-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RTYTV/GNLIOyAK/Qw4xMpVmvj8TA1EXmlltal96fhWQ/cDuVbFp4ZqSejey3TVEt ouVpRMXpCXH502Ik99dX3Q== 0001021408-02-005406.txt : 20020417 0001021408-02-005406.hdr.sgml : 20020417 ACCESSION NUMBER: 0001021408-02-005406 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020202 FILED AS OF DATE: 20020417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABERCROMBIE & FITCH CO /DE/ CENTRAL INDEX KEY: 0001018840 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 311469076 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12107 FILM NUMBER: 02613626 BUSINESS ADDRESS: STREET 1: FOUR LIMITED PARKWAY EAST CITY: REYNOLDSBURG STATE: OH ZIP: 43068 BUSINESS PHONE: 6145776500 MAIL ADDRESS: STREET 1: FOUR LIMITED PARKWAY EAST CITY: COLUMBUS STATE: OH ZIP: 43068 10-K 1 d10k.txt FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ----------- FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 2, 2002 ---------------- OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to _______ Commission file number 1-12107 ------- ABERCROMBIE & FITCH CO. ----------------------- (Exact name of registrant as specified in its charter) Delaware 31-1469076 - --------------------------------- ---------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 6301 Fitch Path, New Albany, OH 43054 - --------------------------------------- --------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (614) 283-6500 ------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- Class A Common Stock, New York Stock Exchange, Inc. $.01 Par Value Series A Participating Cumulative Preferred Stock Purchase Rights New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to the filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- Aggregate market value of the registrant's Class A Common Stock held by non-affiliates of the registrant as of March 28, 2002: $3,037,458,332. -------------- Number of shares outstanding of the registrant's common stock as of March 28, 2002: 99,035,648 shares of Class A Common Stock. ---------- DOCUMENT INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement for the Annual Meeting of Stockholders to be held on May 23, 2002 are incorporated by reference into Part III of this Annual Report on Form 10-K. PART I ITEM 1. BUSINESS. General. Abercrombie & Fitch Co., a Delaware corporation ("A&F"), through its subsidiaries (collectively, A&F and its subsidiaries are referred to as "Abercrombie & Fitch" or the "Company"), is a specialty retailer which operates stores selling casual apparel, personal care and other accessories for men, women and kids under the Abercrombie & Fitch, abercrombie and Hollister Co. brands. As of February 2, 2002, the Company operated 491 stores in the United States. Description of Operations. General. - ------- The Abercrombie & Fitch brand was established in 1892 and became well known as a supplier of rugged, high-quality outdoor gear. Famous for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the expeditions of Admiral Byrd to the North and South Poles, Abercrombie & Fitch goods were renowned for their durability and dependability - and Abercrombie & Fitch placed a premium on complete customer satisfaction with each item sold. In 1992, a new management team began repositioning Abercrombie & Fitch as a more fashion-oriented casual apparel business directed at men and women with a youthful lifestyle. In reestablishing the Abercrombie & Fitch brand, the Company combined its historical image for quality with a new emphasis on casual American style and youthfulness. In 1997, the Company introduced the A&F Quarterly (a catalogue/magazine), which is a lifestyle magazine focused on the college experience, and subsequently added a catalogue format. The Company launched a web-based store featuring lifestyle pieces, such as AFTV, located at www.abercrombie.com, in 1998. Products comparable to those carried at Abercrombie & Fitch stores can be purchased through the Quarterly, catalogue and abercrombie.com. The Company launched abercrombie, which targets 7 to 14-year-old boys and girls, in 1998. These stores offer fashion-oriented casual apparel in the tradition of Abercrombie & Fitch style and quality. A lifestyle web-based store located at www.abercrombiekids.com was introduced in 2000, where products comparable to those carried at abercrombie can be purchased on-line. The Hollister Co. brand was launched in 2000. Hollister Co. is a West Coast oriented lifestyle brand targeted at 14 to 17-year-old high school guys and girls, at lower price points than Abercrombie & Fitch. Hollister Co. has established a lifestyle Web site at www.hollisterco.com but, as yet, no merchandise is available through the site. 2 At the end of fiscal year 2001, the Company operated 491 stores. The following table shows the changes in the number of retail stores operated by the Company for the past five fiscal years: Fiscal Beginning Year of Year Opened Closed End of Year ---- ------- ------ ------ ----------- 1997 127 30 (1) 156 1998 156 41 (1) 196 1999 196 54 250 2000 250 104 354 2001 354 138 (1) 491 Suppliers. - --------- During fiscal year 2001, the Company purchased merchandise from approximately 148 suppliers and factories located throughout the world. In fiscal year 2001, the Company sourced approximately 12% of its apparel through Koos Manufacturing and 8% through Wooliston Garment, Inc. In addition to purchases from Koos and Wooliston, the Company purchases merchandise directly in foreign markets, with additional merchandise purchased in the domestic market, some of which is manufactured overseas. Excluding purchases from Koos and Wooliston, no more than 5% of the merchandise purchased by the Company originated from any single manufacturer. The Company pursues a global sourcing strategy that includes relationships with vendors in over 40 countries. Any event causing a sudden disruption in these sourcing operations, either political or financial, could have an adverse effect on the Company's operations. Substantially all of the Company's foreign purchases of merchandise are negotiated and paid for in U.S. dollars. Distribution and Merchandise Inventory. - -------------------------------------- Most of the merchandise and related materials for the Company's stores are shipped to its distribution center in New Albany, Ohio where the merchandise is received and inspected. Merchandise and related materials are distributed to the Company's stores using contract carriers. The Company's policy is to maintain sufficient quantities of inventory on hand in its retail stores and distribution center so that it can offer customers a full selection of current merchandise. The Company emphasizes rapid turnover and takes markdowns where required to keep merchandise fresh and current with fashion trends. Seasonal Business. - ----------------- The Company views the retail apparel market as having two principal selling seasons, Spring and Fall. As is generally the case in the apparel industry, the Company experiences its peak sales activity during the Fall season. This seasonal sales pattern results in increased inventory during the back-to-school and Christmas selling periods. During fiscal year 2001, the highest inventory level approximated $157.7 million at the July 2001 month-end and the lowest inventory level approximated $97.5 million at the December 2001 month-end. 3 Store Operations and Expansion. - ------------------------------ The Company's stores and point-of-sale marketing are designed to convey the principal elements and personality of each brand. The store design, furniture, fixtures and music are all carefully planned and coordinated to create a shopping experience that is consistent with the A&F lifestyle. The Company's sales associates, or brand representatives, are a central element in creating the entertaining, yet comfortable, atmosphere of the stores. In addition to providing a high level of customer service, the brand representatives reflect the casual, energetic attitude of the brand and culture. The Company maintains a uniform appearance throughout its store base, in terms of merchandise display and location on the selling floor. Store managers receive detailed store plans that dictate fixture and merchandise placement to ensure uniform execution of the merchandising strategy at the store level. Standardization of store design and merchandise presentation also creates a cost savings in store furnishings, maximizes usage and productivity of selling space and allows the Company to efficiently open new stores. Trademarks. - ---------- The Abercrombie & Fitch, abercrombie and Hollister Co. trademarks, and certain other trademarks, either have been registered, or are the subject of pending trademark applications with the United States Patent and Trademark Office and with registries of many foreign countries. The Company believes that its products are identified by its trademarks and, thus, its trademarks are of significant value. Each registered trademark has a duration of 20 years and is subject to an indefinite number of renewals for a like period upon appropriate application. The Company intends to continue the use of each of its trademarks and to renew each of its registered trademarks. Other Information. - ----------------- Additional information about the Company's business, including its revenues and profits for the last three years, plus gross square footage is set forth under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" in ITEM 7, which information is incorporated herein by reference. Competition. The sale of apparel and personal care products through retail stores, catalogues and e-commerce is a highly competitive business with numerous competitors, including individual and chain fashion specialty stores and department stores. Fashion, price, service, selection and quality are the principal competitive factors in retail store sales and on-line sales. The Company is unable to estimate the number of competitors or its relative competitive position due to the large number of companies selling apparel and personal care products through retail stores, catalogues and e-commerce. Associate Relations. On February 2, 2002, the Company employed approximately 16,700 associates (none of whom were party to a collective bargaining agreement), approximately 13,700 of whom were part-time. In addition, temporary associates are hired during peak periods, such as the Holiday season. 4 The Company believes its relationship with associates is good. ITEM 2. PROPERTIES. At the start of fiscal year 2001, the Company's headquarters and support functions (consisting of office, distribution and shipping facilities) were located in Reynoldsburg, Ohio and were owned by The Limited, Inc. and leased by the Company under leases expiring in 2001. The Company began operating out of its new distribution and shipping facilities in February 2001 and moved to its new home office in April 2001. The new headquarters and support functions are located in New Albany, Ohio. All of the retail stores operated by the Company are located in leased facilities, primarily in shopping centers throughout the continental United States. The leases expire at various dates principally between 2002 and 2014. Typically, when space is leased for a retail store in a shopping center, all improvements, including interior walls, floors, ceilings, fixtures and decorations, are supplied by the tenant. In certain cases, the landlord of the property may provide a construction allowance to fund all or a portion of the cost of improvements. The cost of improvements varies widely, depending on the size and location of the store. Rental terms for new locations usually include a fixed minimum rent plus a percentage of sales in excess of a specified amount. Certain operating costs such as common area maintenance, utilities, insurance and taxes are typically paid by tenants. As of February 2, 2002, the Company's 491 stores were located in 48 states and the District of Columbia as follows: Alabama - 6 Hawaii - 1 Massachusetts - 18 New Mexico - 2 South Dakota - 1 Arizona - 11 Idaho - 1 Michigan - 16 New York - 27 Tennessee - 14 Arkansas - 4 Illinois - 27 Minnesota - 9 North Carolina - 15 Texas - 35 California - 33 Indiana - 19 Mississippi - 4 North Dakota - 1 Utah - 4 Colorado - 10 Iowa - 3 Missouri - 13 Ohio - 29 Vermont - 2 Connecticut - 10 Kansas - 5 Montana - 2 Oklahoma - 8 Virginia - 13 Delaware - 1 Kentucky - 7 Nebraska - 2 Oregon - 3 Washington - 13 District of Columbia - 2 Louisiana - 9 Nevada - 1 Pennsylvania - 23 West Virginia - 1 Florida - 19 Maine - 2 New Hampshire - 3 Rhode Island - 3 Wisconsin - 11 Georgia - 21 Maryland - 7 New Jersey - 16 South Carolina - 4
ITEM 3. LEGAL PROCEEDINGS. The Company is a defendant in lawsuits arising in the ordinary course of business. On January 13, 1999, a complaint was filed against many national retailers in the United States District Court for the Central District of California. The complaint (1) purported to be filed on behalf of a class of unnamed garment workers, (2) related to labor practices allegedly employed on the island of Saipan, Commonwealth of the Northern Mariana Islands, by apparel manufacturers unrelated to the Company, some of which have sold goods to the Company, and (3) sought injunctive, unspecified monetary and other relief. On September 29, 1999, the action was transferred to the United States District Court for the District of Hawaii. Thereafter, the plaintiffs moved for leave to amend their complaint to add A&F and others as additional defendants. That motion was granted and, on April 28, 2000, an amended complaint was filed which adds A&F and others as defendants, but does not otherwise significantly alter either the claims alleged or the relief sought by the 5 plaintiffs. A&F moved to dismiss the amended complaint. Certain of the other defendants also moved to transfer the action to Saipan. On June 23, 2000, the District Court of Hawaii ordered the case to be transferred to the United States District Court for the District of the Northern Mariana Islands. Plaintiffs filed a Petition for Writ of Mandamus challenging the transfer and on March 22, 2001, the Ninth Circuit Court of Appeals issued an order denying the Petition for Writ of Mandamus, thus allowing the case to be transferred to the United States District Court for the Northern Mariana Islands. The motion to dismiss was denied in part and granted in part on November 26, 2001. As to the partial granting of the motion, the Court also granted the plaintiffs leave to amend to cure any pleading defects in a second amended complaint. Plaintiffs filed their motion for class certification on December 13, 2001 and their second amended complaint on December 17, 2001. The motion for class certification was heard on February 14, 2002. The motion for preliminary approval of the other defendants' settlement was also heard the same date. On June 2, 1998, A&F filed suit against American Eagle Outfitters, Inc. alleging an intentional and systematic copying of the "Abercrombie & Fitch" brand, its images and business practices, including the design and look of the Company's merchandise, marketing and catalogue/magazine. The lawsuit, filed in Federal District Court in Columbus, Ohio, sought to enjoin American Eagle's practices, recover lost profits and obtain punitive damages. In July 1999, the District Court granted a summary judgment dismissing the lawsuit against American Eagle. A&F filed a motion for reconsideration of the District Court judgment which was subsequently denied by court order dated September 10, 1999. In October 1999, A&F filed an appeal in the United States Court of Appeals for the Sixth Circuit (the "Sixth Circuit") regarding the decisions of the District Court on the motions for summary judgment and reconsideration. The appeal was fully briefed and oral arguments were held before the Sixth Circuit on December 7, 2000. On February 15, 2002, the Sixth Circuit affirmed the decision of the District Court granting summary judgment in favor of American Eagle. A&F is aware of 20 actions that have been filed against A&F and certain of its officers and directors on behalf of a purported, but as yet uncertified, class of shareholders who purchased A&F's Class A Common Stock between October 8, 1999 and October 13, 1999. These 20 actions have been filed in the United States District Courts for the Southern District of New York and the Southern District of Ohio, Eastern Division alleging violations of the federal securities laws and seeking unspecified damages. On April 12, 2000, the Judicial Panel on Multidistrict Litigation issued a Transfer Order transferring the 20 pending actions to the Southern District of New York for consolidated pretrial proceedings under the caption In re Abercrombie & Fitch Securities Litigation. On November 16, 2000, the Court signed an Order appointing the Hicks Group, a group of seven unrelated investors in A&F's securities, as lead plaintiff, and appointing lead counsel in the consolidated action. On December 14, 2000, plaintiffs filed a Consolidated Amended Class Action Complaint (the "Amended Complaint") in which they did not name as defendants Lazard Freres & Co. and Todd Slater, who had formerly been named as defendants in certain of the 20 complaints. A&F and other defendants filed motions to dismiss the Amended Complaint on February 14, 2001. A&F believes that the actions against it are without merit and intends to defend vigorously against them. However, A&F does not believe it is feasible to predict the outcome of these proceedings. The timing of the final resolution of these proceedings is also uncertain. In addition, the United States Securities and Exchange Commission initiated a formal investigation regarding trading in the securities of A&F and the disclosure of sales forecasts in October 1999, and the Ohio Division of Securities requested information from A&F regarding these same matters. A&F has cooperated in the investigations. 6 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT. Set forth below is certain information regarding the executive officers of A&F as of March 28, 2002. Michael S. Jeffries, 57, has been Chairman of the Board and Chief Executive Officer since May 1998. From February 1992 to May 1998, Mr. Jeffries held the position of President and Chief Executive Officer. Mr. Jeffries has also been a director of A&F since 1996. Seth R. Johnson, 48, has been Executive Vice President-Chief Operating Officer since February 2000. Prior thereto, Mr. Johnson had been Vice President-Chief Financial Officer since 1992. Mr. Johnson has been a director of A&F since 1998. Diane Chang, 46, has been Senior Vice President-Sourcing since February 2000. Prior thereto, she held the position of Vice President-Sourcing from May 1998 to February 2000 and for six and one-half years prior thereto, Ms. Chang held the position of Senior Vice President - Manufacturing at J. Crew, Inc. Raymond C. Attanasio, 50, has been Senior Vice President, General Merchandise Manager for Abercrombie & Fitch Boys' since December 2001. Prior thereto, Mr. Attanasio was Senior Vice President, General Merchandise Manager for Abercrombie & Fitch Men's and Boys' from January 2001 to December 2001, Senior Vice President-Human Resources from February 2000 to January 2001 and Vice President-Human Resources from August 1998 to February 2000. Mr. Attanasio also held the position of Vice President-General Merchandising Manager-Men's at J. Crew, Inc. from May 1991 to June 1998. Leslee K. O'Neill, 41, has been Senior Vice President-Planning & Allocation since February 2000. Prior thereto, Ms. O'Neill held the position of Vice President-Planning & Allocation from February 1994 to February 2000. Wesley S. McDonald, 39, has been Vice President-Chief Financial Officer since June 2000. Prior thereto, Mr. McDonald held a variety of positions in finance and distribution at Target Corporation from 1988 to May 2000. His last position at Target Corporation was Director-Information Systems Finance and Administration. The executive officers serve at the pleasure of the Board of Directors of A&F and in the case of Messrs. Jeffries and Johnson, pursuant to employment agreements. 7 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The following is a summary of A&F's sales prices as reported on the New York Stock Exchange ("ANF") for the 2001 and 2000 fiscal years: Sales Price ----------------------------- High Low ------------ -------------- 2001 Fiscal Year ---------------------- 4th Quarter $30.40 $18.06 3rd Quarter $38.50 $16.21 2nd Quarter $47.50 $33.10 1st Quarter $37.90 $26.28 2000 Fiscal Year ---------------------- 4th Quarter $31.31 $14.75 3rd Quarter $26.56 $15.31 2nd Quarter $16.69 $ 8.00 1st Quarter $24.50 $10.06 A&F has not paid dividends on its shares of Class A Common Stock in the past and does not presently plan to pay dividends on the shares. It is presently anticipated that earnings will be retained and reinvested to support the growth of the Company's business. The payment of any future dividends on shares will be determined by the A&F Board of Directors in light of conditions then existing, including earnings, financial condition and capital requirements, restrictions in financing agreements, business conditions and other factors. On February 2, 2002, there were approximately 5,000 shareholders of record. However, when including active associates who participate in A&F's stock purchase plan, associates who own shares through A&F-sponsored retirement plans and others holding shares in broker accounts under street name, A&F estimates the shareholder base at approximately 65,000. 8 ITEM 6. SELECTED FINANCIAL DATA. ABERCROMBIE & FITCH FINANCIAL SUMMARY
