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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
___________
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 29, 2000
----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-12107
ABERCROMBIE & FITCH CO.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 31-1469076
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Four Limited Parkway East, Reynoldsburg, OH 43068
- --------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 577-6500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Class A Common Stock, $.01 Par Value New York Stock Exchange, Inc.
Series A Participating Cumulative Preferred
Stock Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None.
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 and (2) has been subject to the filing requirements for
the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
----
Aggregate market value of the registrant's Class A Common Stock held by
non-affiliates of the registrant as of March 31, 2000: $1,615,983,753.
----------------
Number of shares outstanding of the registrant's common stock as of March 31,
2000: 102,029,782 shares of Class A Common Stock.
DOCUMENT INCORPORATED BY REFERENCE:
Portions of the registrant's definitive proxy statement for the Annual Meeting
of Stockholders to be held on May 18, 2000 are incorporated by reference into
Part III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS.
General.
Abercrombie & Fitch Co., a Delaware corporation (the "Company"), is principally
engaged in the purchase, distribution and sale of men's, women's and kids'
casual apparel. The Company's retail activities are conducted under the
Abercrombie & Fitch and abercrombie trade names through retail stores, a
catalogue, a magazine/catalogue and a website, all bearing some form of the
Company name. Merchandise is targeted to appeal to customers in specialty
markets who have distinctive consumer characteristics.
Description of Operations.
GENERAL.
The Company was incorporated on June 26, 1996, and on July 15, 1996 acquired the
stock of Abercrombie & Fitch Holdings Corporation, the parent company of the
Abercrombie & Fitch business and A&F Trademark, Inc., in exchange for 43 million
shares of Class B Common Stock issued to The Limited, Inc. ("The Limited"). An
initial public offering of 16.1 million shares of the Company's Class A Common
Stock was consummated on October 1, 1996 and, as a result, approximately 84.2%
of the outstanding common stock of the Company was owned by The Limited.
On February 17, 1998, a registration statement was filed with the Securities and
Exchange Commission in connection with a plan to establish the Company as a
fully independent company via a tax-free exchange offer (the "Exchange Offer")
pursuant to which The Limited stockholders were given an opportunity to exchange
shares of The Limited for shares of the Company. The Exchange Offer was
completed on May 19, 1998 and The Limited subsequently effected a pro rata
spin-off of all of its remaining shares of the Company. Subsequent to the
Exchange Offer, the Company and The Limited entered into service agreements
which addressed among other things, tax, information technology, store design
and construction, use of distribution and home office space and transportation
and logistic services. These agreements had terms ranging from one to three
years. The Company has hired associates with the appropriate expertise or
contracted with outside parties to replace those service agreements which
expired in May 1999. The service agreements that remain in effect through May
2001 provide for the continued use of its distribution and home office space and
transportation and logistics services.
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At the end of fiscal year 1999 the Company operated 250 stores. The following
table shows the changes in the number of retail stores operated by the Company
for the past five fiscal years:
Fiscal Beginning
Year of Year Opened Closed End of Year
---- ------- ------ ------ -----------
1995 67 33 100
1996 100 29 (2) 127
1997 127 30 (1) 156
1998 156 41 (1) 196
1999 196 54 250
During fiscal year 1999, the Company purchased merchandise from approximately
100 suppliers and factories located throughout the world. The Company sourced
approximately 11% of its apparel merchandise through Wooliston Garment, Inc. In
addition to purchases from Wooliston, the Company purchases merchandise directly
in foreign markets, with additional merchandise purchased in the domestic
market, some of which is manufactured overseas. Excluding purchases from
Wooliston, no more than 5% of goods purchased originated from any single
manufacturer.
Most of the merchandise and related materials for the Company's stores are
shipped to a distribution center owned by The Limited and leased by the Company
in Reynoldsburg, Ohio, where the merchandise is received and inspected. Under
the service agreement, The Limited distributes merchandise and related materials
using common and contract carriers to the Company's stores. The Company pays
outbound freight for stores to an affiliate of The Limited based on cartons
shipped.
The Company's policy is to maintain sufficient quantities of inventory on hand
in its retail stores and distribution center so that it can offer customers a
full selection of current merchandise. The Company emphasizes rapid turnover and
takes markdowns where required to keep merchandise fresh and current with
fashion trends.
The Company views the retail apparel market as having two principal selling
seasons, Spring and Fall. As is generally the case in the apparel industry, the
Company experiences its peak sales activity during the Fall season. This
seasonal sales pattern results in increased inventory during the back-to-school
and Christmas holiday selling periods. During fiscal year 1999, the highest
inventory level approximated $117.2 million at the November 1999 month-end and
the lowest inventory level approximated $54.2 million at the February 1999
month-end.
Merchandise sales are paid for by cash, personal check, gift certificate
redemption or credit cards issued by third parties, including a private label
credit card. The Company offers its customers a liberal return policy stated as
"No Sale is Ever Final." The Company believes that certain of its competitors
offer similar credit card and service policies.
The following is a brief description of the Company, including its respective
target markets.
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The Company is a specialty retailer of quality, casual, classic American
sportswear, targeted to men and women approximately 15-50 years of age and kids
approximately 7-14 years of age. The Abercrombie & Fitch brand was established
in 1892 and became well known as a supplier of rugged, high-quality outdoor gear
who placed a premium on complete customer satisfaction with each item sold. The
Company was acquired by The Limited in 1988 and in 1992 Abercrombie & Fitch was
repositioned as a more fashion-oriented casual apparel business directed at men
and women with a youthful lifestyle. In re-establishing the Abercrombie & Fitch
brand, the Company combined its historical image for quality with a new emphasis
on casual American style and youthfulness.
Additional information about the Company's business, including its revenues and
profits for the last three years, plus gross square footage is set forth under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in ITEM 7.
COMPETITION.
The sale of apparel and personal care products through retail stores is a highly
competitive business with numerous competitors, including individual and chain
fashion specialty stores and department stores. Fashion, price, service,
selection and quality are the principal competitive factors in retail store
sales.
The Company is unable to estimate the number of competitors or its relative
competitive position due to the large number of companies selling apparel and
personal care products through retail stores, catalogues and e-commerce.
ASSOCIATE RELATIONS.
On January 29, 2000, the Company employed approximately 11,300 associates (none
of whom were parties to a collective bargaining agreement), 9,600 of whom were
part-time. In addition, temporary associates are hired during peak periods, such
as the Holiday season.
ITEM 2. PROPERTIES.
The Company's headquarters and support functions (consisting of office,
distribution and shipping facilities) are located in Reynoldsburg, Ohio and are
owned by The Limited and leased by the Company under leases expiring in 2001.
The Company's new headquarters and support functions are currently under
construction and expected to be completed in early 2001.
All of the retail stores operated by the Company are located in leased
facilities, primarily in shopping centers throughout the continental United
States. The leases expire at various dates principally between 2000 and 2015.
Typically, when space is leased for a retail store in a shopping center, all
improvements, including interior walls, floors, ceilings, fixtures and
decorations, are supplied by the tenant. In certain cases, the landlord of the
property may provide a construction allowance to fund all or a portion of the
cost of improvements. The cost of improvements varies widely, depending on the
size and location of the store. Rental terms for new locations usually include a
fixed minimum rent plus a percentage of sales in excess of a specified amount.
Certain operating costs such as common area maintenance, utilities, insurance
and taxes are typically paid by tenants.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in lawsuits arising in the ordinary course of
business.
On November 13, 1997, the United States District Court for the Southern District
of Ohio, Eastern Division, dismissed with prejudice an amended complaint that
had been filed against the Company by the American Textile Manufacturers
Institute ("ATMI"), a textile industry trade association. The amended complaint
alleged that the defendants violated the federal False Claims Act by submitting
false country of origin records to the U.S. Customs Service. On November 26,
1997, ATMI served a motion to alter or amend judgment and a motion to disqualify
the presiding judge and to vacate the order of dismissal. The motion to
disqualify was denied on December 22, 1997, but as a matter of his personal
discretion, the presiding judge elected to recuse himself from further
proceedings and this matter was transferred to a judge of the United States
District Court for the Southern District of Ohio, Western Division. On May 21,
1998, this judge denied all pending motions seeking to alter, amend or vacate
the judgment that had been entered in favor of the Company. On June 5, 1998,
ATMI appealed to the United States Court of Appeals for the Sixth Circuit (the
"Sixth Circuit"). On August 12, 1999, the Sixth Circuit heard arguments and, on
September 14, 1999, the Sixth Circuit affirmed the judgment in favor of the
Company. The United States Supreme Court denied ATMI's petition for a writ of
certiorari on April 3, 2000.
A motion, which remains pending, was filed on April 4, 2000, in existing
litigation in the United States District Court for the District of Hawaii, to
add the Company as a defendant. The proposed amended complaint relates to labor
practices allegedly employed on the island of Saipan, Commonwealth of the
Northern Mariana Islands, by apparel manufacturers unrelated to the Company
(some of which have sold goods to the Company). The proposed amended complaint,
which is on behalf of a class of unnamed garment workers, alleges violations of
federal statutes, the United States Constitution, and international law, and
seeks an injunction, unspecified monetary damages, and other relief.
