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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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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 February 3, 2001
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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.
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(Exact name of registrant as specified in its charter)
Delaware 31-1469076
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6301 Fitch Path, New Albany, OH 43054
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 283-6500
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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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
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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. X
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Aggregate market value of the registrant's Class A Common Stock held by
non-affiliates of the registrant as of April 6, 2001: $3,435,705,828.
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Number of shares outstanding of the registrant's common stock as of April 6,
2001: 99,082,609 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 30, 2001 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 ("A&F"), through its
subsidiaries (collectively, A&F and its subsidiaries are referred to as
"Abercrombie & Fitch" or 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 web
site, all bearing some form of the Company name. Retail activities are also
conducted under the Hollister Co. trade name through retail stores and a
lifestyle web site. Merchandise is targeted to appeal to customers in specialty
markets who have distinctive consumer characteristics.
DESCRIPTION OF OPERATIONS.
General.
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A&F 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 A&F's Class A Common Stock was
consummated on October 1, 1996 and, as a result, approximately 84.2% of the
outstanding common stock of A&F 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 A&F 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 A&F. 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 A&F. Subsequent to the Exchange Offer, A&F 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. A&F hired associates with the appropriate
expertise or contracted with outside parties to replace those service agreements
which expired in May 1999. The service agreement for use of distribution space
terminates in April 2001 as the Company completed the transition to its new
distribution center in February 2001. The service agreements that remain in
effect through May 2001 provide for the continued use of the Company's home
office space and transportation and logistics services. The Company will
complete its transition to a new home office and begin providing all of its own
transportation and logistics services by the time these service agreements
expire.
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At the end of fiscal year 2000, the Company operated 354 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
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1996 100 29 (2) 127
1997 127 30 (1) 156
1998 156 41 (1) 196
1999 196 54 250
2000 250 104 354
During fiscal year 2000, the Company purchased merchandise from approximately
100 suppliers and factories located throughout the world. In fiscal year 2000,
the Company sourced approximately 9% 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 the merchandise purchased
by the Company originated from any single manufacturer.
Most of the merchandise and related materials for the Company's stores are
shipped to a distribution center, where the merchandise is received and
inspected. During fiscal year 2000, the Company leased a distribution center
owned by The Limited and located in Reynoldsburg, Ohio. Under the service
agreement with The Limited, The Limited distributed merchandise and related
materials using common and contract carriers to the Company's stores. The
Company paid outbound freight for stores to an affiliate of The Limited based on
cartons shipped. In February 2001, the Company transitioned from the
distribution center owned by The Limited to its own newly completed distribution
center located in New Albany, Ohio. In February 2001, most of the transportation
and logistics services provided by The Limited under the service agreement were
also transitioned to the Company. In May 2001, the Company expects to complete
the transition process.
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 selling periods. During fiscal year 2000, the highest inventory
level approximated $147.9 million at the November 2000 month-end and the lowest
inventory level approximated $82.1 million at the February 2000 month-end.
Merchandise sales are paid for by cash, personal check, gift certificate and
gift card redemption or credit cards issued by third parties, including a
private label credit card. The Company offers its customers a liberal return
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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.
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
parent company of the Abercrombie & Fitch business 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, A&F
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 February 3, 2001, the Company employed approximately 13,900 associates (none
of whom were parties to a collective bargaining agreement), approximately 11,700
of whom were part-time. In addition, temporary associates are hired during peak
periods, such as the Holiday season.
ITEM 2. PROPERTIES.
During fiscal year 2000, the Company's headquarters and support functions
(consisting of office, distribution and shipping facilities) were located in
Reynoldsburg, Ohio and were owned by The Limited and leased by the Company under
leases expiring in 2001. The Company's new distribution and shipping facilities
were completed in February 2001 and the home office was completed in April 2001.
The new headquarters and support functions are located in New Albany, Ohio.
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 2001 and 2014.
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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.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in lawsuits arising in the ordinary course of
business.
On January 13, 1999, a complaint was filed against many national retailers in
the United States District Court for the Central District of California. The
complaint (1) purported to be filed on behalf of a class of unnamed garment
workers, (2) related to labor practices allegedly employed on the island of
Saipan, Commonwealth of the Northern Mariana Islands, by apparel manufacturers
unrelated to the Company, some of which have sold goods to the Company, and (3)
sought injunctive, unspecified monetary and other relief. On September 29, 1999,
the action was transferred to the United States District Court for the District
of Hawaii. Thereafter, the plaintiffs moved for leave to amend their complaint
to add A&F and others as additional defendants. That motion was granted and, on
April 28, 2000, an amended complaint was filed which adds A&F and others as
defendants, but does not otherwise significantly alter either the claims alleged
or the relief sought by the plaintiffs. A&F has moved to dismiss the amended
complaint. Certain of the other defendants also moved to transfer the action to
Saipan. On June 23, 2000, the District Court of Hawaii transferred the case to
the United States District Court for the District of the Northern Mariana
Islands, and on July 7, 2000, denied plaintiffs' motion for reconsideration of
the transfer order. Plaintiffs filed a Petition for a Writ of Mandamus
challenging the transfer order and Motion for Emergency Stay in the U.S. Ninth
Circuit Court of Appeals. The Motion for Emergency Stay was granted on November
3, 2000. Oral argument with respect to the Petition for a Writ of Mandamus was
held March 14, 2001 before the Ninth Circuit and on March 22, 2001, the Ninth
Circuit issued an order denying the Petition for a Writ of Mandamus. The motion
to dismiss is still pending.
On June 2, 1998, A&F 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.
A&F filed a motion for reconsideration of the District Court judgment which was
subsequently denied by court order dated September 10, 1999. In October 1999,
A&F filed an appeal in the United States Court of Appeals for the Sixth Circuit
(the "Sixth Circuit") regarding the decisions of the District Court on the
motions for summary judgment and reconsideration. The appeal has been fully
briefed and oral arguments were held before the Sixth Circuit on December 7,
2000. A&F is awaiting a written decision.
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
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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 believes that the actions against it are without merit and intends to defend
vigorously against them. However, A&F does not believe it is feasible to predict
the outcome of these proceedings. The timing of the final resolution of these
proceedings is also uncertain.
In addition, the United States Securities and Exchange Commission initiated a
formal investigation regarding trading in the securities of A&F and the
disclosure of sales forecasts in October 1999, and the Ohio Division of
Securities requested information from A&F regarding these same matters. A&F has
cooperated in the 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 A&F
as of April 6, 2001.
Michael S. Jeffries, 56, 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 A&F since 1996.
Seth R. Johnson, 47, 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 A&F since 1998.