(Thousands except per share and per square foot amounts, ratios and store and associate data) Fiscal Year 2001 2000* 1999 1998 1997 1996 1995* - ------------------------------------------------------------------------------------------------------------------------------------ SUMMARY OF OPERATIONS Net Sales $1,364,853 $1,237,604 $1,030,858 $ 805,180 $ 513,109 $ 329,800 $ 232,415 - ------------------------------------------------------------------------------------------------------------------------------------ Gross Income $ 558,034 $ 509,375 $ 450,383 $ 331,354 $ 191,890 $ 118,194 $ 76,550 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Income $ 271,458 $ 253,652 $ 242,064 $ 166,958 $ 84,125 $ 45,993 $ 23,798 - ------------------------------------------------------------------------------------------------------------------------------------ Operating Income as a Percentage of Net Sales 19.9% 20.5% 23.5% 20.7% 16.4% 13.9% 10.2% - ------------------------------------------------------------------------------------------------------------------------------------ Net Income $ 168,672 $ 158,133 $ 149,604 $ 102,062 $ 48,322 $ 24,674 $ 14,298 - ------------------------------------------------------------------------------------------------------------------------------------ Net Income as a Percentage of Net Sales 12.4% 12.8% 14.5% 12.7% 9.4% 7.5% 6.2% - ------------------------------------------------------------------------------------------------------------------------------------ PER SHARE RESULTS (1) Net Income Per Basic Share $ 1.70 $ 1.58 $ 1.45 $ .99 $ .47 $ .27 $ .17 - ------------------------------------------------------------------------------------------------------------------------------------ Net Income Per Diluted Share $ 1.65 $ 1.55 $ 1.39 $ .96 $ .47 $ .27 $ .17 - ------------------------------------------------------------------------------------------------------------------------------------ Weighted Average Diluted Shares Outstanding 102,524 102,156 107,641 106,202 102,956 91,520 86,000 - ------------------------------------------------------------------------------------------------------------------------------------ OTHER FINANCIAL INFORMATION Total Assets $ 770,546 $ 589,577 $ 458,166 $ 319,161 $ 183,238 $ 105,761 $ 87,693 - ------------------------------------------------------------------------------------------------------------------------------------ Return on Average Assets 25% 30% 38% 41% 33% 26% 20% - ------------------------------------------------------------------------------------------------------------------------------------ Capital Expenditures $ 126,515 $ 153,481 $ 73,377 $ 37,483 $ 29,486 $ 24,323 $ 24,526 - ------------------------------------------------------------------------------------------------------------------------------------ Long-Term Debt - - - - $ 50,000 $ 50,000 - - ------------------------------------------------------------------------------------------------------------------------------------ Shareholders' Equity (Deficit) $ 595,434 $ 422,700 $ 311,094 $ 186,105 $ 58,775 $ 11,238 $ (22,622) - ------------------------------------------------------------------------------------------------------------------------------------ Comparable Store Sales Increase (Decrease) (9%) (7%) 10% 35% 21% 13% 5% - ------------------------------------------------------------------------------------------------------------------------------------ Retail Sales Per Average Gross Square Foot $ 401 $ 474 $ 505 $ 476 $ 370 $ 301 $ 286 - ------------------------------------------------------------------------------------------------------------------------------------ STORES AND ASSOCIATES AT END OF YEAR Total Number of Stores Open 491 354 250 196 156 127 100 - ------------------------------------------------------------------------------------------------------------------------------------ Gross Square Feet 3,673,000 2,849,000 2,174,000 1,791,000 1,522,000 1,229,000 962,000 - ------------------------------------------------------------------------------------------------------------------------------------ Number of Associates 16,700 13,900 11,300 9,500 6,700 4,900 3,000 - ------------------------------------------------------------------------------------------------------------------------------------
*Fifty-three week fiscal year. (1) Per share amounts have been restated to reflect the two-for-one stock split on A&F's Class A Common Stock, distributed on June 15, 1999. 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. RESULTS OF OPERATIONS Net sales for the fourth quarter of the 2001 fiscal year were $466.6 million, an increase of 6% from $439.4 million for the fourth quarter a year ago. Operating income was $128.6 million compared to $124.1 million last year. A&F recorded its 38th consecutive quarter of record earnings as net income increased to $79.2 million in the fourth quarter of 2001 as compared to $77.2 million last year. Earnings per diluted share were $.78, up 3% from $.76 last year. Net sales for the 2001 fiscal year increased 10% to $1.36 billion from $1.24 billion last year. Operating income for the year increased 7% to $271.5 million from $253.7 million in 2000. Net income per diluted share was $1.65 compared to $1.55 a year ago, an increase of 6%. The following data represents the Company's consolidated statements of income for the last 3 fiscal years expressed as a percentage of net sales:
2001 2000 1999 ---- ---- ---- NET SALES 100.0% 100.0% 100.0% Cost of Goods Sold, Occupancy and Buying Costs 59.1 58.8 56.3 ---- ---- ---- GROSS INCOME 40.9 41.2 43.7 General, Administrative and Store Operating Expenses 21.0 20.7 20.2 ---- ---- ---- OPERATING INCOME 19.9 20.5 23.5 Interest Income, Net (0.4) (0.6) (0.7) ----- ----- ----- INCOME BEFORE INCOME TAXES 20.3 21.1 24.2 Provision for Income Taxes 7.9 8.3 9.7 --- --- --- NET INCOME 12.4 12.8 14.5 ==== ==== ====
10 FINANCIAL SUMMARY The following summarized financial data compares the 2001 fiscal year to the comparable periods for 2000 and 1999:
% Change ------------------------------- 2001 2000 1999 2001-2000 2000-1999 ---------------- --------------- ---------------- -------------- ---------------- Net sales (millions) $1,364.9 $1,237.6 $1,030.9 10% 20% Increase (decrease) in comparable store sales (9%) (7%) 10% Retail sales increase attributable to new and remodeled stores, magazine, catalogue and Web sites 19% 27% 18% Retail sales per average gross square foot $ 401 $ 474 $ 505 (15%) (6%) Retail sales per average store (thousands) $ 3,095 $ 3,944 $ 4,487 (22%) (12%) Average store size at year-end (gross square feet) 7,480 8,047 8,695 (7%) (7%) Gross square feet at year-end (thousands) 3,673 2,849 2,174 29% 31% Number of stores: Beginning of year 354 250 196 Opened 138 104 54 Closed (1) -- -- ------- ------- ------- End of year 491 354 250 ======= ======= =======
NET SALES Fourth quarter 2001 net sales increased 6% to $466.6 million from $439.4 million in 2000. The increase was due to the addition of new stores offset by a 9% decline in comparable store sales as compared with last year's 13 week period ended February 3, 2001. The fourth quarter of 2001 was highly promotional and a number of promotional strategies, including direct mail, bouncebacks and selective price point reductions, were employed to improve the sales trend from the previous quarter. Although total Company comparable store sales remained negative, the addition of new and noncomparable store sales resulted in an addition to net sales of $63.6 million. The decrease in comparable store sales amounted to a $35.6 million decrease in net sales and was primarily due to continued weakness in the men's business. Comparable store sales were roughly flat in the women's business for the quarter. Stronger performing categories were in graphic knits, denim, skirts and women's accessories. Men's comparable store sales decreased in the mid-teens for the quarter; however, denim and knits performed well. The kids' business followed a similar trend to the adult business with girls' comparable store sales much stronger than boys'. The adult e-commerce business continued to become a larger part of the business as Internet sales grew by over 27% during the fourth quarter compared to last year. The Company's catalogue, the A&F Quarterly (a catalogue/magazine) and the Company's Web sites accounted for 4.5% of net sales in the fourth quarter of 2001 as compared to 5.0% in 2000. The decrease is primarily due to the Company not producing an A&F Quarterly in the fourth quarter of 2001. 11 Fourth quarter 2000 net sales increased 21% to $439.4 million from $363.7 million in 1999. The increase was due to the addition of new stores offset by a 9% decline in comparable store sales. The addition of new and noncomparable store sales resulted in an addition to net sales of $98.4 million. The decline in comparable store sales, based on a 14 week quarter for both 2000 and 1999, totaled $30.9 million and was primarily due to comparable store sales decreases in the men's graphic tees and pants departments due to the difficulty in anniversarying paratroop pants. Comparable store sales were positive in the women's business for the quarter based on strong increases in the sweaters, denim and outerwear departments. The Company's catalogue, the A&F Quarterly and the Company's Web sites accounted for 5.0% of net sales in the fourth quarter of 2000 as compared to 3.8% in 1999. Net sales for the 2001 fiscal year increased 10% to $1.36 billion from $1.24 billion in 2000. The sales increase was attributable to the net addition of 137 stores offset by a 9% comparable store sales decrease. The addition of new and noncomparable store sales resulted in an addition to net sales of $215.4 million. The decline in comparable store sales, as compared with last year's 52 week period ended February 3, 2001, amounted to $98.9 million and was mostly due to continued weakness in the men's business. Men's comparable store sales decreased in the high-teens for the year; however, denim, knits and gymwear performed well. Comparable store sales were up in the mid-single digits in the women's business for the year. The strongest performing categories were in denim, knits, skirts, gymwear and women's accessories. Overall, the women's business has increased to become a larger percentage of the overall business and the trend is expected to continue. In fiscal 2001, the women's business accounted for 55% of the total adult business. The kids' business had a mid-teen decline in comparable store sales for the year with girls' performing better than boys'. The Company's catalogue, the A&F Quarterly and the Company's Web sites represented 4.2% of 2001 net sales compared to 3.8% last year. Operating improvements in e-commerce fulfillment helped reduce the number of backorders, increasing sales by improving in-stocks. The Company produced only three A&F Quarterly's in fiscal 2001 versus four in 2000, dampening the increase over last year in the direct business. Net sales for the 2000 fiscal year increased 20% to $1.24 billion from $1.03 billion in 1999. The sales increase was attributable to the addition of 104 stores offset by a 7% comparable store sales decrease. The addition of new and noncomparable store sales resulted in an increase to net sales of $255.4 million. The decline in comparable store sales, based on a 53 week fiscal year for both 2000 and 1999, totaled $64.9 million and was across both the men's and women's businesses. During the year, the assortment in each business was repositioned to be more balanced and less focused on graphics and included items at key opening price points. The Company's catalogue, the A&F Quarterly and the Company's Web sites represented 3.8% of 2000 net sales compared to 2.9% last year. GROSS INCOME The gross income rate (gross income divided by net sales) during the fourth quarter of 2001 was 44.7%, down from 46.2% for the same period in 2000. The decrease was primarily due to an increase in the markdown rate, attributable to the expected higher level of promotional business. The planned promotional strategies for the quarter resulted in selling at lower average retail prices. For the quarter, average unit retail prices decreased in the low-double digits. Additionally, buying and occupancy costs, expressed as a percentage of net sales, increased as a result of the inability to leverage fixed expenses with lower sales volume per average store. These decreases were partially offset by higher initial markup (IMU) and tight control of inventory. The increase in IMU was a result of continued improvement in the sourcing of merchandise, particularly in the women's business. The tight control of inventory resulted in inventories being down 30% per gross square foot at year-end as compared with last year. These low levels of inventory provided downside profit protection as season-end merchandise was significantly lower on a per square foot basis as compared to the same period in 2000. 12 For the fourth quarter of 2000, gross income, expressed as a percentage of net sales, decreased to 46.2% from 50.9% for the same period in 1999. The decrease was attributable to lower merchandise margins (representing gross income before the deduction of buying and occupancy costs) due to lower IMU and higher markdowns. The IMU was affected by both a change in sales mix and the planned strategy of offering lower opening price points in key product classifications. For the year, the gross income rate decreased to 40.9% in 2001 from 41.2% in 2000. The decrease was primarily attributable to higher buying and occupancy costs. Buying and occupancy costs increased, as a percentage of net sales, due to the deleveraging created by the decrease in comparable store sales. The decrease was almost entirely offset by higher IMU as continued improvements in sourcing merchandise have reduced costs. The other factors in protecting gross income were tight control of inventory, which resulted in disciplined markdown control, and lower inventory shrinkage as a result of the Company's continued emphasis on in-store operational controls. For the year, the gross income rate decreased to 41.2% in 2000 from 43.7% in 1999. The decrease was attributable to lower merchandise margins, primarily due to lower IMU caused by both a change in sales mix and the planned strategy of offering lower opening price points in key product classifications. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES The fourth quarter general, administrative and store operating expenses rate (general, administrative and store operating expenses divided by net sales) improved to 17.1% as compared to 17.9% in the fourth quarter of 2000. The Company continues to tightly control expenses in both the stores and the home office. These cost controls include limiting headcount additions, reducing home office travel and store payroll hours, and decreasing relocation and recruiting expenses. Savings were also recognized in the new distribution center and in the e-commerce business. During the fourth quarter, productivity in the distribution center, as measured in units processed per labor hour, was over 50% higher than last year. In the e-commerce business, fulfillment costs per order were down by over 10%. Last year's general, administrative and store operating expenses were unfavorably affected by one-time expenses related to the move to the new distribution center and home office and the inclusion of a 14th week in the fourth quarter of 2000. These savings in general, administrative and store operating expenses were partially offset by marketing costs incurred as part of the promotional strategy implemented during the fourth quarter of 2001. General, administrative and store operating expenses, expressed as a percentage of net sales, were 17.9% in the fourth quarter of 2000 and 16.4% in the comparable period in 1999. The increase in the percentage was primarily due to the inability to leverage fixed expenses as a result of the decrease in comparable store sales. The increase was also due to planned one-time expenses related to the Company's move to a new home office and distribution center. The increases were offset by tightly controlled headcount additions, travel expenses, store payroll hours, outside services and compensation expense related to management bonuses. The general, administrative and store operating expenses rate for the year was 21.0%, 20.7% and 20.2% in 2001, 2000 and 1999, respectively. The rate increases in 2001 and 2000 were primarily due to the inability to leverage fixed expenses as a result of the decrease in sales volume per average store. The increases were partially offset by the Company's continued focus on discretionary expense controls. 13 OPERATING INCOME The operating income rate (operating income divided by net sales) was 27.6% and 19.9% for the fourth quarter and fiscal year of 2001, respectively, compared to 28.2% and 20.5% for the same periods in 2000. The decline in operating income rate in these periods was primarily due to lower gross income percentages resulting from planned promotional strategies executed in the fourth quarter. Lower general, administrative and store operating expenses, expressed as a percentage of net sales, partially offset the lower gross income rate in the fourth quarter. For the year, higher general, administrative and store operating expenses, expressed as a percentage of net sales, added to the decrease in operating income rate. Operating income, expressed as a percentage of net sales, was 28.2% and 20.5% for the fourth quarter and fiscal year of 2000, respectively, compared to 34.5% and 23.5% for the same periods in 1999. The decline in operating income as a percentage of net sales in these periods was primarily a result of lower gross income percentages. Higher general, administrative and store operating expenses, expressed as a percentage of net sales, also added to the decrease in the operating income percentage of net sales. INTEREST INCOME/EXPENSE Net interest income was $1.2 million in the fourth quarter of 2001 and $5.1 million for the 2001 fiscal year compared with net interest income of $2.5 million and $7.8 million for the corresponding periods last year. The decrease in net interest income for both the quarter and the year was due to the decline in interest rates. Net interest income in 2001 and 2000 was primarily from short-term investments. Net interest income was $2.5 million in the fourth quarter of 2000 and $7.8 million for all of 2000 compared with net interest income of $2.5 million and $7.3 million for the corresponding periods in 1999. The increase in net interest income for the year was due to an increase in interest rates, which was partially offset by lower cash and equivalents balances. Net interest income in 2000 and 1999 was primarily from short-term investments. FINANCIAL CONDITION The Company's continuing growth in net income affords it financial strength and flexibility. A more detailed discussion of liquidity, capital resources and capital requirements follows. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities provides the resources to support operations, including projected growth, seasonal requirements and capital expenditures. A summary of the Company's working capital position and capitalization follows (thousands):
