Abercrombie & Fitch 2003 Annual Report Download - page 34

Abercrombie &Fitch
shares vest over four years. Options covering the remaining 20,000
shares vest on the first anniversary of the grant date. All options
have a maximum term of ten years.
Options Outstanding Options Exercisable
at January 31, 2004 at January 31, 2004
Wei ghted–
Average Weighted– Weighted–
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercisable
Prices Outstanding Life Price Exercisable Price
$8-$23 2,691,000 4.3 $13.50 1,618,000 $13.86
$23-$38 7,039,000 6.9 $26.50 3,094,000 $26.17
$38-$51 5,131,000 5.4 $43.54 1,479,000 $43.25
$8-$51 14,861,000 5.9 $30.03 6,191,000 $27.04
A summary of option activity for 2003, 2002 and 2001 follows:
Number of Weighted–Average
2003 Shares Option Price
Outstanding at beginning of year 16,059,000 $28.31
Granted 636,000 27.89
Exercised (1,586,000) 12.39
Canceled (248,000) 27.04
Outstanding at end of year 14,861,000 $30.03
Options exercisable at year-end 6,191,000 $27.04
2002
Outstanding at beginning of year 12,961,000 $28.65
Granted 3,583,000 26.53
Exercised (93,000) 16.44
Canceled (392,000) 26.31
Outstanding at end of year 16,059,000 $28.31
Options exercisable at year-end 4,556,000 $19.10
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
A total of 78,000, 1,046,000 and 19,000 restricted shares were grant-
ed in 2003, 2002 and 2001, respectively, with a total market value at
grant date of $2.1 million, $28.0 million and $.6 million, respectively.
Of the restricted shares granted in 2002, 1,000,000 shares were
awarded to the Company’s Chairman, which become vested on
December 31, 2008 provided the Chairman remains continuously
employed by the Company through such date. The remaining
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 $5.3 million, $2.3 million and $3.9 million in
2003, 2002 and 2001, respectively.
11. RETIREMENT BENEF IT S The Company maintains a qualified
defined contribution retirement plan and a nonqualified supple-
mental 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 contribu-
tions to these plans are based on a percentage of associates’ eligible
annual compensation. The cost of these plans was $6.4 million in
2003, $5.6 million in 2002 and $3.9 million in 2001.
Effective February 2, 2003, the Company established a
Supplemental Executive Retirement Plan (the “SERP”) to pro-
vide additional retirement income to its Chairman. Subject to
service requirements, the Chairman will receive a monthly prorat-
ed share of his final average compensation (as defined in the
SERP) for life. The SERP has been actuarially valued by an inde-
pendent third party and the expense associated with the SERP is
being accrued over the stated term of the Amended and Restated
Employment Agreement, dated as of January 30, 2003, between
the Company and its Chairman.
12. CONTINGENCIES The Company is involved in a number of
legal proceedings that arise out of, and are incidental to, the conduct
of its business.
In 2003, five actions were filed under various states’ laws on behalf
of purported classes of employees and former employees of the
Company alleging that the Company required its associates to wear
and pay for a “uniform” in violation of applicable law. Two of the
actions have been ordered coordinated. In each case, the plaintiff,
on behalf of his or her purported class, seeks injunctive relief and
unspecified amounts of economic and liquidated damages. For cer-
tain of the cases, the parties are in the process of discovery. In other
cases, answers have been filed. In one case, the Company has filed
a motion to dismiss and that motion is pending.
In 2003, an action was filed in which the plaintiff alleges that the
“uniform,” when purchased, drove associates’ wages below the fed-
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