Diane Chang, 45, 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 C. Attanasio, 49, has been Senior Vice President, General Merchandise
Manager for Abercrombie & Fitch Men's and Boys' since January 2001. Prior
thereto, Mr. Attanasio was Senior Vice President-Human Resources from February
2000 to January 2001 and was Vice President-Human Resources from August 1998 to
February 2000. Mr. Attanasio also held the position of Vice President-General
Merchandising Manager-Men's at J. Crew, Inc. from May 1991 to June 1998.
Leslee K. O'Neill, 40, 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.
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Wesley S. McDonald, 38, has been Vice President-Chief Financial Officer since
June 2000. Prior thereto, Mr. McDonald held a variety of positions in finance
and distribution at Target Corporation from 1988 to May 2000. His last position
at Target Corporation was Director-Information Systems Finance and
Administration.
The executive officers serve at the pleasure of the Board of Directors of A&F
and in the case of Messrs. Jeffries and Johnson, pursuant to employment
agreements.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The following is a summary of A&F's sales prices as reported on the New York
Stock Exchange ("ANF") for the 2000 and 1999 fiscal years:
Sales Price
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High Low
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2000 Fiscal Year
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4th Quarter $31.31 $14.75
3rd Quarter $26.56 $15.31
2nd Quarter $16.69 $ 8.00
1st Quarter $24.50 $10.06
1999 Fiscal Year
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4th Quarter $32.56 $19.56
3rd Quarter $43.25 $21.00
2nd Quarter $49.69 $36.50
1st Quarter $50.75 $35.25
Per share amounts have been restated to reflect the two-for-one stock split on
A&F's Class A Common Stock, distributed on June 15, 1999 to shareholders of
record at the close of business on May 25, 1999.
A&F has not paid dividends on its shares of Class A Common Stock in the past and
does not presently plan to pay dividends on the shares. It is presently
anticipated that earnings will be retained and reinvested to support the growth
of the Company's business. The payment of any future dividends on shares will be
determined by the A&F Board of Directors in light of conditions then existing,
including earnings, financial condition and capital requirements, restrictions
in financing agreements, business conditions and other factors.
On February 3, 2001, there were approximately 7,000 shareholders of record.
However, when including active associates who participate in A&F's stock
purchase plan, associates who own shares through A&F sponsored retirement plans
and others holding shares in broker accounts under street name, A&F estimates
the shareholder base at approximately 65,000.
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ITEM 6. SELECTED FINANCIAL DATA.
ABERCROMBIE & FITCH
FINANCIAL SUMMARY
(Thousands except per share and per square foot amounts, ratios and store and
associate data)
FISCAL YEAR 2000* 1999 1998 1997 1996 1995* 1994
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SUMMARY OF OPERATIONS
Net Sales $1,237,604 $1,030,858 $805,180 $513,109 $329,800 $232,415 $163,156
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Gross Income $509,375 $450,383 $331,354 $191,890 $118,194 $76,550 $54,513
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Operating Income $253,652 $242,064 $166,958 $84,125 $45,993 $23,798 $13,751
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Operating Income as a
Percentage of Sales 20.5% 23.5% 20.7% 16.4% 13.9% 10.2% 8.4%
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Net Income $158,133 $149,604 $102,062 $48,322 $24,674 $14,298 $8,251
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Net Income as a
Percentage of Sales 12.8% 14.5% 12.7% 9.4% 7.5% 6.2% 5.1%
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PER SHARE RESULTS (1)
Net Income Per Basic Share $1.58 $1.45 $.99 $.47 $.27 $.17 $.10
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Net Income Per Diluted Share $1.55 $1.39 $.96 $.47 $.27 $.17 $.10
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Weighted Average Diluted Shares
Outstanding 102,156 107,641 106,202 102,956 91,520 86,000 86,000
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OTHER FINANCIAL INFORMATION
Total Assets $587,516 $458,166 $319,161 $183,238 $105,761 $87,693 $58,018
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Return on Average Assets 30% 38% 41% 33% 26% 20% 15%
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Capital Expenditures $153,481 $73,377 $37,483 $29,486 $24,323 $24,526 $12,603
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Long-Term Debt - - - $50,000 $50,000 - -
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Shareholders' Equity (Deficit) $422,700 $311,094 $186,105 $58,775 $11,238 $(22,622) $(37,070)
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Comparable Store Sales Increase
(Decrease) (7%) 10% 35% 21% 13% 5% 15%
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Retail Sales Per Average Gross Square
Foot $474 $505 $476 $370 $301 $286 $280
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STORES AND ASSOCIATES AT END OF YEAR
Total Number of Stores Open 354 250 196 156 127 100 67
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Gross Square Feet 2,849,000 2,174,000 1,791,000 1,522,000 1,229,000 962,000 665,000
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Number of Associates 13,900 11,300 9,500 6,700 4,900 3,000 2,300
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*Fifty-three week fiscal year.
(1) Per share amounts have been restated to reflect the two-for-one stock
split on A&F's Class A Common Stock, distributed on June 15, 1999.
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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 of the 2000 fiscal year were $439.4 million, an
increase of 21% from $363.7 million for the fourth quarter a year ago. Operating
income was $124.1 million compared to $125.3 million last year. Net income per
diluted share was $.76, up 4% from $.73 last year.
Net sales for the 2000 fiscal year increased 20% to $1.24 billion from $1.03
billion last year. Operating income for the year increased 5% to $253.7 million
from $242.1 million in 1999. Net income per diluted share was $1.55 compared to
$1.39 a year ago, an increase of 12%.
FINANCIAL SUMMARY
The following summarized financial data compares the 2000 fiscal year to the
comparable periods for 1999 and 1998:
% Change
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2000 1999 1998 2000-1999 1999-1998
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Net sales (millions) $1,237.6 $1,030.9 $805.2 20% 28%
Increase (decrease) in comparable
store sales (7%) 10% 35%
Retail sales increase attributable
to new and remodeled stores,
magazine, catalogue and web site 27% 18% 22%
Retail sales per average gross
square foot $474 $505 $476 (6%) 6%
Retail sales per average store
(thousands) $3,944 $4,487 $4,484 (12%) -
Average store size at year-end
(gross square feet) 8,047 8,695 9,140 (7%) (5%)
Gross square feet at year-end
(thousands) 2,849 2,174 1,791 31% 21%
Number of stores:
Beginning of year 250 196 156
Opened 104 54 41
Closed - - (1)
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End of year 354 250 196
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NET SALES
Fourth quarter 2000 net sales increased 21% to $439.4 million from $363.7
million in 1999. The increase was due to the addition of new stores offset by a
9% decline in comparable store sales. The decline in comparable store sales,
based on a 14 week quarter for both 2000 and 1999, was primarily due to
comparable store sales
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decreases in the men's graphic tees and pants departments. Comparable store
sales were positive in the women's business for the quarter based on strong
increases in the sweaters, denim and outerwear departments. The Company's
catalogue, the A&F Quarterly (a catalogue/magazine) and the Company's web sites
accounted for 5.0% of net sales in the fourth quarter of 2000 as compared to
3.8% in 1999.