2001 2000 1999 ---------------- --------------- ---------------- Working capital $241,616 $146,939 $162,351 ================ =============== ================ Capitalization Shareholders' equity $595,434 $422,700 $311,094 ================ =============== ================
14 The Company considers the following to be measures of liquidity and capital resources:
2001 2000 1999 -------- -------- -------- Current ratio (current assets divided by current 2.48 1.94 2.18 liabilities) Cash flow to capital investment (net cash provided by operating activities divided by capital expenditures) 184% 99% 208% Free cash flow (net cash provided by operating activities less capital expenditures) (in thousands) $106,687 ($ 2,292)$ 79,374 ======== ======== ========
Net cash provided by operating activities, the Company's primary resource of liquidity, totaled $233.2 million, $151.2 million and $152.8 million for 2001, 2000 and 1999, respectively. Cash was provided primarily by current year net income adjusted for depreciation and amortization. Additionally in 2001, cash was provided from increases in deferred income tax liabilities and accrued expenses and decreases in inventories. Deferred income tax liabilities increased in the current year as a result of increasing differences in tax and book depreciation methods due to the number of stores opened in the past few years. Accrued expenses, including unredeemed gift card revenue and catalogue and advertising costs, increased in the current year as a result of the continued growth and development of the business. Inventories decreased $12.1 million during 2001 due to the tight management of inventory, which resulted in a 30% decrease in inventory per gross square foot at year-end. Uses of cash were directly related to store growth and primarily consisted of increases in capitalized store supplies, construction allowance receivables and prepaid rent related to stores (classified in other assets). The Company's operations are seasonal in nature and typically peak during the back-to-school and Christmas selling periods. Accordingly, cash requirements for inventory expenditures are highest during these periods. Cash outflows for investing activities were primarily for capital expenditures (see the discussion in the "Capital Expenditures" section below) related to new stores (net of construction allowances) and the construction costs of the new office and distribution center. Investing activities also included purchases and maturities of marketable securities. As of February 2, 2002, the Company held marketable securities with original maturities of three to five months. Financing activities during 2001, 2000 and 1999 consisted primarily of the repurchase of 600,000 shares, 3,550,000 shares and 1,510,000 shares, respectively, of A&F's Class A Common Stock pursuant to previously authorized stock repurchase programs. As of February 2, 2002, A&F is authorized to repurchase up to an additional 1,850,000 shares under the current repurchase program. Financing activities also consisted of stock option exercises and restricted stock issuances. The Company has available a $150 million syndicated unsecured credit agreement. No amounts are currently outstanding. Additional details regarding the credit agreement can be found in the Notes to Consolidated Financial Statements (Note 8). The Company also has a $75 million facility for trade letters of credit. The trade letters of credit are issued to numerous overseas suppliers and serve as guarantees to the suppliers. As of February 2, 2002, $39.7 million was outstanding under this trade letter of credit facility. 15 The Company has standby letters of credit in the amount of $8.5 million. The beneficiaries, two of the Company's suppliers, have the right to draw upon the standby letters of credit if the Company has authorized or filed a voluntary petition in bankruptcy. To date, the beneficiaries have not drawn upon the standby letters of credit. As of February 2, 2002, the Company was committed to noncancelable leases with remaining terms of one to fourteen years. These commitments include store leases with initial terms ranging primarily from ten to fifteen years. A summary of minimum rent commitments under noncancelable leases follows (thousands):
Payments Due by Period ---------------------- Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years ----- ---------------- --------- --------- ------------- $822,920 $104,085 $211,270 $198,459 $309,106 ======== ======== ======== ======== ========
STORES AND GROSS SQUARE FEET Store count and gross square footage by division were as follows:
February 2, 2002 February 3, 2001 ---------------- ---------------- Number of Gross Square Number of Gross Square Stores Feet (thousands) Stores Feet (thousands) ------ ---------------- ------ ---------------- Abercrombie & Fitch 309 2,798 265 2,443 abercrombie 148 662 84 375 Hollister Co. 34 213 5 31 ------- --------------- -------- ---------------- Total 491 3,673 354 2,849 ======= =============== ======== ================
CAPITAL EXPENDITURES Capital expenditures, net of construction allowances, totaled $126.5 million, $153.5 million and $73.4 million for 2001, 2000 and 1999, respectively. Additionally, the noncash accrual for construction in progress totaled $1.0 million, $9.5 million and $10.4 million in 2001, 2000 and 1999, respectively. Capital expenditures related to the construction of a new office and distribution center, including the noncash accrual for construction in progress, accounted for approximately $17 million, $92 million and $27 million of total capital expenditures in 2001, 2000 and 1999, respectively. The office and distribution center were completed in 2001. The balance of capital expenditures related primarily to new stores. The Company anticipates spending $105 to $115 million in 2002 for capital expenditures, of which $85 to $95 million will be for new stores construction. The balance of expenditures primarily relates to improving the in-store information technology structure and improvements in the distribution center. The Company intends to add approximately 815,000 gross square feet in 2002, which will represent a 22% increase over year-end 2001. It is anticipated the increase will result from the addition of approximately 40 new Abercrombie & Fitch stores, 30 abercrombie stores and 60 Hollister Co. stores. The Company estimates that the average cost for leasehold improvements and furniture and fixtures for Abercrombie & Fitch stores opened in 2002 will approximate $600,000 per store, after giving effect to landlord allowances. In addition, inventory purchases are expected to average approximately $300,000 per store. The Company estimates that the average cost for leasehold improvements and furniture and fixtures for abercrombie stores opened in 2002 will approximate $500,000 per store, after giving effect to landlord allowances. In addition, inventory purchases are expected to average approximately $150,000 per store. 16 The Company estimates that the average cost for leasehold improvements and furniture and fixtures for Hollister Co. stores opened in 2002 will approximate $750,000 per store, after giving effect to landlord allowances. However, the Company is in the early stages of developing Hollister Co. and, as a result, current average costs for leasehold improvements and furniture and fixtures are not representative of future costs. In addition, inventory purchases are expected to average approximately $250,000 per store. The Company expects that substantially all future capital expenditures will be funded with cash from operations. In addition, the Company has available a $150 million credit agreement to support operations. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The Company's discussion and analysis of its financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available. The Company's significant accounting policies can be found in the Notes to Consolidated Financial Statements (Note 2). The Company believes that the following policies are most critical to the portrayal of the Company's financial condition and results of operations. Revenue Recognition - The Company recognizes retail sales at the time the customer takes possession of the merchandise and purchases are paid for, primarily with either cash or credit card. Catalogue and e-commerce sales are recorded upon shipment of merchandise. Amounts relating to shipping and handling billed to customers in a sale transaction are classified as revenue and the related costs are classified as cost of goods sold. Employee discounts are classified as a reduction of revenue. The Company reserves for sales returns through estimates based on historical experience and various other assumptions that management believes to be reasonable. Inventory Valuation - Inventories are principally valued at the lower of average cost or market, on a first-in first-out basis, utilizing the retail method. The retail method of inventory valuation is an averaging technique applied to different categories of inventory. At A&F, the averaging is determined at the stock keeping unit (SKU) level by averaging all costs for each SKU. An initial markup is applied to inventory at cost in order to establish a cost-to-retail ratio. Permanent markdowns, when taken, reduce both the retail and cost components of inventory on hand so as to maintain the already established cost-to-retail relationship. The use of the retail method and the taking of markdowns effectively values inventory at the lower of cost or market. The Company further reduces inventory by recording an additional markdown reserve using the retail carrying value of inventory from the season just passed. Markdowns on this carryover inventory represent the future anticipated selling prices. Additionally, as part of inventory valuation, an inventory shrinkage estimate is made each period that reduces the value of inventory for lost or stolen items. Inherent in the retail method calculation are certain significant judgments and estimates including, among others, initial markup, markdowns and shrinkage, which could significantly impact the ending inventory valuation at cost as well as resulting gross margins. Management believes that this inventory valuation method provides a conservative inventory valuation as it preserves the cost-to-retail relationship in inventory. Property and Equipment - Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line basis, using service lives ranging principally from 10-15 years for 17 leasehold improvements and 3-10 years for other property and equipment. Beneficial leaseholds represent the present value of the excess of fair market rent over contractual rent of existing stores at the 1988 purchase of the Abercrombie & Fitch business by The Limited, Inc. ("The Limited") and are being amortized over the lives of the related leases. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend service lives are capitalized. Long-lived assets are reviewed at the store level at least annually for impairment or whenever events or changes in circumstances indicate that full recoverability is questionable. Factors used in the evaluation include, but are not limited to, management's plans for future operations, recent operating results and projected cash flows. Income Taxes - Income taxes are calculated in accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes," which requires the use of the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Inherent in the measurement of deferred balances are certain judgments and interpretations of enacted tax law and published guidance with respect to applicability to the Company's operations. Significant examples of this concept include capitalization policies for various tangible and intangible costs, income and expense recognition and inventory valuation methods. No valuation allowance has been provided for deferred tax assets because management believes the full amount of the net deferred tax assets will be realized in the future. The effective tax rate utilized by the Company reflects management's judgment of the expected tax liabilities within the various taxing jurisdictions. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets." The standard is effective starting with fiscal years beginning after December 15, 2001 (February 3, 2002 for the Company). SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. It also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Management anticipates that the adoption of SFAS No. 142 will not have an impact on the Company's results of operations or its financial position. SFAS No. 143, "Accounting for Asset Retirement Obligations," will be effective for fiscal years beginning after June 15, 2002 (February 2, 2003 for the Company). The standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related obligation for its recorded amount or the entity incurs a gain or loss upon settlement. Because costs associated with exiting leased properties at the end of lease terms are minimal, management anticipates that the adoption of SFAS No. 143 will not have a significant effect on the Company's results of operations or its financial position. SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," will be effective for fiscal years beginning after December 15, 2001 (February 3, 2002 for the Company), and interim periods within those fiscal years. The standard addresses financial accounting and reporting for the impairment or disposal of long-lived assets. Management anticipates that the adoption of SFAS No. 144 will not have an impact on the Company's results of operations or its financial position. 18 RELATIONSHIP WITH THE LIMITED Effective May 19, 1998, The Limited completed a tax-free exchange offer to establish A&F as an independent company. Subsequent to the exchange offer (see Note 1 of the Notes to Consolidated Financial Statements), A&F and The Limited entered into various service agreements for terms ranging from one to three years. A&F hired associates with the appropriate expertise or contracted with outside parties to replace those services which expired in May 1999. Service agreements were also entered into for the continued use by the Company of its distribution and home office space and transportation and logistic services. The distribution space agreement terminated in April 2001. The home office space and transportation and logistic services agreements expired in May 2001. The cost of these services generally was equal to The Limited's cost in providing the relevant services plus 5% of such costs. Costs incurred to replace the services provided by The Limited did not have a material adverse impact on the Company's financial condition. IMPACT OF INFLATION The Company's results of operations and financial condition are presented based upon historical cost. While it is difficult to accurately measure the impact of inflation due to the imprecise nature of the estimates required, the Company believes that the effects of inflation, if any, on its results of operations and financial condition have been minor. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 A&F cautions that any forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) contained in this Form 10-K or made by management of A&F involve risks and uncertainties and are subject to change based on various important factors. The following factors, among others, in some cases have affected and in the future could affect the Company's financial performance and actual results and could cause actual results for 2002 and beyond to differ materially from those expressed or implied in any of the forward-looking statements included in this Form 10-K or otherwise made by management: changes in consumer spending patterns and consumer preferences; the effects of political and economic events and conditions domestically and in foreign jurisdictions in which the Company operates, including, but not limited to, acts of terrorism or war; the impact of competition and pricing; changes in weather patterns; political stability; currency and exchange risks and changes in existing or potential duties, tariffs or quotas; availability of suitable store locations at appropriate terms; ability to develop new merchandise; and ability to hire, train and retain associates. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company maintains its cash and equivalents in financial instruments with original maturities of three months or less. The Company also holds marketable securities with original maturities of three to five months. These financial instruments bear interest at fixed rates and are subject to interest rate risk through lost income should interest rates increase. The Company does not enter into financial instruments for trading purposes. As of February 2, 2002, the Company has no long-term debt outstanding. Future borrowings would bear interest at negotiated rates and would be subject to interest rate risk. The Company does not believe that a hypothetical adverse change of 10% in interest rates would have a material affect on the Company's financial condition. 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ABERCROMBIE & FITCH CONSOLIDATED STATEMENTS OF INCOME
(Thousands except per share amounts) 2001 2000 1999 ------------- ------------- ------------- NET SALES $1,364,853 $1,237,604 $1,030,858 Cost of Goods Sold, Occupancy and Buying Costs 806,819 728,229 580,475 ------------- ------------- ------------- GROSS INCOME 558,034 509,375 450,383 General, Administrative and Store Operating Expenses 286,576 255,723 208,319 ------------- ------------- ------------- OPERATING INCOME 271,458 253,652 242,064 Interest Income, Net (5,064) (7,801) (7,270) ------------- ------------- ------------- INCOME BEFORE INCOME TAXES 276,522 261,453 249,334 Provision for Income Taxes 107,850 103,320 99,730 ------------- ------------- ------------- NET INCOME $ 168,672 $ 158,133 $ 149,604 ============= ============= ============= NET INCOME PER SHARE: BASIC $ 1.70 $ 1.58 $ 1.45 ============= ============= ============= DILUTED $ 1.65 $ 1.55 $ 1.39 ============= ============= =============
The accompanying Notes are an integral part of these Consolidated Financial Statements. 20 ABERCROMBIE & FITCH CONSOLIDATED BALANCE SHEETS (Thousands)
February 2, February 3, 2002 2001 ---------------- --------------- ASSETS - ------ CURRENT ASSETS: Cash and Equivalents $167,664 $137,581 Marketable Securities 71,220 - Receivables 20,456 15,829 Inventories 108,876 120,997 Store Supplies 21,524 17,817 Other 15,455 11,338 ---------------- --------------- TOTAL CURRENT ASSETS 405,195 303,562 PROPERTY AND EQUIPMENT, NET 365,112 278,785 DEFERRED INCOME TAXES - 6,849 OTHER ASSETS 239 381 ---------------- --------------- TOTAL ASSETS $770,546 $589,577 ================ =============== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts Payable $31,897 $33,942 Accrued Expenses 109,586 101,302 Income Taxes Payable 22,096 21,379 ---------------- --------------- TOTAL CURRENT LIABILITIES 163,579 156,623 DEFERRED INCOME TAXES 1,165 - OTHER LONG-TERM LIABILITIES 10,368 10,254 SHAREHOLDERS' EQUITY: Common Stock - $.01 par value 1,033 1,033 Paid-In Capital 141,394 136,490 Retained Earnings 519,540 350,868 ---------------- --------------- 661,967 488,391 Less: Treasury Stock, at Average Cost (66,533) (65,691) ---------------- --------------- TOTAL SHAREHOLDERS' EQUITY 595,434 422,700 ---------------- --------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $770,546 $589,577 ================ ===============
The accompanying Notes are an intergral part of these Consolidated Financial Statements. 21 ABERCROMBIE & FITCH CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Thousands)
Common Stock ------------------------- Treasury Stock, at Total Shares Par Paid-In Retained Average Shareholders' Outstanding Value Capital Earnings Cost Equity --------------- --------- ------------ ------------- ------------ ---------------- Balance, January 30, 1999 102,814 $1,033 $143,626 $ 43,131 $ (1,685) $186,105 Purchase of Treasury Stock (1,510) - - - (50,856) (50,856) Net Income - - - 149,604 - 149,604 Tax Benefit from Exercise of Stock Options and Vesting of Restricted Stock - - 9,389 - - 9,389 Stock Options, Restricted Stock and Other 700 - (5,710) - 22,562 16,852 --------------- --------- ------------ ------------- ------------ ---------------- Balance, January 29, 2000 102,004 $1,033 $147,305 $ 192,735 $(29,979) $311,094 Purchase of Treasury Stock (3,550) - - - (43,929) (43,929) Net Income - - - 158,133 - 158,133 Tax Benefit from Exercise of Stock Options and Vesting of Restricted Stock - - 462 - - 462 Stock Options, Restricted Stock and Other 342 - (11,277) - 8,217 (3,060) --------------- --------- ------------ ------------- ------------ ---------------- Balance, February 3, 2001 98,796 $1,033 $136,490 $ 350,868 $(65,691) $422,700 Purchase of Treasury Stock (600) - - - (11,069) (11,069) Net Income - - - 168,672 - 168,672 Tax Benefit from Exercise of Stock Options and Vesting of Restricted Stock - - 5,056 - - 5,056 Stock Options, Restricted Stock and Other 677 - (152) - 10,227 10,075 --------------- --------- ------------ ------------- ------------ ---------------- Balance, February 2, 2002 98,873 $1,033 $141,394 $ 519,540 $(66,533) $595,434 =============== ========= ============ ============= ============ ================
