Abercrombie & Fitch 2015 Annual Report Download - page 53

Table of Contents ABERCROMBIE & FITCH CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
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4. INVENTORIES, NET
Inventories, net consisted of:
(in thousands) January 30, 2016 January 31, 2015
Inventories $ 466,918 $ 484,865
Less: Lower of cost or market reserve (19,616) (12,707)
Less: Shrink reserve (10,601) (11,364)
Inventories, net $ 436,701 $ 460,794
The inventory balance, net of reserves, included inventory in transit from vendors of $71.7 million and $56.1 million at January 30,
2016 and January 31, 2015, respectively. Inventory in transit is considered to be merchandise owned by the Company that has not
yet been received at a Company distribution center.
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of:
(in thousands) January 30, 2016 January 31, 2015
Land $ 37,451 $ 37,473
Buildings 287,081 286,820
Furniture, fixtures and equipment 682,013 653,929
Information technology 479,269 427,879
Leasehold improvements 1,283,613 1,338,206
Construction in progress 19,875 49,836
Other 3,135 3,107
Total $ 2,792,437 $ 2,797,250
Less: Accumulated depreciation and amortization (1,898,259) (1,830,249)
Property and equipment, net $ 894,178 $ 967,001
Long-lived assets, primarily comprised of property and equipment, are tested for impairment periodically or whenever events or
changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Factors used in the evaluation
include, but are not limited to, management’s plans for future operations, recent operating results, and undiscounted projected cash
flows.
Fair value of the Company's store-related assets is determined at the individual store level, primarily using a discounted cash flow
model that utilizes Level 3 inputs. The estimation of future cash flows from operating activities requires significant estimates of
factors that include future sales, gross margin performance and operating expenses. In instances where the discounted cash flow
analysis indicates a negative value at the store level, the market exit price based on historical experience, and other comparable
market data where applicable, is used to determine the fair value by asset type.
In Fiscal 2015, the Company incurred non-cash asset impairment charges of $18.2 million as it was determined that the carrying
value of certain assets would not be recoverable and exceeded fair value. The asset impairment charges primarily related to the
Company's Abercrombie & Fitch flagship store in Hong Kong.
In Fiscal 2014, the Company incurred non-cash asset impairment charges of $45.0 million, excluding impairment charges incurred
in connection with the Gilly Hicks restructuring, as it was determined that the carrying value of certain assets would not be
recoverable and exceeded fair value. The asset impairment charges primarily related to the Company's Abercrombie & Fitch
flagship store locations in Tokyo, Japan and Seoul, Korea, as well as nine abercrombie kids stores and nine Hollister stores.
Additionally, in connection with the Company's plan to sell its corporate aircraft, the asset was classified as available-for-sale and
the Company incurred charges of approximately $11.3 million to record the expected loss on the disposal of the asset. The fair
value of the Company's corporate aircraft was determined using a market approach utilizing level 2 inputs.