Abercrombie & Fitch 2011 Annual Report Download - page 46

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included $13.4 million of expense related to a change in the Company’s intent regarding the sale of its
ARS portfolio, which resulted in recognition of an other-than-temporary impairment in Fiscal 2011.
Interest Expense (Income), Net and Tax Expense
Fiscal 2011 interest expense was $7.9 million, offset by interest income of $4.3 million, compared to
interest expense of $7.8 million, offset by interest income of $4.4 million for Fiscal 2010.
The effective tax rate for Fiscal 2011 was 32.0% compared to 34.3% for Fiscal 2010, in each year
benefiting from foreign operations.
As of January 28, 2012, there were approximately $25.6 million of net deferred tax assets in Japan
with a valuation allowance of $2.4 million. The valuation allowance in Japan was established as the result
of changes to the business configuration of operations in Japan, as well as tax law changes. The realization
of the net deferred tax assets not subject to a valuation allowance is dependent upon the future generation
of sufficient profits in Japan. While the Company believes it is more likely than not that the net deferred
tax assets will be realized, it is not certain. Should circumstances change, some or all of the net deferred tax
assets not currently subject to a valuation allowance may be in the future. Any increase in the valuation
allowance would result in additional tax expense.
Income from Discontinued Operations, Net of Tax
The Company completed the closure of its RUEHL branded stores and related direct-to-consumer
operations in the fourth quarter of Fiscal 2009. Accordingly, the after-tax operating results appear in
Income (Loss) from Discontinued Operations, Net of Tax on the Consolidated Statements of Operations
and Comprehensive Income for all years presented. Results from discontinued operations, net of tax, were
immaterial for Fiscal 2010.
Refer to Note 17, “Discontinued Operations,” of the Notes to Consolidated Financial Statements
included in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” of this Annual
Report on Form 10-K for further discussion.
Net Income and Net Income per Diluted Share
Net income for Fiscal 2011 was $127.7 million compared to $150.3 million for Fiscal 2010. Net
income per diluted share for Fiscal 2011 was $1.43 compared to $1.67 for Fiscal 2010. Net income per
diluted share for Fiscal 2011 included store-related asset impairment charges of approximately $0.49 per
diluted share, asset write-down charges of approximately $0.10 per diluted share, store closure and exit
charges of approximately $0.13 per diluted share, legal charges of approximately $0.07 per diluted share,
and other-than-temporary impairment charges of approximately $0.09 per diluted share related to a change
in intent regarding the Company’s ARS portfolio. Net income per diluted share for Fiscal 2010 included
store-related asset impairment charges of approximately $0.34 per diluted share and store exit charges of
approximately $0.03 per diluted share. Refer to the GAAP reconciliation table in the “OVERVIEW”
section of “ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS” for a reconciliation of net income per diluted share on a GAAP basis
to net income per diluted share on a non-GAAP basis, excluding charges for impairment and write-downs
of store related long-lived assets, charges related to store closures and lease exits, and other charges
associated with legal settlements during the quarter and with a change in intent regarding the Company’s
ARS.
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