The accompanying Notes are an intergral of these Consolidated Financial Statements. 22 ABERCROMBIE & FITCH CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands) 2001 2000 1999 ---------- ---------- ---------- OPERATING ACTIVITIES: Net income $ 168,672 $ 158,133 $ 149,604 Impact of Other Operating Activities on Cash Flows: Depreciation and Amortization 41,155 30,731 27,721 Noncash Charge for Deferred Compensation 3,936 4,340 5,212 Changes in Assets and Liabilities: Inventories 12,121 (45,735) (31,270) Accounts Payable and Accrued Expenses 5,272 21,626 4,999 Income Taxes 13,787 (8,420) 9,258 Other Assets and Liabilities (11,741) (9,486) (12,773) ---------- ---------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES 233,202 151,189 152,751 ---------- ---------- ---------- INVESTING ACTIVITIES: Capital Expenditures (126,515) (153,481) (73,377) Proceeds from Maturities of Marketable Securities - 45,601 11,332 Purchase of Marketable Securities (71,220) - (56,933) Note Receivable (454) (3,000) (1,500) ---------- ---------- ---------- NET CASH USED FOR INVESTING ACTIVITIES (198,189) (110,880) (120,478) ---------- ---------- ---------- FINANCING ACTIVITIES: Purchase of Treasury Stock (11,069) (43,929) (50,856) Other Changes in Shareholders' Equity 6,139 (6,707) 2,927 ---------- ---------- ---------- NET CASH USED FOR FINANCING ACTIVITIES (4,930) (50,636) (47,929) ---------- ---------- ---------- NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS 30,083 (10,327) (15,656) Cash and Equivalents, Beginning of Year 137,581 147,908 163,564 ---------- ---------- ---------- CASH AND EQUIVALENTS, END OF YEAR $ 167,664 $ 137,581 $ 147,908 ========== ========== ========== SIGNIFICANT NONCASH INVESTING ACTIVITIES: Accrual for Construction in Progress $ 967 $ 9,531 $ 10,447 ========== ========== ==========
The accompanying Notes are an integral part of these Consolidated Financial Statements. 23 ABERCROMBIE & FITCH NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION Abercrombie & Fitch Co. ("A&F"), through its subsidiaries (collectively, A&F and its subsidiaries are referred to as "Abercrombie & Fitch" or the "Company"), is a specialty retailer of high quality, casual apparel for men, women and kids with an active, youthful lifestyle. The business was established in 1892 and subsequently acquired by The Limited, Inc. ("The Limited") in 1988. A&F was established as an independent Company through an initial public offering (the "Offering") which was consummated on October 1, 1996. As a result of the Offering, 84.2% of the outstanding common stock of A&F was owned by The Limited, until the completion of a tax-free exchange offer (the "Exchange Offer") on May 19, 1998. The accompanying consolidated financial statements include the historical financial statements of, and transactions applicable to, A&F and its subsidiaries and reflect the assets, liabilities, results of operations and cash flows on a historical cost basis. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of A&F and all significant subsidiaries that are more than 50% owned and controlled. All significant intercompany balances and transactions have been eliminated in consolidation. FISCAL YEAR The Company's fiscal year ends on the Saturday closest to January 31. Fiscal years are designated in the financial statements and notes by the calendar year in which the fiscal year commences. The results for fiscal years 2001 and 1999 represent the fifty-two week periods ended February 2, 2002 and January 29, 2000. The results for fiscal year 2000 represent the fifty-three week period ended February 3, 2001. CASH AND EQUIVALENTS Cash and equivalents include amounts on deposit with financial institutions and investments with original maturities of less than 90 days. MARKETABLE SECURITIES All investments with original maturities of greater than 90 days are accounted for in accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The Company determines the appropriate classification at the time of purchase. At February 2, 2002, the Company held investments in marketable securities which were classified as held to maturity based on the Company's positive intent and ability to hold the securities to maturity. All securities held by the Company at February 2, 2002 were corporate debt securities which mature within one year and are stated at amortized cost which approximates market value. 24 INVENTORIES Inventories are principally valued at the lower of average cost or market, on a first-in first-out basis, utilizing the retail method. STORE SUPPLIES The initial inventory of supplies for new stores including, but not limited to, hangers, signage, security tags and point-of-sale supplies are capitalized at the store opening date. Subsequent shipments are expensed except for new merchandise presentation programs which are capitalized. PROPERTY AND EQUIPMENT Depreciation and amortization of property and equipment are computed for financial reporting purposes on a straight-line basis, using service lives ranging principally from 10-15 years for leasehold improvements and 3-10 years for other property and equipment. Beneficial leaseholds represent the present value of the excess of fair market rent over contractual rent of existing stores at the 1988 purchase of the Abercrombie & Fitch business by The Limited and are being amortized over the lives of the related leases. The cost of assets sold or retired and the related accumulated depreciation or amortization are removed from the accounts with any resulting gain or loss included in net income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend service lives are capitalized. Long-lived assets are reviewed at the store level at least annually for impairment or whenever events or changes in circumstances indicate that full recoverability is questionable. Factors used in the evaluation include, but are not limited to, management's plans for future operations, recent operating results and projected cash flows. INCOME TAXES Income taxes are calculated in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires the use of the liability method. Deferred tax assets and liabilities are recognized based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect in the years in which those temporary differences are expected to reverse. Under SFAS No. 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Prior to the Exchange Offer, the Company was included in The Limited's consolidated federal and certain state income tax groups for income tax reporting purposes and was responsible for its proportionate share of income taxes calculated upon its federal taxable income at a current estimate of the Company's annual effective tax rate. Subsequent to the Exchange Offer, the Company began filing its tax returns on a separate basis. SHAREHOLDERS' EQUITY The Board of Directors declared a two-for-one stock split on A&F's Class A Common Stock, distributed on June 15, 1999 to shareholders of record at the close of business on May 25, 1999. All share and per share amounts in the accompanying consolidated financial statements for all periods have been restated to reflect the stock split. 25 At February 2, 2002, there were 150 million shares of $.01 par value Class A Common Stock authorized, of which 98.9 million and 98.8 million shares were outstanding at February 2, 2002 and February 3, 2001, respectively, and 106.4 million shares of $.01 par value Class B Common Stock authorized, none of which were outstanding at February 2, 2002 or February 3, 2001. In addition, 15 million shares of $.01 par value Preferred Stock were authorized, none of which have been issued. See Note 13 for information about Preferred Stock Purchase Rights. Holders of Class A Common Stock generally have identical rights to holders of Class B Common Stock, except that holders of Class A Common Stock are entitled to one vote per share while holders of Class B Common Stock are entitled to three votes per share on all matters submitted to a vote of shareholders. REVENUE RECOGNITION The Company recognizes retail sales at the time the customer takes possession of the merchandise and purchases are paid for, primarily with either cash or credit card. Catalogue and e-commerce sales are recorded upon shipment of merchandise. Amounts relating to shipping and handling billed to customers in a sale transaction are classified as revenue and the related costs are classified as cost of goods sold. Employee discounts are classified as a reduction of revenue. The Company reserves for sales returns through estimates based on historical experience and various other assumptions that management believes to be reasonable. CATALOGUE AND ADVERTISING COSTS Costs related to the A&F Quarterly, a catalogue/magazine, primarily consist of catalogue production and mailing costs and are expensed as incurred. Advertising costs consist of in-store photographs and advertising in selected national publications and are expensed when the photographs or publications first appear. Catalogue and advertising costs amounted to $30.7 million in 2001, $30.4 million in 2000 and $30.3 million in 1999. STORE PREOPENING EXPENSES Preopening expenses related to new store openings are charged to operations as incurred. FAIR VALUE OF FINANCIAL INSTRUMENTS The recorded values of current assets and current liabilities, including receivables, marketable securities and accounts payable, approximate fair value due to the short maturity and because the average interest rate approximates current market origination rates. EARNINGS PER SHARE Net income per share is computed in accordance with SFAS No. 128, "Earnings Per Share." Net income per basic share is computed based on the weighted average number of outstanding shares of common stock. Net income per diluted share includes the weighted average effect of dilutive stock options and restricted shares. 26
Weighted Average Shares Outstanding (thousands): 2001 2000 1999 ---------- ----------- ---------- Shares of common stock issued 103,300 103,300 103,300 Treasury shares (4,198) (3,239) (429) --------- ----------- ---------- Basic shares 99,102 100,061 102,871 Dilutive effect of options and restricted shares 3,422 2,095 4,770 --------- ----------- ---------- Diluted shares 102,524 102,156 107,641 ========= =========== ==========
Options to purchase 5,630,000, 9,100,000 and 5,600,000 shares of Class A Common Stock were outstanding at year-end 2001, 2000 and 1999, respectively, but were not included in the computation of net income per diluted share because the options' exercise prices were greater than the average market price of the underlying shares. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Since actual results may differ from those estimates, the Company revises its estimates and assumptions as new information becomes available. RECLASSIFICATIONS Certain amounts have been reclassified to conform with current year presentation. The amounts reclassified did not have an effect on the Company's results of operations or shareholders' equity. 3. ISSUANCES OF ACCOUNTING STANDARDS In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets." The standard is effective starting with fiscal years beginning after December 15, 2001 (February 3, 2002 for the Company). SFAS No. 142 addresses how intangible assets that are acquired individually or with a group of other assets should be accounted for in financial statements upon their acquisition. It also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. Management anticipates that the adoption of SFAS No. 142 will not have an impact on the Company's results of operations or its financial position. SFAS No. 143, "Accounting for Asset Retirement Obligations," will be effective for fiscal years beginning after June 15, 2002 (February 2, 2003 for the Company). The standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related obligation for its recorded amount or the entity incurs a gain or loss upon settlement. Because costs associated with exiting leased properties at the end of lease terms are minimal, management anticipates that the adoption of SFAS No. 143 will not have a significant effect on the Company's results of operations or its financial position. SFAS No.144, "Accounting for Impairment or Disposal of Long-Lived Assets," will be effective for fiscal years beginning after December 15, 2001 (February 3, 2002 for the Company), and interim periods within those fiscal years. The standard addresses financial accounting and 27 reporting for the impairment or disposal of long-lived assets. Management anticipates that the adoption of SFAS No. 144 will not have an impact on the Company's results of operations or its financial position. 4. PROPERTY AND EQUIPMENT Property and equipment, at cost, consisted of (thousands):
2001 2000 -------------- ------------- Land $ 15,414 $ 14,007 Building 91,531 - Furniture, fixtures and equipment 303,606 212,674 Beneficial leaseholds 7,349 7,349 Leasehold improvements 54,702 31,613 Construction in progress 28,721 118,553 ------------- ------------- Total $ 501,323 $ 384,196 Less: accumulated depreciation and amortization 136,211 105,411 ------------- ------------- Property and equipment, net $ 365,112 $ 278,785 ============= -============
5. LEASED FACILITIES AND COMMITMENTS Annual store rent is comprised of a fixed minimum amount, plus contingent rent based on a percentage of sales exceeding a stipulated amount. Store lease terms generally require additional payments covering taxes, common area costs and certain other expenses. A summary of rent expense follows (thousands):
2001 2000 1999 ------------- ------------- -------------- Store rent: Fixed minimum $ 83,608 $ 65,716 $ 51,086 Contingent 4,897 7,079 8,246 ------------- ------------- -------------- Total store rent $ 88,505 $ 72,795 $ 59,332 Buildings, equipment and other 1,566 2,777 2,574 ------------- ------------- -------------- Total rent expense $ 90,071 $ 75,572 $ 61,906 ============= ============= ==============
At February 2, 2002, the Company was committed to noncancelable leases with remaining terms of one to fourteen years. These commitments include store leases with initial terms ranging primarily from ten to fifteen years. A summary of minimum rent commitments under noncancelable leases follows (thousands): 2002 $104,085 2003 105,953 2004 105,317 2005 102,533 2006 95,926 Thereafter 309,106 28 6. ACCRUED EXPENSES Accrued expenses consisted of the following (thousands): 2001 2000 ---------- --------- Accrual for construction in progress $ 25,338 $ 24,371 Unredeemed gift card revenue 17,031 11,636 Rent and landlord charges 16,247 15,634 Catalogue and advertising costs 11,178 7,818 Compensation and benefits 9,492 11,771 Taxes, other than income 3,552 5,102 Other 26,748 24,970 ---------- --------- Total $ 109,586 $ 101,302 ========== ========= 7. INCOME TAXES The provision for income taxes consisted of (thousands):
2001 2000 1999 ---------- ---------- ------------ Currently Payable: Federal $ 80,126 $ 80,856 $ 84,335 State 14,567 18,403 20,251 ---------- ---------- ------------ $ 94,693 $ 99,259 $ 104,586 ---------- ---------- ------------ Deferred: Federal 11,133 2,814 (3,885) State 2,024 1,247 (971) ---------- ---------- ------------ $ 13,157 $ 4,061 $ (4,856) ---------- ---------- ------------ Total provision $ 107,850 $ 103,320 $ 99,730 ========== ========== ============ A reconciliation between the statutory Federal income tax rate and the effectice income tax rate follows: 2001 2000 1999 --------------- ------------- ------------ Federal income tax rate 35.0% 35.0% 35.0% State income tax, net of Federal income tax effect 3.9% 4.1% 4.6% Other items, net 0.1% 0.4% 0.4% --------------- ------------- ------------ Total 39.0% 39.5% 40.0% =============== ============= ============
Income taxes payable included net current deferred tax assets of $4.9 million and $12.6 million at February 2, 2002 and February 3, 2001, respectively. Subsequent to the Exchange Offer, the Company began filing its tax returns on a separate basis and made tax payments directly to taxing authorities. Prior to the Exchange Offer, the Company was included in the consolidated federal and certain state income tax groups of The Limited for income tax purposes. Under this arrangement, the Company was responsible for and paid The Limited its proportionate share of income taxes, calculated upon its separate taxable income at the estimated annual effective tax rate. Amounts paid to The Limited totaled $20 thousand, $829 thousand and 29 $9.1 million in 2001, 2000 and 1999, respectively. Amounts paid directly to taxing authorities were $94.3 million, $111.7 million and $81.1 million in 2001, 2000 and 1999, respectively. The effect of temporary differences which gives rise to deferred income tax assets (liabilities) was as follows (thousands):
2001 2000 ---------------- ----------------- Deferred tax assets: Deferred compensation $ 8,833 $ 8,311 Rent 1,525 2,414 Accrued expenses 7,216 8,144 Inventory 1,747 2,767 Other, net 139 - ---------------- ----------------- Total deferred tax assets 19,460 21,636 ---------------- ----------------- Deferred tax liabilities: Store supplies (7,417) (2,061) Property and equipment (8,307) (85) ---------------- ----------------- Total deferred tax liabilities (15,724) (2,146) ---------------- ----------------- Net deferred income tax assets $ 3,736 $19,490 ================ =================