Net sales for the fourth quarter of 1999 increased 21% to $363.7 million from
$300.1 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
strong. The Company's catalogue, the A&F Quarterly and the Company's web site
accounted for 3.8% of net sales in the fourth quarter of 1999 as compared to
2.2% in 1998.
Net sales for the 2000 fiscal year increased 20% to $1.24 billion from $1.03
billion in 1999. The sales increase was attributable to the addition of 104
stores offset by a 7% comparable store sales decrease. The decline in comparable
store sales, based on a 53 week fiscal year for both 2000 and 1999, was across
both the men's and women's businesses. During the year, the assortment in each
business was repositioned to be more balanced and less focused on graphics and
included items at key opening price points. The Company's catalogue, the A&F
Quarterly and the Company's web sites represented 3.8% of 2000 net sales
compared to 2.9% last year.
Net sales for the 1999 fiscal year increased 28% to $1.03 billion from $805.2
million in 1998. 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 web site represented 2.9% of 1999 net sales compared to 2.0% of
1998 net sales.
GROSS INCOME
For the fourth quarter of 2000, gross income, expressed as a percentage of net
sales, decreased to 46.2% from 50.9% for the same period in 1999. The decrease
was attributable to lower merchandise margins (representing gross income before
the deduction of buying and occupancy costs) due to lower initial markups (IMU)
and higher markdowns. The IMU was affected by both a change in sales mix and the
planned strategy of offering lower opening price points in key product
classifications.
Gross income, expressed as a percentage of net sales, increased to 50.9% for the
fourth quarter of 1999 from 48.3% for the same period in 1998. The increase was
attributable to higher merchandise margins, resulting from higher 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 year, the gross income rate decreased to 41.2% in 2000 from 43.7% in
1999. The decrease was attributable to lower merchandise margins, primarily due
to lower IMU caused by both a change in sales mix and the planned strategy of
offering lower opening price points in key product classifications.
In 1999, the gross income rate increased to 43.7% from 41.2% 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.
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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 2000 and 16.4% in the
comparable period in 1999. The increase in the percentage was primarily due to
the inability to leverage fixed expenses as a result of the decrease in
comparable store sales. The increase was also due to planned one-time expenses
related to the Company's move to a new home office and distribution center. The
increases were offset by tightly controlled headcount additions, travel
expenses, store payroll hours, outside services and compensation expense related
to management bonuses.
General, administrative and store operating expenses, expressed as a percentage
of net sales, were 16.4% in the fourth quarter of 1999 as compared to 15.4% for
the same period in 1998. The increase in the percentage was primarily due to a
change in the accounting for gift certificates and gift cards. This was
partially offset by lower compensation expenses related to management bonuses
and restricted share 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 20.7%, 20.2% and 20.4% in 2000, 1999 and 1998,
respectively. The rate has increased in 2000 primarily due to the inability to
leverage fixed expenses as a result of the decrease in comparable store sales.
The increase was partially offset by the Company's continued focus on
discretionary expense controls. The 1999 improvement was due to the control of
expenses and favorable leveraging of expenses due to higher comparable store
sales.
OPERATING INCOME
Operating income, expressed as a percentage of net sales, was 28.2% and 20.5%
for the fourth quarter and fiscal year of 2000, respectively, compared to 34.5%
and 23.5% for the same periods in 1999. The decline in operating income as a
percentage of sales in these periods is primarily a result of lower gross income
percentages. Higher general, administrative and store operating expenses also
added to the decrease in the operating income percentage of net sales.
Operating income, expressed as a percentage of net sales, was 34.5% and 23.5%
for the fourth quarter and fiscal year of 1999, respectively, compared to 32.9%
and 20.7% for the same periods in 1998. 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
increased at a faster rate than general, administrative and store operating
expenses due to the Company's emphasis on cost controls.
INTEREST INCOME/EXPENSE
Net interest income was $2.5 million in the fourth quarter of 2000 and $7.8
million for all of 2000 compared with net interest income of $2.5 million and
$7.3 million for the corresponding periods last year. Net interest income in
2000 and 1999 was primarily from short-term investments.
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FINANCIAL CONDITION
The Company's continuing growth in net income provides evidence of financial
strength and flexibility. A more detailed discussion of liquidity, capital
resources and capital requirements follows.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities provides the resources to support
operations, including seasonal requirements and capital expenditures. A summary
of the Company's working capital position and capitalization follows
(thousands):
2000 1999 1998
----------------- ---------------- -----------------
Working capital $149,000 $162,351 $95,890
================= ================ =================
Capitalization
Shareholders' equity $422,700 $311,094 $186,105
================= ================ =================
The Company considers the following to be measures of liquidity and capital
resources:
2000 1999 1998
----------------- ---------------- -----------------
Current ratio (current assets divided by current
liabilities) 1.96 2.18 1.78
Cash flow to capital investment (net cash
provided by operating activities divided
by capital expenditures) 99% 208% 451%
Net cash provided by operating activities totaled $151.2 million, $152.8 million
and $169.0 million for 2000, 1999 and 1998, respectively. Cash was provided
primarily by current year net income adjusted for depreciation and amortization,
and increased accounts payable and accrued expenses needed to support the growth
in inventories. Cash was used primarily to fund inventory purchases required to
support the addition of new stores and the investment in new women's categories,
including underwear, gymwear and fragrances. The inventory increase is also due
to the timing of spring deliveries as a result of the 2000 fiscal year having 53
weeks. Additionally, cash used for income taxes increased due to the timing of
income tax payments.
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 primarily for capital expenditures
related to new and remodeled stores (net of construction allowances) and the
construction costs of the new office and distribution center. In 2000 and 1999,
investing activities also included maturities and purchases of marketable
securities.
Financing activities during 2000 and 1999 consisted primarily of the repurchase
of 3,550,000 shares and 1,510,000 shares, respectively, of A&F's Class A Common
Stock pursuant to previously authorized stock repurchase programs. A&F is
authorized to repurchase up to an additional 2,450,000 shares under the current
repurchase program.
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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, A&F also repurchased 490 thousand shares of Class A Common Stock.
CAPITAL EXPENDITURES
Capital expenditures, primarily for new and remodeled stores and the
construction of a new office and distribution center, totaled $153.5 million,
$73.4 million and $37.5 million for 2000, 1999 and 1998, respectively.
Additionally, the noncash accrual for construction in progress totaled $9.5
million, $10.4 million and $4.4 million in 2000, 1999 and 1998, respectively.
Expenditures related to the new office and distribution center accounted for
$92.3 million of total capital expenditures in 2000, of which $12.9 million was
noncash accrual for construction in progress.
