outflows for investing activities were for purchases of marketable securities and capital
expenditures related primarily to new stores and construction in process (see the discussion in
Capital Expenditures and Landlord Construction Allowances). Cash inflows from investing
activities consisted of proceeds from the sales of marketable securities. As of July 30, 2005, the
Company held $216.4 million of marketable securities with original maturities greater than 90 days.
Financing
activities, for the twenty-six week period ended July 30, 2005, consisted of $69.9 million
received in connection with stock option exercises, $26.9 million paid for the repurchase of A&Fs
Class A Common Stock, $21.6 million for two separate $0.125
per share quarterly dividends paid on
June 21, 2005 and March 22, 2005 and $2.9 million for the change in cash overdrafts, which are
outstanding checks reclassified from cash to accounts payable.
During the twenty-six week period ended July 30, 2005, the Company repurchased 475,000 shares of
A&Fs Class A Common Stock at an average cost of $56.64 per share for a total of $26.9 million. As
of July 30, 2005, 973,500 shares are authorized for repurchase as part of the November 9, 2004 A&F
Board of Directors authorization to repurchase 6 million shares. On August 16, 2005, A&F
announced that the Board of Directors authorized the Company to repurchase an additional 6
million shares of A&F Class A Common Stock.
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 current Credit Agreement to support operations.
Letters of credit totaling approximately $44.7 million and $58.0 million were outstanding on July
30, 2005 and July 31, 2004, respectively. No loans were outstanding on July 30, 2005 or July 31,
2004.
The Company has standby letters of credit in the amount of $4.5 million that are set to expire
primarily during the fourth quarter of the fiscal year ending January 28, 2006 (the 2005 fiscal
year). The primary beneficiary, a merchandise supplier, has the right to draw upon the standby
letter of credit if the Company has authorized or filed a voluntary petition in bankruptcy. To
date, the beneficiary has not drawn upon the standby letter of credit.
27
Off-Balance Sheet Arrangements and Contractual Obligations
As of
July 30, 2005, the Company did not have any off-balance sheet arrangements and the Companys
contractual obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period (thousands) |
|
|
|
|
|
|
Less than 1 |
|
|
|
|
|
|
|
|
|
More than 5 |
Contractual Obligations |
|
Total |
|
year |
|
1-3 years |
|
3-5 years |
|
years |
|
Operating Leases
Obligations |
|
$ |
1,354,220 |
|
|
$ |
89,054 |
|
|
$ |
354,172 |
|
|
$ |
319,399 |
|
|
$ |
591,595 |
|
Purchase Obligations |
|
|
298,522 |
|
|
|
276,032 |
|
|
|
22,490 |
|
|
|
|
|
|
|
|
|
Other Obligations |
|
|
50,663 |
|
|
|
46,040 |
|
|
|
4,553 |
|
|
|
70 |
|
|
|
|
|
|
|
|
Totals |
|
$ |
1,703,404 |
|
|
$ |
411,126 |
|
|
$ |
381,214 |
|
|
$ |
319,469 |
|
|
$ |
591,595 |
|
|
|
|
The majority of the Companys contractual obligations are made up of operating leases for its
stores. The purchase obligations category represents purchase orders for merchandise to be
delivered during Fall 2005 and commitments for fabric and trim to be used during the next several
seasons. Other obligations represent Capital Lease Obligations and
letters of credit outstanding as of July 30, 2005 (see Note 9 of the Notes to Condensed
Consolidated Financial Statements). The Company expects to fund all of these obligations with cash
provided from operations.
