Abercrombie & Fitch 1999 Annual Report Download - page 17

A total of 140,000 restricted shares were granted in 1999, with
a total market value at grant date of $5.4 million. In 1998 and
1997, a total of 140,000 and 1,094,000 restricted shares were
granted, with a total market value at grant date of $2.7 million
and $8.7 million. The restricted share grants generally vest
either on a graduated scale over four years or 100% at the end of
a fixed vesting period, principally five years. The market value
of restricted shares is being amortized as compensation expense
over the vesting period, generally four to five years.
Compensation expenses related to restricted share awards
amounted to $5.2 million, $11.5 million and $6.2 million in
1999, 1998 and 1997. Long-term liabilities at fiscal year-end 1998
included $8.7 million of compensation expense relating to
restricted shares.
10. RETIREMENT BENEFITS The Company participates in a
qualified defined contribution retirement plan and a nonqual-
ified 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 require-
ments. The Company’s contributions to these plans are based
on a percentage of associates’ eligible annual compensation.
The cost of these plans was $1.4 million in 1999, $760 thousand
in 1998 and $558 thousand in 1997.
11. CONTINGENCIES The Company is involved in a number of
legal proceedings. Although it is not possible to predict with any
certainty the eventual outcome of any legal proceedings, it is the
opinion of management that the ultimate resolution of these
matters will not have a material impact on the Company’s results
of operations, cash flows or financial position.
12. PREFERRED STOCK PURCHASE RIGHTS On July 16, 1998,
the Company’s Board of Directors declared a dividend of .50 of
a Series A Participating Cumulative Preferred Stock Purchase
Right (Right) for each outstanding share of Class A Common
Stock, par value $.01 per share (Common Stock), of the Company.
The dividend was paid to shareholders of record on July 28, 1998.
Shares of Common Stock issued after July 28, 1998 and prior to
the Distribution Date described below will be issued with .50
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Abercrombie &Fitch Co.
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Right attached. Under certain conditions, each whole Right may
be exercised to purchase one one-thousandth of a share of Series
A Participating Cumulative Preferred Stock at an initial price of
$250. The Rights initially will be attached to the shares of
Common Stock. The Rights will separate from the Common
Stock and a Distribution Date will occur upon the earlier of 10
business days after a public announcement that a person or group
has acquired beneficial ownership of 20% or more of the
Company’s outstanding shares of Common Stock and become an
“Aquiring Person” (Share Acquisition Date) or 10 business days
(or such later date as the Board shall determine before any person
has become an Aquiring Person) after commencement of a ten-
der or exchange offer which would result in a person or group
beneficially owning 20% or more of the Company’s outstanding
Common Stock. The Rights are not exercisable until the
Distribution Date.
In the event that any person becomes an Aquiring Person,
each holder of a Right (other than the Aquiring Person and cer-
tain 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 Aquiring Person (but before any person
becomes the beneficial owner of 50% or more of the outstand-
ing shares), the Company’s Board of Directors may exchange
all or part of the Rights (other than Rights beneficially owned
by an Aquiring Person and certain affiliated persons) for shares
of Common Stock at an exchange ratio of one share of Common
Stock per Right. In the event that, at any time following the
Share Acquisition Date, the Company is acquired in a merger
or other business combination transaction in which the
Company is not the surviving corporation, the Common Stock
is exchanged for other securities or assets, or 50% or more of the
Company’s assets or earning power is sold or transferred, the
holder of a Right will be entitled to buy, for the exercise price of
the Rights, the number of shares of Common Stock of the
acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the Right.
The Rights, which do not have any voting rights, expire on
July 16, 2008, and may be redeemed by the Company at a price
of $.01 per Right at any time before a person becomes an
Acquiring Person.
Rights holders have no rights as a stockholder of the Company,
including the right to vote and to receive dividends.
13. SUBSEQUENT EVENT (UNAUDITED) In March 2000, the
Company loaned the amount of $1.5 million to its Chairman of
the Board, a major shareholder of the Company, pursuant to the
terms of a promissory note, which provides that such amount is
due and payable August 28, 2000, together with interest at the rate
of 6.5% per annum.
14. QUARTERLY FINANCIAL DATA (UNAUDITED)
Summarized quarterly financial results for 1999 and 1998 follow
(thousands except per share amounts):
1999 Quarter First (1) Second (1) Third (1) Fourth
Net sales $188,294 $198,895 $286,983 $367,884
Gross income 71,904 80,721 121,886 191,072
Net income 14,963 18,858 39,059 76,724
Net income per basic share $.14 $.18 $.38 $.75
Net income per diluted share $.14 $.17 $.36 $.73
1998 Quarter First Second Third Fourth
Net sales $134,230 $147,127 $229,869 $304,578
Gross income 49,211 55,194 89,444 150,102
Net income 6,308 10,598 24,943 60,213
Net income per basic share $.06 $.10 $.24 $.59
Net income per diluted share $.06 $.10 $.24 $.56
MARKET PRICE INFORMATION The following is a summary of
the Company’s sales price as reported on the New York Stock
Exchange (“ANF”) for the 1999 and 1998 fiscal years:
Sales Price
High Low
1999 Fiscal Year
4th Quarter $329⁄16 $199⁄16
3rd Quarter $431⁄4 $21
2nd Quarter $4911⁄16 $361⁄2
1st Quarter $503⁄4 $351⁄4
1998 Fiscal Year
4th Quarter $389⁄16 $203⁄16
3rd Quarter $273⁄4$143⁄4
2nd Quarter $259⁄16 $1911⁄16
1st Quarter $233⁄4 $155⁄32
Per share amounts reflect the two-for-one stock split on the
Company’s Class A Common Stock, paid on June 15, 1999 to
shareholders of record at the close of business on May 25, 1999.
The Company has not paid dividends on its shares of Class
A Common Stock in the past and does not presently plan to pay
dividends on the shares. It is presently anticipated that earnings
will be retained and reinvested to support the growth of the
Company’s business. The payment of any future dividends on
shares will be determined by the Board of Directors in light of
conditions then existing, including earnings, financial condition
and capital requirements, restrictions in financing agreements,
business conditions and other factors.
On January 29, 2000, there were approximately 7,000 share-
holders of record. However, when including active associates
who participate in the Company’s stock purchase plan, associates
who own shares through Company sponsored retirement plans and
others holding shares in broker accounts under street name, the
Company estimates the shareholder base at approximately 80,000.
Abercrombie &Fitch Co.
(1) During the fourth quarter of 1999, the Company changed its accounting for gift certificates.
Under the new method, the Company establishes a liability upon the sale of a gift certificate.
The liability is reduced when the gift certificate is redeemed and the customer takes possession
of the merchandise. The impact of this change is not significant to the prior year results. The
change was retroactively applied to the first three quarters of 1999. Net income and net income
per diluted share as previously reported were $12,506 and $.12; $18,448 and $.17; and $38,947
and $.36 for the first, second and third quarters of 1999.