On June 2, 1998, the Company filed suit against American Eagle Outfitters, Inc.
alleging an intentional and systematic copying of the Abercrombie & Fitch brand,
its images and business practices, including the design and look of the
Company's merchandise, marketing and catalogue/magazine. The lawsuit, filed in
Federal District Court in Columbus, Ohio, sought to enjoin American Eagle's
practices, recover lost profits and obtain punitive damages. In July 1999, the
District Court granted a summary judgment dismissing the lawsuit against
American Eagle. The Company filed a motion for reconsideration of the District
Court judgment which was subsequently denied by court order dated September 10,
1999. In October 1999 the Company filed an appeal in the United States Court of
Appeals for the Sixth Circuit regarding the decisions of the District Court on
the motions for summary judgment and reconsideration. The appeal is pending.
As of March 27, 2000, the Company is aware of 20 actions that have been filed
against the Company and certain of its officers and directors on behalf of a
purported, but as yet uncertified, class of shareholders who purchased the
Company's Class A Common Stock between October 8, 1999 and October 13, 1999.
These 20 actions have been filed in the United States District Courts for the
Southern District of New York, Southern District of Ohio, Eastern Division, and
Southern District of California alleging violations of the federal securities
laws and seeking unspecified damages. A motion is pending before the Judicial
Panel on Multidistrict Litigation to transfer all of these actions to the
Southern District of New York for consolidated pre-trial proceedings. The
Company has joined in this motion.
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The Company believes that the actions against it are without merit and intends
to defend vigorously against them. However, the Company does not believe it is
feasible to predict the outcome of these proceedings. The timing of the final
resolutions of these proceedings is also uncertain.
In addition, the United States Securities and Exchange Commission has commenced
a formal investigation regarding trading in the securities of the Company and
the disclosure of sales forecasts in October 1999, and the Ohio Division of
Securities has requested information from the Company regarding these same
matters. These investigations are ongoing. The Company is cooperating in these
investigations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
Set forth below is certain information regarding the executive officers of the
Company as of March 31, 2000.
Michael S. Jeffries, 55, has been Chairman of the Board and Chief Executive
Officer since May 1998. From February 1992 to May 1998, Mr. Jeffries held the
position of President and Chief Executive Officer. Mr. Jeffries has also been a
director of the Company since 1996.
Seth R. Johnson, 46, has been Executive Vice President-Chief Operating Officer
since February 2000. Prior thereto, Mr. Johnson had been Vice President-Chief
Financial Officer since 1992. Mr. Johnson has been a director of the Company
since 1998.
Diane Chang, 44, has been Senior Vice President-Sourcing since February 2000.
Prior thereto, she held the position of Vice President-Sourcing from May 1998 to
February 2000 and for six and one-half years prior thereto, Ms. Chang held the
position of Senior Vice President - Manufacturing at J. Crew, Inc.
Raymond Attanasio, 48, has been Senior Vice President-Human Resources since
February 2000. Prior thereto, Mr. Attanasio was Vice President-Human Resources
from August 1998 to February 2000 and Vice President-General Merchandising
Manager-Men's at J. Crew, Inc. from May 1991 to June 1998.
Leslee K. O'Neill, 39, has been Senior Vice President-Planning & Allocation
since February 2000. Prior thereto, Ms. O'Neill held the position of Vice
President-Planning & Allocation from February 1994 to February 2000.
All of the above officers serve at the pleasure of the Board of Directors of the
Company.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The following is a summary of the Company's sales price as reported on the New
York Stock Exchange ("ANF") for the 1999 and 1998 fiscal years:
Sales Price
-----------------------------------------
High Low
----------------- --------------------
1999 Fiscal Year
----------------------
4th Quarter $32 9/16 $19 9/16
3rd Quarter $43 1/4 $21
2nd Quarter $49 11/16 $36 1/2
1st Quarter $50 3/4 $35 1/4
1998 Fiscal Year
----------------------
4th Quarter $38 9/16 $20 3/16
3rd Quarter $27 3/4 $14 3/4
2nd Quarter $25 $19 11/16
1st Quarter $23 3/4 $15 5/32
Per share amounts reflect the two-for-one stock split on the Company's Class A
Common Stock, paid on June 15, 1999 to shareholders of record at the close of
business on May 25, 1999.
The Company has not paid dividends on its shares of Class A Common Stock in the
past and does not presently plan to pay dividends on the shares. It is presently
anticipated that earnings will be retained and reinvested to support the growth
of the Company's business. The payment of any future dividends on shares will be
determined by the Board of Directors in light of conditions then existing,
including earnings, financial condition and capital requirements, restrictions
in financing agreements, business conditions and other factors.
On January 29, 2000, there were approximately 7,000 shareholders of record.
However, when including active associates who participate in the Company's stock
purchase plan, associates who own shares through Company sponsored retirement
plans and others holding shares in broker accounts under street name, the
Company estimates the shareholder base at approximately 80,000.
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ITEM 6. SELECTED FINANCIAL DATA.
ABERCROMBIE & FITCH CO.
FINANCIAL SUMMARY
(Thousands except per share and per square foot amounts, ratios and store and
associate data)
FISCAL YEAR 1999 1998 1997 1996 1995* 1994 1993
- --------------------------------------------------------------------------------------------------------------------------
SUMMARY OF OPERATIONS
Net Sales $1,042,056 $815,804 $521,617 $335,372 $235,659 $165,463 $110,952
- --------------------------------------------------------------------------------------------------------------------------
Gross Income $465,583 $343,951 $201,080 $123,766 $79,794 $56,820 $30,562
- --------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) $242,064 $166,958 $84,125 $45,993 $23,798 $13,751 $(4,064)
- --------------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) as a
Percentage of Sales 23.2% 20.5% 16.1% 13.7% 10.1% 8.3% (3.7%)
- --------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $149,604 $102,062 $48,322 $24,674 $14,298 $8,251 $(2,464)
- --------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) as a
Percentage of Sales 14.4% 12.5% 9.3% 7.4% 6.1% 5.0% (2.2%)
- --------------------------------------------------------------------------------------------------------------------------
PER SHARE RESULTS (1)
Net Income (Loss) Per Basic Share $1.45 $.99 $.47 $.27 $.17 $.10 $(.03)
- --------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Per Diluted Share $1.39 $.96 $.47 $.27 $.17 $.10 $(.03)
- --------------------------------------------------------------------------------------------------------------------------
Weighted Average Diluted Shares
Outstanding 107,641 106,202 102,956 91,520 86,000 86,000 86,000
- --------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION
Total Assets $458,166 $319,161 $183,238 $105,761 $87,693 $58,018 $48,882
- --------------------------------------------------------------------------------------------------------------------------
Return on Average Assets 38% 41% 33% 26% 20% 15% (4%)
- --------------------------------------------------------------------------------------------------------------------------
Capital Expenditures $83,824 $41,876 $29,486 $24,323 $24,526 $12,603 $4,694
- --------------------------------------------------------------------------------------------------------------------------
Long-Term Debt - - $50,000 $50,000 - - -
- --------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity (Deficit) $311,094 $186,105 $58,775 $11,238 $(22,622) $(37,070) $(45,341)
- --------------------------------------------------------------------------------------------------------------------------
Comparable Store Sales Increase 10% 35% 21% 13% 5% 15% 6%
- --------------------------------------------------------------------------------------------------------------------------
Retail Sales Per Average Gross Square
Foot $512 $483 $376 $306 $290 $284 $243
- --------------------------------------------------------------------------------------------------------------------------
STORES AND ASSOCIATES AT END OF YEAR
Total Number of Stores Open 250 196 156 127 100 67 49
- --------------------------------------------------------------------------------------------------------------------------
Gross Square Feet 2,174,000 1,791,000 1,522,000 1,229,000 962,000 665,000 499,000
- --------------------------------------------------------------------------------------------------------------------------
Number of Associates 11,300 9,500 6,700 4,900 3,000 2,300 1,300
- --------------------------------------------------------------------------------------------------------------------------
*Fifty-three week fiscal year.
(1) Per share amounts reflect the two-for-one stock split on the Company's
Class A Common Stock, paid on June 15, 1999.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Net sales for the fourth quarter were $367.9 million, an increase of 21% from
$304.6 million for the fourth quarter a year ago. Operating income was $125.3
million, up 27% compared to $98.7 million last year. Net income per diluted
share was $.73, up 30% from $.56 last year.
Net sales for the fiscal year ended January 29, 2000, increased 28% to $1.04
billion from $815.8 million last year. Operating income for the year increased
45% to $242.1 million from $167.0 million in 1998. Net income per diluted share
was $1.39 compared to $.96 a year ago, an increase of 45%.