Store Count and Gross Square Feet
Store count and gross square footage by brand were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 30, 2005 |
|
July 31, 2004 |
|
|
Number |
|
Gross Square |
|
Average |
|
Number |
|
Gross Square |
|
Average |
|
|
of Stores |
|
Feet (thousands) |
|
Store Size |
|
of Stores |
|
Feet (thousands) |
|
Store Size |
Abercrombie & Fitch |
|
|
355 |
|
|
|
3,086 |
|
|
|
8,693 |
|
|
|
359 |
|
|
|
3,164 |
|
|
|
8,813 |
|
abercrombie |
|
|
163 |
|
|
|
714 |
|
|
|
4,379 |
|
|
|
171 |
|
|
|
755 |
|
|
|
4,415 |
|
Hollister |
|
|
281 |
|
|
|
1,826 |
|
|
|
6,499 |
|
|
|
197 |
|
|
|
1,274 |
|
|
|
6,466 |
|
RUEHL |
|
|
5 |
|
|
|
47 |
|
|
|
9,488 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
804 |
|
|
|
5,674 |
|
|
|
7,057 |
|
|
|
727 |
|
|
|
5,192 |
|
|
|
7,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Capital Expenditures and Landlord Construction Allowances
Capital expenditures totaled $117.5 million and $83.3 million for the twenty-six weeks ended July
30, 2005 and July 31, 2004, respectively. Additionally, the non-cash accrual for construction in
progress increased by $16.6 million for the twenty-six week period ended July 30, 2005 and
decreased $14.4 million for the twenty-six week period ended July 31, 2004, respectively. Capital
expenditures related primarily to new store construction and the home office expansion project.
The balance of capital expenditures related primarily to miscellaneous store remodeling, home
office and distribution center projects.
Construction allowances are an integral part of the decision-making process for assessing the
viability of new store leases. In making the decision whether to invest in a store location, the
Company calculates the estimated future return on its investment based on the cost of construction,
less any construction allowances to be received from the landlord. For the twenty-six week periods
ended July 30, 2005 and July 31, 2004, the Company received $15.8 million and $16.9 million in
construction allowances, respectively. For accounting purposes, the Company treats construction
allowances as a deferred lease credit, which reduces rent expense in accordance with Statement of
Financial Accounting Standards No.13, Accounting for Leases and Financial Accounting Standards
Board Technical Bulletin No. 88-1, Issues Relating to Accounting for Leases.
The Company anticipates spending $265 million to $285 million, excluding landlord construction
allowances, in the 2005 fiscal year for capital expenditures, of which $215 million to $225 million
has been appropriated for the construction of approximately 75 new stores as well as the remodeling
of 25 to 35 existing stores and other miscellaneous store projects. The balance of the capital
expenditures will be spent on new home office buildings and other miscellaneous home office and
distribution center projects.
By the end of fiscal 2005 the Company plans to increase gross square footage by approximately 8%
over fiscal year-end 2004. Management anticipates the increase during the 2005 fiscal year will be
due to the net addition of approximately 56 new Hollister stores and 3 RUEHL stores. Furthermore,
the Company plans to remodel 20 to 30 Abercrombie & Fitch stores and convert a total of eight
Abercrombie & Fitch and abercrombie stores to six Hollister stores, one Abercrombie & Fitch store
and one RUEHL store. In addition, the Company plans to open a new 34,000 gross square foot flagship
store on the corner of Fifth Avenue and 56th Street in Manhattan, New York and expand
its store at The Grove in Los Angeles by approximately 14,000 gross square feet.
The Company estimates that the average cost for leasehold improvements and furniture and fixtures
for new Abercrombie & Fitch stores, excluding the above mentioned New York and Los Angeles flagship
stores, opened during the 2005 fiscal year will approximate $776,000 per store, net of construction
allowances. In addition, initial inventory purchases for the stores are expected to average
approximately $260,000 per store.
The Company estimates that the average cost for leasehold improvements and furniture and fixtures
for new abercrombie stores opened during the 2005 fiscal year will approximate $401,000 per store,
net of construction allowances. In addition, initial inventory purchases are expected to average
approximately $120,000 per store.
29
The Company estimates that the average cost for leasehold improvements and furniture and fixtures
for new Hollister stores opened during the 2005 fiscal year will approximate $843,000 per store,
net of construction allowances. In addition, initial inventory purchases are expected to average
approximately $195,000 per store.
