Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 2003
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)
6301 Fitch Path, New Albany, OH 43054
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 283-6500
Not Applicable
-----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock Outstanding at September 5, 2003
- ------------------------ ----------------------------------
$.01 Par Value 96,696,893 Shares
ABERCROMBIE & FITCH CO.
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Income
Thirteen and Twenty-Six Weeks Ended
August 2, 2003 and August 3, 2002............................................... 3
Condensed Consolidated Balance Sheets
August 2, 2003 and February 1, 2003............................................. 4
Condensed Consolidated Statements of Cash Flows
Twenty-Six Weeks Ended
August 2, 2003 and August 3, 2002............................................... 5
Notes to Condensed Consolidated Financial Statements..................................... 6
Report of Independent Accountants ........................................................ 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................... 22
Item 4. Controls and Procedures............................................................ 23
Part II. Other Information
Item 1. Legal Proceedings.................................................................. 24
Item 6. Exhibits and Reports on Form 8-K................................................... 25
2
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ABERCROMBIE & FITCH
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
(Unaudited)
Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------------- -----------------------------
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
------------ ------------ ------------ ------------
NET SALES $ 355,719 $ 329,154 $ 702,442 $ 641,946
Cost of Goods Sold, Occupancy and Buying Costs 211,386 197,280 429,921 395,643
------------ ------------ ------------ ------------
GROSS INCOME 144,333 131,874 272,521 246,303
General, Administrative and Store Operating
Expenses 88,716 82,304 176,614 159,746
------------ ------------ ------------ ------------
OPERATING INCOME 55,617 49,570 95,907 86,557
Interest Income, Net (861) (731) (1,852) (1,603)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 56,478 50,301 97,759 88,160
Provision for Income Taxes 21,660 19,160 37,390 33,730
------------ ------------ ------------ ------------
NET INCOME $ 34,818 $ 31,141 $ 60,369 $ 54,430
============ ============ ============ ============
NET INCOME PER SHARE:
BASIC $ 0.36 $ 0.32 $ 0.62 $ 0.55
============ ============ ============ ============
DILUTED $ 0.35 $ 0.31 $ 0.60 $ 0.53
============ ============ ============ ============
WEIGHTED-AVERAGE SHARES OUTSTANDING:
BASIC 97,186 98,764 97,410 98,894
============ ============ ============ ============
DILUTED 100,128 101,465 100,542 101,879
============ ============ ============ ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
ABERCROMBIE & FITCH
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands)
August 2, February 1,
2003 2003
------------- ------------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and Equivalents $ 385,187 $ 391,035
Marketable Securities - 10,000
Receivables 11,520 10,462
Inventories 199,581 144,218
Store Supplies 28,515 25,671
Other 20,612 19,770
------------- ------------
TOTAL CURRENT ASSETS 645,415 601,156
PROPERTY AND EQUIPMENT, NET 426,191 392,941
OTHER ASSETS 607 725
------------- ------------
TOTAL ASSETS $ 1,072,213 $ 994,822
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 79,746 $ 50,153
Accrued Expenses 143,811 120,438
Income Taxes Payable 25,798 40,879
------------- ------------
TOTAL CURRENT LIABILITIES 249,355 211,470
DEFERRED INCOME TAXES 28,872 20,781
OTHER LONG-TERM LIABILITIES 16,351 13,044
SHAREHOLDERS' EQUITY:
Class A Common Stock - $.01 par value: 150,000,000 shares authorized,
96,438,443 and 97,268,877 shares outstanding at August 2, 2003 and
February 1, 2003, respectively 1,033 1,033
Paid-In Capital 142,952 142,577
Retained Earnings 774,844 714,475
------------- ------------
918,829 858,085
Less: Treasury Stock, at Average Cost . (141,194) (108,558)
------------- ------------
TOTAL SHAREHOLDERS' EQUITY 777,635 749,527
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,072,213 $ 994,822
============= ============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
ABERCROMBIE & FITCH
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
(Unaudited)
Twenty-Six Weeks Ended
----------------------
August 2, August 3,
2003 2002
--------- ---------
OPERATING ACTIVITIES:
Net income $ 60,369 $ 54,430
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 31,462 26,309
Noncash Charge for Deferred Compensation 2,669 1,300
Changes in Assets and Liabilities:
Inventories (55,363) (70,686)
Accounts Payable and Accrued Expenses 34,165 40,662
Income Taxes (1,572) 8,897
Other Assets and Liabilities (192) (3,729)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 71,538 57,183
--------- ---------
INVESTING ACTIVITIES:
Capital Expenditures (49,323) (44,255)
Proceeds from Maturities of Marketable Securities 10,000 71,220
--------- ---------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (39,323) 26,965
--------- ---------
FINANCING ACTIVITIES:
Stock Option Exercises and Other 13,183 791
Purchases of Treasury Stock (51,246) (23,569)
--------- ---------
NET CASH USED FOR FINANCING ACTIVITIES $ (38,063) $ (22,778)
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (5,848) 61,370
Cash and Equivalents, Beginning of Year 391,035 167,664
--------- ---------
CASH AND EQUIVALENTS, END OF PERIOD $ 385,187 $ 229,034
========= =========
SIGNIFICANT NONCASH INVESTING ACTIVITIES:
Construction Allowance Receivables $ 9,550 $ 8,317
========= =========
Accrual for Construction in Progress $ 29,196 $ 13,135
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
ABERCROMBIE & FITCH
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Abercrombie & Fitch Co. ("A&F"), through its subsidiaries
(collectively, A&F and its subsidiaries are referred to as "Abercrombie
& Fitch" or the "Company"), is a specialty retailer of high quality,
casual apparel for men, women and kids with an active, youthful
lifestyle.
The condensed consolidated financial statements include the accounts of
A&F and all significant subsidiaries that are more than 50 percent
owned and controlled. All significant intercompany balances and
transactions have been eliminated in consolidation.
The condensed consolidated financial statements as of August 2, 2003
and for the thirteen and twenty-six week periods ended August 2, 2003
and August 3, 2002 are unaudited and are presented pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, these condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and
notes thereto contained in A&F's Annual Report on Form 10-K for the
fiscal year ended February 1, 2003 (the "2002 fiscal year"). In the
opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (which are of a normal
recurring nature) necessary to present fairly the financial position
and results of operations and cash flows for the interim periods, but
are not necessarily indicative of the results of operations for a full
fiscal year.
The condensed consolidated financial statements as of August 2, 2003
and for the thirteen and twenty-six week periods ended August 2, 2003
and August 3, 2002 included herein have been reviewed by the
independent accounting firm of PricewaterhouseCoopers LLP and the
report of such firm follows the notes to condensed consolidated
financial statements. PricewaterhouseCoopers LLP is not subject to the
liability provisions of Section 11 of the Securities Act of 1933 (the
"Act") for its report on the condensed consolidated financial
statements because that report is not a "report" within the meaning of
Sections 7 and 11 of the Act.
