Abercrombie & Fitch 2008 Annual Report Download - page 64
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Table of Contents
ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For construction allowances, the Company records a deferred lease credit on the Consolidated
Balance Sheets and amortizes the deferred lease credit as a reduction of rent expense on the Consolidated
Statements of Net Income and Comprehensive Income over the terms of the leases. For scheduled rent
escalation clauses during the lease terms, the Company records minimum rental expenses on a
straight-line basis over the terms of the leases on the Consolidated Statements of Net Income and
Comprehensive Income. The term of the lease over which the Company amortizes construction
allowances and minimum rental expenses on a straight-line basis begins on the date of initial possession,
which is generally when the Company enters the space and begins to make improvements in preparation
for intended use.
Certain leases provide for contingent rents, which are determined as a percentage of gross sales. The
Company records a contingent rent liability in accrued expenses on the Consolidated Balance Sheets and
the corresponding rent expense on the Consolidated Statements of Net Income and Comprehensive
Income when management determines that achieving the specified levels during the fiscal year is
probable.
STORE PRE-OPENING EXPENSES
Pre-opening expenses related to new store openings are charged to operations as incurred.
DESIGN AND DEVELOPMENT COSTS
Costs to design and develop the Company’s merchandise are expensed as incurred and are reflected as
a component of “Marketing, General and Administrative Expense.”
NET INCOME PER SHARE
Net income per share is computed in accordance with SFAS No. 128, “Earnings Per Share.” Net
income per basic share is computed based on the weighted-average number of outstanding shares of
Common Stock. Net income per diluted share includes the weighted-average effect of dilutive stock
options and restricted stock units.
Weighted-Average Shares Outstanding (in thousands):
2008 2007 2006
Shares of Class A Common Stock issued 103,300 103,300 103,300
Treasury shares (16,484) (16,052) (15,248)
Basic shares outstanding 86,816 87,248 88,052
Dilutive effect of stock options and restricted stock units 2,475 4,275 3,958
Diluted shares outstanding 89,291 91,523 92,010
Stock options to purchase approximately 3.7 million, 0.4 million and 0.1 million shares of Common
Stock were outstanding for Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively, but were not included
in the computation of net income per diluted share because the impact of such stock options would be
anti-dilutive.
60
Source: ABERCROMBIE & FITCH CO /DE/, 10-K, March 27, 2009 Powered by Morningstar® Document Research℠