Although the Company has opened 5 RUEHL stores, it believes that the costs it has incurred to-date
for the stores are not representative of the future average cost of opening a store.
The Company expects that substantially all future capital expenditures will be funded with cash
from operations and landlord construction allowances. 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 Companys discussion and analysis of its financial condition and results of operations are
based upon the Companys 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 Companys significant accounting policies can be found in the Notes to Consolidated Financial
Statements (see Note 2 of the Notes to Consolidated Financial Statements of A&Fs Annual Report on
Form 10-K). The Company believes that the following policies are most critical to the portrayal of
the Companys 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 the estimated customer receipt of merchandise.
Amounts relating to shipping and handling billed to customers are classified as revenue and the
direct shipping 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.
The Company accounts for gift cards by recognizing a liability at the time when a gift card is
sold. Revenue is recognized when the gift card is redeemed for merchandise. The Company reviews
its gift card liability quarterly and adjusts the liability based on historical redemption patterns
as required.
30
Inventory Valuation Inventories are principally valued at the lower of average cost or market,
utilizing the retail method. The retail method of inventory valuation is an averaging technique
applied to different categories of inventory. At the Company, 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. At fiscal quarter end, the
Company reduces inventory value by recording a markdown reserve that represents the estimated
future anticipated selling price decreases necessary to sell-through the current season inventory.
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 profit. Management believes that this inventory valuation
method is appropriate since 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
30 years for buildings, the lesser of 10 years or the life of the lease for leasehold improvements
and 3 to 10 years for other property and equipment. The cost of assets sold or retired and the
related accumulated depreciation or amortizations 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 remodels and improvements that extend service lives of the assets 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, managements plans for future operations, recent
operating results and projected cash flows.
31
Income Taxes Income taxes are calculated in accordance with SFAS No. 109, Accounting for Income
Taxes, which requires the use of the asset and 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 Companys 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 that it is more likely than not that the full
amount of the net deferred tax assets will be realized in the future. The effective tax rate
utilized by the Company reflects managements judgment of the expected tax liabilities within the
various taxing jurisdictions.
Contingencies In the normal course of business, the Company must make continuing estimates of
potential future legal obligations and liabilities, which requires the use of managements judgment
on the outcome of various issues. Management may also use outside legal advice to assist in the
estimating process. However, the ultimate outcome of various legal issues could be different from
management estimates, and adjustments may be required.
32
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 Quarterly Report on Form 10-Q or made by
management of A&F involve risks and uncertainties and are subject to change based on various
important factors, many of which may be beyond the Companys control. Words such as estimate,
project, plan, believe, expect, anticipate, intend and similar expressions may identify
forward-looking statements. The following factors, in addition to those included in the disclosure
under the heading FORWARD-LOOKING STATEMENTS AND RISK FACTORS in ITEM 1. BUSINESS of A&Fs
Annual Report on Form 10-K for the fiscal year ended January 29, 2005, in some cases have affected
and in the future could affect the Companys financial performance and could cause actual results
for the 2005 fiscal year and beyond to differ materially from those expressed or implied in any of
the forward-looking statements included in this Quarterly Report on Form 10-Q or otherwise made by
management:
|
|
|
changes in consumer spending patterns and consumer preferences; |
|
|
|
|
the impact of competition and pricing; |
|
|
|
|
disruptive weather conditions; |
|
|
|
|
availability and market prices of key raw materials; |
|
|
|
|
currency and exchange risks and changes in existing or
potential duties, tariffs or quotas; |
|
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|
|
availability of suitable store locations on appropriate terms; |
|
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|
|
ability to develop new merchandise; |
|
|
|
|
ability to hire, train and retain associates; and |
|
|
|
|
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; |
Future economic and industry trends that could potentially impact revenue and profitability are
difficult to predict. Therefore, there can be no assurance that the forward-looking statements
included in this Quarterly Report on Form 10-Q will prove to be accurate. In light of the
significant uncertainties in the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company, or any other person, that
the objectives of the Company will be achieved. The forward-looking statements herein are based on
information presently available to the management of the Company. Except as may be required by
applicable law, the Company assumes no obligation to publicly update or revise its forward-looking
statements even if experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.