6
2. ADOPTION OF ACCOUNTING STANDARDS
Statement of Financial Accounting Standards ("SFAS") No. 143,
"Accounting for Asset Retirement Obligations," was effective February
2, 2003 for the Company. The standard requires entities to record the
fair value of a liability for an asset retirement obligation in the
period in which it is a cost by increasing the carrying amount of the
related long-lived asset. Over time, the liability is accreted to its
present value each period, and the capitalized cost is depreciated over
the useful life of the related obligation for its recorded amount or
the entity incurs a gain or loss upon settlement. Because costs
associated with exiting leased properties at the end of lease terms are
minimal, the adoption of SFAS No. 143 had no impact on the Company's
results of operations or its financial position.
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure-an Amendment of FASB No. 123," was issued on December 31,
2002. Pursuant to this standard, companies that chose to adopt the
accounting provisions of FASB Statement No. 123, "Accounting for
Stock-Based Compensation," were permitted to select from three
transition methods (prospective, modified prospective and retroactive
restatement).
Companies that chose not to adopt the accounting provisions of SFAS No.
123 were affected by the new disclosure requirements of SFAS No. 148.
The new interim disclosure provisions were effective for the first
quarter of 2003 and have been adopted by the Company (see Note 3).
Emerging Issues Task Force ("EITF") 03-03 issued "Accounting for
Claims-Made Insurance and Retroactive Insurance Contracts by the
Insured Entity," which discusses the accounting implications of
retroactive and prospective claims-made insurance policies. The
consensus reached was that a claims-made insurance policy that contains
no retroactive provisions should be accounted for on a prospective
basis. However, if a claims-made insurance policy contains a
retroactive provision, the retroactive and prospective provisions of
the policy should be accounted for separately, if practicable;
otherwise, the claims-made insurance policy should be accounted for
entirely as a retroactive contract. This consensus will be effective
for new insurance contracts entered into beginning with the third
quarter of fiscal 2003. The Company is in the process of evaluating the
impact of this issue.
7
3. STOCK-BASED COMPENSATION
The Company reports stock-based compensation through the
disclosure-only requirements of SFAS No. 123, "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure-an Amendment to FASB
No. 123," but elects to measure compensation expense using the
intrinsic value method in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense for options has been recognized as
all options are granted at fair market value at the grant date. The
Company does recognize compensation expense related to restricted share
awards. If compensation expense related to options for the thirteen and
twenty-six week periods ended August 2, 2003, and August 3, 2002 had
been determined based on the estimated fair value of options granted,
consistent with the methodology in SFAS No. 123, the pro forma effect
on net income and net income per basic and diluted share would have
been as follows:
(Thousands except per share amounts)
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------- --------------------------
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
---------- ---------- ---------- ---------
Net income:
As reported $ 34,818 $ 31,141 $ 60,369 $ 54,430
Stock-based compensation expense included in
reported net income, net of tax 854 446 1,649 801
Stock-based compensation expense determined under
fair value based method, net of tax(1) (6,507) (6,872) (12,862) (13,370)
---------- ---------- ---------- ---------
Pro forma $ 29,165 $ 24,715 $ 49,156 $ 41,861
========== ========== ========== =========
Basic earnings per share:
As reported $ 0.36 $ 0.32 $ 0.62 $ 0.55
Pro forma $ 0.30 $ 0.25 $ 0.50 $ 0.42
Diluted earnings per share:
As reported $ 0.35 $ 0.31 $ 0.60 $ 0.53
Pro forma $ 0.29 $ 0.25 $ 0.50 $ 0.42
(1) Includes stock-based compensation expense related to restricted share
awards actually recognized in earnings in each period presented.
The pro forma effect on net income for the second quarters of fiscal
2003 and fiscal 2002 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 through
the second quarter of fiscal 2003.
The weighted-average fair value of all options granted during the
second quarter of fiscal 2003 and fiscal 2002 was $13.98 and $12.07,
respectively. The fair value of each option was estimated using the
Black-Scholes option-pricing model, which is included in the pro forma
results above. For purposes of the valuation, the following
weighted-average assumptions were used: no expected dividends in 2003
and 2002; price volatility of 63% in 2003 and 53% in 2002; risk-free
interest rates of 2.9% in 2003 and 4.3% in 2002; assumed forfeiture
rates of 23% and 15% in 2003 and 2002, respectively; and expected lives
of 4 years in 2003 and 2002.
8
4. EARNINGS PER SHARE
Weighted-Average Shares Outstanding (in thousands):
Thirteen Weeks Ended
--------------------
August 2, August 3,
2003 2002
-------- ---------
Shares of Class A Common Stock issued 103,300 103,300
Treasury shares (6,114) (4,536)
------- -------
Basic shares 97,186 98,764
Dilutive effect of options and restricted shares 2,942 2,701
------- -------
Diluted shares 100,128 101,465
======= =======
Twenty-Six Weeks Ended
----------------------
August 2, August 3,
2003 2002
-------- ---------
Shares of Class A Common Stock issued 103,300 103,300
Treasury shares (5,890) (4,406)
------- -------
Basic shares 97,410 98,894
Dilutive effect of options and restricted shares 3,132 2,985
------- -------
Diluted shares 100,542 101,879
======= =======
Options to purchase 6,035,217 and 5,760,715 shares of Class A Common
Stock during the thirteen and twenty-six weeks ended August 2, 2003,
respectively, and 9,443,000 and 6,209,000 shares during the thirteen
and twenty-six weeks ended August 3, 2002, respectively, were
outstanding 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.
5. INVENTORIES
The fiscal year of A&F and its subsidiaries is comprised of two
principal selling seasons: Spring (the first and second quarters) and
Fall (the third and fourth quarters). Valuation of finished goods
inventories is based principally upon the lower of average cost or
market determined on a first-in, first-out basis utilizing the retail
method. Inventory valuation at the end of the first and third quarters
reflects adjustments for inventory markdowns and shrinkage estimates
for the total selling season.
9
6. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consisted of (in thousands):
August 2, February 1,
2003 2003
---------- -----------
Property and equipment, at cost $ 639,466 $ 585,642
Accumulated depreciation and amortization (213,275) (192,701)
--------- ----------
Property and equipment, net $ 426,191 $ 392,941
========= ==========
7. INCOME TAXES
The provision for income taxes is based on the current estimate of the
annual effective tax rate. Income taxes paid during the twenty-six
weeks ended August 2, 2003 and August 3, 2002 approximated $39.6
million and $24.4 million, respectively.