The Company anticipates spending $105 to $115 million in 2001 for capital
expenditures, of which $85 to $95 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 the new home
office and distribution center. The distribution center was completed in
February 2001 and the home office was completed in April 2001. The Company
intends to add approximately 825,000 gross square feet in 2001, which will
represent a 29% increase over year-end 2000. It is anticipated the increase will
result from the addition of approximately 50 new Abercrombie & Fitch stores, 60
abercrombie stores and 20 Hollister Co. stores.
The Company estimates that the average cost for leasehold improvements and
furniture and fixtures for Abercrombie & Fitch stores opened in 2001 will
approximate $600,000 per store, after giving effect to landlord allowances. In
addition, inventory purchases are expected to average approximately $300,000 per
store.
The Company estimates that the average cost for leasehold improvements and
furniture and fixtures for abercrombie stores opened in 2001 will approximate
$500,000 per store, after giving effect to landlord allowances. In addition,
inventory purchases are expected to average approximately $150,000 per store.
The Company is in the early stages of developing Hollister Co. As a result,
current average costs for leasehold improvements, furniture and fixtures and
inventory purchases are not representative of future costs.
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.
RELATIONSHIP WITH THE LIMITED
Effective May 19, 1998, The Limited, Inc. ("The Limited") completed a tax-free
exchange offer to establish A&F as an independent company. Subsequent to the
exchange offer (see Note 1 to the Consolidated Financial Statements), A&F and
The Limited entered into various service agreements for terms ranging from one
to three years. A&F 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. The distribution
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space agreement terminates in April 2001. The home office space service
agreement expires in May 2001. The agreement for transportation and logistic
services will also expire in May 2001, although most of these services have
already been transitioned to the Company. The cost of these services generally
is equal to The Limited's cost in providing the relevant services plus 5% of
such costs.
The Company does not anticipate that costs incurred to replace the services
provided by The Limited will have a material adverse impact on its financial
condition.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities," subsequently amended and
clarified by SFAS No. 138, is effective for the Company's 2001 fiscal year. It
requires that derivative instruments be recorded at fair value and that changes
in their fair value be recognized in current earnings unless specific hedging
criteria are met. The adoption of this standard had no impact on the Company's
financial position or results of operations.
IMPACT OF INFLATION
The Company's results of operations and financial condition are presented based
upon historical cost. While it is difficult to accurately measure the impact of
inflation due to the imprecise nature of the estimates required, the Company
believes that the effects of inflation, if any, on its results of operations and
financial condition have been minor.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
A&F cautions that any forward-looking statements (as that term is defined in the
Private Securities Litigation Reform Act of 1995) contained in this Report 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 2001
and beyond to differ materially from those expressed or implied in any of the
forward-looking statements included in this Form 10-K or otherwise made by
management: changes in consumer spending patterns, 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.
The Company maintains its cash and equivalents in financial instruments with
original maturities of three months or less. These financial instruments bear
interest at fixed rates and are subject to interest rate risk through lost
income should interest rates increase. The Company does not enter into financial
instruments for trading purposes.
As of February 3, 2001, the Company has no long-term debt outstanding. Future
borrowings would bear interest at negotiated rates and would be subject to
interest rate risk. The Company does not believe that a hypothetical adverse
change of 10% in interest rates would have a material affect on the Company's
financial condition.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ABERCROMBIE & FITCH
CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts)
2000 1999 1998
------------- ------------- ------------
NET SALES $1,237,604 $1,030,858 $805,180
Cost of Goods Sold, Occupancy and Buying Costs 728,229 580,475 473,826
------------- ------------- ------------
GROSS INCOME 509,375 450,383 331,354
General, Administrative and Store Operating Expenses 255,723 208,319 164,396
------------- ------------- ------------
OPERATING INCOME 253,652 242,064 166,958
Interest Income, Net (7,801) (7,270) (3,144)
------------- ------------- ------------
INCOME BEFORE INCOME TAXES 261,453 249,334 170,102
Provision for Income Taxes 103,320 99,730 68,040
------------- ------------- ------------
NET INCOME $158,133 $149,604 $102,062
============= ============= ============
NET INCOME PER SHARE:
BASIC $1.58 $1.45 $.99
============= ============ ============
DILUTED $1.55 $1.39 $.96
============= ============= ============
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH
CONSOLIDATED BALANCE SHEETS
(Thousands)
February 3, January 29,
2001 2000
---------------- ----------------
ASSETS
------
CURRENT ASSETS:
Cash and Equivalents $137,581 $147,908
Marketable Securities - 45,601
Receivables 15,829 11,447
Inventories 120,997 75,262
Store Supplies 17,817 11,674
Other 11,338 8,325
---------------- ----------------
TOTAL CURRENT ASSETS 303,562 300,217
PROPERTY AND EQUIPMENT, NET 278,785 146,403
DEFERRED INCOME TAXES 4,788 11,060
OTHER ASSETS 381 486
---------------- ----------------
TOTAL ASSETS $587,516 $458,166
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts Payable $33,942 $18,714
Accrued Expenses 101,302 85,373
Income Taxes Payable 19,318 33,779
---------------- ----------------
TOTAL CURRENT LIABILITIES 154,562 137,866
OTHER LONG-TERM LIABILITIES 10,254 9,206
SHAREHOLDERS' EQUITY:
Common Stock 1,033 1,033
Paid-In Capital 136,490 147,305
Retained Earnings 350,868 192,735
---------------- ----------------
488,391 341,073
Less: Treasury Stock, at Average Cost (65,691) (29,979)
---------------- ----------------
TOTAL SHAREHOLDERS' EQUITY 422,700 311,094
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $587,516 $458,166
================ ================
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH
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, 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
Tax Benefit from Exercise of Stock
Options and Vesting of Restricted
Stock - - 329 - - 329
Stock Options, Restricted Stock
and Other 86 - (34) - 10,332 10,298
--------------- --------- ------------ ------------- ------------ ----------------
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
Tax Benefit from Exercise of Stock
Options and Vesting of Restricted
Stock - - 9,389 - - 9,389
Stock Options, Restricted Stock
and Other 700 - (5,710) - 22,562 16,852
--------------- --------- ------------ ------------- ------------ ----------------
Balance, January 29, 2000 102,004 $1,033 $147,305 $192,735 $(29,979) $311,094
Purchase of Treasury Stock (3,550) - - - (43,929) (43,929)
Net Income - - - 158,133 - 158,133
Tax Benefit from Exercise of Stock
Options and Vesting of Restricted
Stock - - 462 - - 462
Stock Options, Restricted Stock
and Other 342 - (11,277) - 8,217 (3,060)
--------------- --------- ------------ ------------- ------------ ----------------
Balance, February 3, 2001 98,796 $1,033 $136,490 $350,868 $(65,691) $422,700
=============== ========= ============ ============= ============ ================
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
2000 1999 1998
-------------- ------------- --------------
OPERATING ACTIVITIES:
Net income $158,133 $149,604 $102,062
Impact of Other Operating Activities on Cash Flows:
Depreciation and Amortization 30,731 27,721 20,946
Noncash Charge for Deferred Compensation 4,340 5,212 11,497
Changes in Assets and Liabilities:
Inventories (45,735) (31,270) (10,065)
Accounts Payable and Accrued Expenses 21,626 4,999 33,137
