Abercrombie & Fitch 2012 Annual Report Download - page 47

Table of Contents
• Adjusted non-GAAP net income per diluted share* increased 12.7% to $2.31 in Fiscal 2011 from $2.05 in Fiscal 2010.
Due to the Company's Fiscal 2011 performance, our NEOs received bonuses that were at 66% of the aggregate target payouts, on an annualized basis.
Bonuses were paid at 165% of target for Spring 2011 when we exceeded operating income goals, but no bonuses were paid for Fall 2011 since we did not
meet our operating income goals.
During Fiscal 2011, our Executive Vice Presidents received annual equity grants comprised of SARs and performance-based restricted stock units. A
majority of their total long-term incentive awards granted was in the form of SARs that vest in installments over four years. The performance-based restricted
stock units also vest in installments over four years, but only if the applicable performance measure has been met. In this regard, the majority of the restricted
stock unit grants that were made in Fiscal 2008 to Mr. Ramsden, Ms. Chang and Ms. Herro were forfeited or remained unvested as a result of Fiscal 2011
performance.
Consideration of Last Year's "Say on Pay" Vote
After the Company's 2011 Annual Meeting of Stockholders, the Compensation Committee and the Board reviewed the results of the stockholder
advisory vote on executive compensation related to Fiscal 2010 compensation actions and decisions for the CEO and the other named executive officers. 56%
of the votes cast on the proposal were voted in support of the advisory resolution on the compensation of our NEOs.
During Fiscal 2011, prior to the 2011 Annual Meeting of Stockholders, the Company held a significant number of face-to-face and telephonic meetings
with our largest stockholders (and other stockholders, regardless of size, who requested a meeting). These meetings were with members of management and,
in several cases, with members of the Compensation Committee and the Board. In connection with the 2011 Annual Meeting of Stockholders and recognizing
that the CEO's employment agreement was entered into in 2008, we made a commitment to our largest stockholder at the time (and now), FMR LLC
(Fidelity), to recommend to our Compensation Committee that it review the CEO's employment agreement in light of the current landscape and current
practices. We also agreed to consider adding objective criteria in determining whether equity awards would be made to other NEOs and to enhance the
disclosure in the proxy statement to add transparency to the Compensation Committee's decision-making process for equity awards.
Taking into account the results of the 2011 "say on pay" vote, we have continued our ongoing dialogue with our stakeholders. We have engaged in
further discussions with Fidelity and communicated with other stakeholders who have corresponded with the Company. Recognizing that the use of
performance-based vesting in compensation programs is increasing, the Compensation Committee determined it was appropriate to consider whether
performance-based vesting triggers that would apply to future semi-annual equity grants to the CEO should be established. Since the addition of such triggers
would require amendment of the CEO's employment agreement, the Compensation Committee began a dialogue with the CEO and his advisers concerning his
employment agreement. These discussions culminated in the recent amendment of the CEO's employment agreement as described below.
In addition to continuing dialogue with investors, the Compensation Committee has made several changes to the design and disclosure of our executive
compensation program for Fiscal 2012, including:
• Adding performance shares to the mix of long-term incentives granted to the Executive Vice Presidents with awards vesting only if earnings per
share growth targets are achieved.
• Negotiating the amendment to the CEO's employment agreement described above under the caption "Compensation Program for the CEO"
beginning on page 42.
* Adjusted to exclude charges for impairments and write-downs of store-related long-lived assets, charges related to store closures and lease exits and other charges associated with legal
settlements and a change in intent regarding the Company's auction rate securities ("ARS charges"). See page 50 of this Proxy Statement. In addition, a reconciliation of the GAAP financial
measure of net income per diluted share to this non-GAAP financial measure is provided on page 37 of the Company's Fiscal 2011 Form 10-K.
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