33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company maintains its cash equivalents in financial instruments with original maturities of 90
days or less. The Company also holds investments in marketable securities, which primarily consist
of investment grade municipal notes and bonds and investment grade auction rate securities, all
classified as available-for-sale. These securities are consistent with the investment objectives
contained within the investment policy established by the Companys Board of Directors. The basic
objectives of the investment policy are the preservation of capital, maintaining sufficient
liquidity to meet operating requirements and maximizing net after-tax yield. The Companys
investments in municipal notes and bonds all have maturities under
five years. Despite the underlying
long-term maturity of auction rate securities, from the investors perspective, such securities are
priced and subsequently traded as short-term investments because of the interest rate reset
feature. Interest rates are reset through an auction process at predetermined periods ranging from
one to 49 days. Failed auctions rarely occur. As of July 30, 2005, the Company held approximately
$216.4 million in marketable securities.
The Company does not enter into financial instruments for trading purposes.
As of July 30, 2005, 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 an adverse change in interest rates would have a material affect on the Companys
financial condition.
The Companys market risk profile as of July 30, 2005 has not significantly changed since January
29, 2005. The Companys market risk profile on January 29, 2005 is disclosed in A&Fs 2004 Annual
Report on Form 10-K.
34
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) that are
designed to provide reasonable assurance that information required to be disclosed in the reports
that the Company files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange Commissions rules and
forms, and that such information is accumulated and communicated to the Companys management,
including the Chairman and Chief Executive and the Chief Financial Officer, as appropriate, to
allow timely decisions regarding required financial disclosures. Because of inherent limitations,
disclosure controls and procedures, no matter how well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures
are met.
The Companys management, including the Chairman and Chief Executive and the Chief Financial
Officer, evaluated the effectiveness of the Companys design and operation of its disclosure
controls and procedures as of the end of the second quarter ended July 30, 2005. Based upon that
evaluation, the Chairman and Chief Executive and the Chief Operating Officer, concluded that the
material weakness discussed in the Companys 2004 Annual Report on Form 10-K had been remediated
and the Companys disclosure controls and procedures were effective at a reasonable level of
assurance as of the period covered by this Form 10-Q.
Changes in Internal Control Over Financial Reporting
There were no changes in A&Fs internal control over financial reporting (as defined in Rule
13a-15(f) under the Exchange Act) that occurred during A&Fs fiscal quarter ended July 30, 2005
that have materially affected, or are reasonably likely to materially affect, A&Fs internal
control over financial reporting.
35
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following includes updated information relating to certain of the Companys material legal
proceedings as previously reported in A&Fs 2004 Annual Report on Form 10-K and updated in A&Fs
Quarterly Report on Form 10-Q for the quarterly period ended April 30, 2005.
In Melissa Mitchell, et al. v. Abercrombie & Fitch Co. and Abercrombie & Fitch Stores, Inc., the
state law claim of plaintiff Oros was dismissed by the United States District Court for the
Southern District of Ohio on May 17, 2005 and his Fair Labor Standards Act claim remains pending.
The defendants filed an answer to plaintiffs October 28, 2004 amended complaint on May 23, 2005
and the parties have commenced discovery. In Casey Fuller, Individually and on Behalf of All
Others Similarly Situated v. Abercrombie & Fitch Stores, Inc., because of its similarities to the
Mitchell case, the defendant filed, on April 19, 2005, a motion to stay the Fuller case pending the
outcome of the Mitchell case or, in the alternative, transfer the Fuller case to the United States
District Court for the Southern District of Ohio. On May 31, 2005, the United States District
Court for the Eastern District of Tennessee transferred the Fuller case to the United States
District Court for the Southern District of Ohio. On September 2, 2005, the Fuller case was
consolidated with the Mitchell case for all purposes.