Income Taxes (8,420) 9,258 11,087
Other Assets and Liabilities (9,486) (12,773) 355
-------------- ------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 151,189 152,751 169,019
-------------- ------------- --------------
INVESTING ACTIVITIES:
Capital Expenditures (153,481) (73,377) (37,483)
Proceeds from Maturities of Marketable Securities 45,601 11,332 -
Purchase of Marketable Securities - (56,933) -
Note Receivable (3,000) (1,500) -
-------------- ------------- --------------
NET CASH USED FOR INVESTING ACTIVITIES (110,880) (120,478) (37,483)
-------------- ------------- --------------
FINANCING ACTIVITIES:
Settlement of Balance with The Limited - - 23,785
Net Proceeds from Issuance of Common Stock - - 25,875
Repayment of Long-Term Debt - - (50,000)
Purchase of Treasury Stock (43,929) (50,856) (11,240)
Other Changes in Shareholders' Equity (6,707) 2,927 941
-------------- ------------- --------------
NET CASH USED FOR FINANCING ACTIVITIES (50,636) (47,929) (10,639)
-------------- ------------- --------------
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS (10,327) (15,656) 120,897
Cash and Equivalents, Beginning of Year 147,908 163,564 42,667
-------------- ------------- --------------
CASH AND EQUIVALENTS, END OF YEAR $137,581 $147,908 $163,564
============== ============= ==============
SIGNIFICANT NONCASH INVESTING ACTIVITIES:
Accrual for Construction in Progress $9,531 $10,447 $4,393
============== ============= ==============
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
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ABERCROMBIE & FITCH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Abercrombie & Fitch Co. ("A&F") 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"). 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
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
A&F'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 A&F 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 A&F was owned by The Limited, until the completion of a
tax-free exchange offer (the "Exchange Offer") on May 19, 1998, to
establish A&F 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 A&F
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 A&F shares.
Limited shareholders of record at the close of trading on May 29, 1998
received .027346 of a share of A&F stock for each Limited share owned at
that time.
The accompanying consolidated financial statements include the historical
financial statements of, and transactions applicable to, A&F 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 A&F 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
year 2000 represent the fifty-three week period ended February 3, 2001.
The results for fiscal years 1999 and 1998 represent the fifty-two week
periods ended January 29, 2000 and January 30, 1999.
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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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 were corporate debt securities which matured within one year and
were stated at amortized cost which approximated 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
Abercrombie & Fitch business 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
estimate
20
21
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 A&F's Class
A Common Stock, distributed 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 February 3, 2001, there were 150 million shares of $.01 par value
Class A Common Stock authorized, of which 98.8 million and 102.0 million
shares were outstanding at February 3, 2001 and January 29, 2000,
respectively, and 106.4 million shares of $.01 par value Class B Common
Stock authorized, none of which were outstanding at February 3, 2001 or
January 29, 2000. In addition, 15 million shares of $.01 par value
Preferred Stock were authorized, none of which have been issued. See Note
13 for information about Preferred Stock Purchase Rights.
Holders of Class A Common Stock generally have identical rights to
holders of Class B Common Stock, except that holders of Class A Common
Stock are entitled to one vote per share while holders of Class B Common
Stock are entitled to three votes per share on all matters submitted to a
vote of shareholders.
REVENUE RECOGNITION
The Company recognizes retail sales at the time the customer takes
possession of the merchandise and purchases are paid for via cash, credit
card or gift certificate and gift card redemption. Catalogue and
e-commerce sales are recorded upon shipment of merchandise. Amounts
relating to shipping and handling billed to customers in a sale
transaction are classified as revenue and the related costs are
classified as cost of goods sold. Employee discounts are classified as a
reduction of revenue.
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 $30.4 million in 2000, $30.3 million in 1999 and $24.9
million in 1998.
STORE PREOPENING EXPENSES
Preopening expenses related to new store openings are charged to
operations as incurred.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The recorded values of current assets and current liabilities, including
receivables, marketable securities and accounts payable, approximate fair
value due to the short maturity and because the average interest rate
approximates current market origination rates.
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
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common stock. Net income per diluted share includes the weighted average
effect of dilutive stock options and restricted shares.
Weighted Average Shares Outstanding (thousands):
2000 1999 1998
---------- ----------- ----------
Shares of common stock issued 103,300 103,300 103,300
Treasury shares (3,239) (429) (216)
---------- ----------- ----------
Basic shares 100,061 102,871 103,084
Dilutive effect of options and restricted shares 2,095 4,770 3,118
---------- ----------- ----------
Diluted shares 102,156 107,641 106,202
========== =========== ==========
Options to purchase 7,875,000 and 5,690,000 shares of Class A Common
Stock were outstanding at year-end 2000 and 1999 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. At year-end 1998, no anti-dilutive options were
outstanding.
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. ADOPTION OF ACCOUNTING STANDARDS
In the fourth quarter 2000, the Company adopted Emerging Issues Task
Force ("EITF") No. 00-10 "Accounting for Shipping and Handling Fees and
Costs" which changed its classification for shipping revenue. The Company
also changed its classification for direct shipping expenses for
shipments to customers to cost of goods sold and for employee discounts
to a reduction of revenue. All other fulfillment costs are included in
General, Administrative and Store Operating Expenses. Previously,
shipping revenues, certain shipping expenses and employee discounts were
included in General, Administrative and Store Operating Expenses. Prior
periods' financial statements presented for comparative purposes have
been reclassified to comply with these classification guidelines. These
reclassifications did not have an impact on net income.
The Company has adopted Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." SAB No. 101 provides the
Securities and Exchange Commission's views in applying generally accepted
accounting principles to selected revenue recognition issues. The
adoption of SAB No. 101 did not have a material effect on the Company's
results of operations, cash flows or financial position.
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4. PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of (thousands):
2000 1999
---------------- -------------
Land $14,007 $14,007
Furniture, fixtures and equipment 212,674 158,753
Beneficial leaseholds 7,349 7,349
Leasehold improvements 31,613 19,572
Construction in progress 118,553 26,100
---------------- -------------
Total $384,196 $225,781
Less: accumulated depreciation and amortization 105,411 79,378
---------------- -------------
Property and equipment, net $278,785 $146,403
================ =============
5. LEASED FACILITIES AND COMMITMENTS
Annual store rent is comprised of a fixed minimum amount, plus contingent
rent based on a percentage of sales exceeding a stipulated amount. Store
lease terms generally require additional payments covering taxes, common
area costs and certain other expenses. Rent expense for 1998 included
charges from The Limited and its subsidiaries for space under formal
agreements that approximated market rates.