No valuation allowance has been provided for deferred tax assets because management believes that it is more likely than not that the full amount of the net deferred tax assets will be realized in the future. 8. LONG-TERM DEBT The Company entered into a $150 million syndicated unsecured credit agreement (the "Agreement") on April 30, 1998. Borrowings outstanding under the Agreement are due April 30, 2003. The Agreement has several borrowing options, including interest rates that are based on the bank agent's "Alternate Base Rate," a LIBO Rate or a rate submitted under a bidding process. Facility fees payable under the Agreement are based on the Company's ratio (the "leverage ratio") of the sum of total debt plus 800% of forward minimum rent commitments to trailing four-quarters EBITDAR and currently accrues at .225% of the committed amount per annum. The Agreement contains limitations on debt, liens, restricted payments (including dividends), mergers and acquisitions, sale-leaseback transactions, investments, acquisitions, hedging transactions, and transactions with affiliates. It also contains financial covenants requiring a minimum ratio of EBITDAR to interest expense and minimum rent and a maximum leverage ratio. No amounts were outstanding under the Agreement at February 2, 2002 or February 3, 2001. 9. RELATED PARTY TRANSACTIONS Subsequent to the Exchange Offer, A&F and The Limited entered into various service agreements for terms ranging from one to three years. A&F hired associates with the appropriate expertise or contracted with outside parties to replace those services which expired in May 1999. Service agreements were also entered into for the continued use by the Company of its distribution and home office space and transportation and logistic services. The agreement for use of distribution space terminated in April 2001. The agreements for home office space and transportation and logistics services expired in May 2001. The cost of these services generally was equal to The Limited's cost in providing the relevant services plus 5% of such costs. 30 Costs incurred to replace the services provided by The Limited did not have a material adverse impact on the Company's financial condition. Shahid & Company, Inc. has provided advertising and design services for the Company since 1995. Sam N. Shahid Jr., who serves on A&F's Board of Directors, has been President and Creative Director of Shahid & Company, Inc. since 1993. Fees paid to Shahid & Company, Inc. for services provided during fiscal years 2001, 2000 and 1999 were approximately $1.8 million, $1.7 million and $1.4 million, respectively. On January 1, 2002, A&F loaned the amount of $4,953,833 to its Chairman of the Board, a major shareholder of A&F, pursuant to the terms of a replacement promissory note, which provides that such amount is due and payable on December 31, 2002. If A&F records net sales of at least $1,156,100,000 during the period from February 3, 2002 through November 30, 2002, the outstanding principal under the note will not bear interest. If A&F does not record net sales exceeding that threshold, the outstanding principal under the note will bear interest from January 1, 2002 at the rate of 4.5% per annum. This note constitutes a replacement of, and substitute for, the replacement promissory note dated as of May 18, 2001 in the amount of $4,817,146, which has been cancelled. The replacement promissory note dated May 18, 2001 constituted a replacement of, and substitute for, the replacement promissory note dated as of August 28, 2000 in the amount of $4.5 million. The replacement promissory note dated August 28, 2000 constituted a replacement of, and substitute for, the promissory note dated March 1, 2000 and the replacement promissory note dated May 19, 2000 in the amounts of $1.5 million and $3.0 million, respectively. The replacement promissory note dated May 19, 2000 constituted a replacement of, and substitute for, the promissory note dated as of November 17, 1999 in the amount of $1.5 million. 10. STOCK OPTIONS AND RESTRICTED SHARES Under A&F's stock plans, associates and non-associate directors may be granted up to a total of 21.3 million restricted shares and options to purchase A&F's common stock at the market price on the date of grant. In 2001, associates of the Company were granted approximately 600 thousand options, with vesting periods from four to five years. A total of 84,000 options were granted to non-associate directors in 2001, all of which vest over four years. All options have a maximum term of ten years. The Company adopted the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based Compensation," in 1996, but elected to continue to measure compensation expense in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation expense for stock options has been recognized. If compensation expense had been determined based on the estimated fair value of options granted in 2001, 2000 and 1999, consistent with the methodology in SFAS No. 123, the pro forma effect on net income and net income per diluted share would have been a reduction of approximately $20.6 million or $.20 per share in 2001, $20.0 million or $.20 per share in 2000 and $18.5 million or $.17 per share in 1999. The weighted-average fair value of all options granted during fiscal 2001, 2000 and 1999 was $14.96, $8.90 and $23.34, respectively. The fair value of each option was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions for 2001, 2000 and 1999: no expected dividends; price volatility of 54% in 2001, 50% in 2000 and 45% in 1999; risk-free interest rates of 4.7%, 6.2% and 6.0% in 2001, 2000 and 1999, respectively; assumed forfeiture rates of 15% in 2001 and 10% in 2000 and 1999; and expected lives of 5 years in 2001 and 2000 and 6.5 years in 1999. The pro forma effect on net income for 2001, 2000 and 1999 is not representative of the pro forma effect on net income in future years because it takes into consideration pro forma compensation expense related only to those grants made subsequent to the Offering. 31 Options Outstanding at February 2, 2002
Options Outstanding Options Exercisable ----------------------------------------------------------------------- --------------------------------- Weighted Average Weighted Weighted Range of Remaining Average Average Exercise Number Contractual Exercise Number Exercisable Prices Outstanding Life Price Exercisable Price ----------------- --------------- --------------- ------------- --------------- -------------- $ 8 - $23 4,449,000 6.3 $13.02 1,762,000 $11.21 $23 - $38 3,304,000 7.2 $26.29 1,126,000 $26.34 $38 - $52 5,208,000 7.5 $43.50 177,000 $41.07 ----------------- --------------- --------------- ------------- --------------- -------------- $ 8 - $52 12,961,000 7.0 $28.65 3,065,000 $18.49 ================= =============== =============== ============= =============== ==============
A summary of option activity for 2001, 2000 and 1999 follows:
2001 2000 1999 --------------------------- ---------------------------- --------------------------- Weighted Weighted Weighted Average Average Average Option Option Option Shares Price Shares Price Shares Price -------------- ------------ ------------- ------------- ------------- ------------ Outstanding at beginning of year 12,994,000 $28.01 12,809,000 $28.03 7,568,000 $15.87 Granted 648,000 29.38 1,414,000 17.25 5,794,000 42.90 Exercised (521,000) 15.00 (193,000) 14.57 (337,000) 9.39 Canceled (160,000) 24.09 (1,036,000) 16.06 (216,000) 25.25 -------------- ------------ ------------- ------------- ------------ ------------- Outstanding at end of year 12,961,000 $28.65 12,994,000 $28.01 12,809,000 $28.03 ============== ============ ============= ============= ============= ============ Options exercisable at year-end 3,065,000 $18.49 2,164,000 $16.13 556,000 $ 9.85 ============== ============ ============= ============= ============= ============
A total of 19,000, 102,000 and 140,000 restricted shares were granted in 2001, 2000 and 1999, respectively, with a total market value at grant date of $.6 million, $2.3 million and $5.4 million, respectively. The restricted share grants generally vest either on a graduated scale over four years or 100% at the end of a fixed vesting period, principally five years. The market value of restricted shares is being amortized as compensation expense over the vesting period, generally four to five years. Compensation expenses related to restricted share awards amounted to $3.9 million, $4.3 million and $5.2 million in 2001, 2000 and 1999, respectively. 11. RETIREMENT BENEFITS The Company participates in a qualified defined contribution retirement plan and a nonqualified supplemental retirement plan. Participation in the qualified plan is available to all associates who have completed 1,000 or more hours of service with the Company during certain 12-month periods and attained the age of 21. Participation in the nonqualified plan is subject to service and compensation requirements. The Company's contributions to these plans are based on a percentage of associates' eligible annual compensation. The cost of these plans was $3.9 million in 2001, $3.0 million in 2000 and $2.6 million in 1999. 32 12. CONTINGENCIES The Company is involved in a number of legal proceedings. Although it is not possible to predict with any certainty the eventual outcome of any legal proceedings, it is the opinion of management that the ultimate resolution of these matters will not have a material impact on the Company's results of operations, cash flows or financial position. 13. PREFERRED STOCK PURCHASE RIGHTS On July 16, 1998, A&F's Board of Directors declared a dividend of .50 of a Series A Participating Cumulative Preferred Stock Purchase Right (Right) for each outstanding share of Class A Common Stock, par value $.01 per share (Common Stock), of A&F. The dividend was paid to shareholders of record on July 28, 1998. Shares of Common Stock issued after July 28, 1998 and prior to the Distribution Date described below will be issued with .50 Right attached. Under certain conditions, each whole Right may be exercised to purchase one one-thousandth of a share of Series A Participating Cumulative Preferred Stock at an initial price of $250. The Rights initially will be attached to the shares of Common Stock. The Rights will separate from the Common Stock and a Distribution Date will occur upon the earlier of 10 business days after a public announcement that a person or group has acquired beneficial ownership of 20% or more of A&F's outstanding shares of Common Stock and become an "Acquiring Person" (Share Acquisition Date) or 10 business days (or such later date as the Board shall determine before any person has become an Acquiring Person) after commencement of a tender or exchange offer which would result in a person or group beneficially owning 20% or more of A&F's outstanding Common Stock. The Rights are not exercisable until the Distribution Date. In the event that any person becomes an Acquiring Person, each holder of a Right (other than the Acquiring Person and certain affiliated persons) will be entitled to purchase, upon exercise of the Right, shares of Common Stock having a market value two times the exercise price of the Right. At any time after any person becomes an Acquiring Person (but before any person becomes the beneficial owner of 50% or more of the outstanding shares), A&F's Board of Directors may exchange all or part of the Rights (other than Rights beneficially owned by an Acquiring Person and certain affiliated persons) for shares of Common Stock at an exchange ratio of one share of Common Stock per Right. In the event that, at any time following the Share Acquisition Date, A&F is acquired in a merger or other business combination transaction in which A&F is not the surviving corporation, the Common Stock is exchanged for other securities or assets or 50% or more of A&F's assets or earning power is sold or transferred, the holder of a Right will be entitled to buy, for the exercise price of the Rights, the number of shares of Common Stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the Right. The Rights, which do not have any voting rights, expire on July 16, 2008, and may be redeemed by A&F at a price of $.01 per whole Right at any time before a person becomes an Acquiring Person. Rights holders have no rights as a shareholder of A&F, including the right to vote and to receive dividends. 33 14. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial results for 2001 and 2000 follow (thousands except per share amounts):
2001 Quarter First Second Third Fourth --------------------------------- ------------- -------------- -------------- -------------- Net sales $263,680 $280,116 $354,473 $466,584 Gross income 97,840 108,327 143,403 208,464 Net income 20,603 25,038 43,863 79,168 Net income per basic share $.21 $.25 $.44 $.80 Net income per diluted share $.20 $.24 $.43 $.78 2000 Quarter First Second Third Fourth --------------------------------- ------------- -------------- -------------- -------------- Net sales $205,006 $229,031 $364,122 $439,445 Gross income 75,403 87,765 143,283 202,924 Net income 16,163 21,163 43,592 77,215 Net income per basic share $.16 $.21 $.44 $.78 Net income per diluted share $.16 $.21 $.43 $.76
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 34 Report of Independent Accountants To the Board of Directors and Shareholders of Abercrombie & Fitch: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity and cash flows present fairly, in all material respects, the financial position of Abercrombie & Fitch and its subsidiaries at February 2, 2002 and February 3, 2001, and the results of their operations and their cash flows for each of the three years in the period ended February 2, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Columbus, Ohio February 19, 2002 35 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information regarding directors of A&F is set forth under the captions "ELECTION OF DIRECTORS - Nominees and Directors", "- Business Experience", "- Information Concerning the Board of Directors" and "- Security Ownership of Directors and Management" and "EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with Certain Executive Officers" in A&F's definitive proxy statement for the Annual Meeting of Shareholders to be held on May 23, 2002 (the "Proxy Statement") and is incorporated herein by reference. Information regarding executive officers of A&F is set forth under the captions "ELECTION OF DIRECTORS - Business Experience", " - Executive Officers", and "- Security Ownership of Directors and Management" and "EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with Certain Executive Officers" in the Proxy Statement and is incorporated herein by reference. In addition, information regarding executive officers of A&F is included in this Annual Report on Form 10-K under the caption "SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT" in Part I and is incorporated herein by reference. No disclosure is required to be made under Item 405 of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION. Information regarding executive compensation is set forth under the caption "EXECUTIVE COMPENSATION" in the Proxy Statement and is incorporated herein by reference. Such incorporation by reference shall not be deemed to specifically incorporate by reference the information referred to in Item 402(a)(8) of Regulation S-K. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information regarding the security ownership of certain beneficial owners and management is set forth under the captions "PRINCIPAL HOLDERS OF SHARES" and "ELECTION OF DIRECTORS - Security Ownership of Directors and Management" in the Proxy Statement and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information regarding certain relationships and related transactions is set forth under the captions "ELECTION OF DIRECTORS - Business Experience" and "EXECUTIVE COMPENSATION - Employment Agreements and Other Transactions with Certain Executive Officers" in the Proxy Statement and is incorporated herein by reference. 36 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1) List of Financial Statements. ---------------------------- The following consolidated financial statements of Abercrombie & Fitch and the related notes are filed as a part of this report pursuant to ITEM 8: Consolidated Statements of Income for the fiscal years ended February 2, 2002, February 3, 2001 and January 29, 2000. Consolidated Balance Sheets as of February 2, 2002 and February 3, 2001. Consolidated Statements of Shareholders' Equity for the fiscal years ended February 2, 2002, February 3, 2001 and January 29, 2000. Consolidated Statements of Cash Flows for the fiscal years ended February 2, 2002, February 3, 2001 and January 29, 2000. Notes to Consolidated Financial Statements. Report of Independent Accountants. (a)(2) List of Financial Statement Schedules. ------------------------------------- All schedules are omitted because the required information is either presented in the consolidated financial statements or notes thereto, or is not applicable, required or material. (a)(3) List of Exhibits. ---------------- 3. Certificate of Incorporation and Bylaws 3.1 Amended and Restated Certificate of Incorporation of A&F as filed with the Delaware Secretary of State on August 27, 1996, incorporated by reference to Exhibit 3.1 to A&F's Quarterly Report on Form 10-Q for the quarter ended November 2, 1996. (File No. 1-12107) 3.2 Certificate of Designation of Series A Participating Cumulative Preferred Stock of A&F as filed with the Delaware Secretary of State on July 21, 1998, incorporated by reference to Exhibit 3.2 to A&F's Annual Report on Form 10-K for the year ended January 30, 1999. (File No. 1-12107) 3.3 Certificate of Decrease of Shares Designated as Class B Common Stock as filed with the Delaware Secretary of State on July 30, 1999, incorporated by reference to Exhibit 3.3 to A&F's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999. (File No. 1-12107) 3.4 Amended and Restated Bylaws of A&F, effective January 31, 2002. 4. Instruments Defining the Rights of Security Holders. 4.1 Credit Agreement, dated as of April 30, 1998, among Abercrombie & Fitch Stores, Inc., as Borrower, A&F, as Guarantor, the Lenders party thereto, The Chase Manhattan Bank, as Administrative Agent, and Chase Securities, Inc., as Arranger, 37 incorporated by reference to Exhibit 4.1 to A&F's Current Report on Form 8-K dated May 7, 1998. (File No. 1-12107) 4.2 First Amendment and Waiver, dated as of July 30, 1999, to the Credit Agreement, dated as of April 30, 1998, among Abercrombie & Fitch Stores, Inc., A&F, the lenders party thereto and The Chase Manhattan Bank, as Administrative Agent, incorporated by reference to Exhibit 4.3 to A&F's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999. (File No. 1-12107) 4.3 Rights Agreement, dated as of July 16, 1998, between A&F and First Chicago Trust Company of New York, as Rights Agent, incorporated by reference to Exhibit 1 to A&F's Registration Statement on Form 8-A dated July 21, 1998. (File No. 1-12107) 4.4 Amendment No. 1 to Rights Agreement, dated as of April 21, 1999, between A&F and First Chicago Trust Company of New York, as Rights Agent, incorporated by reference to Exhibit 2 to A&F's Amendment No. 1 to Form 8-A dated April 23, 1999. (File No. 1-12107) 4.5 Certificate of adjustment of number of Rights associated with each share of Class A Common Stock, dated May 27, 1999, incorporated by reference to Exhibit 4.6 to A&F's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999. (File No. 1-12107) 4.6 Appointment and Acceptance of Successor Rights Agent, effective as of the opening of business on October 8, 2001, between A&F and National City Bank, incorporated by reference to Exhibit 4.6 to A&F's Quarterly Report on Form 10-Q for the quarter ended August 4, 2001. (File No. 1-12107) 10. Material Contracts. 10.1 Abercrombie & Fitch Co. Incentive Compensation Performance Plan, incorporated by reference to Exhibit A to A&F's Proxy Statement dated April 14, 1997. (File No. 1-12107) 10.2 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Option and Performance Incentive Plan (reflects amendments through December 7, 1999 and the two-for-one stock split distributed June 15, 1999 to stockholders of record on May 25, 1999), incorporated by reference to Exhibit 10.2 to A&F's Annual Report on Form 10-K for the year ended January 29, 2000. (File No. 1-12107) 10.3 1998 Restatement of the Abercrombie & Fitch Co. 1996 Stock Plan for Non-Associate Directors (reflects amendments through November 1, 2001 and the two-for-one stock split distributed June 15, 1999 to stockholders of record on May 25, 1999), incorporated by reference to Exhibit 10.3 to A&F's Quarterly Report on Form 10-Q for the quarter ended November 3, 2001. (File No. 1-12107) 10.4 Abercrombie & Fitch Co. 2002 Stock Option Plan for Associates. 10.5 Employment Agreement by and between A&F and Michael S. Jeffries dated as of May 13, 1997 with exhibits and amendment, incorporated by reference to Exhibit 10.4 to A&F's Quarterly Report on Form 10-Q for the quarter ended November 1, 1997. (File No. 1-12107) 10.6 Employment Agreement by and between A&F and Seth R. Johnson dated as of December 5, 1997, incorporated by reference to Exhibit 10.10 to A&F's 38 Amendment No. 4 to Form S-4 Registration Statement filed on April 14, 1998 (Registration No. 333-46423). 10.7 Tax Disaffiliation Agreement dated as of May 19, 1998 between The Limited, Inc. and A&F, incorporated by reference to Exhibit 10.7 to A&F's Quarterly Report on Form 10-Q for the quarter ended May 2, 1998. (File No. 1-12107) 10.8 Abercrombie & Fitch, Inc. Directors' Deferred Compensation Plan, incorporated by reference to Exhibit 10.14 to A&F's Annual Report on Form 10-K for the year ended January 30, 1999. (File No. 1-12107) 10.9 Replacement Promissory Note, dated January 1, 2002, issued by Michael S. Jeffries to A&F. 21. Subsidiaries of the Registrant. 23. Consent of Independent Accountants. 24. Powers of Attorney. (b) Reports on Form 8-K. ------------------- No reports on Form 8-K were filed during the fiscal quarter ended February 2, 2002. (c) Exhibits. -------- The exhibits to this report are listed in section (a)(3) of Item 14 above. (d) Financial Statement Schedules. ----------------------------- Not applicable. 39 SIGNATURES Pursuant to the requirements of Section 13 or l5(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: April 17, 2002 ABERCROMBIE & FITCH CO. By /s/ SETH R. JOHNSON -------------------------------------------------- Seth R. Johnson, Executive Vice President - Chief Operating Officer Principal Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on April 17, 2002. Signature Title --------- ----- /s/ MICHAEL S. JEFFRIES* Chairman of the Board of Directors and - ------------------------- Chief Executive Officer Michael S. Jeffries /s/ SETH R. JOHNSON Executive Vice President - Chief Operating - ------------------------- Officer and Director Seth R. Johnson /s/ RUSSELL M. GERTMENIAN* Director - -------------------------- Russell M. Gertmenian /s/ JOHN A. GOLDEN* Director - ------------------------- John A. Golden /s/ ARCHIE M. GRIFFIN* Director - ------------------------- Archie M. Griffin /s/ JOHN W. KESSLER* Director - ------------------------- John W. Kessler /s/ SAM N. SHAHID* Director - ------------------------- Sam N. Shahid /s/ KATHRYN D. SULLIVAN, Ph.D.