As a recent development to the stockholder derivative lawsuits filed in February 2005 and
consolidated under the caption In re Abercrombie & Fitch Co. Shareholder Derivative Litigation,
Consol. C.A. No. 1077-N and as discussed in A&Fs Current Report on Form 8-K filed on August 26,
2005, the settlement agreement previously discussed in A&Fs Annual Report on Form 10-K filed on
April 14, 2005 and attached to A&Fs Quarterly Report on Form 10-Q filed on June 9, 2005 was
approved by the Court of Chancery of the State of Delaware on June 14, 2005.
In Shelby Port, et al v. Abercrombie & Fitch Stores, Inc., the parties have agreed to a settlement
of the matter, which must be approved by the Washington Superior Court of King County. The parties
filed a joint motion for preliminary approval of the settlement on or about June 6, 2005. The
Washington Superior Court of King County preliminarily approved the settlement on June 13, 2005 and
a final approval hearing is scheduled for September 19, 2005. The Company believes that the impact
of the proposed settlement will not have a material effect on the Companys consolidated financial
statements.
In Bryan T. Kimbell, Individually and on Behalf of All Others Similarly Situated and on Behalf of
the Public v. Abercrombie & Fitch Stores, Inc., the parties have agreed to a settlement of the
matter, which must be approved by the California Superior Court for Los Angeles County. The
parties filed a joint motion for preliminary approval of the settlement on August 26, 2005. The
Company believes that the impact of the proposed settlement will not have a material effect on the
Companys consolidated financial statements.
On September 2, 2005, a purported class action lawsuit was filed against the Company and certain of
its officers in the United States District Court for the Southern District of Ohio on behalf of a
purported class of all persons who purchased or acquired securities of Abercrombie & Fitch Co.
between June 2, 2005 and August 16, 2005. Based on a preliminary review and analysis of the
complaint, the Company believes the suit has no merit and intends to vigorously defend itself in
court.
The Company believes that additional purported class action lawsuits have been filed against the
Company and certain of its officers, which are believed to be similar to the aforesaid lawsuit.
36
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table provides information regarding A&Fs purchase of its Class A Common Stock
during each fiscal month of the quarterly period ended July 30, 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
Maximum Number |
|
|
|
Total |
|
|
|
|
|
|
Shares Purchased |
|
|
of Shares that May |
|
|
|
Number of |
|
|
Average |
|
|
as Part of Publicly |
|
|
Yet be Purchased |
|
|
|
Shares |
|
|
Price Paid |
|
|
Announced |
|
|
under the |
|
Period |
|
Purchased |
|
|
per Share |
|
|
Program |
|
|
Program(1)(2) |
|
|
|
|
|
|
|
|
|
|
|
May 1 through May
28, 2005 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
973,500 |
|
May 29 through
June 28, 2005 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
973,500 |
|
June 29 through
July 30, 2005 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
973,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
973,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The number shown represents, as of the end of each period, the maximum
number of shares of Class A Common Stock that may yet be purchased under A&Fs publicly
announced stock purchase authorizations. On November 9, 2004, A&F announced the
authorization for the repurchase of 6,000,000 shares of Class A Common Stock. The shares
may be purchased from time-to-time, depending on market conditions. |
|
(2) |
|
On August 16, 2005, A&F announced that the Board of Directors
authorized the Company to repurchase an additional 6,000,000 shares of A&F Class A Common
Stock. |
37
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
38
ITEM 4. SUBMISSION OF A MATTERS TO A VOTE OF SECURITY HOLDERS
On June 15, 2005, A&F held its annual meeting of shareholders at Abercrombie & Fitch executive
offices located at 6301 Fitch Path, New Albany, Ohio. At the close of business on the March 26,
2004 record date, 86,324,134 shares of Class A Common Stock of A&F were outstanding and entitled to
vote. At the Annual Meeting, 77,439,038 or 89.7% of the outstanding shares of Class A Common Stock
entitled to vote were represented by proxy or in person. At the Annual Meeting, Mr. Allan A.
