Abercrombie & Fitch 2001 Annual Report Download - page 15

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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 pub-
lic 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 own-
ing 20% or more of A&F’s outstanding Common Stock. T he
Rights are not exercisable until the Distribution Date.
In the event that any person becomes an Acquiring Pe r s o n ,
each holder of a Right (other than the Acquiring 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 per-
son 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 transac-
tion 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 mar-
ket 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 Pe r s o n .
Rights holders have no rights as a shareholder of A&F, includ-
ing the right to vote and to receive dividends.
14. Q U A RT E R LY F INANCIAL DATA ( UNAU D I T E D )
Summarized quarterly financial results for 2001 and 2000 fol-
low (thousands except per share amounts):
2001 Quarter First Second Third Fourth
Net sales $263,680 $280,116 $354,473 $466,584
Gross income 97,840 108,327 143,403 208,464
Net income 20,603 25,038 43,863 79,168
Net income per basic share $.21 $.25 $.44 $.80
Net income per diluted share $.20 $.24 $.43 $.78
2000 Quarter First Second Third 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
MARKET PRICE INFORMAT I O N The following is a summary
of A&F’s sales price as reported on the New York Stock
Exchange (“ANF”) for the 2001 and 2000 fiscal years:
Sales Price
High Low
2001 Fiscal Year
4th Quarter $30.40 $18.06
3rd Quarter $38.50 $16.21
2nd Quarter $47.50 $33.10
1st Quarter $37.90 $26.28
2000 Fiscal Year
4th Quarter $31.31 $14.75
3rd Quarter $26.56 $15.31
2nd Quarter $16.69 $ 8.00
1st Quarter $24.50 $10.06
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 busi-
ness. 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 con-
ditions and other factors.
On February 2, 2002, there were approximately 5,000 share-
holders 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 hold-
ing shares in broker accounts under street name, A&F estimates
the shareholder base at approximately 65,000.
Ab e rcr ombi e &Fitch
15% in 2001 and 10% in 2000 and 1999; and expected lives of 5
years in 2001 and 2000 and 6.5 years in 1999.
The pro forma effect on net income for 2001, 2000 and 1999 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 2, 2002
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 4,449,000 6.3 $13.02 1,762,000 $11.21
$23-$38 3,304,000 7.2 $26.29 1,126,000 $26.34
$38-$52 5,208,000 7.5 $43.50 177,000 $41.07
$8-$52 12,961,000 7.0 $28.65 3,065,000 $18.49
A summary of option activity for 2001, 2000 and 1999 follows:
Number of Weighted Average
Shares Option Price
2001
Outstanding at beginning of year 12,994,000 $28.01
Granted 648,000 29.38
Exercised (521,000) 15.00
Canceled (160,000) 24.09
Outstanding at end of year 12,961,000 $28.65
Options exercisable at year-end 3,065,000 $18.49
2000
Outstanding at beginning of year 12,809,000 $28.03
Granted 1,414,000 17.25
Exercised (193,000) 14.57
Canceled (1,036,000) 16.06
Outstanding at end of year 12,994,000 $28.01
Options exercisable at year-end 2,164,000 $16.13
1999
Outstanding at beginning of year 7,568,000 $15.87
Granted 5,794,000 42.90
Exercised (337,000) 9.39
Canceled (216,000) 25.25
Outstanding at end of year 12,809,000 $28.03
Options exercisable at year-end 556,000 $ 9.85
Ab e rcr ombi e &Fitch
28
A total of 19,000, 102,000 and 140,000 restricted shares were
granted in 2001, 2000 and 1999, respectively, with a total mar-
ket value at grant date of $.6 million, $2.3 million and $5.4
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 $3.9 million, $4.3 million and $5.2 million in
2001, 2000 and 1999, respectively.
11. 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 $3.9 million in 2001, $3.0 million in
2000 and $2.6 million in 1999.
12. C O N T I N G E N C I E S 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 Pa r t i c i p a t i n g
Cumulative Preferred Stock at an initial price of $250. The Rights