8. LONG-TERM DEBT
The Company entered into a $250 million syndicated unsecured credit
agreement (the "New Credit Agreement") on November 14, 2002 to replace
both a $150 million syndicated unsecured credit agreement (the "Old
Credit Agreement") and a separate $75 million facility for the issuance
of trade letters of credit. The primary purposes of the New Credit
Agreement are for trade and stand-by letters of credit and working
capital. The New Credit Agreement is due to expire on November 14,
2005. The New Credit Agreement has several borrowing options, including
interest rates that are based on the agent bank's "Alternative Base
Rate," or a LIBO Rate. Facility fees payable under the New Credit
Agreement are based on the Company's ratio (the "leverage ratio") of
the sum of total debt plus 800% of forward minimum rent commitments to
EBITDAR for the trailing four-fiscal-quarter period and currently
accrues at .225% of the committed amounts per annum. The New Credit
Agreement contains limitations on indebtedness, liens, sale-leaseback
transactions, significant corporate changes including mergers and
acquisitions with third parties, investments, restricted payments
(including dividends and stock repurchases), hedging transactions and
transactions with affiliates. The New Credit Agreement also contains
financial covenants requiring a minimum ratio of EBITDAR for the
trailing four-fiscal-quarter period to the sum of interest expense and
minimum rent for such period, as well as a maximum leverage ratio.
Letters of credit totaling approximately $56 million were outstanding
under the New Credit Agreement at August 2, 2003. Letters of credit
totaling approximately $44 million were outstanding under the $75
million facility for the issuance of trade letters of credit at August
3, 2002. No borrowings were outstanding under the New Credit Agreement
at August 2, 2003 or under the Old Credit Agreement at August 3, 2002.
10
9. RELATED PARTY TRANSACTIONS
Shahid & Company, Inc. has provided advertising and design services for
the Company since 1995. Sam N. Shahid, Jr., who serves on A&F's Board
of Directors, has been President and Creative Director of Shahid &
Company, Inc. since 1993. Fees paid to Shahid & Company, Inc. for
services provided during the thirteen and twenty-six weeks ended August
2, 2003 and August 3, 2002 were approximately $0.5 million and $1.0
million, respectively, in both periods. These amounts do not include
reimbursements to Shahid & Company, Inc. for expenses incurred while
performing these services.
10. CONTINGENCIES
The Company is involved in a number of legal proceedings. The Company
accrues amounts related to legal matters if reasonably estimable.
The Company does not believe it is feasible to predict the outcome of
these proceedings. The timing of the final resolution of these
proceedings is also uncertain.
The Company has standby letters of credit in the amount of $4.7 million
that expire during the 2003 fiscal year but automatically renew for a
period of one year. The beneficiary, a merchandise supplier, has the
right to draw upon the standby letters of credit if the Company has
authorized or filed a voluntary petition into bankruptcy. To date, the
beneficiary has not drawn upon the standby letters of credit.
The Company enters into agreements with professional services firms, in
the ordinary course of business and, in most agreements, indemnifies
these firms from any harm. There is no financial impact on the Company
related to these indemnification agreements.
11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Abercrombie & Fitch Co.:
We have reviewed the accompanying condensed consolidated balance sheet of
Abercrombie & Fitch Co. (the "Company") and its subsidiaries as of August 2,
2003 and the related condensed consolidated statements of income for each of the
thirteen and twenty-six week periods ended August 2, 2003 and August 3, 2002 and
the condensed consolidated statements of cash flows for the twenty-six week
periods ended August 2, 2003 and August 3, 2002. These interim financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole. Accordingly, we do
not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated interim financial statements
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We previously audited, in accordance with auditing standards generally accepted
in the United States of America, the consolidated balance sheet as of February
1, 2003, and the related consolidated statements of income, of shareholders'
equity, and of cash flows for the year then ended (not presented herein), and in
our report dated February 18, 2003, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of February 1, 2003, is fairly
stated in all material respects in relation to the consolidated balance sheet
from which it has been derived.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
August 12, 2003
12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the second quarter of the 2003 fiscal year, net sales increased 8% to
$355.7 million from $329.2 million in the second quarter of 2002. Operating
income improved to $55.6 million in the second quarter of 2003 from $49.6
million in the second quarter of 2002. A&F recorded its 44th consecutive
comparable quarter of record earnings as net income increased to $34.8 million
in the second quarter of 2003 as compared to $31.1 million in the second quarter
of 2002. Earnings per diluted share were $.35 in the second quarter of 2003
compared to $.31 in the second quarter of 2002.
The following data represent the amounts shown in the Company's condensed
consolidated statements of income for the thirteen and twenty-six week periods
ending August 2, 2003, and August 3, 2002, expressed as a percentage of net
sales:
Thirteen Weeks Ended Twenty-Six Weeks Ended
----------------------------- ---------------------------
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
------------ ------------ ----------- -----------
NET SALES 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold, Occupancy and
Buying Costs 59.4 59.9 61.2 61.6
------- ----- ------ -----
GROSS INCOME 40.6 40.1 38.8 38.4
General, Administrative and Store
Operating Expenses 24.9 25.0 25.1 24.9
------- ----- ------ -----
OPERATING INCOME 15.6 15.1 13.7 13.5
Interest Income, Net (0.2) (0.2) (0.3) (0.2)
------- ----- ------ -----
INCOME BEFORE INCOME TAXES 15.9 15.3 13.9 13.7
Provision for Income Taxes 6.1 5.8 5.3 5.3
------- ----- ------ -----
NET INCOME 9.8% 9.5% 8.6% 8.5%
======= ===== ====== =====
13
Financial Summary
The following summarized financial and statistical data compare the thirteen and
twenty-six week periods ended August 2, 2003 to the comparable fiscal 2002
periods:
Thirteen Weeks Ended Twenty-Six Weeks Ended
---------------------------------- --------------------------------
August 2, August 3, August 2, August 3,
2003 2002 Change 2003 2002 Change
-------- -------- ------ -------- -------- ------
Decrease in comparable store
sales (8)% (5)% (7)% (6)%
Retail sales increase
attributable to new and
remodeled stores, magazine,
catalogue and Web sites 16% 23% 16% 24%
Retail sales per average gross
square foot $ 76 $ 82 (7)% $ 151 $ 161 (6)%
Retail sales per average store
(thousands) $ 554 $ 607 (9)% $ 1,097 $ 1,195 (8)%
Average store size at end of
quarter (gross square feet) 7,261 7,386 (2)%
Gross square feet at end of
quarter (thousands) 4,538 3,937 15%
Number of stores and
gross square feet by concept:
Abercrombie & Fitch:
Stores at beginning of period 342 311 340 309
Opened 6 6 9 10
Closed (2) (1) (3) (3)
--------- --------- --------- ---------
Stores at end of period 346 316 346 316
========= ========= ========= =========
Gross square feet at end of
period (thousands) 3,082 2,852
========= =========
abercrombie:
Stores at beginning of period 165 153 164 148
Opened 2 4 3 9
Closed - - - -
--------- --------- --------- ---------
Stores at end of period 167 157 167 157
========= ========= ========= =========
Gross square feet at end of
period (thousands) 739 701
========= =========
Hollister Co.:
Stores at beginning of period 95 43 93 34
Opened 17 17 19 27
Closed - - - (1)
--------- --------- --------- ---------
Stores at end of period 112 60 112 60
========= ========= ========= =========
Gross square feet at end of
period (thousands) 717 384
========= =========
14
Net Sales
Second Quarter 2003
Net sales for the second quarter of 2003 were $355.7 million, up 8% over last
year's second quarter net sales of $329.2 million. The increase was due to the
addition of new stores offset by an 8% decline in comparable store sales
("comps"), defined as sales in stores that have been open for at least one year.