FINANCIAL SUMMARY
The following summarized financial data compares the 1999 fiscal year to the
comparable periods for 1998 and 1997:
% Change
--------------------------------
1999 1998 1997 1999-1998 1998-1997
---------------- --------------- ------------------------------------------------
Net sales (millions) $1,042.1 $815.8 $521.6 28% 56%
Increase in comparable
store sales 10% 35% 21%
Retail sales increase attributable
to new and remodeled stores,
magazine, catalogue and website 18% 21% 34%
Retail sales per average gross
square foot $512 $483 $376 6% 28%
Retail sales per average store
(thousands) $4,550 $4,551 $3,653 - 25%
Average store size at year-end
(gross square feet) 8,695 9,140 9,755 (5%) (6%)
Gross square feet at year-end
(thousands) 2,174 1,791 1,522 21% 18%
Number of Stores:
Beginning of year 196 156 127
Opened 54 41 30
Closed - (1) (1)
---------------- --------------- ----------------
End of year 250 196 156
================ =============== ================
NET SALES
Net sales for the fourth quarter of 1999 increased 21% to $367.9 million from
$304.6 million in 1998. The increase was primarily due to the addition of new
stores and a comparable store sales increase of 3%. Comparable store increases
were driven by men's pants and knits while the women's knit business was very
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strong. The Company's catalogue, the A&F Quarterly, a catalogue/magazine, and
the Company's website accounted for 3.4% of net sales in the fourth quarter of
1999 as compared to 2.0% last year.
Fourth quarter 1998 net sales as compared to net sales for the fourth quarter
1997 increased 44% to $304.6 million, due to a 26% increase in comparable store
sales and sales attributable to new and remodeled stores. Comparable store sales
increases were strong in both the men's and women's businesses and across all
geographic regions of the country. The A&F Quarterly accounted for 2.0% of net
sales in the fourth quarter of 1998 as compared to 1.7% in 1997.
Net sales for 1999 increased 28% to $1.04 billion from $815.8 million a year
ago. Sales growth resulted from a comparable store sales increase of 10% and the
addition of 54 new stores. Comparable store sales increases were driven by both
men's and women's knits and pants. Net retail sales per gross square foot for
the Company increased 6%, principally from an increase in the number of
transactions per store. The Company's catalogue, the A&F Quarterly and the
Company's website represented 2.6% of 1999 net sales compared to 1.8% last year.
Net sales for 1998 increased 56% to $815.8 million over the same period in 1997.
The sales increase was attributable to the net addition of 40 stores and a 35%
comparable store sales increase. Comparable store sales increases were equally
strong in both men's and women's businesses and their performance strength was
broadly based across all major merchandise categories. Net retail sales per
gross square foot for the Company increased 28%, driven principally by an
increase in the number of transactions per store.
GROSS INCOME
Gross income, expressed as a percentage of net sales, increased to 51.9% for the
fourth quarter of 1999 from 49.3% for the same period in 1998. The increase was
attributable to higher merchandise margins (representing gross income before the
deduction of buying and occupancy costs), resulting from higher initial markups
(IMU), and improved control of store inventory shrinkage and merchandise freight
costs. The Company also achieved some leverage in buying and occupancy costs,
expressed as a percentage of net sales.
For the fourth quarter of 1998, gross income, expressed as a percentage of net
sales, increased to 49.3% from 45.4% for the same period in 1997. The increase
was attributable to significant leverage in buying and occupancy costs,
expressed as a percentage of net sales associated with increased comparable
store sales. Merchandise margins improved primarily due to a lower markdown rate
as the Company efficiently managed inventories.
For the year, the gross income rate increased to 44.7% in 1999 from 42.2% in
1998. Merchandise margins, expressed as a percentage of net sales, increased due
to slightly higher IMU across most merchandise categories. In addition, buying
and occupancy costs, expressed as a percentage of net sales, declined slightly
due to leverage achieved from comparable store sales increases. The Company also
improved the gross income rate through reduced freight costs and enhanced store
inventory control procedures which reduced shrink cost.
In 1998, the gross income rate increased to 42.2% from 38.5% in 1997. The
improvement was the result of higher merchandise margins, expressed as a
percentage of net sales due to higher IMU across most major merchandise
categories and a lower markdown rate. In addition, buying and occupancy costs,
expressed as a percentage of net sales, declined due to leverage achieved from
comparable store sales increases.
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GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES
General, administrative and store operating expenses, expressed as a percentage
of net sales, were 17.9% in the fourth quarter of 1999 and 16.9% in the
comparable period in 1998. The increase in the rate was primarily due to a
change in the accounting for gift certificates. Excluding the impact of the
accounting change, the rate would have improved compared to last year primarily
due to lower compensation expenses related to management bonuses and restricted
stock grants awarded to key executives of the Company. Additionally, the Company
did not incur expenses related to service agreements with The Limited, Inc. that
expired prior to the fourth quarter of 1999 and emphasized tighter expense
control in travel, relocation and legal expenses.
General, administrative and store operating expenses for the year, expressed as
a percentage of net sales, were 21.4%, 21.7% and 22.4% in 1999, 1998 and 1997.
The improvement during the three-year period resulted from management's
continued emphasis on expense control and favorable leveraging of expenses due
to higher sales volume. The 1998 improvement was offset by compensation expense
associated with restricted stock grants of approximately $11.5 million.
OPERATING INCOME
Operating income, expressed as a percentage of net sales, was 34.1%, 32.4% and
27.9% for the fourth quarter of 1999, 1998 and 1997 and 23.2%, 20.5% and 16.1%
for fiscal years 1999, 1998 and 1997. The improvement was the result of higher
gross income coupled with lower general, administrative and store operating
expenses, expressed as a percentage of net sales. Sales volume and gross income
have increased at a faster rate than general, administrative and store operating
expenses as the Company continues to emphasize cost controls.
INTEREST INCOME/EXPENSE
Net interest income was $2.5 million in the fourth quarter of 1999 and $7.3
million for all of 1999 compared with net interest income of $1.6 million and
$3.1 million for the corresponding periods last year. Net interest income in
1999 and 1998 was primarily from short-term investments. Net interest expense in
1997 included $975 thousand per quarter associated with $50 million of long-term
debt that was repaid during the first quarter of 1998, offset by interest income
on short-term investments.
FINANCIAL CONDITION
The Company's continuing growth in operating income provides evidence of
financial strength and flexibility. A more detailed discussion of liquidity,
capital resources and capital requirements follows.
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities provides the resources to support
operations, including seasonal requirements and capital expenditures. A summary
of the Company's working capital position and capitalization follows
(thousands):
1999 1998 1997
----------------- ---------------- -----------------
Working capital $162,351 $95,890 $42,000
================= ================ =================
Capitalization
Long-term debt - - $50,000
Shareholders' equity $311,094 $186,105 58,775
----------------- ---------------- -----------------
Total Capitalization $311,094 $186,105 $108,775
================= ================ =================
The Company considers the following to be measures of liquidity and capital
resources:
1999 1998 1997
----------------- ---------------- -----------------
Current ratio (current assets divided by current
liabilities) 2.18 1.78 1.63
Debt-to-capitalization ratio (long-term debt
divided by total capitalization) n/a n/a 46%
Cash flow to capital investment (net cash
provided by operating activities divided
by capital expenditures) 183% 413% 340%
n/a = not applicable
Net cash provided by operating activities totaled $153.8 million, $173.1 million
and $100.2 million for 1999, 1998 and 1997.
In 1999, net cash provided by operating activities was largely due to current
year net income. Cash requirements for inventory increased $31.3 million during
1999. The increase in inventory was necessary to support the growth in sales as
well as increased investment in non-seasonal "locker stock" items (primarily tee
shirts). The inventory increase also reflects the early delivery of a portion of
Spring receipts to reduce the potential risk related to Year 2000 issues.
Accounts payable and accrued expenses increased primarily due to the increase in
the liability for the estimated costs to complete the construction of new stores
and the change in the accounting for gift certificates (as described in Note 14
to the Consolidated Financial Statements).
The Company's operations are seasonal in nature and typically peak during the
back-to-school and Christmas holiday selling seasons. Accordingly, cash
requirements for inventory expenditures are highest during these periods.
Investing activities were for capital expenditures, which are primarily for new
and remodeled stores, and for purchases of short-term marketable securities.
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Financing activities in 1999 consisted of the repurchase of 1.5 million shares
of the Company's Class A Common Stock pursuant to a previously authorized stock
repurchase program.
On February 14, 2000, the Board of Directors authorized the repurchase of up to
6.0 million shares of the Company's Class A Common Stock for general corporate
purposes.
In 1998, financing activities consisted primarily of the repayment of $50
million long-term debt to The Limited. This occurred through the issuance of 1.2
million shares of Class A Common Stock to The Limited with the remaining balance
paid with cash from operations. Additionally, settlement of the intercompany
balance between the Company and The Limited occurred on May 19, 1998. During
1998, the Company also repurchased 490 thousand shares of Class A Common Stock.
CAPITAL EXPENDITURES
Capital expenditures, primarily for new and remodeled stores, amounted to $83.8
million, $41.9 million and $29.5 million for 1999, 1998 and 1997.
During the year, the Company opened 32 Abercrombie & Fitch stores and 22
abercrombie stores.