Tuttle was elected and Messrs. Russell M. Gertmenian and Archie M. Griffin were re-elected to A&Fs
Board of Directors, each to serve for a three-year term expiring in 2008. The vote on the
proposals was as follows:
Proposal 1 Election of Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
Broker |
|
|
Votes For |
|
Withheld |
|
Non-Votes |
|
|
|
Russell M. Gertmenian |
|
|
67,515,819 |
|
|
|
9,923,219 |
|
|
|
|
|
Archie M. Griffin |
|
|
69,976,399 |
|
|
|
7,462,639 |
|
|
|
|
|
Allan A. Tuttle |
|
|
73,584,260 |
|
|
|
3,854,778 |
|
|
|
|
|
Proposal 2 Approve Abercrombie & Fitch Co. 2005 Long-Term Incentive Plan
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
Votes |
|
|
|
|
Votes For |
|
Against |
|
Abstain |
|
|
|
Beneficial Common |
|
|
38,562,272 |
|
|
|
29,787,023 |
|
|
|
191,931 |
|
Registered Common |
|
|
72,427 |
|
|
|
14,967 |
|
|
|
1,628 |
|
Proposal 3
Ratify PricewaterhouseCoopers LLP as Independent Registered Public Accountants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Votes |
|
|
|
|
Votes For |
|
Against |
|
Abstain |
|
|
|
Beneficial Common |
|
|
72,215,127 |
|
|
|
5,056,715 |
|
|
|
78,174 |
|
Registered Common |
|
|
86,796 |
|
|
|
1,338 |
|
|
|
888 |
|
The following individuals also continue to serve on the Board of Directors: Ms. Lauren J.
Brisky and Messrs. James B. Bachmann, John A. Golden, Michael S. Jeffries, John W. Kessler, and
Edward F. Limato. At the June 15, 2005 annual meeting of the Board of Directors, Mr. Daniel J.
Brestle was elected to A&Fs Board of Directors.
39
ITEM 5. OTHER INFORMATION
Not Applicable.
40
ITEM 6. EXHIBITS
(a) Exhibits
|
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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&Fs
Quarterly Report on Form 10-Q for the quarterly period ended November 2, 1996 (File No.
1-12107). |
|
|
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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&Fs Annual Report on Form 10-K for the fiscal 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&Fs Quarterly Report on Form 10-Q for the quarterly period ended July 31, 1999 (File No.
1-12107). |
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|
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3.4
|
|
Amended and Restated Bylaws of A&F, effective January 31, 2002, incorporated herein by
reference to Exhibit 3.4 to A&Fs Annual Report on Form 10-K for the fiscal year ended
February 2, 2002 (File No. 1-12107). |
|
|
|
3.5
|
|
Certificate regarding adoption of amendment to Section 2.02 of Amended and Restated Bylaws of
A&F by Board of Directors on July 10, 2003, incorporated herein by reference to Exhibit 3.5 to
A&Fs Quarterly Report on Form 10-Q for the quarterly period ended November 1, 2003 (File No.