By merchandise concept, Hollister continued to show strong momentum, achieving
high-teen positive comps for the quarter. Comps were positive in both mens
and womens in Hollister. Second quarter comps for Abercrombie & Fitch were
negative in the low-double-digits largely due to a continuing very difficult
men's business. Comps in the abercrombie kids' business, during the second
quarter, were slightly negative overall, with girls positive and boys negative.
By region, second quarter comps were strongest on the West Coast and in Florida
and weakest in the Midwest.
The Company's strategy of protecting the brand image resulted in no direct mail
promotions during the second quarter of 2003. This was opposed to last year's
second quarter where a significant amount of direct mail was used to drive the
back-to-school business. The strategy improved merchandise margins and average
retail selling prices during the second quarter of 2003 as compared to the
second quarter of 2002, but at the expense of comps and transactions per store.
For the Abercrombie & Fitch adult business, the average dollar sale increased 6%
in the second quarter of 2003 compared to the second quarter of 2002, with
transactions per average store down 15%.
From a merchandising standpoint, womens and girls continued to drive the
business across all three concepts and represented approximately 64% of total
net sales for the second quarter of 2003. In Abercrombie & Fitch, women's
bottoms continued to perform well with strong comps in pants, skirts and shorts.
The better performing categories for mens were woven shirts, t-shirts and
personal care.
In the kids' business, woven tops, skirts, sweats and pants were the strongest
girls' classifications during the second quarter. In boys, graphic t-shirts and
shorts performed well.
In Hollister, the best performing girls' classifications during the second
quarter were graphic knits, skirts, woven shirts and sweats. In guys, woven
shirts, graphic t-shirts, pants and shorts performed very well.
Sales from the e-commerce business grew by approximately 43% during the second
quarter of 2003 as compared to the second quarter of 2002. The Company launched
the Hollister e-commerce site at the beginning of July 2003. The direct
business, which includes the Company's catalogue, the A&F Quarterly (a
catalogue/magazine) and the Company's Web sites, accounted for 4.5% and 4.1% of
net sales in the second quarter of each of 2003 and 2002, respectively.
15
Year-to-Date 2003
Year-to-date net sales in 2003 were $702.4 million, an increase of 9%, from
$641.9 million for the same period in 2002. The net sales increase was
attributable to the net addition of 92 stores offset by a 7% comparable store
sales decrease.
Year-to-date comps by merchandise concept were as follows: Abercrombie & Fitch
comps declined in high-single digits while the kids' business had a
mid-single-digit decline. Hollister year-to-date comps were positive high-teens.
The women's business in each concept continued to be more significant than mens.
Year-to-date, womens and girls represented approximately 64% of net sales for
each of the Abercrombie & Fitch and kids' businesses. Womens had a
low-single-digit decline in comps year-to-date while girls had positive
mid-single-digit comps. Hollister girls represented 68% of year-to-date net
sales and had positive comps in the mid-twenties.
The e-commerce business (including the Hollister e-commerce site) grew by
approximately 27% during the year-to-date period as compared to last year. The
Company's catalogue, the A&F Quarterly and the Company's Web sites represented
4.6% of 2003 year-to-date net sales as compared to 4.7% last year.
Gross Income
Second Quarter 2003
The gross income rate (gross income divided by net sales) increased to 40.6%
during the second quarter of 2003 from 40.1% for the same period in 2002. The
increase largely resulted from higher initial markup (IMU) and a slightly lower
markdown rate, partially offset by an increase in buying and occupancy costs, as
a percentage of net sales.
The Company continued to make progress in sourcing merchandise which resulted in
IMU improvement in all three concepts. Improvement was most dramatic in
Hollister and kids.
The increase in buying and occupancy costs, as a percentage of net sales,
reflects the inability to leverage fixed costs such as rent, depreciation and
other real estate related charges with a comp store decrease.
The markdown rate for the second quarter of 2003 was lower than the same period
last year due to tight control of inventory levels and a reduced level of
promotional activity. This year, the Company did not anniversary a direct mail
promotion that had a significant impact on July and early August 2002 business
for Abercrombie & Fitch and abercrombie.
The Company ended the second quarter of 2003 with inventories at cost down 4%
per gross square foot versus the second quarter of 2002.
16
Year-to-Date 2003
The year-to-date gross income rate increased to 38.8% from 38.4% for the
comparable period in 2002. The increase was attributable to an increase in IMU
and a lower markdown rate, partially offset by an increase in buying and
occupancy costs, as a percentage of net sales.
The aforementioned improved sourcing of merchandise has been an important factor
in improving the IMU in all three concepts. Improvement was most dramatic in
Hollister and kids.
The markdown rate was lower for the year-to-date 2003 than the comparable period
in 2002 due to the Company's decision to have fewer in-store promotions and to
not anniversary the 2002 year-to-date direct mail promotions.
Buying and occupancy costs year-to-date increased over the comparable period in
2002, as a percentage of net sales, due to the inability to leverage fixed
expenses with lower sales volume per average store.
General, Administrative and Store Operating Expenses
Second Quarter 2003
The general, administrative and store operating expense rate (general,
administrative and store operating expenses divided by net sales) was 24.9% in
the second quarter of 2003 compared to 25.0% in last year's second quarter. The
improvement reflects lower expenses for incentive compensation, marketing and
the distribution center. Offsetting these improvements were higher store and
legal expenses.
Marketing expenses for the second quarter of 2003 dropped, as a percentage of
net sales, versus last year due to savings in printing and postage costs
resulting from the elimination of second quarter and back-to-school direct mail
campaigns.
Incentive compensation expense was reduced in the second quarter of 2003 versus
the comparable period last year as the rate of growth in net income was less
than what was achieved in last year's second quarter.
The distribution center continued to make a major contribution to the Company's
success in expense control. During the second quarter of 2003, distribution
center productivity, as measured in units processed per labor hour, was 29%
higher than the comparable period last year. This was on top of more than a 50%
improvement in the second quarter of 2002 compared to the second quarter of
2001. For the quarter, a similar number of units were processed with 25% fewer
labor hours than the comparable period in 2002.