The Company anticipates spending $150 to $160 million in 2000 for capital
expenditures, of which $60 to $70 million will be for new stores, remodeling
and/or expansion of existing stores and related improvements. The balance of
capital expenditures will chiefly be related to the construction of a new office
and distribution center which is expected to be completed in early 2001. During
1999, the Company spent approximately $27 million on the new home office and
distribution center. The Company intends to add approximately 560,000 gross
square feet in 2000, which will represent a 26% increase over year-end 1999. It
is anticipated the increase will result from the addition of approximately 45
new Abercrombie & Fitch stores, 40 abercrombie stores and the remodeling and/or
expansion of four stores. Additionally, the Company plans to open five new
concept stores in 2000.
The Company estimates that the average cost for leasehold improvements and
furniture and fixtures for Abercrombie & Fitch stores opened in 2000 will
approximate $650,000 per store, after giving effect to landlord allowances. In
addition, inventory purchases are expected to average approximately $300,000 per
store.
The average size of the abercrombie stores is approximately 4,400 gross square
feet and the average cost for leasehold improvements and furniture and fixtures
will be approximately $450,000 per store, after giving effect to landlord
allowances. In addition, inventory purchases are expected to average
approximately $150,000 per store.
The Company expects that substantially all future capital expenditures will be
funded with cash from operations. In addition, the Company has available a $150
million credit agreement to support operations.
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INFORMATION SYSTEMS AND "YEAR 2000" COMPLIANCE
The Year 2000 issue arose primarily from computer programs which only have a
two-digit date field, rather than four, to define the applicable year of
business transactions. Because such computer programs are unable to properly
interpret dates beyond the year 1999, a systems failure or other computer errors
could have ensued. The Company relies on computer-based technology and utilizes
a variety of proprietary and third party hardware and software. The Company's
critical information technology (IT) functions include point-of-sale equipment,
merchandise and non-merchandise procurement and business and accounting
management. The Company also procures its merchandise, supplies and certain
services from a vast network of vendors located both within and outside the
United States.
At the present time, the Company has not experienced, nor is it aware of any
Year 2000 issues that might materially affect its products, services,
competitive position or financial performance. At July 31, 1999, the Company had
incurred substantially all expenses relating to the Year 2000 issue, consisting
of internal staff costs as well as outside consulting and other expenditures.
Total expenditures related to remediation, testing, conversion, replacement and
upgrading system applications were approximately $4.0 million. Of the total,
approximately $1.0 million were expenses associated with remediation and testing
of existing systems. In 1999 and 1998, a significant amount of total internal
staff resources were directed toward Year 2000 projects. Subsequent to the
completion of Year 2000 remediation of existing systems and implementation of
new systems, internal resources and costs have not changed significantly but
have been redirected from Year 2000 projects to other Company initiatives.
RELATIONSHIP WITH THE LIMITED
Effective May 19, 1998, The Limited completed a tax-free exchange offer to
establish the Company as an independent company. Subsequent to the Exchange
Offer (see Note 1 to the Consolidated Financial Statements), the Company and The
Limited entered into various service agreements for terms ranging from one to
three years. The Company has hired associates with the appropriate expertise or
contracted with outside parties to replace those services provided by The
Limited which expired in May 1999. Service agreements were also entered into for
the continued use by the Company of its distribution and home office space and
transportation and logistic services. These agreements expire in May 2001. The
cost of these services generally is equal to the costs and expenses incurred by
The Limited plus five percent of such amounts.
The Company does not anticipate that costs associated with the services provided
by The Limited, which expire in May 2001, or costs incurred to replace the
services currently provided by The Limited will have a material adverse impact
on its financial condition.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented based
upon historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, the Company
believes that the effects of inflation, if any, on its results of operations and
financial condition have been minor.
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SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Company cautions that any forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) contained in
this Report or made by management of the Company involve risks and uncertainties
and are subject to change based on various important factors. The following
factors, among others, in some cases have affected and in the future could
affect the Company's financial performance and could cause actual results for
2000 and beyond to differ materially from those expressed or implied in any such
forward-looking statements: changes in consumer spending patterns, consumer
preferences and overall economic conditions, the impact of competition and
pricing, changes in weather patterns, political stability, currency and exchange
risks and changes in existing or potential duties, tariffs or quotas,
availability of suitable store locations at appropriate terms, ability to
develop new merchandise and ability to hire and train associates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
No response required.
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16
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ABERCROMBIE & FITCH CO.
CONSOLIDATED STATEMENTS OF INCOME
(THOUSANDS EXCEPT PER SHARE AMOUNTS)
1999 1998 1997
----------- ----------- -----------
NET SALES $ 1,042,056 $ 815,804 $ 521,617
Costs of Goods Sold, Occupancy and Buying Costs 576,473 471,853 320,537
----------- ----------- -----------
GROSS INCOME 465,583 343,951 201,080
General, Administrative and Store Operating Expenses 223,519 176,993 116,955
----------- ----------- -----------
OPERATING INCOME 242,064 166,958 84,125
Interest (Income)/Expense, Net (7,270) (3,144) 3,583
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 249,334 170,102 80,542
Provision for Income Taxes 99,730 68,040 32,220
----------- ----------- -----------
NET INCOME $ 149,604 $ 102,062 $ 48,322
=========== =========== ===========
NET INCOME PER SHARE:
BASIC $ 1.45 $ .99 $ .47
=========== =========== ===========
DILUTED $ 1.39 $ .96 $ .47
=========== =========== ===========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH CO.
CONSOLIDATED BALANCE SHEETS
(Thousands)
January 29, January 30,
2000 1999
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and Equivalents $ 147,908 $ 163,564
Marketable Securities 45,601 --
Accounts Receivable 11,447 4,101
Inventories 75,262 43,992
Other 19,999 6,578
--------- ---------
TOTAL CURRENT ASSETS 300,217 218,235
PROPERTY AND EQUIPMENT, NET 146,403 89,558
DEFERRED INCOME TAXES 11,060 10,854
OTHER ASSETS 486 631
--------- ---------
TOTAL ASSETS $ 458,166 $ 319,278
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 18,714 $ 24,759
Accrued Expenses 85,373 63,882
Income Taxes Payable 33,779 33,704
--------- ---------
TOTAL CURRENT LIABILITIES 137,866 122,345
OTHER LONG-TERM LIABILITIES 9,206 10,828
SHAREHOLDERS' EQUITY:
Common Stock 1,033 1,033
Paid-In Capital 147,305 143,626
Retained Earnings 192,735 43,131
--------- ---------
341,073 187,790
Less: Treasury Stock, at Average Cost (29,979) (1,685)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 311,094 186,105
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 458,166 $ 319,278
========= =========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH CO.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Thousands)
Common Stock
-------------------------
Treasury
Retained Stock, at Total
Shares Par Paid-In Earnings Average Shareholders'
Outstanding Value Capital (Deficit) Cost Equity
--------- --------- --------- --------- --------- ---------
Balance, February 1, 1997 102,100 $ 1,022 $ 117,469 $(107,253) -- $ 11,238
Purchase of Treasury Stock (100) -- -- -- $ (929) (929)
Net Income -- -- -- 48,322 -- 48,322
Stock Options, Restricted Stock
and Other 18 -- (8) -- 152 144
--------- --------- --------- --------- --------- ---------
Balance, January 31, 1998 102,018 $ 1,022 $ 117,461 $ (58,931) $ (777) $ 58,775
Purchase of Treasury Stock (490) -- -- -- (11,240) (11,240)
Net Income -- -- -- 102,062 -- 102,062
Issuance of Common Stock 1,200 11 25,870 -- -- 25,881
Stock Options, Restricted Stock
and Other 86 -- 295 -- 10,332 10,627
--------- --------- --------- --------- --------- ---------
Balance, January 30, 1999 102,814 $ 1,033 $ 143,626 $ 43,131 $ (1,685) $ 186,105
Purchase of Treasury Stock (1,510) -- -- -- (50,856) (50,856)
Net Income -- -- -- 149,604 -- 149,604
Stock Options, Restricted Stock
and Other 700 -- 3,679 -- 22,562 26,241
--------- --------- --------- --------- --------- ---------
Balance, January 29, 2000 102,004 $ 1,033 $ 147,305 $ 192,735 $ (29,979) $ 311,094
========= ========= ========= ========= ========= =========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH CO.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
1999 1998 1997
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 149,604 $ 102,062 $ 48,322
Impact of Other Operating Activities on Cash Flows
Depreciation and Amortization 27,721 20,946 16,342
Noncash Charge for Deferred Compensation 5,212 11,497 6,219
Change in Assets and Liabilities:
Inventories (31,270) (10,065) 1,016
Accounts Payable and Accrued Expenses 15,446 37,530 22,309
Income Taxes (131) 10,758 4,606
Other Assets and Liabilities (12,773) 355 1,381
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 153,809 173,083 100,195
--------- --------- ---------
INVESTING ACTIVITIES
Capital Expenditures (83,824) (41,876) (29,486)
Proceeds from Maturities of Marketable Securities 11,332 -- --
Purchase of Marketable Securities (56,933) -- --
Note Receivable (1,500) -- --
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (130,925) (41,876) (29,486)
FINANCING ACTIVITIES
Settlement of Balance with The Limited -- 23,785 --
Decrease in Receivable from The Limited -- -- (29,202)
Net Proceeds from Issuance of Common Stock -- 25,875 --
Repayment of Long-Term Debt -- (50,000) --
Purchase of Treasury Stock (50,856) (11,240) (929)
Other Changes in Shareholders' Equity 12,316 1,270 144
--------- --------- ---------
NET CASH USED FOR FINANCING ACTIVITIES (38,540) (10,310) (29,987)
--------- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS (15,656) 120,897 40,722
Cash and Equivalents, Beginning of Year 163,564 42,667 1,945
--------- --------- ---------
CASH AND EQUIVALENTS, END OF YEAR $ 147,908 $ 163,564 $ 42,667
========= ========= =========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Abercrombie & Fitch Co. (the "Company") was incorporated on June 26,
1996, and on July 15, 1996 acquired the stock of Abercrombie & Fitch
Holdings, the parent company of the Abercrombie & Fitch business, and A&F
Trademark, Inc., in exchange for 43 million shares of Class B Common
Stock issued to The Limited, Inc. ("The Limited"). The Company is a
specialty retailer of high quality, casual apparel for men, women and
kids with an active, youthful lifestyle. The business was established in
1892 and subsequently acquired by The Limited in 1988.
