Abercrombie & Fitch 2007 Annual Report Download - page 21

in A&F’s stock purchase plan, and associates who own shares through
A&F-sponsored retirement plans, A&F estimates that there are
approximately 102,000 stockholders.
During Fiscal 2007, A&F repurchased approximately 3.6 million
shares of A&F’s Common Stock with a value of approximately $287.9
million. A&F did not repurchase any shares of A&F’s Common Stock
during Fiscal 2006. During Fiscal 2005, A&F repurchased approxi-
mately 1.8 million shares of A&F’s Common Stock with a value of
approximately $103.3 million. Both the Fiscal 2007 and Fiscal 2005
repurchases were pursuant to A&F Board of Directors’ authorizations.
A&F did not repurchase any shares of A&F’s Common Stock during
the fiscal quarter ended February 2, 2008.
Subsequent to February 2, 2008, A&F repurchased approximately 0.7
million shares of A&F’s Common Stock with a value of approximately
$50.0 million from the approximately 12.0 million shares of Common
Stock remaining authorized for repurchase at February 2, 2008.
COMPARISON OF 5 YEAR
CUMULATIVE TOTAL RETURN*
The following graph shows the changes, over the five-year period
ended February 2, 2008 (the last day of A&F’s 2007 fiscal year), in the
value of $100 invested in (i) shares of A&F’s Common Stock; (ii) the
Standard & Poor’s 500 Stock Index (the “S&P 500 Index”) and (iii)
the Standard & Poor’s Apparel Retail Composite Index (the “S&P
Apparel Retail Index”), including reinvestment of dividends. The
plotted points represent the closing price on the last day of the fiscal
year indicated (and if such day was not a trading day, the closing price
on the last day immediately preceding the trading day).
Among Abercrombie & Fitch Co., The S&P 500 Index, and
The S&P Apparel Retail Index
16. SUBSEQUENT EVENTS
AUCTION RATE SECURITIES At February 2, 2008, the
Company’s investments in marketable securities consisted of investment
grade auction rate securities (“ARS”), all classified as available-for-sale
and reported at fair value based on the Dutch auction market as of
February 2, 2008, with maturities that range from eight to 34 years.
Despite the underlying long-term maturity of ARS, such securi-
ties were priced and subsequently traded as short-term investments
because of the interest rate reset feature. Interest rates reset through
a Dutch auction process at predetermined periods ranging from
seven to 35 days. If there are insufficient buyers, the auction is
said to “fail” and the holders are unable to liquidate the investments
through auction. A failed auction does not result in a default of the
debt instrument. The securities will continue to accrue interest and
be auctioned until the auction succeeds, the issuer calls the securities
or the securities mature.
On February 13, 2008, the Company began to experience failed
auctions on some of its ARS. At March 27, 2008, the Company held
approximately $365.9 million in ARS classified as marketable securi-
ties, of which $326.9 million were also held as of February 2, 2008.
As of March 27, 2008, approximately 89% of the Company’s ARS are
“AAA” rated and the remaining ARS have ratings that range from A1
to A3 by one or more major credit rating agencies. The ratings take
into account insurance policies which guarantee both the principal
and accrued interest. The Company believes that it will fully collect
the principal and interest of the securities. Approximately $101.5 mil-
lion of these securities were invested in closed end municipal bond
funds and approximately $264.4 million were invested in securities
issued by state agencies which issue student loans, substantially all of
which are guaranteed by the United States government.
At March 27, 2008, the ARS market remains uncertain. However, the
Company believes that it currently has adequate working capital to fund
operations based on access to cash and cash equivalents and expected
operating cash flows. The Company also has $250 million available, less
outstanding letters of credit, under its unsecured credit agreement.
REPURCHASE OF COMMON STOCK Subsequent to
February 2, 2008, A&F had repurchased approximately 0.7 million
shares of A&F’s Common Stock with a value of approximately $50.0
million from the approximately 12.0 million shares of Common Stock
remaining authorized for repurchase at February 2, 2008.
MANAGEMENT’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING The management of A&F
is responsible for establishing and maintaining adequate internal
control over financial reporting. A&F’s internal control over finan-
cial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accor-
dance with accounting principles generally accepted in the United
States of America.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections
of any evaluations of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes
in conditions, or that the degree of compliance with the policies or
procedures may deteriorate. Accordingly, even an effective system of
internal control over financial reporting will provide only reasonable
assurance with respect to financial statement preparation.
With the participation of the Chairman and Chief Executive Officer
of A&F and the Executive Vice President and Chief Financial Officer
of A&F, management evaluated the effectiveness of A&F’s internal
control over financial reporting as of February 2, 2008 using criteria
established in the Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). Based on the assessment of A&F’s internal
control over financial reporting, under the criteria described in the
preceding sentence, management has concluded that, as of February
2, 2008, A&F’s internal control over financial reporting was effective.
A&F’s independent registered public accounting firm,
PricewaterhouseCoopers LLP, has issued an audit report on the effec-
tiveness of A&F’s internal control over financial reporting as of February
2, 2008 as stated in their report, which is included herein.
MARKET FOR REGISTRANT’S COMMON EQUITY,
RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES A&F’s Class A
Common Stock (the “Common Stock”) is traded on the New York
Stock Exchange under the symbol “ANF.” The table below sets forth
the high and low sales prices of A&F’s Common Stock on the New
York Stock Exchange for Fiscal 2007 and Fiscal 2006:
SALES PRICE
High Low
Fiscal 2007
4th Quarter $84.54 $66.05
3rd Quarter $85.77 $67.91
2nd Quarter $84.16 $67.72
1st Quarter $84.92 $71.75
Fiscal 2006
4th Quarter $81.70 $65.75
3rd Quarter $79.42 $51.76
2nd Quarter $65.19 $49.98
1st Quarter $70.94 $54.50
Beginning in Fiscal 2004, the Board of Directors of A&F voted
to initiate a cash dividend at an annual rate of $0.50 per share. A
quarterly dividend of $0.125 per share was paid in March and June
2005. In August 2005, the A&F Board of Directors increased the quar-
terly dividend to $0.175 per share, which was paid in September and
December of Fiscal 2005. A quarterly dividend, of $0.175 per share,
was paid in March, June, September and December of Fiscal 2006 and
Fiscal 2007. A&F expects to continue to pay a dividend, subject to the
Board of Directors’ review of the Company’s cash position and results
of operations.
As of March 21, 2008, there were approximately 4,929 stockhold-
ers of record. However, when including investors holding shares in
broker accounts under street name, active associates who participate
38 39
*$100 invested on 2/1/03 in stock or on 1/31/03 in index-including reinvestment of
dividends. Indexes calculated on month-end basis.
S&P Apparel Retail
S&P 500
Abercrombie & Fitch
2/1/03 1/31/04 1/29/05 1/28/06 2/3/07 2/2/08
$0
$50
$100
$150
$200
$250
$300
$350