Abercrombie & Fitch 2002 Annual Report Download - page 25

Abercrombie &Fitch
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. A summary
of rent expense follows (thousands):
2002 2001 2000
Store rent:
Fixed minimum $105,751 $83,608 $65,716
Contingent 4,886 4,897 7,079
Total store rent $110,637 $88,505 $72,795
Buildings, equipment and other 1,133 1,566 2,777
Total rent expense $111,770 $90,071 $75,572
At February 1, 2003, the Company was committed to noncance-
lable leases with remaining terms of one to fourteen years. These
commitments include store leases with initial terms ranging pri-
marily from ten to fifteen years. A summary of minimum rent
commitments under noncancelable leases follows (thousands):
2003 $120,313 2006 112,899
2004 $121,316 2007 99,381
2005 $118,695 Thereafter 316,724
6. ACCRUED EXPENSES Accrued expenses consisted of the
following (thousands):
2002 2001
Unredeemed gift card revenue $23,454 $17,031
Rent and landlord charges 18,465 16,247
Compensation and benefits 15,857 9,492
Accrual for construction in progress 12,680 25,338
Catalogue and advertising costs 9,701 11,178
Taxes, other than income 5,512 3,552
Other 34,769 26,748
Total $120,438 $109,586
7. INCOME TAXES The provision for income taxes consisted of
(thousands):
2002 2001 2000
Currently payable:
Federal $ 90,069 $ 80,126 $ 80,856
State 12,034 14,567 18,403
$102,103 $ 94,693 $ 99,259
Deferred:
Federal 17,699 11,133 2,814
State 1,648 2,024 1,247
$ 19,347 $ 13,157)$ 4,061
Total provision $121,450 $107,850 $103,320
A reconciliation between the statutory Federal income tax rate
and the effective income tax rate follows:
2002 2001 2000
Federal income tax rate 35.0% 35.0% 35.0%
State income tax, net of Federal
income tax effect 3.5% 3.9% 4.1%
Other items, net (0.1)% 0.1% 0.4%
Total 38.4% 39.0% 39.5%
Income taxes payable included net current deferred tax
assets of $6.0 million and $4.9 million at February 1, 2003 and
February 2, 2002, respectively.
Under a tax sharing arrangement with The Limited, who
owned 84.2% of the outstanding Common Stock through May
19, 1998, the Company was responsible for and paid to The
Limited its proportionate share of income taxes calculated upon
its separate taxable income at the estimated annual effective tax
rate for periods prior to May 19, 1998. Amounts paid to The
Limited totaled $1.4 million, $20 thousand and $829 thousand
in 2002, 2001 and 2000, respectively. Amounts paid directly to
taxing authorities were $82.3 million, $94.3 million and $111.7
million in 2002, 2001 and 2000, respectively. The amount paid
to The Limited during 2002 constituted a final tax sharing pay-
ment pursuant to an agreement to terminate the tax sharing
agreement entered into with The Limited as of May 19, 1998.
As a result, the Company has been indemnified by The Limited
for any federal, state or local income taxes asserted with respect
to The Limited for all periods prior to May 19, 1998.
The effect of temporary differences which give rise to de-
ferred income tax assets (liabilities) was as follows (thousands):
2002 2001
Deferred tax assets:
Deferred compensation $ 8,113 $ 8,833
Accrued expenses 6,754 7,216
Inventory 2,960 1,747
Rent 1,314 1,525
Other 124 139
Total deferred tax assets 19,265 19,460
Deferred tax liabilities:
Property and equipment (25,954) (8,307)
Store supplies (8,061) (7,417)
Total deferred tax liabilities (34,015) (15,724)
Net deferred income tax assets (liabilities) $(14,750) $3,736
No valuation allowance has been provided for deferred tax
assets because management believes that it is more likely than
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