An initial public offering (the "Offering") of 16.1 million shares of the
Company's Class A Common Stock, including the sale of 2.1 million shares
pursuant to the exercise by the underwriters of their options to purchase
additional shares, was consummated on October 1, 1996. The net proceeds
received by the Company from the Offering, approximating $118.2 million,
and cash from operations were used to repay the borrowings under a $150
million credit agreement. As a result of the Offering, 84.2% of the
outstanding common stock of the Company was owned by The Limited, until
the completion of a tax-free exchange offer (the "Exchange Offer") on May
19, 1998, to establish the Company as an independent company.
In the Exchange Offer, The Limited accepted 94,150,104 shares of its
common stock that were exchanged at a ratio of .86 of a share of
Abercrombie & Fitch stock for each Limited share. On June 1, 1998, The
Limited effected a pro rata spin-off to its shareholders of its remaining
6,230,910 Abercrombie & Fitch shares. Limited shareholders of record at
the close of trading on May 29, 1998 received .027346 of a share of
Abercrombie & Fitch stock for each Limited share owned at that time.
The accompanying consolidated financial statements include the historical
financial statements of, and transactions applicable to the Company and
its subsidiaries and reflect the assets, liabilities, results of
operations and cash flows on a historical cost basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and all significant subsidiaries that are more than 50% owned and
controlled. All significant intercompany balances and transactions have
been eliminated in consolidation.
FISCAL YEAR
The Company's fiscal year ends on the Saturday closest to January 31.
Fiscal years are designated in the financial statements and notes by the
calendar year in which the fiscal year commences. The results for fiscal
years 1999, 1998 and 1997 represent the fifty-two week periods ended
January 29, 2000, January 30, 1999 and January 31, 1998.
CASH AND EQUIVALENTS
Cash and equivalents include amounts on deposit with financial
institutions and investments with original maturities of less than 90
days.
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21
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 January 29, 2000, the Company
held investments in marketable securities which were classified as held
to maturity based on the Company's positive intent and ability to hold
the securities to maturity. All securities held by the Company at January
29, 2000 are corporate debt securities which mature within one year and
are stated at amortized cost which approximates market value.
INVENTORIES
Inventories are principally valued at the lower of average cost or
market, on a first-in first-out basis, utilizing the retail method.
STORE SUPPLIES
The initial inventory of supplies for new stores including, but not
limited to, hangers, signage, security tags and point-of-sale supplies
are capitalized at the store opening date. Subsequent shipments are
expensed except for new merchandise presentation programs which are
capitalized.
PROPERTY AND EQUIPMENT
Depreciation and amortization of property and equipment are computed for
financial reporting purposes on a straight-line basis, using service
lives ranging principally from 10-15 years for leasehold improvements and
3-10 years for other property and equipment. Beneficial leaseholds
represent the present value of the excess of fair market rent over
contractual rent of existing stores at the 1988 purchase of the Company
by The Limited and are being amortized over the lives of the related
leases. The cost of assets sold or retired and the related accumulated
depreciation or amortization are removed from the accounts with any
resulting gain or loss included in net income. Maintenance and repairs
are charged to expense as incurred. Major renewals and betterments that
extend service lives are capitalized. Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that full
recoverability is questionable. Factors used in the valuation include,
but are not limited to, management's plans for future operations, recent
operating results and projected cash flows.
INCOME TAXES
Income taxes are calculated in accordance with SFAS No. 109, "Accounting
for Income Taxes," which requires the use of the liability method.
Deferred tax assets and liabilities are recognized based on the
difference between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
in effect in the years in which those temporary differences are expected
to reverse. Under SFAS No. 109, the effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes the
enactment date.
Prior to the Exchange Offer, the Company was included in The Limited's
consolidated federal and certain state income tax groups for income tax
reporting purposes and was responsible for its proportionate share of
income taxes calculated upon its federal taxable income at a current
21
22
estimate of the Company's annual effective tax rate. Subsequent to the
Exchange Offer, the Company began filing its tax returns on a separate
basis.
SHAREHOLDERS' EQUITY
The Board of Directors declared a two-for-one stock split on the
Company's Class A Common Stock, paid on June 15, 1999 to shareholders of
record at the close of business on May 25, 1999. All share and per share
amounts in the accompanying consolidated financial statements for all
periods have been restated to reflect the stock split.
At January 29, 2000, there were 150 million shares of $.01 par value
Class A Common Stock authorized, of which 102.0 million and 102.8 million
shares were outstanding at January 29, 2000 and January 30, 1999 and
106.4 million shares of $.01 par value Class B Common Stock authorized,
none of which were outstanding at January 29, 2000 or January 30, 1999.
In addition, 15 million shares of $.01 par value Preferred Stock were
authorized, none of which have been issued.
Holders of Class A Common Stock generally have identical rights to
holders of Class B Common Stock, except that holders of Class A Common
Stock are entitled to one vote per share while holders of Class B Common
Stock are entitled to three votes per share on all matters submitted to a
vote of shareholders.
REVENUE RECOGNITION
The Company recognizes retail sales at the time the customer takes
possession of the merchandise and purchases are paid for via cash, credit
card or gift certificate redemption. Catalogue and e-commerce sales are
recorded upon shipment of merchandise.
In the fourth quarter of 1999, the Company changed its accounting for
gift certificates. Under the new method, the Company establishes a
liability upon the sale of a gift certificate. The liability is reduced
when the gift certificate is redeemed and the customer takes possession
of the merchandise. The information in Note 14 provides the impact of the
accounting change for the first three quarters of 1999. The accounting
change was not material to prior year results.
CATALOGUE AND ADVERTISING COSTS
Costs related to the A&F Quarterly, a catalogue/magazine, primarily
consist of catalogue production and mailing costs and are expensed as
incurred. Advertising costs consist of in-store photographs and
advertising in selected national publications and are expensed when the
photographs or publications first appear. Catalogue and advertising costs
amounted to $30.3 million in 1999, $24.9 million in 1998 and $13.7
million in 1997.
STORE PREOPENING EXPENSES
Preopening expenses related to new store openings are charged to
operations as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded values of current assets and current liabilities, including
accounts receivable, marketable securities and accounts payable,
approximate fair value due to the short maturity and because the average
interest rate approximates current market origination rates.
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23
EARNINGS PER SHARE
Net income per share is computed in accordance with SFAS No. 128,
"Earnings Per Share." Net income per basic share is computed based on the
weighted average number of outstanding shares of common stock. Net income
per diluted share includes the weighted average effect of dilutive stock
options and restricted shares. The common stock issued to The Limited (43
million Class B shares) in connection with the incorporation of the
Company is assumed to have been outstanding for 1997.
Weighted Average Shares Outstanding (thousands):
1999 1998 1997
---------- ----------- ----------
Shares of common stock issued 103,300 103,300 102,100
Treasury shares (429) (216) (78)
---------- ----------- ----------
Basic shares 102,871 103,084 102,022
Dilutive effect of options and restricted shares 4,770 3,118 934
---------- ----------- ----------
Diluted shares 107,641 106,202 102,956
========== =========== ==========
Options to purchase 5,690,000 and 456,000 shares of Class A Common Stock
were outstanding at year-end 1999 and 1997 but were not included in the
computation of net income per diluted share because the options' exercise
prices were greater than the average market price of the underlying
shares.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Since actual results
may differ from those estimates, the Company revises its estimates and
assumptions as new information becomes available.
RECLASSIFICATIONS
Certain amounts have been reclassified to conform with current year
presentation.
3. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of (thousands):
1999 1998
---------------- -------------
Land $14,007 -
Furniture, fixtures and equipment 158,753 $126,091
Beneficial leaseholds 7,349 7,349
Leasehold improvements 19,572 16,450
Construction in progress 26,100 2,728
-------- --------
Total $225,781 $152,618
======== ========
Less: accumulated depreciation and amortization 79,378 63,060
-------- --------
Property and equipment, net $146,403 $89,558
======== ========
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4. LEASED FACILITIES AND COMMITMENTS
Annual store rent is comprised of a fixed minimum amount, plus contingent
rent based on a percentage of sales exceeding a stipulated amount. Store
lease terms generally require additional payments covering taxes, common
area costs and certain other expenses. Rent expense for 1998 and 1997
included charges from The Limited and its subsidiaries for space under
formal agreements that approximate market rates.