A summary of rent expense follows (thousands):
2000 1999 1998
------------------- ----------------- -------------------
Store rent:
Fixed minimum $65,716 $51,086 $42,774
Contingent 7,079 8,246 6,382
------------------- ----------------- -------------------
Total store rent $72,795 $59,332 $49,156
Buildings, equipment and other 2,777 2,574 1,814
------------------- ----------------- -------------------
Total rent expense $75,572 $61,906 $50,970
=================== ================= ===================
At February 3, 2001, the Company was committed to noncancelable leases
with remaining terms of one to thirteen 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):
2001 $80,082
2002 83,014
2003 81,672
2004 81,060
2005 78,089
Thereafter 251,391
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6. ACCRUED EXPENSES
Accrued expenses consisted of the following (thousands):
2000 1999
--------------- -------------
Accrual for construction in progress $24,371 $14,840
Rent and landlord charges 15,634 15,282
Compensation and benefits 11,771 11,588
Deferred revenue 11,636 8,482
Catalogue and advertising costs 7,818 7,005
Taxes, other than income 5,102 4,507
Other 24,970 23,669
--------------- -------------
Total $101,302 $85,373
=============== =============
7. INCOME TAXES
The provision for income taxes consisted of (thousands):
2000 1999 1998
------------------- ----------------- ------------------
Currently Payable:
Federal $80,856 $84,335 $65,778
State 18,403 20,251 14,809
------------------- ----------------- ------------------
$99,259 $104,586 $80,587
------------------- ----------------- ------------------
Deferred:
Federal 2,814 (3,885) (10,038)
State 1,247 (971) (2,509)
------------------- ----------------- ------------------
$4,061 $(4,856) $(12,547)
------------------- ----------------- ------------------
Total provision $103,320 $99,730 $68,040
=================== ================= ==================
A reconciliation between the statutory Federal income tax rate and the
effective income tax rate follows:
2000 1999 1998
------------------ --------------- ----------------
Federal income tax rate 35.0% 35.0% 35.0%
State income tax, net of Federal income
tax effect 4.1% 4.6% 4.7%
Other items, net 0.4% 0.4% 0.3%
------------------ --------------- ----------------
Total 39.5% 40.0% 40.0%
================== =============== ================
Income taxes payable included net current deferred tax assets of $14.7
million and $14.2 million at February 3, 2001 and January 29, 2000,
respectively.
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 $829
thousand, $9.1 million and
24
25
$27.4 million in 2000, 1999 and 1998, respectively. Amounts paid directly
to taxing authorities were $111.7 million, $81.1 million and $31.7
million in 2000, 1999 and 1998, respectively.
The effect of temporary differences which gives rise to deferred income
tax assets (liabilities) was as follows (thousands):
2000 1999
----------------- ----------------
Deferred tax assets:
Deferred compensation $8,311 $9,333
Property and equipment - 1,478
Rent 2,414 2,565
Accrued expenses 8,144 10,230
Inventory 2,767 1,650
----------------- ----------------
Total deferred tax assets 21,636 25,256
----------------- ----------------
Deferred tax liabilities:
Property and equipment (2,146) -
----------------- ----------------
Net deferred income tax assets $19,490 $25,256
================= ================
No valuation allowance has been provided for deferred tax assets because
management believes that it is more likely than not that the full amount
of the net deferred tax assets will be realized in the future.
8. LONG-TERM DEBT
The Company entered into a $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 .225% 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. It also contains
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 February 3, 2001 and January 29, 2000.
9. 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
25
26
Subsequent to the Exchange Offer, A&F negotiated arms-length terms with
the merchandise and service suppliers that are Limited subsidiaries. A&F
and The Limited also entered into various service agreements for terms
ranging from one to three years. A&F 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. The agreement for
use of distribution space terminates in April 2001. The agreement for use
of home office space expires in May 2001. The agreement for
transportation and logistics services will also expire in May 2001,
although most services have already been transitioned to the Company. The
cost of these services generally is equal to The Limited's cost in
providing the relevant services plus 5% of such costs.
For the periods prior to the Exchange Offer, A&F 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.
The following table summarizes the related party transactions between the
Company and The Limited and its subsidiaries, for fiscal year 1998. The
amounts below reflect activity through the completion of the Exchange
Offer.
(Thousands)
1998
-------------
Mast and Gryphon purchases $20,176
Capital expenditures 3,199
Inbound and outbound transportation 2,280
Corporate charges 2,671
Store leases and other occupancy, net 561
Distribution center, IT and home office expenses 2,217
Centrally managed benefits 1,524
Interest charges, net 4
-------------
$32,632
=============
The Company does not anticipate that costs incurred to replace the
services currently provided by The Limited will have a material adverse
impact on its financial condition.
Shahid & Company, Inc. has provided advertising and design services for
the Company since 1995. Sam N. Shahid Jr., who serves on A&F's Board of
Directors, has been President and Creative Director of Shahid & Company,
Inc. since 1993. Fees paid to Shahid & Company, Inc. for services
provided during fiscal years 2000, 1999 and 1998 were approximately $1.7
million, $1.4 million and $1.2 million, respectively.
On August 28, 2000, A&F loaned $4.5 million to its Chairman of the Board,
a major shareholder of A&F, pursuant to the terms of a replacement
promissory note, which provides that such amount is due and payable on
May 18, 2001 together with interest at the rate of 6.5% per annum. This
note constitutes a replacement of, and substitute for, the promissory
notes dated March 1, 2000 and May 19, 2000 in the amounts of $1.5 million
and $3.0 million, respectively, which were cancelled.
26
27
10. STOCK OPTIONS AND RESTRICTED SHARES
Under A&F's stock plans, associates and non-associate directors may be
granted up to a total of 16.3 million restricted shares and options to
purchase A&F's common stock at the market price on the date of grant. In
2000, associates of the Company were granted approximately 1.4 million
options, with vesting periods from four to five years. A total of 30,000
options were granted to non-associate directors in 2000, 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 2000, 1999 and 1998, 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
$20.0 million or $.20 per share in 2000, $18.5 million or $.17 per share
in 1999 and $6.1 million or $.06 per share in 1998. The weighted-average
fair value of all options granted during fiscal 2000, 1999 and 1998 was
$8.90, $23.34 and $9.89, respectively. The fair value of each option was
estimated using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 2000, 1999 and 1998: no expected
dividends; price volatility of 50% in 2000, 45% in 1999 and 40% in 1998;
risk-free interest rates of 6.2%, 6.0% and 5.5% in 2000, 1999 and 1998,
respectively; assumed forfeiture rates of 10%; and expected lives of 5
years in 2000, 6.5 years in 1999 and 5 years in 1998.