* Director - ------------------------------- Kathryn D. Sullivan, Ph.D. *The undersigned, by signing his name hereto, does hereby sign this report on behalf of each of the above-indicated directors and executive officers of the registrant pursuant to powers of attorney executed by such directors and executive officers. By /s/ SETH R. JOHNSON -------------------------------------- Seth R. Johnson Attorney-in-fact 40 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2002 _________ ABERCROMBIE & FITCH CO. (Exact name of registrant as specified in its charter) _________ EXHIBITS _________ ================================================================================ EXHIBIT INDEX ------------- Exhibit No. Document - ----------- ------------------------------ 3.4 Amended and Restated Bylaws of A&F, effective January 31, 2002. 10.4 Abercrombie & Fitch Co. 2002 Stock Option Plan For Associates. 10.9 Replacement Promissory Note, dated January 1, 2002, issued by Michael S. Jeffries to A&F. 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. 24 Powers of Attorney. EX-3.4 3 dex34.txt AMENDED AND RESTATED BYLAWS EXHIBIT 3.4 ----------- AMENDED AND RESTATED BYLAWS OF ABERCROMBIE & FITCH CO. ARTICLE I STOCKHOLDERS Section 1.01. Annual Meeting. The annual meeting of the stockholders of -------------- this corporation, for the purpose of fixing or changing the number of directors of the corporation, electing directors and transacting such other business as may come before the meeting, shall be held on such date, at such time and at such place as may be designated by the Board of Directors. Section 1.02. Special Meetings. Special meetings of the stockholders ---------------- may be called at any time by the chairman of the board, or in case of the death, absence or disability of the chairman of the board, the president, or in case of the president's death, absence, or disability, the vice president, if any, authorized to exercise the authority of the president, or a majority of the Board of Directors acting with or without a meeting; provided, that if and to the extent that any special meeting of stockholders may be called by any other person or persons specified in any provision of the certificate of incorporation or any amendment thereto or any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), then such special meeting may also be called by the person or persons, in the manner, at the times and for the purposes so specified. Section 1.03. Place of Meetings. Meetings of stockholders shall be held ----------------- at the principal office of the corporation in the State of Ohio, unless the Board of Directors decides that a meeting shall be held at some other place and causes the notice thereof to so state. The Board of Directors may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place but may instead be held solely by means of remote communication satisfying the applicable provisions of the Delaware General Corporation Law (or its successor statute as in effect from time to time). Section 1.04. Notice of Meetings. (a) Unless waived, a written notice ------------------ of each annual or special meeting, stating the place, if any, date, hour and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting as well as the purpose or purposes of such meeting shall be given to each stockholder of record entitled to vote or entitled to notice, not more than 60 days nor less than 10 days before any such meeting. If mailed, such notice shall be directed to a stockholder at his or her address as the same appears on the records of the corporation. Notice to a stockholder shall also be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in the manner provided for in the applicable provisions of the Delaware General Corporation Law (or its successor statute as in effect from time to time). If a meeting is adjourned to another time or place and such adjournment is for 30 days or less and no new record date is fixed for the adjourned meeting, no further notice as to such adjourned meeting need be given if the time and place, if any, to which it is adjourned and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are fixed and announced at such meeting. In the event of a transfer of shares after notice has been given and prior to the holding of the meeting, it shall not be necessary to serve notice on the transferee. If the adjournment is for more than 30 days, or after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. (b) A written waiver of any such notice signed by the person entitled thereto, or a waiver by electronic transmission by the person entitled to any such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 1.05. Fixing Date for Determination of Stockholders of Record. ------------------------------------------------------- In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If the Board shall not fix such a record date, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held, and (ii) in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board of Directors shall adopt the resolution relating thereto. Determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 1.06. Organization. At each meeting of the stockholders, the ------------ chairman of the board, or in his absence, the president, or, in his absence, any vice-president, or, in the absence of the chairman of the board, the president and a vice-president, a chairman chosen by a majority in interest of the stockholders present in person or by proxy and entitled to vote, shall act as chairman of the meeting; and the secretary of the corporation, or, if the secretary of the corporation not be present, the assistant secretary, or if the secretary and the assistant secretary not be present, any person whom the chairman of the meeting shall appoint, shall act as secretary of the meeting. Section 1.07. Quorum. A stockholders' meeting duly called shall not be ------ organized for the transaction of business unless a quorum is present. Except as otherwise expressly provided by law, the certificate of incorporation, these Bylaws, or any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time), (i) at any meeting called by the Board of Directors, the presence in person or by proxy of holders of record entitling them to exercise at least one-third of the voting power of the corporation shall constitute a quorum for such meeting and (ii) at any meeting called other than by the Board of Directors, the presence in person or by proxy of holders of record entitling them to exercise at least a majority of the voting power of the corporation shall constitute a quorum for such meeting. The stockholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, a majority in voting interest of the stockholders present may adjourn, or, in the absence of a decision by the majority, any officer entitled to preside at such meeting may adjourn, the meeting from time to time to such time (not more than 30 days after the previously adjourned meeting) and place as they (or he) may determine, without notice other than by announcement at the meeting of the time and place, if any, of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. Section 1.08. Order of Business and Procedure. The order of business at ------------------------------- all meetings of the stockholders and all matters relating to the manner of conducting the meeting shall be determined by the chairman of the meeting. Meetings shall be conducted in a manner designed to accomplish the business of the meeting in a prompt and orderly fashion and to be fair and equitable to all stockholders, but it shall not be necessary to follow any manual of parliamentary procedure. Section 1.09. Advance Notice of Stockholder Proposals. In order to --------------------------------------- properly submit any business to an annual meeting of stockholders, a stockholder must give timely notice in writing to the secretary of the corporation. To be considered timely, a stockholder's notice must be delivered either in person or by United States certified mail, postage prepaid, and received at the principal executive offices of the corporation (a) not less than 120 days nor more than 150 days before the first anniversary date of the corporation's proxy statement in connection with the last annual meeting of stockholders or (b) if no annual meeting was held in the previous year or the date of the applicable annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year's proxy statement, not less than a reasonable time, as determined by the Board of Directors, prior to the date of the applicable annual meeting. Nomination of persons for election to the Board of Directors may be made by the Board of Directors or any committee designated by the Board of Directors or by any stockholder entitled to vote for the election of directors at the applicable meeting of stockholders. However, nominations other than those made by the Board of Directors or its designated committee must comply with the procedures set forth in this Section 1.09, and no person shall be eligible for election as a director unless nominated in accordance with the terms of this Section 1.09. A stockholder may nominate a person or persons for election to the Board of Directors by giving written notice to the secretary of the corporation in accordance with the procedures set forth above. In addition to the timeliness requirements set forth above for notice to the corporation by a stockholder of business to be submitted at an annual meeting of stockholders, with respect to any special meeting of stockholders called for the election of directors, written notice must be delivered in the manner specified above and not later than the close of business on the seventh day following the date on which notice of such meeting is first given to stockholders. The secretary of the corporation shall deliver any stockholder proposals and nominations received in a timely manner for review by the Board of Directors or a committee designated by the Board of Directors. A stockholder's notice to submit business to an annual meeting of stockholders shall set forth (i) the name and address of the stockholder, (ii) the class and number of shares of stock beneficially owned by such stockholder, (iii) the name in which such shares are registered on the stock transfer books of the corporation, (iv) a representation that the stockholder intends to appear at the meeting in person or by proxy to submit the business specified in such notice, (v) any material interest of the stockholder in the business to be submitted and (vi) a brief description of the business desired to be submitted to the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting. In addition, the stockholder making such proposal shall promptly provide any other information reasonably requested by the corporation. In addition to the information required above to be given by a stockholder who intends to submit business to a meeting of stockholders, if the business to be submitted is the nomination of a person or persons for election to the Board of Directors, then such stockholder's notice must also set forth, as to each person whom the stockholder proposes to nominate for election as a director, (a) the name, age, business address and, if known, residence address of such person, (b) the principal occupation or employment of such person, (c) the class and number of shares of stock of the corporation which are beneficially owned by such person, (d) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors or is otherwise required by the rules and regulations of the Securities and Exchange Commission promulgated under the Securities Exchange Act of 1934, as amended, (e) the written consent of such person to be named in the proxy statement as a nominee and to serve as a director if elected and (f) a description of all arrangements or understandings between such stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by such stockholder. Any person nominated for election as director by the Board of Directors or any committee designated by the Board of Directors shall, upon the request of the Board of Directors or such committee, furnish to the secretary of the corporation all such information pertaining to such person that is required to be set forth in a stockholder's notice of nomination. Notwithstanding the foregoing provisions of this Section 1.09, a stockholder who seeks to have any proposal included in the corporation's proxy statement shall comply with the requirements of Regulation 14A under the Securities Exchange Act of 1934, as amended. Section 1.10. Voting. (a) Each stockholder shall, at each meeting of ------ the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the corporation having voting rights on the matter in question and which shall have been held by him and registered in his name on the books of the corporation on the date fixed pursuant to Section 1.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting. (b) Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the corporation, shall neither be entitled to vote nor be counted for quorum purposes. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing signed by such stockholder or by his attorney thereunto authorized or appointed in any other manner permitted by the law of Delaware. Any such instrument in writing or record of any such appointment shall be filed with or received by the secretary of the meeting in sufficient time to permit the necessary examination and tabulation thereof before the vote is taken. No appointment of a proxy shall be valid after the expiration of three years after it is made unless the writing or other communication or transmission which appoints such proxy specifies the length of time it is to continue in force. At any meeting of the stockholders all matters, except as otherwise provided in the certificate of incorporation, in these Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and voting thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting or required by the certificate of incorporation. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and shall state the number of shares voted. Section 1.11. Inspectors. The Board of Directors, in advance of any ---------- meeting of the stockholders, shall appoint one or more inspectors to act at the meeting and make a written report thereof. If any person so appointed fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at the meeting with strict impartiality and according to the best of his ability. The inspectors so appointed shall (a) ascertain the number of shares outstanding and the voting power of each; (b) determine the shares represented at the meeting and the validity of proxies and ballots; (c) count all votes and ballots; (d) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (e) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. Any report or certificate made by the inspectors shall be prima facie evidence of the facts stated and of the vote as certified by them. Section 1.12. List of Stockholders. The officer who has charge of the -------------------- stock ledger of the corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing contained in this Section shall require the corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting: (a) on a reasonably accessible electronic network, provided that the information to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of the corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. ARTICLE II BOARD OF DIRECTORS Section 2.01. General Powers of Board. The powers of the corporation ----------------------- shall be exercised, its business and affairs conducted, and its property controlled by or under the direction of the Board of Directors, except as otherwise provided by the law of Delaware or in the certificate of incorporation. Section 2.02. Number of Directors. The number of directors of the ------------------- corporation (exclusive of directors to be elected by the holders of any one or more series of Preferred Stock voting separately as a class or classes) shall not be less than four nor more than nine, the exact number of directors to be such number as may be set from time to time within the limits set forth above by resolution adopted by affirmative vote of a majority of the whole Board. As used in these Bylaws, the term "whole Board" means the total number of directors which the corporation would have if there were no vacancies. Section 2.03. Election of Directors. At each meeting of the --------------------- stockholders for the election of directors, the persons receiving the greatest number of votes shall be the directors. Directors need not be stockholders. Section 2.04. Nominations. ----------- 2.04.1. Nominations for the election of directors may be made by the Board of Directors or any committee designated by the Board of Directors or by any stockholder entitled to vote for the election of directors at the applicable meeting of stockholders. 2.04.2. Such nominations, if not made by the Board of Directors or its designated committee, shall be made in accordance with the procedures set forth in Section 1.09 of these Bylaws. 2.04.3. Notice of nominations which are proposed by the Board of Directors or its designated committee shall be given on behalf of the Board or such committee by the chairman of the meeting. 2.04.4. The chairman of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the required procedures, and if the chairman should so determine, the chairman shall so declare to the meeting and the defective nomination shall be disregarded. Section 2.05. Resignations. Any director of the corporation may resign ------------ at any time by giving written notice or notice by electronic transmission to the chairman of the board or the secretary of the corporation. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 2.06. Vacancies. In the event that any vacancy shall occur in --------- the Board of Directors, whether because of death, resignation, removal, newly created directorships resulting from any increase in the authorized number of directors, the failure of the stockholders to elect the whole authorized number of directors, or any other reason, such vacancy may be filled by the vote of a majority of the directors then in office, although less than a quorum. A director elected to fill a vacancy, other than a newly created directorship, shall hold office for the unexpired term of his predecessor. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. Section 2.07. Removal of Directors. Directors may be removed only as -------------------- provided in the certificate of incorporation. Section 2.08. Place of Meeting, etc. The Board of Directors may hold --------------------- any of its meetings at the principal office of the corporation or at such other place or places as the Board of Directors (or the chairman in the absence of a determination by the Board of Directors) may from time to time designate. Directors may participate in any regular or special meeting of the Board of Directors by means of conference telephone or other communications equipment pursuant to which all persons participating in the meeting of the Board of Directors can hear each other and such participation shall constitute presence in person at such meeting. Section 2.09. Annual Meeting. A regular annual meeting of the Board of -------------- Directors shall be held each year at the same place as and immediately after the annual meeting of stockholders, or at such other place and time as shall theretofore have been determined by the Board of Directors and notice thereof need not be given. At its regular annual meeting, the Board of Directors shall organize itself and elect the officers of the corporation for the ensuing year, and may transact any other business. Section 2.10. Regular Meetings. Regular meetings of the Board of ---------------- Directors may be held at such intervals at such time as shall from time to time be determined by the Board of Directors. After such determination and notice thereof has been once given to each person then a member of the Board of Directors, regular meetings may be held at such intervals and time and place without further notice being given. Section 2.11. Special Meetings. Special meetings of the Board of ---------------- Directors may be called at any time by the Board of Directors or by the chairman of the board or by a majority of directors then in office to be held on such day and at such time as shall be specified by the person or persons calling the meeting. Section 2.12. Notice of Meetings. Notice of each special meeting or, ------------------ where required, each regular meeting, of the Board of Directors shall be given to each director either by being mailed on at least the third day prior to the date of the meeting or by being telegraphed, faxed or given personally or by telephone on at least 24 hours notice prior to the date of meeting. Such notice shall specify the place, date and hour of the meeting and, if it is for a special meeting, the purpose or purposes for which the meeting is called. At any meeting of the Board of Directors at which every director shall be present, even though without such notice, any business may be transacted. Any acts or proceedings taken at a meeting of the Board of Directors not validly called or constituted may be made valid and fully effective by ratification at a subsequent meeting which shall be legally and validly called or constituted. Notice of any regular meeting of the Board of Directors need not state the purpose of the meeting and, at any regular meeting duly held, any business may be transacted. If the notice of a special meeting shall state as a purpose of the meeting the transaction of any business that may come before the meeting, then at the meeting any business may be transacted, whether or not referred to in the notice thereof. A written waiver of notice of a special or regular meeting, signed by the person or persons entitled to such notice, whether before or after the time stated therein shall be deemed the equivalent of such notice, and attendance of a director at a meeting shall constitute a waiver of notice of such meeting except when the director attends the meeting and prior to or at the commencement of such meeting protests the lack of proper notice. Section 2.13. Quorum and Voting. At all meetings of the Board of ----------------- Directors, the presence of a majority of the directors then in office shall constitute a quorum for the transaction of business. Except as otherwise required by law, the certificate of incorporation, or these Bylaws, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors. At all meetings of the Board of Directors, each director shall have one vote. Section 2.14. Committees. The Board of Directors may appoint an ---------- executive committee and any other committee of the Board of Directors, to consist of one or more directors of the corporation, and may delegate to any such committee any of the authority of the Board of Directors, however conferred, other than the power or authority in reference to amending the certificate of incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the Bylaws of the corporation. No committee shall have the power or authority to declare a dividend or to authorize the issuance of stock unless the resolution creating such committee expressly so provides. Each such committee shall serve at the pleasure of the Board of Directors, shall act only in the intervals between meetings of the Board of Directors and shall be subject to the control and direction of the Board of Directors. Any such committee may act by a majority of its members at a meeting or without a meeting if all members of the committee consent to the action in writing or by electronic transmission. Any such committee shall keep written minutes of its meetings and report the same to the Board of Directors at the next regular meeting of the Board of Directors. Section 2.15. Compensation. The Board of Directors may, by resolution ------------ passed by a majority of those in office, fix the compensation of directors for service in any capacity and may fix fees for attendance at meetings and may authorize the corporation to pay the traveling and other expenses of directors incident to their attendance at meetings, or may delegate such authority to a committee of the Board of Directors. Section 2.16. Action by Consent. Any action required or permitted to be ----------------- taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing(s) or electronic transmission(s) are filed with the minutes of proceedings of the Board or such committee. ARTICLE III OFFICERS Section 3.01. General Provisions. The principal officers of the ------------------ corporation shall be the chairman of the board (who shall be a director), a president (who shall be a director), such number of vice-presidents as the Board of Directors may from time to time determine, a secretary and a treasurer. Any person may hold any two or more offices and perform the duties thereof, except the offices of president and vice-president or the offices of president and secretary. Section 3.02. Election, Terms of Office, and Qualification. The -------------------------------------------- officers of the corporation named in Section 3.01 of this Article III shall be elected by the Board of Directors for an indeterminate term and shall hold office at the pleasure of the Board of Directors. Section 3.03. Additional Officers, Agents, etc. In addition to the -------------------------------- officers mentioned in Section 3.01 of this Article III, the corporation may have such other officers or agents as the Board of Directors may deem necessary and may appoint, each of whom shall hold office for such period, have such authority and perform such duties as the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer the power to appoint any subordinate officers or agents. In the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers and duties, or any of them, of such officer to any other officer, or to any director. Section 3.04. Removal. Except as set forth below, any officer of the ------- corporation may be removed, either with or without cause, at any time, by resolution adopted by the Board of Directors at any meeting, the notice (or waivers of notice) of which shall have specified that such removal action was to be considered. Any officer appointed not by the Board of Directors but by an officer or committee to which the Board of Directors shall have delegated the power of appointment may be removed, with or without cause, by the committee or superior officer (including successors) who made the appointment, or by any committee or officer upon whom such power of removal may be conferred by the Board of Directors. Section 3.05. Resignations. Any officer may resign at any time by ------------ giving written notice to the Board of Directors, or to the chairman of the board, the president, or the secretary of the corporation. Any such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.06. Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification, or otherwise, shall be filled in the manner prescribed in these Bylaws for regular appointments or elections to such office. ARTICLE IV DUTIES OF THE OFFICERS Section 4.01. The Chairman of the Board. The chairman of the board ------------------------- shall have general supervision over the property, business and affairs of the corporation and over its several officers, subject, however, to the control of the Board of Directors. The chairman of the board shall, if present, preside at all meetings of the stockholders and of the Board of Directors. The chairman of the board may sign, with the secretary, treasurer or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares in the corporation. The chairman of the board may also sign, execute and deliver in the name of the corporation all deeds, mortgages, bonds, leases, contracts or other instruments either when specially authorized by the Board of Directors or when required or deemed necessary or advisable by him in the conduct of the corporation's normal business, except in cases where the signing and execution thereof shall be expressly delegated by these Bylaws or the Board of Directors to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed by some other officer or agent, and the chairman of the board may cause the seal of the corporation, if any, to be affixed to any instrument requiring the same. Section 4.02. The President. The president shall be chief executive ------------- officer of the corporation and shall perform such duties as are conferred upon him by these Bylaws or as may from time to time be assigned to him by the chairman of the board or the Board of Directors. The president may sign, execute and deliver in the name of the corporation all deeds, mortgages, bonds, leases, contracts, or other instruments either when specially authorized by the Board of Directors or when required or deemed necessary or advisable by him in the ordinary conduct of the corporation's normal business, except in cases where the signing and execution thereof shall be expressly delegated by these Bylaws to some other officer or agent of the corporation or shall be required by law or otherwise to be signed or executed by some other officer or agent, and the president may cause the seal of the corporation, if any, to be affixed to any instrument requiring the same. Section 4.03. Vice-Presidents. The vice-presidents shall perform such --------------- duties as are conferred upon them by these Bylaws or as may from time to time be assigned to them by the Board of Directors, the chairman of the board or the president. At the request of the chairman of the board, in the absence or disability of the president, the vice-president designated by the chairman of the board shall perform all the duties of the president, and when so acting, shall have all of the powers of the president. Section 4.04. The Treasurer. The treasurer shall be the custodian of ------------- all funds and securities of the corporation. Whenever so directed by the Board of Directors, the treasurer shall render a statement of the cash and other accounts of the corporation, and the treasurer shall cause to be entered regularly in the books and records of the corporation to be kept for such purpose full and accurate accounts of the corporation's receipts and disbursements. The treasurer shall have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors or the chairman of the board. Section 4.05. The Secretary. The secretary shall record and keep the ------------- minutes of all meetings of the stockholders and the Board of Directors in a book to be kept for that purpose. The secretary shall be the custodian of, and shall make or cause to be made the proper entries in, the minute book of the corporation and such other books and records as the Board of Directors may direct. The secretary shall be the custodian of the seal of the corporation, if any, and shall affix such seal to such contracts, instruments and other documents as the Board of Directors or any committee thereof may direct. The secretary shall have such other powers and shall perform such other duties as may from time to time be assigned to him by the Board of Directors or the chairman of the board. ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 5.01. Indemnification. (a) The corporation shall indemnify and --------------- hold harmless any person (and the heirs, executors or administrators of such person) who was or is a party or is threatened to be made a party to, or is involved in, any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he, his testator, or intestate is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, to the fullest extent permitted by the laws of Delaware as they may exist from time to time. The right to indemnification conferred in this Article V shall also include the right to be paid by the corporation the expenses incurred in connection with any such proceeding in advance of its final disposition to the fullest extent permitted by the laws of Delaware as they may exist from time to time. (b) The corporation may, by action of its Board of Directors, provide indemnification to such of the employees and agents of the corporation to such extent and to such effect as the Board of Directors shall determine to be appropriate and authorized by the laws of Delaware as they may exist from time to time. Section 5.02. Insurance. The proper officers of the corporation, --------- without further authorization by the Board of Directors, may in their discretion purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent for another corporation, partnership, joint venture, trust or other enterprise, against any liability. Section 5.03. ERISA. To assure indemnification under this Article V of ----- all such persons who are or were "fiduciaries" of an employee benefit plan governed by the Act of Congress entitled "Employee Retirement Income Security Act of 1974", as amended from time to time, the provisions of this Article V shall, for the purposes hereof, be interpreted as follows: an "other enterprise" shall be deemed to include an employee benefit plan; the corporation shall be deemed to have requested a person to serve as an employee of an employee benefit plan where the performance by such person of his duties to the corporation also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; excise taxes assessed on a person with respect to an employee benefit plan pursuant to said Act of Congress shall be deemed "fines"; and action taken or omitted by a person with respect to an employee benefit plan in the performance of such person's duties for a purpose reasonably believed by such person to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the corporation. Section 5.04. Contractual Nature. The foregoing provisions of this ------------------ Article V shall be deemed to be a contract between the corporation and each director and officer who serves in such capacity at any time while this Article V is in effect. Neither any repeal or modification of this Article V or, to the fullest extent permitted by the laws of Delaware, any repeal or modification of laws, shall affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts. Section 5.05. Construction. For the purposes of this Article V, ------------ references to "the corporation" include in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director or officer of such constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body shall stand in the same position under the provisions of this Article V with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS Section 6.01. Depositories. The chairman of the board, the president, ------------ the treasurer, and any vice-president of the corporation whom the Board of Directors authorizes to designate depositories for the funds of the corporation are each authorized to designate depositories for the funds of the corporation deposited in its name and the signatories and conditions with respect thereto in each case, and from time to time, to change such depositories, signatories and conditions, with the same force and effect as if each such depository, the signatories and conditions with respect thereto and changes therein had been specifically designated or authorized by the Board of Directors; and each depository designated by the Board of Directors or by the chairman of the board, the president, the treasurer, or any such vice-president of the corporation, shall be entitled to rely upon the certificate of the secretary or any assistant secretary of the corporation setting forth the fact of such designation and of the appointment of the officers of the corporation or of other persons who are to be signatories with respect to the withdrawal of funds deposited with such depository, or from time to time the fact of any change in any depository or in the signatories with respect thereto. Section 6.02. Execution of Instruments Generally. In addition to the ---------------------------------- powers conferred upon the chairman of the board in Section 4.01 of these Bylaws and except as otherwise provided in Section 6.01 of this Article VI, all contracts and other instruments entered into in the ordinary course of business requiring execution by the corporation may be executed and delivered by the president, the treasurer, or any vice president and authority to sign any such contracts or instruments, which may be general or confined to specific instances, may be conferred by the Board of Directors upon any other person or persons. Any person having authority to sign on behalf of the corporation may delegate, from time to time, by instrument in writing, all or any part of such authority to any person or persons if authorized so to do by the Board of Directors. ARTICLE VII SHARES AND THEIR TRANSFER Section 7.01. Certificate for Shares. Every owner of one or more shares ---------------------- in the corporation shall be entitled to a certificate, which shall be in such form as the Board of Directors shall prescribe, certifying the number and class of shares in the corporation owned by him. The certificates for the respective classes of such shares shall be numbered in the order in which they shall be issued and shall be signed in the name of the corporation by the chairman of the board, the president or a vice president, and by the secretary or an assistant secretary or the treasurer or an assistant treasurer. Any or all signatures on the certificate may be a facsimile. A record shall be kept of the name of the person, firm, or corporation owning the shares represented by each such certificate and the number of shares represented thereby, the date thereof, and in case of cancellation, the date of cancellation. Every certificate surrendered to the corporation for exchange or transfer shall be cancelled and no new certificate or certificates shall be issued in exchange for any existing certificates until such existing certificates shall have been so cancelled. Section 7.02. Lost, Destroyed and Mutilated Certificates. If any ------------------------------------------ certificates for shares in the corporation become worn, defaced, or mutilated but are still substantially intact and recognizable, the directors or authorized officers, upon production and surrender thereof, shall order the same cancelled and shall issue a new certificate in lieu of same. The holder of any shares in the corporation shall immediately notify the corporation if a certificate therefor shall be lost, destroyed, or mutilated beyond recognition, and the corporation may issue a new certificate in the place of any certificate theretofore issued by it which is alleged to have been lost or destroyed or mutilated beyond recognition, and the Board of Directors may, in its discretion, require the owner of the certificate which has been lost, destroyed, or mutilated beyond recognition, or his legal representative, to give the corporation a bond in such sum and with such surety or sureties as it may direct, not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss, destruction, or mutilation of any such certificate. The Board of Directors may, however, in its discretion, refuse to issue any such new certificate except pursuant to legal proceedings, under the laws of the State of Delaware in such case made and provided. Section 7.03. Transfers of Shares. Transfers of shares in the ------------------- corporation shall be made only on the books of the corporation by the registered holder thereof, his legal guardian, executor, or administrator, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation or with a transfer agent appointed by the Board of Directors, and on surrender of the certificate or certificates for such shares properly endorsed or accompanied by properly executed stock powers and evidence of the payment of all taxes imposed upon such transfer. The person in whose name shares stand on the books of the corporation shall, to the full extent permitted by law, be deemed the owner thereof for all purposes as regards the corporation. Section 7.04. Regulations. The Board of Directors may make such rules ----------- and regulations as it may deem expedient, not inconsistent with these Bylaws concerning the issue, transfer, and registration of certificates for shares in the corporation. It may appoint one or more transfer agents or one or more registrars, or both, and may require all certificates for shares to bear the signature of either or both. ARTICLE VIII SEAL The Board of Directors may provide a corporate seal, which shall be circular and contain the name of the corporation engraved around the margin and the words "corporate seal", the year of its organization, and the word "Delaware." EX-10.4 4 dex104.txt 2002 STOCK OPTION PLAN FOR ASSOCIATES EXHIBIT 10.4 ------------ ABERCROMBIE & FITCH CO. 2002 STOCK OPTION PLAN FOR ASSOCIATES 1. PURPOSE The purpose of the Abercrombie & Fitch Co. 2002 Stock Option Plan for Associates (the "Plan") is to promote the interests of Abercrombie & Fitch Co. (the "Company") and its stockholders by allowing the Company to attract and retain the best available associates for itself and its subsidiaries and to encourage the highest level of performance by such associates. The Plan is expected to contribute to the attainment of these objectives by offering eligible associates the opportunity to acquire Shares (as hereinafter defined) of the Company, and to thereby provide them with incentives to put forth maximum efforts for the success of the Company and its subsidiaries. 