A summary of rent expense follows (thousands):
1999 1998 1997
------- ------- -------
Store rent:
Fixed minimum $51,086 $42,774 $34,402
Contingent 8,246 6,382 2,138
------- ------- -------
Total store rent $59,332 $49,156 $36,540
Buildings, equipment and other 2,574 1,814 1,400
------- ------- -------
Total rent expense $61,906 $50,970 $37,940
======= ======= =======
At January 29, 2000, the Company was committed to noncancelable leases
with remaining terms of one to fifteen years. These commitments include
store leases with initial terms ranging primarily from ten to fifteen
years and offices and a distribution center leased from an affiliate of
The Limited with a term of three years from the date of the Exchange
Offer. A summary of minimum rent commitments under noncancelable leases
follows (thousands):
2000 $62,765
2001 63,991
2002 63,646
2003 62,377
2004 61,706
Thereafter 205,857
5. ACCRUED EXPENSES
Accrued expenses consisted of the following (thousands):
1999 1998
------- -------
Rent and landlord charges $15,282 $13,368
Estimated cost to complete store construction 14,840 4,393
Compensation and benefits 11,588 9,800
Deferred revenue 8,482 --
Catalogue and advertising costs 7,005 8,701
Taxes, other than income 4,507 3,634
Other 23,669 23,986
------- -------
Total $85,373 $63,882
======= =======
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6. INCOME TAXES
The provision for income taxes consisted of (thousands):
1999 1998 1997
--------- --------- ---------
Currently Payable:
Federal $ 84,335 $ 65,778 $ 29,040
State 20,251 14,809 6,450
--------- --------- ---------
$ 104,586 $ 80,587 $ 35,490
--------- --------- ---------
Deferred:
Federal (3,885) (10,038) (2,620)
State (971) (2,509) (650)
--------- --------- ---------
$ (4,856) $ (12,547) $ (3,270)
--------- --------- ---------
Total provision $ 99,730 $ 68,040 $ 32,220
========= ========= =========
A reconciliation between the statutory Federal income tax rate and the
effective income tax rate follows:
1999 1998 1997
--------- --------- ---------
Federal income tax rate 35.0% 35.0% 35.0%
State income tax, net of Federal income
tax effect 4.6% 4.7% 4.7%
Other items, net 0.4% 0.3% 0.3%
--------- --------- ---------
Total 40.0% 40.0% 40.0%
========= ========= =========
Income taxes payable included net current deferred tax assets of $14.2
million and $9.5 million at January 29, 2000 and January 30, 1999.
Subsequent to the Exchange Offer, the Company began filing its tax
returns on a separate basis and made tax payments directly to taxing
authorities. Prior to the Exchange Offer, the Company was included in the
consolidated federal and certain state income tax groups of The Limited
for income tax purposes. Under this arrangement, the Company was
responsible for and paid The Limited its proportionate share of income
taxes, calculated upon its separate taxable income at the estimated
annual effective tax rate. Amounts paid to The Limited totaled $9.1
million, $27.4 million and $27.6 million in 1999, 1998 and 1997. Amounts
paid directly to taxing authorities were $81.1 million and $31.7 million
in 1999 and 1998.
The effect of temporary differences which gives rise to net deferred
income tax assets was as follows (thousands):
1999 1998
----------------- ----------------
Deferred compensation $9,333 $9,228
Property and equipment 1,478 1,849
Rent 2,565 2,341
Accrued expenses 10,230 4,008
Inventory 1,650 2,093
Other, net - 882
----------------- ----------------
Total deferred income taxes $25,256 $20,401
================= ================
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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.
7. LONG-TERM DEBT
The Company entered into a $150 million syndicated unsecured credit
agreement (the "Agreement"), on April 30, 1998 (the "Effective Date").
Borrowings outstanding under the Agreement are due April 30, 2003. The
Agreement has several borrowing options, including interest rates that
are based on the bank agent's "Alternate Base Rate", a LIBO Rate or a
rate submitted under a bidding process. Facility fees payable under the
Agreement are based on the Company's ratio (the "leverage ratio") of the
sum of total debt plus 800% of forward minimum rent commitments to
trailing four-quarters EBITDAR and currently accrues at .275% of the
committed amount per annum. The Agreement contains limitations on debt,
liens, restricted payments (including dividends), mergers and
acquisitions, sale-leaseback transactions, investments, acquisitions,
hedging transactions and transactions with affiliates and financial
covenants requiring a minimum ratio of EBITDAR to interest expense and
minimum rent and a maximum leverage ratio. No amounts were outstanding
under the Agreement at January 29, 2000 and January 30, 1999.
During the first quarter of 1998, the Company repaid a $50 million
long-term note owed to The Limited with $24,125,000 in cash and by
issuing 1.2 million shares of Class A Common Stock at a price of $21.563
per share.
8. RELATED PARTY TRANSACTIONS
Prior to the Exchange Offer, transactions between the Company and The
Limited and its subsidiaries and affiliates principally consisted of the
following:
Merchandise purchases
Real estate management and leasing
Capital expenditures
Inbound and outbound transportation
Corporate services
Subsequent to the Exchange Offer, the Company negotiated arms-length
terms with the merchandise and service suppliers that are Limited
subsidiaries. The Company and The Limited also entered into various
service agreements for terms ranging from one to three years. The Company
has hired associates with the appropriate expertise or contracted with
outside parties to replace those services which expired in May 1999.
Service agreements were also entered into for the continued use by the
Company of its distribution and home office space and transportation and
logistic services. These agreements expire in May 2001. The cost of these
services generally is equal to The Limited's cost in providing the
relevant services plus five percent of such costs.
For the periods prior to the Exchange Offer, the Company and The Limited
entered into intercompany agreements that established the provision of
certain services. The prices charged to the Company for services provided
under these agreements may have been higher or lower than prices that
would have been charged by third parties. It is not practicable,
therefore, to estimate what these costs would have been if The Limited
had not provided these services and the Company was required to purchase
these services from outsiders or develop internal expertise. Management
believes the charges and allocations described above are fair and
reasonable.
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The following table summarizes the related party transactions between the
Company and The Limited and its subsidiaries, for the years prior to the
Exchange Offer. Fiscal year 1998 reflects activity through the completion
of the Exchange Offer.
(Thousands)
1998 1997
-------- --------
Mast and Gryphon purchases $ 20,176 $ 89,892
Capital expenditures 3,199 27,012
Inbound and outbound transportation 2,280 5,524
Corporate charges 2,671 6,857
Store leases and other occupancy, net 561 1,184
Distribution center, IT and home office expenses 2,217 3,102
Centrally managed benefits 1,524 3,596
Interest charges, net 4 3,583
-------- --------
$ 32,632 $140,750
======== ========
The Company does not anticipate that costs associated with the remaining
services provided by The Limited under agreements which expire in May
2001 or costs incurred to replace the services currently provided by The
Limited will have a material adverse impact on its financial condition.
In November 1999, the Company loaned the amount of $1.5 million to its
Chairman of the Board, a major shareholder of the Company, pursuant to
the terms of a promissory note, which provides that such amount is due
and payable May 31, 2000, together with interest at the rate of 6.5% per
annum.
Shahid & Company, Inc. has provided advertising and design services for
the Company since 1995. Sam N. Shahid Jr., who serves on the Board of
Directors for the Company, has been President and Creative Director of
Shahid & Company, Inc. since 1993. Fees paid to Shahid & Company, Inc.
for services provided during fiscal years 1999 and 1998 were
approximately $1.4 million and $1.2 million respectively.
9. STOCK OPTIONS AND RESTRICTED SHARES
Under the Company's stock plans, associates and non-associate directors
may be granted up to a total of 16.3 million restricted shares and
options to purchase the Company's common stock at the market price on the
date of grant. In 1999, associates of the Company were granted
approximately 5.8 million options, with vesting periods ranging from four
to seven years. A total of 36,000 options were granted to non-associate
directors in 1999, all of which vest over four years. All options have a
maximum term of ten years.
The Company adopted the disclosure requirements of SFAS No. 123,
"Accounting for Stock-Based Compensation," in 1996, but elected to
continue to measure compensation expense in accordance with APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense for stock options has been recognized. If
compensation expense had been determined based on the estimated fair
value of options granted in 1999, 1998 and 1997, consistent with the
methodology in SFAS No. 123, the pro forma effect on net income and net
income per diluted share would have been a reduction of approximately
$18.5 million or $.17 per share in 1999, $6.1 million or $.06 per share
in 1998 and $1.7 million or $.02 per share in 1997. The weighted-average
fair value of all options granted during fiscal 1999, 1998 and 1997 was
$23.34, $9.89 and $4.25. The fair value of each option was estimated
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1999, 1998 and 1997: no expected
dividends, price volatility of 45% in 1999, 40% in 1998 and 35% in 1997,
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risk-free interest rates of 6.0%, 5.5% and 6.0% in 1999, 1998 and 1997,
respectively, assumed forfeiture rates of 10% and expected lives of 6.5
years in 1999, 5 years in 1998 and 6.5 years in 1997.