The pro forma effect on net income for 2000, 1999 and 1998 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 Offering.
Options Outstanding at February 3, 2001
Options Outstanding Options Exercisable
----------------------------------------------------------------------- ---------------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercisable
Prices Outstanding Life Price Exercisable Price
----------------- --------------- --------------- ------------- --------------- --------------
$8 - $23 5,004,000 7.2 $13.17 1,496,000 $10.82
$23 - $38 2,821,000 7.8 $25.85 590,000 $26.36
$38 - $52 5,169,000 8.4 $43.55 78,000 $40.70
----------------- --------------- --------------- ------------- --------------- --------------
$8 - $52 12,994,000 7.8 $28.01 2,164,000 $16.13
================= =============== =============== ============= =============== ==============
A summary of option activity for 2000, 1999 and 1998 follows:
27
28
2000 1999 1998
--------------------------- ---------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Option Option Option
Shares Price Shares Price Shares Price
-------------- ----------- -------------- ------------- ------------- ------------
Outstanding at beginning of year 12,809,000 $28.03 7,568,000 $15.87 3,768,000 $8.91
Granted 1,414,000 17.25 5,794,000 42.90 3,970,000 22.47
Exercised (193,000) 14.57 (337,000) 9.39 (60,000) 8.99
Canceled (1,036,000) 16.06 (216,000) 25.25 (110,000) 19.40
-------------- ----------- -------------- ------------- ------------- ------------
Outstanding at end of year 12,994,000 $28.01 12,809,000 $28.03 7,568,000 $15.87
============== =========== ============== ============= ============= ============
Options exercisable at year-end 2,164,000 $16.13 556,000 $9.85 388,000 $8.99
============== =========== ============== ============= ============= ============
A total of 102,000 restricted shares were granted in 2000, with a total
market value at grant date of $2.3 million. A total of 140,000 restricted
shares were granted in both 1999 and 1998, with a total market value at
grant date of $5.4 million and $2.7 million, respectively. 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 $4.3
million, $5.2 million and $11.5 million in 2000, 1999 and 1998,
respectively. Long-term liabilities at fiscal year-end 1998 included $8.7
million of compensation expense relating to restricted shares.
11. RETIREMENT BENEFITS
The Company participates in a qualified defined contribution retirement
plan and a nonqualified supplemental retirement plan. Participation in
the qualified plan is available to all associates who have completed
1,000 or more hours of service with the Company during certain 12-month
periods and attained the age of 21. Participation in the nonqualified
plan is subject to service and compensation requirements. The Company's
contributions to these plans are based on a percentage of associates'
eligible annual compensation. The cost of these plans was $3.0 million in
2000, $2.6 million in 1999 and $2.0 million in 1998.
12. CONTINGENCIES
The Company is involved in a number of legal proceedings. Although it is
not possible to predict with any certainty the eventual outcome of any
legal proceedings, it is the opinion of management that the ultimate
resolution of these matters will not have a material impact on the
Company's results of operations, cash flows or financial position.
13. PREFERRED STOCK PURCHASE RIGHTS
On July 16, 1998, A&F's Board of Directors declared a dividend of .50 of
a Series A Participating Cumulative Preferred Stock Purchase Right
(Right) for each outstanding share of Class A Common Stock, par value
$.01 per share (Common Stock), of A&F. The dividend was paid to
shareholders of record on July 28, 1998. Shares of Common Stock issued
after July 28, 1998 and prior to the Distribution Date described below
will be issued with .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 A&F's outstanding shares of Common Stock and become an
"Acquiring Person" (Share Acquisition Date) or 10 business days (or such
later date as the Board shall determine before any person has become an
Acquiring Person) after commencement of a tender or exchange offer which
would result in a person or group beneficially owning 20% or more of
A&F's outstanding Common Stock. The Rights are not exercisable until the
Distribution Date.
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29
In the event that any person becomes an Acquiring Person, each holder of
a Right (other than the Acquiring Person and certain affiliated persons)
will be entitled to purchase, upon exercise of the Right, shares of
Common Stock having a market value two times the exercise price of the
Right. At any time after any person becomes an Acquiring Person (but
before any person becomes the beneficial owner of 50% or more of the
outstanding shares), A&F's Board of Directors may exchange all or part of
the Rights (other than Rights beneficially owned by an Acquiring Person
and certain affiliated persons) for shares of Common Stock at an exchange
ratio of one share of Common Stock per Right. In the event that, at any
time following the Share Acquisition Date, A&F is acquired in a merger or
other business combination transaction in which A&F is not the surviving
corporation, the Common Stock is exchanged for other securities or assets
or 50% or more of A&F's assets or earning power is sold or transferred,
the holder of a Right will be entitled to buy, for the exercise price of
the Rights, the number of shares of Common Stock of the acquiring company
which at the time of such transaction will have a market value of two
times the exercise price of the Right.
The Rights, which do not have any voting rights, expire on July 16, 2008,
and may be redeemed by A&F at a price of $.01 per whole Right at any time
before a person becomes an Acquiring Person.
Rights holders have no rights as a shareholder of A&F, including the
right to vote and to receive dividends.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial results for 2000 and 1999 follow
(thousands except per share amounts):
2000 Quarter First (1) Second (1) Third (1) Fourth
------------------------------------- ------------- -------------- -------------- --------------
Net sales $205,006 $229,031 $364,122 $439,445
Gross income 75,403 87,765 143,283 202,924
Net income 16,163 21,163 43,592 77,215
Net income per basic share $.16 $.21 $.44 $.78
Net income per diluted share $.16 $.21 $.43 $.76
1999 Quarter First (1) Second (1) Third (1) Fourth (1)
------------------------------------- ------------- -------------- -------------- --------------
Net sales $186,427 $196,227 $284,510 $363,694
Gross income 69,368 77,346 118,600 185,069
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
(1) Net sales and gross income for 1999 and the first three quarters of
2000 reflect the reclassification of shipping and handling revenues
and costs and employee discounts (see Note 3).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
29
30
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Abercrombie & Fitch:
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
and its subsidiaries at February 3, 2001 and January 29, 2000, and the results
of their operations and their cash flows for each of the three fiscal years in
the period ended February 3, 2001 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 20, 2001
30
31
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of A&F is set forth under the captions "ELECTION
OF DIRECTORS - Nominees and Directors", "- Business Experience", "- Information
Concerning the Board of Directors" and "- Security Ownership of Directors and
Management" in A&F's definitive proxy statement for the Annual Meeting of
Shareholders to be held on May 30, 2001 (the "Proxy Statement") and is
incorporated herein by reference. Information regarding executive officers of
A&F is set forth under the captions "ELECTION OF DIRECTORS - Business
Experience", " - Executive Officers", and "- Security Ownership of Directors and
Management" and "EXECUTIVE COMPENSATION - Employment Agreements and Other
Transactions with Certain Executive Officers" in the Proxy Statement and is
incorporated herein by reference. In addition, information regarding executive
officers of A&F is included in this Annual Report on Form 10-K under the caption
"SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I and is
incorporated herein by reference. No disclosure is required to be made under
Item 405 of Regulation S-K.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is set forth under the 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 Executive Officers" in the Proxy Statement and is incorporated herein by
reference.
