Abercrombie & Fitch 2003 Annual Report Download - page 35

eral minimum wage. The complaint purports to state a collective
action on behalf of all part-time associates nationwide under the Fair
Labor Standards Act. The parties are in the process of discovery.
In 2003, two actions were filed on behalf of purported classes
alleged to be discriminated against in hiring or employment deci-
sions due to race and/or national origin. One of the actions was
voluntarily dismissed. Additionally, the EEOC has undertaken an
investigation into these allegations. The plaintiffs in the action
seek, on behalf of their purported class, injunctive relief and
unspecified amounts of economic, compensatory and punitive
damages . The parties are in the process of discovery.
In each of 2003 and 2002, one action was filed against the
Company involving overtime compensation. In each action, the
plaintiffs, on behalf of their respective purported class, seek injunc-
tive relief and unspecified amounts of economic and liquidated
damages. The Company has filed a motion to dismiss in one of the
cases and that motion is pending. In the other case, the parties are
in the process of discovery.
The Company accrues amounts related to legal matters if reason-
ably estimable and reviews these amounts at least quarterly. The
Company does not believe it is feasible to predict the outcome of
these proceedings. The timing of the final resolution of these pro-
ceedings is also uncertain. Accordingly, the Company cannot esti-
mate a range of potential loss, if any, for these legal proceedings.
The Company has standby letters of credit in the amount of $4.7
million that are set to expire during the third quarter of fiscal 2004.
The beneficiary, a merchandise supplier, has the right to draw upon
the standby letters of credit if the Company has authorized or filed
a voluntary petition in bankruptcy. To date, the beneficiary has not
drawn upon the standby letters of credit.
The Company enters into agreements with professional services
firms, in the ordinary course of business and, in most agreements,
indemnifies these firms from any harm. There is no financial impact
on the Company related to these indemnification agreements.
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 a 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 exercise price of $250. The Rights ini-
tially 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 announce-
ment 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 the date of the
commencement of a tender or exchange offer which, if consummat-
ed, 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.
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 involved
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 the assets
or earning power of A&F and its subsidiaries, taken as a whole, 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 other party to the business combination or sale 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. SUBSEQUENT EVENTS On February 17, 2004, the Company
announced that its Board of Directors voted to initiate a cash div-
idend, at an annual rate of $0.50 per share. The first quarterly
payment, of $0.125 per share, was paid on March 30, 2004 to
stockholders of record as of March 9, 2004.
Abercrombie &Fitch
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