During the quarter, average payroll hours were reduced by 6% per store in
Abercrombie & Fitch and 3% in abercrombie. These cuts did not fully offset the
comps decrease resulting in an overall increase of store expenses as a
percentage of net sales.
Legal expenses for the second quarter of 2003 increased versus the comparable
period last year as
17
the Company reserved expected defense costs for pending litigation. The
incremental impact of these legal charges, as compared to the prior year, was
approximately $.02 in earnings per share for the second quarter of 2003.
Year-to-Date 2003
The general, administrative and store operating expense rate was 25.1% and 24.9%
for the year-to-date periods in 2003 and 2002, respectively.
The increased rate in 2003 resulted primarily from a drop in sales per average
store that could not be fully offset by lower payroll hours per average store.
Additionally, legal expenses increased in the 2003 year-to-date period compared
to 2002 due to the previously mentioned reserves for pending litigation.
Partially offsetting these costs were improvements in distribution center
productivity, reduced fulfillment costs and reduced marketing expenses, as a
percentage of net sales, due to savings from the lack of direct mail campaigns
in 2003.
Operating Income
The second quarter and year-to-date operating income rates (operating income
divided by net sales) were 15.6% and 13.7% in 2003, up from 15.1% and 13.5% for
the comparable periods in 2002. The increase in operating income rates in these
periods was a result of increased gross income rates. A slightly lower general,
administrative and store operating expense rate in the second quarter of 2003,
versus the same period in 2002, also contributed to the second quarter operating
income rate increase. Higher general, administrative and store operating expense
rates in the 2003 year-to-date period, compared to the same period in 2002,
partially offset the 2003 increased gross income rate.
Interest Income and Income Tax Expense
Second quarter and year-to-date net interest income was $0.9 million and $1.9
million, respectively, in 2003 as compared to net interest income of $0.7
million and $1.6 million, respectively, for the second quarter and year-to-date
periods last year. The Company continued to invest in tax-free securities.
The effective tax rate for the second quarter was 38.4% as compared to 38.1% for
2002's comparable period. Enacted state tax legislation in several states was
the primary cause of the rate increase. Year-to-date 2003, the effective tax
rate was 38.2% compared with 38.3% in the same period last year.
18
FINANCIAL CONDITION
Liquidity and Capital Resources
Cash provided by operating activities provides the resources to support
operations, including projected growth, seasonal requirements and capital
expenditures. A summary of the Company's working capital position and
capitalization follows (in thousands):
August 2, August 3,
2003 2002
----------- ------------
Working capital $ 396,060 $ 246,509
=========== ============
Capitalization:
Shareholders' equity $ 777,635 $ 626,182
=========== ============
Net cash provided by operating activities, the Company's primary source of
liquidity, totaled $71.5 million for the twenty-six weeks ended August 2, 2003
versus $57.2 million in the comparable period of 2002. Cash was provided
primarily by current year net income adjusted for depreciation and amortization.
Additionally, cash was provided from increases in accounts payable and accrued
expenses.
Accounts payable increased as a result of the overall increase in inventories
supporting the continued growth of the business. The Company ended the second
quarter 2003 with inventories down 4% per gross square foot compared to last
year's second quarter and intends to remain conservative in future inventory
commitments.
Accrued expenses also increased for items such as payroll and property taxes
related to the continued growth and development of the business. In addition,
legal expenses increased as the Company reserved expected defense costs for
pending litigation.
Uses of cash consisted mostly of increases in inventory. Although inventories
were down on a gross square footage basis to last year at quarter end, the total
inventory balance increased as a result of a 15% increase in gross square feet.
The Company's operations are seasonal in nature and typically peak during the
back-to-school and Christmas selling periods. Accordingly, cash requirements for
inventory expenditures are highest during these periods.
Cash outflows for investing activities were for capital expenditures (see the
discussion in the "Capital Expenditures" section below) related primarily to new
stores. Cash inflows from investing activities consisted of maturities of
marketable securities. As of August 2, 2003, the Company held no marketable
securities with original maturities of greater than 90 days.
Financing activities consisted primarily of the repurchase of 1.9 million shares
of A&F's Class A Common Stock pursuant to a previously authorized stock
repurchase program. As of August 2, 2003, there were 3.1 million shares which
could still be purchased as part of the 5 million share
19
repurchase authorization. In addition to stock repurchases, financing activities
in the second quarter of 2003 consisted of stock option exercises and restricted
stock issuances.
In the second quarter of 2002, the Company had available a $150 million
syndicated unsecured credit agreement (the "Old Credit Agreement"). The Company
also had a $75 million facility for trade letters of credit.
Effective November 14, 2002, the Company entered into a new $250 million
syndicated unsecured credit agreement (the "New Credit Agreement"), which
replaced both the Old Credit Agreement and the trade letter of credit facility.
Additional details regarding the New Credit Agreement can be found in the Notes
to Condensed Consolidated Financial Statements (Note 8).
Letters of credit totaling approximately $56 million were outstanding under the
New Credit Agreement at August 2, 2003. Letters of credit totaling approximately
$44 million were outstanding under the trade letter of credit facility at August
3, 2002. No borrowings were outstanding under either the New Credit Agreement at
August 2, 2003 or the Old Credit Agreement at August 3, 2002.
The Company has standby letters of credit in the amount of $4.7 million that
expire during the 2003 fiscal year but automatically renew for a period of one
year. The beneficiary, a merchandise supplier, has the right to draw upon the
standby letters of credit if the Company has authorized or filed a voluntary
petition into bankruptcy. To date, the beneficiary has not drawn upon the
standby letters of credit.
Store Count and Gross Square Feet
Store count and gross square footage by concept were as follows:
August 2, 2003 August 3, 2002
----------------------------- -----------------------------
Number of Gross Square Number of Gross Square
Stores Feet (thousands) Stores Feet (thousands)
--------- ---------------- --------- ----------------
Abercrombie & Fitch 346 3,082 316 2,852
abercrombie 167 739 157 701
Hollister Co. 112 717 60 384
--- ----- --- -----
Total 625 4,538 533 3,937
=== ===== === =====
Capital Expenditures
The cash outlay for capital expenditures totaled $49.3 million and $44.3 million
for the twenty-six weeks ended August 2, 2003 and August 3, 2002, respectively.
The noncash accrual for construction in progress increased $16.5 million in 2003
and $13.1 million in 2002. The majority of capital expenditures related to new
stores during the first twenty-six weeks of 2003. The balance of capital
expenditures related primarily to the construction of additional home office
space to accommodate the growth of Hollister, improvements in the distribution
center and information technology expenditures for a new point of sale system.
20
The Company anticipates spending $120 to $125 million in 2003 for capital
expenditures, of which $65 to $70 million will be for new store construction.
