Abercrombie & Fitch 2009 Annual Report Download - page 35

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increase in interest expense in Fiscal 2008 was due to borrowings made under the Company’s unsecured
amended credit agreement in Fiscal 2008.
The effective tax rate for Fiscal 2008 was 39.5% compared to 37.4% for Fiscal 2007. Fiscal 2008
included a $9.9 million charge related to the execution of the Chairman and Chief Executive Officer’s new
employment agreement, which resulted in certain non-deductible amounts pursuant to Section 162(m) of the
Internal Revenue Code.
Net Loss from Discontinued Operations
Net loss from discontinued operations, net of tax, was $35.9 million and $23.4 million for Fiscal 2008
and Fiscal 2007, respectively. The results for Fiscal 2008 included $13.6 million of after-tax non-cash asset
impairment charges related to RUEHL assets as a result of the determination that the carrying value of the
assets exceeded the fair value of those assets.
Refer to Note 14, “Discontinued Operations” of the Notes to Consolidated Financial Statements for
further discussion.
Net Income and Net Income per Share
Net income for Fiscal 2008 was $272.3 million compared to $475.7 million for Fiscal 2007. Net income
per diluted weighted-average share was $3.05 in Fiscal 2008 versus $5.20 in Fiscal 2007. For Fiscal 2008, net
income per diluted share included $0.40 of net loss per diluted share from discontinued operations and an
after-tax charge of approximately $0.06 per diluted share associated with the impairment of store-related
assets. Fiscal 2007 included $0.26 of net loss per diluted share from discontinued operations.
FINANCIAL CONDITION
Liquidity and Capital Resources
The Company had $680.1 million in cash and equivalents available as of January 30, 2010, as well as an
additional $299.1 million available (less outstanding letters of credit of $50.0 million) under its unsecured
Amended Credit Agreement (as amended in June 2009) and $26.3 million available under the UBS Credit
Line, both described in Note 12, “Long-Term Debt” of the Notes to Consolidated Financial Statements. The
unsecured Amended Credit Agreement contains financial covenants that require the Company to maintain a
minimum coverage ratio and a maximum leverage ratio and also limits the Company’s consolidated capital
expenditures to $325 million in Fiscal 2010 plus the unused portion from Fiscal 2009 of $99.5 million, all
defined in the Amended Credit Agreement. If circumstances occur that would lead to the Company failing to
meet the covenants under the Amended Credit Agreement and the Company is unable to obtain a waiver or
amendment, an event of default would result and the lenders could declare outstanding borrowings imme-
diately due and payable. The Company believes it is likely that it would either obtain a waiver or amendment
in advance of a default, or would have sufficient cash available to repay borrowings in the event a waiver was
not obtained.
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