31
32
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
and the related notes are filed as a part of this report pursuant to
ITEM 8:
Consolidated Statements of Income for the fiscal years ended February
3, 2001, January 29, 2000 and January 30, 1999.
Consolidated Balance Sheets as of February 3, 2001 and January 29,
2000.
Consolidated Statements of Shareholders' Equity for the fiscal years
ended February 3, 2001, January 29, 2000 and January 30, 1999.
Consolidated Statements of Cash Flows for the fiscal years ended
February 3, 2001, January 29, 2000 and January 30, 1999.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because the required information is either
presented in the consolidated financial statements or notes thereto, or
is not applicable, required or material.
(a)(3) LIST OF EXHIBITS.
3. Certificate of Incorporation and Bylaws
3.1 Amended and Restated Certificate of Incorporation of
A&F as filed with the Delaware Secretary of State on
August 27, 1996, incorporated 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 by reference to Exhibit 3.2 to A&F's
Annual Report on Form 10-K for the year ended January
30, 1999. (File No. 1-12107)
3.3 Certificate of Decrease of Shares Designated as Class
B Common Stock as filed with the Delaware Secretary
of State on July 30, 1999, incorporated 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, incorporated by
reference to Exhibit 3.2 to A&F's Quarterly Report on Form
10-Q for the quarter ended November 2, 1996. (File No.
1-12107)
3.5 Certificate regarding adoption of amendment to Subsection
1.10(c) of Amended and Restated Bylaws of A&F by Board of
Directors on April 4, 2000, incorporated by reference to
Exhibit 3.5 to A&F's Annual Report on Form 10-K for the
year ended January 29, 2000. (File No. 1-12107)
32
33
3.6 Amended and Restated Bylaws of A&F (reflecting amendments
through April 4, 2000) (for SEC reporting compliance
purposes only), incorporated by reference to Exhibit 3.6
to A&F's Annual Report on Form 10-K for the year ended
January 29, 2000. (File No. 1-12107)
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, A&F, 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
A&F's Current Report on Form 8-K dated May 7, 1998. (File
No. 1-12107)
4.2 First Amendment and Waiver, 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 A&F's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1999. (File No. 1-12107)
4.3 Rights Agreement, dated as of July 16, 1998, between
Abercrombie & Fitch Co. and First Chicago Trust Company of
New York, as Rights Agent, incorporated 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 Abercrombie & Fitch Co. and First Chicago
Trust Company of New York, as Rights Agent, incorporated
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 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)
10. Material Contracts.
10.1 Abercrombie & Fitch Co. Incentive Compensation Performance
Plan, incorporated by reference to Exhibit A to A&F's
Proxy Statement dated April 14, 1997. (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 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 October 26, 2000 and the two-for-one stock split
distributed June 15, 1999 to stockholders of record on May
25, 1999), incorporated by reference to Exhibit 10.3 to
A&F's Quarterly Report on Form 10-Q for the quarter ended
October 28, 2000. (File No. 1-12107)
10.4 Employment Agreement by and between A&F and Michael S.
Jeffries dated as of May 13, 1997 with exhibits and
amendment, incorporated by reference to Exhibit 10.4 to
A&F's Quarterly Report on Form 10-Q for the quarter ended
November 1, 1997. (File No. 1-12107)
33
34
10.5 Employment Agreement by and between A&F and Seth R.
Johnson dated as of December 5, 1997, incorporated 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).
10.6 Tax Disaffiliation Agreement dated as of May 19, 1998
between The Limited, Inc. and A&F, incorporated by
reference to Exhibit 10.7 to A&F's Quarterly Report on
Form 10-Q for the quarter ended May 2, 1998. (File No.
1-12107)
10.7 Amended and Restated Services Agreement dated as of May
19, 1998 between The Limited, Inc. and A&F, incorporated
by reference to Exhibit 10.8 to A&F's Quarterly Report on
Form 10-Q for the quarter ended May 2, 1998. (File No.
1-12107)
10.8 Sublease Agreement by and between Victoria's Secret
Stores, Inc. and A&F, dated as of June 1, 1995 (the
"Sublease Agreement"), incorporated by reference to
Exhibit 10.3 to A&F's Registration Statement on Form S-1
filed on July 17, 1996 (Registration No. 333-08231).
10.9 Amendment to Sublease Agreement dated as of May 19, 1998,
incorporated by reference to Exhibit 10.11 to A&F's
Quarterly Report on Form 10-Q for the quarter ended May 2,
1998. (File No. 1-12107)
10.10 Abercrombie & Fitch, Inc. Directors' Deferred Compensation
Plan, incorporated by reference to Exhibit 10.14 to A&F's
Annual Report on Form 10-K for the year ended January 30,
1999. (File No. 1-12107)
10.11 Replacement Promissory Note, dated August 28, 2000, issued
by Michael S. Jeffries to A&F, incorporated by reference
to Exhibit 10.14 to A&F's Quarterly Report on Form 10-Q
for the quarter ended July 29, 2000. (File No. 1-12107)
21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
24. Powers of Attorney.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the fiscal quarter
ended February 3, 2001.
(c) EXHIBITS.
The exhibits to this report are listed in section (a)(3) of Item
14 above.
(d) FINANCIAL STATEMENT SCHEDULES.
Not applicable.
34
35
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 20, 2001
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 20, 2001:
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/ RUSSELL M. GERTMENIAN* Director
--------------------------
Russell M. Gertmenian
/s/ JOHN A. GOLDEN* Director
------------------------------------
John A. Golden
/s/ ARCHIE M. GRIFFIN* Director
------------------------------------
Archie M. Griffin
/s/ JOHN W. KESSLER* Director
------------------------------------
John W. Kessler
/s/ SAM N. SHAHID* Director
------------------------------------
Sam N. Shahid
/s/ KATHRYN D. SULLIVAN, Ph.D.* Director
-------------------------------
Kathryn D. Sullivan, Ph.D.
*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
35
36
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2001
---------
ABERCROMBIE & FITCH CO.
(exact name of Registrant as specified in its charter)
---------
EXHIBITS
---------
37
EXHIBIT INDEX
Exhibit No. Document
----------- --------
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
24 Powers of Attorney.