The balance of capital expenditures primarily relates to infrastructure
investments. The Company intends to add approximately 719,000 gross square feet
in 2003, which will represent a 16% increase over year-end 2002. It is
anticipated the increase will result from the addition of approximately 19 new
Abercrombie & Fitch stores, 9 new abercrombie stores and 80 new Hollister Co.
stores.
The Company estimates that the average cost for leasehold improvements and
furniture and fixtures for Abercrombie & Fitch stores to be opened in 2003 will
approximate $630,000 per store, after giving effect to landlord allowances. In
addition, inventory purchases are expected to average approximately $330,000 per
store.
The Company estimates that the average cost for leasehold improvements and
furniture and fixtures for abercrombie stores to be opened in 2003 will
approximate $485,000 per store, after giving effect to landlord allowances. In
addition, inventory purchases are expected to average approximately $130,000 per
store.
The Company estimates that the average cost for leasehold improvements and
furniture and fixtures for Hollister Co. stores to be opened in 2003 will
approximate $650,000 per store, after giving effect to landlord allowances. In
addition, inventory purchases are expected to average approximately $230,000 per
store.
The Company expects that substantially all future capital expenditures will be
funded with cash from operations. In addition, the Company has $250 million
available (less outstanding letters of credit) under the New Credit Agreement to
support operations.
Critical Accounting Policies and Estimates
The Company's significant and critical accounting policies and estimates can be
found in the Notes to Consolidated Financial Statements contained in A&F's
Annual Report on Form 10-K for the fiscal year ended February 1, 2003 (Note 2).
Additionally, the Company believes that the following policies are critical to
the portrayal of the Company's financial condition and results of operations for
interim periods.
Income Taxes - At the end of each interim period, the Company makes its best
estimate of the base effective tax rate expected to be applicable for the full
fiscal year. This base rate is adjusted on a quarterly basis for the effect of
the tax-free investments.
Recently Adopted Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for
Asset Retirement Obligations," was effective February 2, 2003 for the Company.
The standard requires entities to record the fair value of a liability for an
asset retirement obligation in the period in which it is a cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related obligation for its recorded
amount or the entity incurs a gain or loss upon settlement. Because costs
associated with exiting leased properties at the end of lease terms are
21
minimal, the adoption of SFAS No. 143 had no impact on the Company's results of
operations or its financial position.
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure-an Amendment of FASB No. 123," was issued on December 31, 2002.
Pursuant to this standard, companies that chose to adopt the accounting
provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation,"
were permitted to select from three transition methods (prospective, modified
prospective and retroactive restatement).
Companies that chose not to adopt the accounting provisions of SFAS No. 123 were
affected by the new disclosure requirements of SFAS No. 148. The new interim
disclosure provisions were effective for the first quarter of 2003 and have been
adopted by the Company (see Note 3).
Emerging Issues Task Force ("EITF") 03-03 issued "Accounting for Claims-Made
Insurance and Retroactive Insurance Contracts by the Insured Entity," which
discusses the accounting implications of retroactive and prospective claims-made
insurance policies. The consensus reached was that a claims-made insurance
policy that contains no retroactive provisions should be accounted for on a
prospective basis. However, if a claims-made insurance policy contains a
retroactive provision, the retroactive and prospective provisions of the policy
should be accounted for separately, if practicable; otherwise, the claims-made
insurance policy should be accounted for entirely as a retroactive contract.
This consensus will be effective for new insurance contracts entered into
beginning with the third quarter of fiscal 2003. The Company is in the process
of evaluating the impact of this issue.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
A&F cautions that any forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995) contained in this Form 10-Q or
made by management of A&F involve risks and uncertainties and are subject to
change based on various important factors. The following factors, among others,
in some cases have affected and in the future could affect the Company's
financial performance and actual results and could cause actual results for 2003
and beyond to differ materially from those expressed or implied in any of the
forward-looking statements included in this Form 10-Q or otherwise made by
management: changes in consumer spending patterns and consumer preferences; the
effects of political and economic events and conditions domestically and in
foreign jurisdictions in which the Company operates, including, but not limited
to, acts of terrorism or war; the impact of competition and pricing; changes in
weather patterns; market price of key raw materials; ability to source product
from its global supplier base; political stability; currency and exchange risks
and changes in existing or potential duties, tariffs or quotas; availability of
suitable store locations at appropriate terms; ability to develop new
merchandise; and ability to hire, train and retain associates.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk of A&F's financial instruments as of August 2, 2003 has not
significantly changed since February 1, 2003. A&F's market risk profile as of
February 1, 2003 is disclosed in Item 7A - Quantitative and Qualitative
Disclosures about Market Risk of A&F's Annual Report on Form 10-K for the fiscal
year ended February 1, 2003.
22
ITEM 4. CONTROLS AND PROCEDURES
With the participation of A&F management, including the principal executive
officer and principal financial officer, A&F has evaluated the effectiveness of
the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities and Exchange Act of 1934 (the "Exchange Act")) as of the
end of the period covered by this Quarterly Report on Form 10-Q. Based upon that
evaluation, A&F's principal executive officer and principal financial officer
have concluded that such disclosure controls and procedures were effective as of
the end of the period covered by this Quarterly Report on Form 10-Q to ensure
that material information relating to A&F and its consolidated subsidiaries is
made known to them, particularly during the period for which A&F's periodic
reports, including this Quarterly Report on Form 10-Q, are being prepared.
In addition, there were no significant changes during the period covered by this
Quarterly Report on Form 10-Q in the Company's internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
23
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is a defendant in lawsuits arising in the ordinary course of
business.
A&F is aware of 20 actions that have been filed against A&F and certain of its
officers and directors on behalf of a purported, but as yet uncertified, class
of shareholders who purchased A&F's Class A Common Stock between October 8, 1999
and October 13, 1999. These 20 actions have been filed in the United States
District Courts for the Southern District of New York and the Southern District
of Ohio, Eastern Division, alleging violations of the federal securities laws
and seeking unspecified damages. On April 12, 2000, the Judicial Panel on
Multidistrict Litigation issued a Transfer Order transferring the 20 pending
actions to the Southern District of New York for consolidated pretrial
proceedings under the caption In re Abercrombie & Fitch Securities Litigation.
On November 16, 2000, the Court signed an Order appointing the Hicks Group, a
group of seven unrelated investors in A&F's securities, as lead plaintiff, and
appointing lead counsel in the consolidated action. On December 14, 2000,
plaintiffs filed a Consolidated Amended Class Action Complaint (the "Amended
Complaint") in which they did not name as defendants Lazard Freres & Co. and
Todd Slater, who had formerly been named as defendants in certain of the 20
complaints. A&F and other defendants filed motions to dismiss the Amended
Complaint on February 14, 2001.