The pro forma effect on net income for 1999, 1998 and 1997 is not
representative of the pro forma effect on net income in future years
because it takes into consideration pro forma compensation expense
related only to those grants made subsequent to the Company's initial
public offering.
Stock Options Outstanding at January 29, 2000
Options Outstanding Options Exercisable
----------------------------------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercisable
Prices Outstanding Life Price Exercisable Price
----------------- --------------- --------------- ------------- --------------- --------------
$8 - $22 4,842,000 7.6 $12.63 549,000 $9.67
$23 - $37 2,793,000 8.7 $25.96 7,000 $24.16
$38 - $52 5,174,000 9.4 $43.55 - -
----------------- --------------- --------------- ------------- --------------- --------------
$8 - $52 12,809,000 8.6 $28.03 556,000 $9.85
================= =============== =============== ============= =============== ==============
A summary of option activity for 1999, 1998 and 1997 follows:
1999 1998 1997
--------------------------- --------------------------- ---------------------------
Weighted Weighted
Average Weighted Average
Option Average Option
Shares Price Shares Option Price Shares Price
-------------- ----------- ------------- ------------- ------------- ------------
Outstanding at beginning of year 7,568,000 $15.87 3,768,000 $8.91 480,000 $8.00
Granted 5,794,000 42.90 3,970,000 22.47 3,338,000 9.02
Exercised (337,000) 9.39 (60,000) 8.99 (8,000) 8.00
Canceled (216,000) 25.25 (110,000) 19.40 (42,000) 8.00
-------------- ----------- ------------- ------------- ------------ ------------
Outstanding at end of year 12,809,000 $28.03 7,568,000 $15.87 3,768,000 $8.91
============== =========== ============= ============= ============= ============
Options exercisable at year-end 556,000 $9.85 388,000 $8.99 70,000 $8.00
============== =========== ============= ============= ============= ============
A total of 140,000 restricted shares were granted in 1999, with a total
market value at grant date of $5.4 million. In 1998 and 1997, a total of
140,000 and 1,094,000 restricted shares were granted, with a total market
value at grant date of $2.7 million and $8.7 million. The restricted
share grants generally vest either on a graduated scale over four years
or 100% at the end of a fixed vesting period, principally five years. The
market value of restricted shares is being amortized as compensation
expense over the vesting period, generally four to five years.
Compensation expenses related to restricted share awards amounted to $5.2
million, $11.5 million and $6.2 million in 1999, 1998 and 1997. Long-term
liabilities at fiscal year-end 1998 included $8.7 million of compensation
expense relating to restricted shares.
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10. RETIREMENT BENEFITS
The Company participates in a qualified defined contribution retirement
plan and a nonqualified supplemental retirement plan. Participation in
the qualified plan is available to all associates who have completed
1,000 or more hours of service with the Company during certain 12-month
periods and attained the age of 21. Participation in the nonqualified
plan is subject to service and compensation requirements. The Company's
contributions to these plans are based on a percentage of associates'
eligible annual compensation. The cost of these plans was $1.4 million in
1999, $760 thousand in 1998 and $558 thousand in 1997.
11. CONTINGENCIES
The Company is involved in a number of legal proceedings. Although it is
not possible to predict with any certainty the eventual outcome of any
legal proceedings, it is the opinion of management that the ultimate
resolution of these matters will not have a material impact on the
Company's results of operations, cash flows or financial position.
12. PREFERRED STOCK PURCHASE RIGHTS
On July 16, 1998, the Company's Board of Directors declared a dividend of
.50 of a Series A Participating Cumulative Preferred Stock Purchase Right
(Right) for each outstanding share of Class A Common Stock, par value
$.01 per share (Common Stock), of the Company. The dividend was paid to
shareholders of record on July 28, 1998. Shares of Common Stock issued
after July 28, 1998 and prior to the Distribution Date described below
will be issued with .50 Right attached. Under certain conditions, each
whole Right may be exercised to purchase one one-thousandth of a share of
Series A Participating Cumulative Preferred Stock at an initial price of
$250. The Rights initially will be attached to the shares of Common
Stock. The Rights will separate from the Common Stock and a Distribution
Date will occur upon the earlier of 10 business days after a public
announcement that a person or group has acquired beneficial ownership of
20% or more of the Company's outstanding shares of Common Stock and
become an "Acquiring Person" (Share Acquisition Date) or 10 business days
(or such later date as the Board shall determine before any person has
become an Acquiring Person) after commencement of a tender or exchange
offer which would result in a person or group beneficially owning 20% or
more of the Company's outstanding Common Stock. The Rights are not
exercisable until the Distribution Date.
In the event that any person becomes an Acquiring Person, each holder of
a Right (other than the Acquiring Person and certain affiliated persons)
will be entitled to purchase, upon exercise of the Right, shares of
Common Stock having a market value two times the exercise price of the
Right. At any time after any person becomes an Acquiring Person (but
before any person becomes the beneficial owner of 50% or more of the
outstanding shares), the Company's Board of Directors may exchange all or
part of the Rights (other than Rights beneficially owned by an Acquiring
Person and certain affiliated persons) for shares of Common Stock at an
exchange ratio of one share of Common Stock per Right. In the event that,
at any time following the Share Acquisition Date, the Company is acquired
in a merger or other business combination transaction in which the
Company is not the surviving corporation, the Common Stock is exchanged
for other securities or assets or 50% or more of the Company's assets or
earning power is sold or transferred, the holder of a Right will be
entitled to buy, for the exercise price of the Rights, the number of
shares of Common Stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of
the Right.
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The Rights, which do not have any voting rights, expire on July 16, 2008,
and may be redeemed by the Company at a price of $.01 per whole Right at
any time before a person becomes an Acquiring Person.
Rights holders have no rights as a stockholder of the Company, including
the right to vote and to receive dividends.
13. SUBSEQUENT EVENT (UNAUDITED)
In March 2000, the Company loaned the amount of $1.5 million to its
Chairman of the Board, a major shareholder of the Company, pursuant to
the terms of a promissory note, which provides that such amount is due
and payable August 28, 2000, together with interest at the rate of 6.5%
per annum.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial results for 1999 and 1998 follow
(thousands except per share amounts):
1999 Quarter First (1) Second (1) Third (1) Fourth
------------------------------------- ------------- ------------- ------------- --------------
Net sales $188,294 $198,895 $286,983 $367,884
Gross income 71,904 80,721 121,886 191,072
Net income 14,963 18,858 39,059 76,724
Net income per basic share $.14 $.18 $.38 $.75
Net income per diluted share $.14 $.17 $.36 $.73
1998 Quarter First Second Third Fourth
------------------------------------- ------------- ------------- ------------- --------------
Net sales $134,230 $147,127 $229,869 $304,578
Gross income 49,211 55,194 89,444 150,102
Net income 6,308 10,598 24,943 60,213
Net income per basic share $.06 $.10 $.24 $.59
Net income per diluted share $.06 $.10 $.24 $.56
(1) During the fourth quarter of 1999, the Company changed its accounting
for gift certificates. Under the new method, the Company establishes
a liability upon the sale of a gift certificate. The liability is
reduced when the gift certificate is redeemed and the customer takes
possession of the merchandise. The impact of this change is not
significant to the prior year results. The change was retroactively
applied to the first three quarters of 1999. Net income and net
income per diluted share as previously reported were $12,506 and
$.12; $18,448 and $.17; and $38,947 and $.36 for the first, second
and third quarters of 1999.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Abercrombie & Fitch Co.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Abercrombie & Fitch
Co. and its subsidiaries at January 29, 2000 and January 30, 1999, and the
results of their operations and their cash flows for each of the three fiscal
years in the period ended January 29, 2000 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Columbus, Ohio
February 15, 2000
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company is set forth under the captions
"ELECTION OF DIRECTORS - Nominees and Directors", "- Business Experience", "-
Information Concerning the Board of Directors", "- Security Ownership of
Directors and Management" and "- Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's definitive proxy statement for the Annual Meeting
of Stockholders to be held on May 18, 2000 (the "Proxy Statement") and is
incorporated herein by reference. Information regarding executive officers of
the Company is set forth under the captions "ELECTION OF DIRECTORS - Business
Experience", " - Executive Officers", "- Security Ownership of Directors and
Management", "- Section 16(a) Beneficial Ownership Reporting Compliance" and
"EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with
Certain Executive Officers" in the Proxy Statement and is incorporated herein by
reference. In addition, information regarding executive officers of the Company
is included in this Annual Report on Form 10-K under the caption "SUPPLEMENTAL
ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I and is incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is set forth under the caption
"EXECUTIVE COMPENSATION" in the Proxy Statement and is incorporated herein by
reference. Such incorporation by reference shall not be deemed to specifically
incorporate by reference the information referred to in Item 402(a)(8) of
Regulation S-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding the security ownership of certain beneficial owners and
management is set forth under the captions "PRINCIPAL HOLDERS OF SHARES" and
"ELECTION OF DIRECTORS - Security Ownership of Directors and Management" in the
Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is set
forth under the captions "ELECTION OF DIRECTORS - Business Experience" and
"EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with
Certain Officers" in the Proxy Statement and is incorporated herein by
reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) LIST OF FINANCIAL STATEMENTS.