2. ADMINISTRATION The Plan shall be administered by a committee (the "Committee") appointed by the Company's Board of Directors (the "Board") and consisting of not less than two (2) members of the Board. Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan and to make all determinations necessary or advisable for the administration of the Plan. In addition, subject to the provisions of the Plan, the Committee shall have the power and authority to grant options and to determine the eligible associates to whom such options will be granted, the purchase price of the Shares covered by each option, the term of each option, the number of Shares covered by each option, the vesting schedule applicable to each option and such other terms and conditions pertaining to each option, as determined by the Committee. The determinations of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. Any officer of the Company shall be authorized to implement the Plan in accordance with its terms and to take such actions of a ministerial nature as shall be necessary to effectuate the intent and purposes thereof. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Delaware. 3. ELIGIBILITY The class of individuals eligible to receive grants of options to purchase shares of Class A Common Stock, par value $.01 per share (the "Shares"), of the Company under the Plan shall be associates of the Company or its subsidiaries ("Eligible Associates"). Any holder of an option granted hereunder shall hereinafter be referred to as a "Participant." 4. SHARES SUBJECT TO THE PLAN Subject to adjustment as provided in Section 7, an aggregate of 5,000,000 Shares shall be available for issuance under the Plan. The Shares deliverable upon the exercise of options may be made available from Shares currently held or subsequently acquired by the Company as treasury Shares, including Shares purchased in the open market or in private transactions. If any option granted under the Plan shall terminate for any reason without having been exercised, the Shares subject to, but not delivered under, such option shall be available for issuance under the Plan. 5. GRANT, TERMS AND CONDITIONS OF OPTIONS (a) The Committee, in its sole discretion, shall select from among the Eligible Associates the individuals to whom options to purchase Shares are to be granted under this Plan. Options shall be granted in such form and upon such terms and conditions, as the Committee shall from time to time determine. (b) The options granted under this Plan will be nonstatutory stock options not intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and shall have the following terms and conditions: (i) Price. The purchase price per Share deliverable upon the exercise of each option shall be 100% of the Fair Market Value per Share on the date the option is granted. For purposes of the Plan, Fair Market Value shall be the closing price of the Shares as reported on the principal securities exchange on which the Shares are listed or traded for the date in question, or if there were no sales on such date, the most recent prior date on which there were sales. (ii) Exercisability and Term of Options. Each option granted under the Plan shall become exercisable pursuant to a vesting schedule, as determined by the Committee, to be included in the option agreement described in paragraph (vi). Subject to the provisions of Sections 5(c) and 5(d), each option granted under the Plan shall be exercisable until the earlier of (A) ten years from the date of grant and (B) the expiration of the period provided in paragraph (iv) below. (iii) Exercise and Payment. An option granted under this Plan may be exercised, in whole or in part, at such time or times as the Committee shall determine. The Committee may, in its discretion, accelerate the exercisability of any option at any time. Options may be exercised by a Participant by giving written notice to any individual or individuals designated from time to time by the Committee stating the number of Shares with respect to which the option is being exercised and tendering payment therefor. Payment for the Shares issuable upon exercise of the option shall be made in full in cash or by certified check or, if the Committee, in its sole discretion, permits, in Shares of the Company (valued at Fair Market Value on the date of exercise). As soon as reasonably practicable following such exercise, the Shares purchased shall be registered in the name of the Participant. (iv) Termination of Service as Eligible Associate. Subject to the provisions of Sections 5(c) and 5(d), upon termination of a Participant's service as an associate of the Company and its subsidiaries for any reason, all outstanding options held by such Participant, to the extent then exercisable, shall be exercisable in whole or in part for the time period specified in the agreement described in paragraph (vi) or otherwise provided at any time by the Committee; provided that in no event shall the options be exercisable after the tenth anniversary of the date of their grant. (v) Nontransferability of Options. No option may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant otherwise than by will or the laws of descent and distribution, and during the lifetime of the Participant to whom an option is granted it may be exercised only by the Participant or by the Participant's guardian or legal representative. Notwithstanding the foregoing, options may be transferred pursuant to a qualified domestic relations order, as defined in Section 414(p) of the Code. (vi) Option Agreement. Each option granted hereunder shall be evidenced by an agreement with the Company which shall contain the terms and provisions set forth herein and shall otherwise be consistent with the provisions of the Plan. (c) Death of Participant. Notwithstanding the provisions of paragraphs (ii) and (iv) of Section 5(b) of this Plan, if a Participant should die while employed by the Company or one of its subsidiaries or within three months after the termination of such employment, all outstanding options held by such Participant (whether or not then exercisable by their terms) shall become immediately exercisable in full by the Participant's estate or by the person who acquires the right to exercise such options upon the Participant's death by bequest or inheritance. Such exercise may occur at any time within one year after the date of the Participant's death or such other period as the Committee may at any time determine, provided that in no event shall the options of a deceased Participant be exercisable after the tenth anniversary of the date of their grant. (d) Total Disability. Notwithstanding the provisions of paragraphs (ii) and (iv) of Section 5(b) of this Plan, if a Participant's employment with the Company and its subsidiaries ceases as a result of the Participant becoming totally disabled, all outstanding options held by such Participant (whether or not then exercisable by their terms) shall become immediately exercisable in full. Such exercise may occur at any time during the first nine months that the Participant receives benefits under the Abercrombie & Fitch Co. Long-Term Disability Program or any successor plan or program (the "Disability Plan"); provided that, in no event shall the options of a totally disabled Participant be exercisable after the tenth anniversary of the date of their grant. For purposes of this Plan, "total disability" shall have the definition set forth in the Disability Plan, which definition is hereby incorporated by reference. (e) Change of Control. Upon the occurrence of a Change of Control, all outstanding options held by Participants shall be fully exercisable. For purposes of this Plan, the term "Change of Control" shall mean, unless otherwise defined in an option agreement, an occurrence of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Exchange Act or any successor provision. Without limiting the inclusiveness of the definition in the preceding sentence, a Change of Control of the Company shall be deemed to have occurred as of the first day that any one or more of the following conditions is satisfied: (i) any person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act or any successor provision), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities and such person would be deemed an "Acquiring Person" for purposes of the Rights Agreement dated as of July 16, 1998, as amended (the "Rights Agreement"), to which the Company and National City Bank, as successor Rights Agent, are parties; or (ii) any of the following occur: (A) any merger or consolidation of the Company, other than a merger or consolidation in which the voting securities of the Company immediately prior to the merger or consolidation continue to represent (either by remaining outstanding or being converted into securities of the surviving entity) 80% or more of the combined voting power of the Company or surviving entity immediately after the merger or consolidation with another entity; (B) any sale, exchange, lease, mortgage, pledge, transfer or other disposition (in a single transaction or a series of related transactions) of assets or earning power aggregating more than 50% of the assets or earning power of the Company and its subsidiaries on a consolidated basis; (C) any complete liquidation or dissolution of the Company; (D) any reorganization, reverse stock split or recapitalization of the Company that would result in a Change of Control as otherwise defined in this Plan; or (E) any transaction or series of related transactions having, directly or indirectly, the same effect as any of the foregoing. 6. TAX WITHHOLDING (a) The Company will withhold from other amounts owed to a Participant, or require the Participant to remit to the Company, an amount sufficient to satisfy federal, state and local withholding tax requirements on any exercise of an option and purchase of Shares. If these amounts are not to be withheld from other payments due to the Participant, the Company will defer the issuance of Shares until the earlier of: (i) Thirty days after the settlement date; or (ii) The date the Participant remits the required amount. (b) If the Company has been unable to satisfy its withholding obligations pursuant to Section 6(a), in its discretion, the Committee may allow a Participant to elect, subject to conditions the Committee establishes, to reimburse the Company for such withholding obligation through one or more of the following methods: (i) By having Shares otherwise issuable under the Plan withheld by the Company (but only to the extent of the minimum amount that must be withheld to comply with applicable state, federal and local income, employment and wage tax laws); (ii) By delivering to the Company previously acquired Shares; (iii) By remitting cash to the Company; or (iv) By remitting a personal check immediately payable to the Company. 7. ADJUSTMENT AND CHANGES IN SHARES In the event of a stock split, stock dividend, extraordinary cash dividend, subdivision or combination of the Shares or other change in corporate structure affecting the Shares, (a) the number of Shares authorized by the Plan shall be increased or decreased proportionately, as the case may be, and (b) the number of Shares subject to any outstanding option shall be increased or decreased proportionately, as the case may be, in each case with an appropriate corresponding adjustment in the purchase price per Share thereunder. 8. NO RIGHTS OF SHAREHOLDERS Neither a Participant nor a Participant's legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company in respect of any Shares purchasable upon the exercise of any option, in whole or in part, unless and until such Shares shall have been registered in the name of such Participant or such Participant's legal representative. 9. PLAN AMENDMENT AND TERMINATION The Board may suspend, terminate, modify or amend the Plan at any time, as it shall deem advisable or to conform to any change in any law or regulation applicable thereto. If the Plan is terminated, the terms of the Plan shall, notwithstanding such termination, continue to apply to options granted prior to such termination. No suspension, termination, modification or amendment of the Plan may, without the consent of the Participant to whom an option shall theretofore have been granted, adversely affect the rights of such Participant under such option. 10. APPLICABLE LAW AND REGISTRATION The granting of options and the issuance of Shares shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding the foregoing, no Shares shall be issued under the Plan unless the Company is satisfied that such issuance will be in compliance with applicable federal and state securities laws. Shares issued under the Plan may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange upon which the Shares are then listed or traded, or any applicable federal or state securities law. The Committee may cause a legend or legends to be placed on any certificates evidencing the Shares to make appropriate reference to such restrictions. 11. EFFECTIVE DATE AND DURATION OF PLAN The Plan shall become effective on the date of the approval of the Plan by the Board ("Effective Date"). The Plan shall terminate on the day preceding the tenth anniversary of the Effective Date, unless the Plan is extended or terminated at an earlier date by the Board or is terminated by exhaustion of the Shares available for issuance hereunder. EX-10.9 5 dex109.txt REPLACEMENT PROMISSORY NOTE EXHIBIT 10.9 ------------ REPLACEMENT ----------- PROMISSORY NOTE --------------- $4,953,832.52 January 1, 2002 FOR VALUE RECEIVED, the undersigned, Michael S. Jeffries, promises to pay to the order of Abercrombie & Fitch Co., a Delaware corporation, the principal sum of Four Million, Nine Hundred Fifty-Three Thousand, Eight Hundred Thirty-Two and 52/100 Dollars ($4,953,832.52), without interest. Said principal and all accrued interest thereon, if any (see below), shall be payable in full on December 31, 2002. Notwithstanding anything contained herein to the contrary, if Abercrombie & Fitch Co. does not record net sales of at least $1,156,100,000 during the period from February 3, 2002 through November 30, 2002, the principal due and owing under this Note shall bear interest from the date hereof at the rate of four and one-half percent (4.5%) per annum. The undersigned reserves the privilege of prepaying all or a portion of the principal balance hereof at any time without penalty. All persons now or hereafter liable for the principal amount due on this Note or any part hereof do expressly waive presentment for payment, notice of dishonor, protest and notice of protest and agree that the time for the payment of this Note may be extended without releasing or otherwise affecting their liability on this Note, or any other security agreements or guarantees, if any, securing this Note. This Note was signed at New Albany, Ohio and shall be construed in accordance with and governed by the provisions of the laws of the State of Ohio. Any failure of Abercrombie & Fitch Co. or the legal holder hereof to exercise any option herein provided upon default shall not constitute a waiver of the right to exercise such option in the event of any continuing or subsequent default. The undersigned hereby agrees that the maturity of all or any part of the indebtedness evidenced hereby may be postponed or extended without prejudice to his liability on this Promissory Note. If any provision of this Note is illegal, or hereafter rendered illegal, or is for any other reason void, voidable or otherwise unenforceable or invalid, or hereafter rendered void, voidable or otherwise unenforceable or invalid, the remainder of this Note shall not be affected by, but shall be construed as if it does not contain such provision. This Replacement Note constitutes a replacement of, and substitute for, the Replacement Promissory Note, dated as of May 18, 2001, executed by the undersigned and payable to the order of Abercrombie & Fitch Co. in the principal amount of Four Million, Eight Hundred Seventeen Thousand, One Hundred Forty-Six Dollars ($4,817,146.00) (the "Replacement Note"). Upon the undersigned's execution of this Replacement Note, Abercrombie & Fitch Co. shall mark the Replacement Note "Cancelled". /s/ MICHAEL S. JEFFRIES ---------------------------------- Michael S. Jeffries EX-21 6 dex21.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 ---------- SUBSIDIARIES OF THE REGISTRANT Jurisdiction Subsidiaries (a) of Incorporation ------------ ---------------- Abercrombie & Fitch Holding Corporation (b) Delaware Abercrombie & Fitch Management Co. (c) Delaware Abercrombie & Fitch Stores, Inc. (d) Delaware A&F Trademark, Inc. (d) Delaware (a) The names of certain subsidiaries are omitted since such unnamed subsidiaries, considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary as of February 2, 2002. (b) Wholly-owned subsidiary of the registrant. (c) Wholly-owned subsidiary of Abercrombie & Fitch Holding Corporation. (d) Wholly-owned subsidiary of Abercrombie & Fitch Management Co. EX-23 7 dex23.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 ---------- CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statement on Form S-8, Registration Nos. 333-15941, 333-15943, 333-15945, 333-60189, 333-60203 and 333-81373 of Abercrombie & Fitch of our report dated February 19, 2002 relating to the financial statements, which appears in this Form 10-K. PricewaterhouseCoopers LLP Columbus, Ohio April 17, 2002 EX-24 8 dex24.txt POWER OF ATTORNEY EXHIBIT 24 ---------- POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ MICHAEL S. JEFFRIES ----------------------- Michael S. Jeffries POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ SETH R. JOHNSON ------------------- Seth R. Johnson POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ RUSSELL M. GERTMENIAN ------------------------- Russell M. Gertmenian POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ JOHN A. GOLDEN ------------------ John A. Golden POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ ARCHIE M. GRIFFIN --------------------- Archie M. Griffin POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH, CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ JOHN W. KESSLER ------------------- John W. Kessler POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH, CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ SAM N. SHAHID ----------------- Sam N. Shahid POWER OF ATTORNEY OFFICERS AND DIRECTORS OF ABERCROMBIE & FITCH, CO. The undersigned officer and/or director of Abercrombie & Fitch Co., a Delaware corporation, which anticipates filing an Annual Report on Form 10-K for its 2001 fiscal year under the provisions of the Securities Exchange Act of 1934 with the Securities and Exchange Commission, Washington, D.C., hereby constitutes and appoints Michael S. Jeffries and Seth R. Johnson, and each of them, with full powers of substitution and resubstitution, as attorney to sign for the undersigned in any and all capacities such Annual Report on Form 10-K and any and all amendments thereto, and any and all applications or other documents to be filed with the Securities and Exchange Commission pertaining to such Annual Report on Form 10-K with full power and authority to do and perform any and all acts and things whatsoever required and necessary to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present. The undersigned hereby ratifies and confirms all that said attorney-in-fact and agent or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. EXECUTED as of the 31st day of January, 2002. /s/ KATHRYN D. SULLIVAN, Ph.D. ------------------------------ Kathryn D. Sullivan, Ph.D. -----END PRIVACY-ENHANCED MESSAGE-----