A&F is aware of six actions that have been filed on behalf of purported classes
of employees and former employees of the Company alleging that the Company
required its associates to wear and pay for a "uniform" in violation of
applicable law. In each case, the plaintiff, on behalf of his or her purported
class, seeks injunctive relief and unspecified amounts of economic and
liquidated damages. Two of these cases, Jennifer M. Solis v. Abercrombie & Fitch
Stores, Inc. and A&F California, LLC and Sarah Stevenson v. Abercrombie & Fitch
Co., allege violations of California law and were served on February 4, 2003 and
February 10, 2003 in the California Superior Courts for Los Angeles County and
San Francisco County, respectively. An answer was filed in the Solis case on
March 26, 2003 and the parties are in the process of discovery. The Stevenson
case has been abated (i.e., stayed) pending the outcome of the Solis case. Jadii
Mohme v. Abercrombie & Fitch, which alleges violations of Illinois law, was
filed on July 28, 2003 in the Illinois Circuit Court of St. Clair County. Shelby
Port v. Abercrombie & Fitch Stores, Inc., which alleges violations of Washington
law, was filed on or about July 18, 2003 in the Washington Superior Court of
King County. Holly Zemany v. Abercrombie & Fitch, which alleges violations of
Pennsylvania law, was filed on July 18, 2003 in the Pennsylvania Court of Common
Pleas of Allegheny County. In Michael Gualano v. Abercrombie & Fitch, which was
filed in the United States District Court for the Western District of
Pennsylvania on March 14, 2003, the plaintiff alleges that the "uniform," when
purchased, drove associates' wages below the federal minimum wage. An answer was
filed in the Gualano case on May 22, 2003 and the parties are in the process of
discovery.
Eduardo Gonzalez, et al. v. Abercrombie & Fitch Co. was filed on June 16, 2003
in the United States District Court for the Northern District of California. The
plaintiffs subsequently amended their complaint to add A&F California, LLC,
Abercrombie & Fitch Stores, Inc. and A&F Ohio, Inc. as defendants. The
plaintiffs allege, on behalf of their purported class, that they were
discriminated against in hiring and employment decisions due to their race
and/or national
24
origin. The plaintiffs seek, on behalf of their purported class, injunctive
relief and unspecified amounts of economic, compensatory and punitive damages.
A&F is aware of two actions that have been filed against the Company involving
overtime compensation. In each action, the plaintiffs, on behalf of their
respective purported class, seek injunctive relief and unspecified amounts of
economic and liquidated damages. In Bryan T. Kimbell, Individually and on Behalf
of All Others Similarly Situated and on Behalf of the Public v. Abercrombie &
Fitch Stores, Inc., which was filed on July 10, 2002 in the California Superior
Court for Los Angeles County, the plaintiffs allege that California general and
store managers were entitled to receive overtime pay as "non-exempt" employees
under California wage and hour laws. An answer was filed in the Kimbell case on
September 4, 2002 and the parties are in the process of discovery. In Melissa
Mitchell, et al. v. Abercrombie & Fitch Co. and Abercrombie & Fitch Stores,
Inc., which was filed on June 13, 2003 in the United States District Court for
the Southern District of Ohio, the plaintiffs allege that assistant managers and
store managers were not paid overtime compensation in violation of the Fair
Labor Standards Act and Ohio law. A&F filed a motion to dismiss the Mitchell
case on July 28, 2003, which is pending.
A&F believes that these actions are without merit and intends to defend
vigorously against them. However, A&F does not believe it is feasible to predict
the outcome of these proceedings. The timing of the final resolution of these
proceedings is also uncertain.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3. Certificate of Incorporation and Bylaws.
3.1 Amended and Restated Certificate of Incorporation of
A&F as filed with the Delaware Secretary of State on
August 27, 1996, incorporated herein by reference to
Exhibit 3.1 to A&F's Quarterly Report on Form 10-Q
for the quarter ended November 2, 1996. (File No.
1-12107)
3.2 Certificate of Designation of Series A Participating
Cumulative Preferred Stock of A&F as filed with the
Delaware Secretary of State on July 21, 1998,
incorporated herein by reference to Exhibit 3.2 to
A&F's Annual Report on Form 10-K for the year ended
January 30, 1999. (File No. 1-12107)
3.3 Certificate of Decrease of Shares Designated as Class
B Common Stock of A&F as filed with the Delaware
Secretary of State on July 30, 1999, incorporated
herein by reference to Exhibit 3.3 to A&F's Quarterly
Report on Form 10-Q for the quarter ended July 31,
1999. (File No. 1-12107)
3.4 Amended and Restated Bylaws of A&F, effective January
31, 2002, incorporated herein by reference to Exhibit
3.4 to A&F's Annual Report on Form 10-K for the year
ended February 2, 2002. (File No. 1-12107)
25
4. Instruments Defining the Rights of Security Holders.
4.1 Credit Agreement, dated as of November 14, 2002,
among Abercrombie & Fitch Management Co., as
Borrower, Abercrombie & Fitch Co., as Guarantor, the
Lenders party thereto, and National City Bank, as
Administrative Agent and Lead Arranger (the "Credit
Agreement"), incorporated herein by reference to
Exhibit 4.1 to A&F's Current Report on Form 8-K dated
November 26, 2002. (File No. 1-12107)
4.2 Guarantee Agreement, dated as of November 14, 2002,
among Abercrombie & Fitch Co., each direct and
indirect domestic subsidiary of Abercrombie & Fitch
Co. other than Abercrombie & Fitch Management Co.,
and National City Bank, as Administrative Agent for
the Lenders party to the Credit Agreement,
incorporated herein by reference to Exhibit 4.2 to
A&F's Current Report on Form 8-K dated November 26,
2002. (File No. 1-12107)
4.3 Rights Agreement, dated as of July 16, 1998, between
A&F and First Chicago Trust Company of New York, as
Rights Agent, incorporated herein by reference to
Exhibit 1 to A&F's Registration Statement on Form 8-A
dated July 21, 1998. (File No. 1-12107)
4.4 Amendment No. 1 to Rights Agreement, dated as of
April 21, 1999, between A&F and First Chicago Trust
Company of New York, as Rights Agent, incorporated
herein by reference to Exhibit 2 to A&F's Amendment
No. 1 to Form 8-A dated April 23, 1999. (File No.
1-12107)
4.5 Certificate of adjustment of number of Rights
associated with each share of Class A Common Stock,
dated May 27, 1999, incorporated herein by reference
to Exhibit 4.6 to A&F's Quarterly Report on Form 10-Q
for the quarter ended July 31, 1999. (File No.