1-12107). |
|
|
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3.6
|
|
Certificate regarding adoption of amendments to Sections 1.02, 1.06, 3.01, 3.05, 4.02, 4.03,
4.04, 4.05, 4.06, 6.01 and 6.02 of Amended and Restated Bylaws of A&F by Board of Directors on
May 20, 2004, incorporated herein by reference to Exhibit 3.6 to A&Fs Quarterly Report on
Form 10-Q for the quarterly period ended May 1, 2004 (File No. 1-12107). |
|
|
|
3.7
|
|
Amended and Restated Bylaws of A&F (reflecting amendments through May 20, 2004), incorporated
herein by reference to Exhibit 3.7 to A&Fs Quarterly Report on Form 10-Q for the quarterly
period ended May 1, 2004 (File No. 1-12107). |
|
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4.1
|
|
Credit Agreement, dated as of November 14, 2002, as amended and restated as of December 15,
2004, among Abercrombie & Fitch Management Co., as Borrower; Abercrombie & Fitch Co., as
Guarantor; the Lenders party thereto; National City Bank, as Administrative Agent; JPMorgan
Chase Bank, N.A., as Syndication Agent; and National City Bank and J.P. Morgan Securities
Inc., as Co-Lead Arrangers and Joint Bookrunners (the Amended Credit Agreement),
incorporated herein by reference to Exhibit 4.1 to A&Fs Current Report on Form 8-K dated
December 21, 2004 (File No. 1-12107). |
41
|
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|
4.2
|
|
Guarantee Agreement, dated as of November 14, 2002, as amended and restated as of December
15, 2004, 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 Amended Credit Agreement, incorporated
herein by reference to Exhibit 4.2 to A&Fs Current Report on Form 8-K dated December 21, 2004
(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&Fs 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&Fs 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&Fs Quarterly
Report on Form 10-Q for the quarterly period 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&Fs Quarterly Report on Form 10-Q for the quarterly period ended August 4,
2001 (File No. 1-12107). |
|
|
|
4.7
|
|
First Amendment, dated as of June 22, 2005, to the Credit Agreement, dated as of November 14,
2002, as amended and restated as of December 15, 2004, among Abercrombie & Fitch Management Co., as
Borrower; Abercrombie & Fitch Co., as Guarantor; the Lenders party thereto; and National City Bank,
as Administrative Agent, incorporated herein by reference to Exhibit 4.1 to A&Fs Current Report on
Form 8-K filed on June 22, 2005 (File No. 1-12107). |
|
|
|
10.1
|
|
Abercrombie & Fitch Co. 2005 Long-Term Incentive Plan, incorporated herein by reference to Exhibit
10.1 to A&Fs Current Report on Form 8-K filed on June 17, 2005 (File No. 1-12107). |
|
|
|
10.2
|
|
Supplemental Stipulation of Settlement dated June 1, 2005 regarding In re Abercrombie & Fitch
Co. Shareholder Derivative Litigation, Consol. C.A. No. 1077-N,
incorporated herein by reference to Exhibit 10.2 to A&F's Quarterly
Report on Form 10-Q for the quarterly period ended April 30, 2005
(File No. 1-12107).
|
|
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|
15
|
|
Letter re: Unaudited Interim
Financial Information to Securities and Exchange Commission re:
Inclusion of Report of Independent Registered Public Accounting Firm.* |
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer).* |
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer).* |
|
|
|
32
|
|
Section 1350 Certifications (Principal Executive Officer and Principal Financial Officer).* |
42
SIGNATURES
Pursuant to the requirements 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.
|
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|
ABERCROMBIE & FITCH CO. |
|
|
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|
|
Date: September 8, 2005
|
|
By
|
|
/s/ Michael W. Kramer |
|
|
|
|
|
|
|
Michael W. Kramer, |
|
|
Senior Vice President and Chief Financial Officer |
|
|
|
* |
|
Mr. Kramer has been duly authorized to sign on behalf of the Registrant as its principal
financial officer. |
43
EXHIBIT INDEX
|
|
|
Exhibit No. |
|
Document |
15
|
|
Letter re: Unaudited Interim Financial Information to Securities and Exchange
Commission re: Inclusion of Report of Independent Registered Public Accounting Firm. |
|
|
|
31.1
|
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer). |
|
|
|
31.2
|
|
Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer). |
|
|
|
32
|
|
Section 1350 Certifications (Principal Executive Officer and Principal Financial
Officer). |
44