Abercrombie & Fitch 2015 Annual Report Download - page 27

Table of Contents
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Marketing, General and Administrative Expense
Fiscal 2015 Fiscal 2014
(in thousands) % of Net Sales % of Net Sales
Marketing, general and administrative expense $ 470,321 13.4% $ 458,820 12.3%
Legal settlement charges(1) (15,753) (0.4)% — —%
Profit improvement initiative(2) (1,770) (0.1)% (3,776) (0.1)%
Corporate governance matters(3) — —% (12,644) (0.3)%
Adjusted non-GAAP marketing, general and administrative expense $ 452,798 12.9% $ 442,400 11.8%
(1) Includes charges related to certain proposed legal settlements.
(2) Includes charges related to the Company's profit improvement initiative.
(3) Includes legal, advisory and other charges related to certain corporate governance matters.
Marketing, general and administrative expense as a percentage of net sales and adjusted non-GAAP marketing, general and
administrative expense as a percentage of net sales increased by approximately 110 basis points for Fiscal 2015 compared to Fiscal
2014. The increase in rate was primarily due to the deleveraging effect from lower net sales, higher compensation related expense
and certain proposed legal settlement charges of $15.8 million, partially offset by the year-over-year impact of corporate governance
matters related charges and expense reduction efforts.
Restructuring (Benefit) Charge
The Company recognized a restructuring benefit of $1.6 million for Fiscal 2015 from better than expected lease exit terms associated
with the restructuring of the Gilly Hicks brand. Restructuring charges associated with the closure of the Gilly Hicks stand-alone
stores for Fiscal 2014 were $8.4 million.
Asset Impairment
The Company incurred non-cash asset impairment charges of $18.2 million for Fiscal 2015, compared to $45.0 million for Fiscal
2014 primarily related to stores whose asset carrying values were determined not to be recoverable and exceeded fair value. For
Fiscal 2015, the non-cash asset impairment charges primarily related to the Company's Abercrombie & Fitch flagship store in
Hong Kong as well as certain fixtures that were removed in connection with changes to the Abercrombie and Hollister store
experiences. For Fiscal 2014, store-related asset impairment charges primarily related to the Company's Abercrombie & Fitch
flagship store locations in Tokyo, Japan and Seoul, Korea, as well as nine Hollister stores and nine abercrombie kids stores.
Additionally, the Company incurred charges of approximately $11.3 million in Fiscal 2014 to record the expected loss on the sale
of the Company-owned aircraft.
Other Operating Income, Net
Fiscal 2015 Fiscal 2014
(in thousands) % of Net Sales % of Net Sales
Other operating income, net $ 6,441 0.2% $ 15,239 0.4%
Lease termination and store closure costs(1) 2,211 0.1% — —%
Adjusted non-GAAP other operating income, net $ 8,652 0.2% $ 15,239 0.4%
(6) Includes charges related to a release of cumulative translation adjustment as the Company substantially completed the liquidation of its Australian operations.
Other operating income, net was $6.4 million for Fiscal 2015 compared to $15.2 million for Fiscal 2014. For Fiscal 2015, other
operating income, net included income of $2.2 million related to insurance recoveries and $4.7 million related to gift card breakage,
partially offset by losses of $1.5 million related to foreign currency transactions. For Fiscal 2014, other operating income, net
included income of $10.2 million related to insurance recoveries and $5.8 million related to gift card breakage, and losses of $2.0
million related to foreign currency transactions.