1-12107)
4.6 Appointment and Acceptance of Successor Rights Agent,
effective as of the opening of business on October 8,
2001, between A&F and National City Bank,
incorporated herein by reference to Exhibit 4.6 to
A&F's Quarterly Report on Form 10-Q for the quarter
ended August 4, 2001. (File No. 1-12107)
10. Material Contracts.
10.1 Abercrombie & Fitch Co. Incentive Compensation
Performance Plan, incorporated herein by reference to
Exhibit 10.1 to A&F's Quarterly Report on Form 10-Q
for the quarter ended May 4, 2002. (File No. 1-12107)
10.2 1998 Restatement of the Abercrombie & Fitch Co. 1996
Stock Option and Performance Incentive Plan (reflects
amendments through December 7, 1999 and the
two-for-one stock split distributed June 15, 1999 to
stockholders of record on May 25, 1999), incorporated
herein by reference to Exhibit 10.2 to A&F's Annual
Report on Form 10-K for the year ended January 29,
2000. (File No. 1-12107)
10.3 1998 Restatement of the Abercrombie & Fitch Co. 1996
Stock Plan for Non-Associate Directors (reflects
amendments through January 30, 2003 and the
two-for-one stock split distributed June 15, 1999 to
stockholders of record on May 25, 1999), incorporated
herein by reference to Exhibit 10.3 to
26
A&F's Annual Report on Form 10-K for the year ended
February 1, 2003. (File No. 1-12107)
10.4 Abercrombie & Fitch Co. 2002 Stock Plan for
Associates (as amended and restated May 22, 2003),
incorporated herein by reference to Exhibit 10.4 to
A&F's Quarterly Report on Form 10-Q for the quarter
ended May 3, 2003. (File No. 1-12107)
10.5 Amended and Restated Employment Agreement, dated as
of January 30, 2003, by and between Abercrombie &
Fitch Co. and Michael S. Jeffries, including as
Exhibit A thereto the Supplemental Executive
Retirement Plan effective February 2, 2003,
incorporated herein by reference to Exhibit 10.1 to
A&F's Current Report on Form 8-K dated February 11,
2003. (File No. 1-12107)
10.6 Employment Agreement by and between A&F and Seth R.
Johnson dated as of December 5, 1997, incorporated
herein by reference to Exhibit 10.10 to A&F's
Amendment No. 4 to Form S-4 Registration Statement
filed on April 14, 1998 (Registration No. 333-46423)
10.7 Abercrombie & Fitch Co. Directors' Deferred
Compensation Plan (as amended and restated May 22,
2003), incorporated herein by reference to Exhibit
10.7 to A&F's Quarterly Report on Form 10-Q for the
quarter ended May 3, 2003. (File No. 1-12107)
10.8 Abercrombie & Fitch Nonqualified Savings and
Supplemental Retirement Plan (formerly known as the
Abercrombie & Fitch Co. Supplemental Retirement
Plan), as amended and restated effective January 1,
2001, incorporated herein by reference to Exhibit
10.9 to A&F's Annual Report on Form 10-K for the year
ended February 1, 2003. (File No. 1-12107)
10.9 Abercrombie & Fitch Co. 2003 Stock Plan for
Non-Associate Directors, incorporated herein by
reference to Exhibit 10.9 to A&F's Quarterly Report
on Form 10-Q for the quarter ended May 3, 2003. (File
No. 1-12107)
15 Letter re: Unaudited Interim Financial Information to Securities and
Exchange Commission re: Inclusion of Report of Independent Accountants.
31.1 Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
31.2 Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)
32 Section 1350 Certifications (Principal Executive Officer and Principal
Financial Officer)
(b) Reports on Form 8-K.
On May 8, 2003, A&F furnished information to the SEC on a Current Report on
Form 8-K dated May 8, 2003, reporting under "Item 9. Regulation FD
Disclosure," that on May 8, 2003, A&F issued a news release reporting net
sales for the four-week period ended May 3, 2003 and the fiscal
year-to-date.
On May 13, 2003, A&F furnished information to the SEC on a Current Report
on Form 8-K dated May 13, 2003, reporting under "Item 9. Regulation FD
Disclosure," (which information was also deemed provided under "Item 12.
Results of Operations and Financial Condition") that on May 13, 2003, A&F
issued a news release reporting earnings for the fiscal quarter ended May
3, 2003.
27
On June 5, 2003, A&F furnished information to the SEC on a Current Report
on Form 8-K dated June 5, 2003, reporting under "Item 9. Regulation FD
Disclosure" that on June 5, 2003, A&F issued a news release reporting net
sales for the four-week period ended May 31, 2003 and the fiscal
year-to-date.
On July 10, 2003, A&F furnished information to the SEC on a Current Report
on Form 8-K dated July 10, 2003, reporting under "Item 9. Regulation FD
Disclosure" that on July 10, 2003, A&F issued a news release reporting net
sales for the five-week period ended July 5, 2003 and the fiscal
year-to-date.
On July 11, 2003, A&F furnished information to the SEC on a Current Report
on Form 8-K dated July 11, 2003, reporting under "Item 9. Regulation FD
Disclosure" that on July 11, 2003, A&F issued a news release announcing the
election of James B. Bachmann and Lauren J. Brisky to the Board of
Directors of A&F.
On July 23, 2003, A&F filed information with the SEC on a Current Report on
Form 8-K dated July 22, 2003, reporting under "Item 5. Other Events and
Regulation FD Disclosure," that on July 22, 2003, A&F issued a news release
announcing that Wesley S. McDonald had resigned his position as the Vice
President-Chief Financial Officer of A&F.
On August 7, 2003, A&F furnished information to the SEC on a Current Report
on Form 8-K dated August 7, 2003, reporting under "Item 9. Regulation FD
Disclosure," that on August 7, 2003, A&F issued a news release reporting
net sales for the four-week period ended August 2, 2003 and the fiscal
year-to-date.
On August 12, 2003, A&F furnished information to the SEC on a Current
Report on Form 8-K dated August 12, 2003, reporting under "Item 12. Results
of Operations and Financial Condition" that on August 12, 2003, A&F issued
a news release reporting earnings for the fiscal quarter ended August 2,
2003.
28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABERCROMBIE & FITCH CO.
(Registrant)
By /S/ Seth R. Johnson
--------------------------------------
Seth R. Johnson
Executive Vice President-
Chief Operating Officer*
Date: September 11, 2003
* Mr. Johnson has been duly authorized to sign on behalf of the Registrant as
its principal financial officer.
29
EXHIBIT INDEX
Exhibit No. Document
- ----------- -----------------------------------------------------
15 Letter re: Unaudited Interim Financial Information to
Securities and Exchange Commission re: Inclusion of
Report of Independent Accountants.
31.1 Rule 13a-14(a)/15d-14(a) Certification (Principal
Executive Officer)
31.2 Rule 13a-14(a)/15d-14(a) Certification (Principal
Financial Officer)
32 Section 1350 Certifications (Principal Executive
Officer and Principal Financial Officer)
30