The following consolidated financial statements of Abercrombie & Fitch
Co. and subsidiaries and the related notes are filed as a part of this
report pursuant to ITEM 8:
Consolidated Statements of Income for the fiscal years ended January
29, 2000, January 30, 1999 and January 31, 1998.
Consolidated Balance Sheets as of January 29, 2000 and January 30,
1999.
Consolidated Statements of Shareholders' Equity for the fiscal years
ended January 29, 2000, January 30, 1999 and January 31, 1998.
Consolidated Statements of Cash Flows for the fiscal years ended
January 29, 2000, January 30, 1999 and January 31, 1998.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because the required information is either
presented in the financial statements or notes thereto, or is not
applicable, required or material.
(a)(3) LIST OF EXHIBITS.
3. Certificate of Incorporation and Bylaws.
3.1. Amended and Restated Certificate of Incorporation of
the Company as filed with the Delaware Secretary of
State on August 27, 1996, incorporated by reference
to Exhibit 3.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 2, 1996.
3.2. Certificate of Designation of Series A Participating
Cumulative Preferred Stock of the Company as filed
with the Delaware Secretary of State on July 21,
1998, incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year
ended January 30, 1999.
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 by reference
to Exhibit 3.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended July 31, 1999.
3.4. Bylaws of the Company, incorporated by reference to
Exhibit 3.2 to the Company's Quarterly Report on Form
10-Q for the quarter ended November 2, 1996.
33
34
3.5. Certificate regarding adoption of amendment to
Subsection 1.10(c) of Amended and Restated Bylaws of
the Company by the Board of Directors on April 4,
2000.
3.6. Amended and Restated Bylaws of the Company
(reflecting amendments through April 4, 2000) (for
SEC reporting compliance only).
4. Instruments Defining the Rights of Security Holders.
4.1. Credit Agreement dated as of April 30, 1998 among
Abercrombie & Fitch Stores, Inc., as Borrower, the
Company, as Guarantor, the Lenders party thereto, The
Chase Manhattan Bank, as Administrative Agent, and
Chase Securities, Inc., as Arranger, incorporated by
reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K dated April 30, 1998.
4.2. First Amendment, dated as of July 30, 1999, to the
Credit Agreement, dated as of April 30, 1998, among
Abercrombie & Fitch Stores, Inc., Abercrombie & Fitch
Co., the lenders party thereto and The Chase
Manhattan Bank, as Administrative Agent, incorporated
by reference to Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended
July 31, 1999.
4.3. Rights Agreement dated as of July 16, 1998 between
Abercrombie & Fitch Co. and First Chicago Trust
Company of New York, incorporated by reference to
Exhibit 1 to the Company's Current Report on Form 8-A
dated July 21, 1998.
4.4. Amendment No. 1 to the Rights Agreement dated as of
April 21, 1999 between Abercrombie & Fitch Co. and
First Chicago Trust Company of New York, incorporated
by reference to Exhibit 2 to the Company's Amendment
No. 1 to Form 8-A dated April 23, 1999.
4.5. Certificate of adjustment of number of Rights
associated with each share of Class A Common Stock,
dated May 27, 1999, incorporated by reference to
Exhibit 4.6 to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1999.
10. Material Contracts.
10.1. Abercrombie & Fitch Co. Incentive Compensation
Performance Plan incorporated by reference to Exhibit
A to the Company's Proxy Statement dated April 14,
1997.
10.2. 1998 Restatement of the Abercrombie & Fitch Co. 1996
Stock Option and Performance Incentive Plan (reflects
amendments through December 7, 1999 and the
two-for-one stock split distributed June 15, 1999 to
stockholders of record on May 25, 1999).
10.3. 1998 Restatement of the Abercrombie & Fitch Co. 1996
Stock Plan for Non-Associate Directors (reflects
amendments through December 7, 1999 and the
two-for-one stock split distributed June 15, 1999 to
stockholders of record on May 25, 1999).
34
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10.4. Employment Agreement by and between the Company and
Michael S. Jeffries dated as of May 13, 1997 with
exhibits and amendment incorporated by reference to
Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended November 1, 1997.
10.5. Amended and Restated Employment Agreement by and
between the Company and Michele S. Donnan-Martin,
executed by the Company on November 18, 1999 and by
Ms. Donnan-Martin on October 11, 1999, incorporated
by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
October 30, 1999.
10.6. Employment Agreement by and between the Company and
Seth R. Johnson dated December 5, 1997, incorporated
by reference to Exhibit 10.10 to the Form S-4.
10.7. Tax Disaffiliation Agreement dated as of May 19, 1998
between The Limited, Inc. and the Company,
incorporated by reference to Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended May 2, 1998.
10.8. Amended and Restated Services Agreement dated as of
May 19, 1998 between The Limited, Inc. and the
Company, incorporated by reference to Exhibit 10.8 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended May 2, 1998.
10.9. Shared Facilities Agreement dated September 27, 1996
by and between the Company and The Limited, Inc.,
incorporated by reference to Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended November 2, 1996.
10.10. Sublease Agreement by and between Victoria's Secret
Stores, Inc. and the Company, dated June 1, 1995 (the
"Sublease Agreement"), incorporated by reference to
Exhibit 10.3 to the Form S-1.
10.11. Amendment No. 1 to the Sublease Agreement dated as of
May 19, 1998, incorporated by reference to Exhibit
10.11 to the Company's Quarterly Report on Form 10-Q
for the quarter ended May 2, 1998.
10.12. Amended and Restated Employment Agreement by and
between the Company and Charles W. Martin, executed
by the Company on November 18, 1999 and by Mr. Martin
on October 11, 1999, incorporated by reference to
Exhibit 10.12 to the Company's Quarterly Report on
Form 10-Q for the quarter ended October 30, 1999.
10.13. Abercrombie & Fitch, Inc. Directors' Deferred
Compensation Plan, incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form
10-K for the year ended January 30, 1999.
10.14. Promissory Note, dated November 17, 1999, issued by
Michael S. Jeffries to the Company, incorporated by
reference to Exhibit 10.15 to the Company's Quarterly
Report on Form 10-Q for the quarter ended October 30,
1999.
10.15. Promissory Note, dated March 1, 2000, issued by
Michael S. Jeffries to the Company.
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21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fiscal quarter
ended January 29, 2000.
(c) EXHIBITS.
The exhibits to this report are listed in section (a)(3) of
Item 14 above.
(d) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
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SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: April 24, 2000
ABERCROMBIE & FITCH CO.
By /s/ SETH R. JOHNSON
--------------------------------------------
Seth R. Johnson,
Executive Vice President - Chief Operating Officer
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on April 24, 2000:
SIGNATURE TITLE
/s/ MICHAEL S. JEFFRIES* Chairman of the Board of Directors and
- ------------------------------------ Chief Executive Officer
Michael S. Jeffries
/s/ SETH R. JOHNSON Executive Vice President - Chief Operating Officer
- ------------------------------------ and Director
Seth R. Johnson
/s/ GEORGE FOOS* Director
- -----------------------------------
George Foos
/s/ RUSSELL M. GERTMENIAN* Director
- ------------------------------------
Russell M. Gertmenian
/s/ JOHN A. GOLDEN* Director
- ------------------------------------
John A. Golden
/s/ JOHN W. KESSLER* Director
- ------------------------------------
John W. Kessler
/s/ SAM N. SHAHID* Director
- ------------------------------------
Sam N. Shahid
*The undersigned, by signing his name hereto, does hereby sign this report on
behalf of each of the above-indicated directors and executive officers of the
registrant pursuant to powers of attorney executed by such directors and
executive officers.
By /s/ SETH R. JOHNSON
-------------------
Seth R. Johnson
Attorney-in-fact
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- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 29, 2000
---------
ABERCROMBIE & FITCH CO.
(exact name of Registrant as specified in its charter)
---------
EXHIBITS
---------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT INDEX
39
EXHIBIT NO. DOCUMENT
3.5 Certificate regarding adoption of amendment to Subsection 1.10(c)
of Amended and Restated Bylaws of the Company by the Board of
Directors on April 4, 2000.
3.6 Amended and Restated Bylaws of the Company (reflecting amendments
through April 4, 2000) (for SEC reporting compliance purposes
only).
10.2 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Option
and Performance Incentive Plan (reflects amendments through
December 7, 1999 and the two-for-one stock split distributed June
15, 1999 to stockholders of record on May 25, 1999).
10.3 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Plan
for Non-Associate Directors (reflects amendments through December
7, 1999 and the two-for-one stock split distributed June 15, 1999
to stockholders of record on May 25, 1999).
10.15 Promissory Note, dated March 1, 2000, issued by Michael S.
Jeffries to the Company.
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Powers of Attorney.
27 Financial Data Schedule.