UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 14, 2005
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ABERCROMBIE & FITCH CO.
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(Exact name of registrant as specified in its charter)
Delaware 1-12107 31-1469076
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
6301 Fitch Path, New Albany, Ohio 43054
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(Address of principal executive offices) (Zip Code)
(614) 283-6500
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act(17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL AGREEMENT
As a result of the approval of the financial results for the fiscal
year ended January 29, 2005 presented at the meeting of the Board of Directors
of Abercrombie & Fitch Co. (the "Registrant") on February 14, 2005, semi-annual
cash incentive (i.e., bonus) awards were paid to each of the Registrant's named
executive officers and certain other individuals on February 18, 2005. These
bonus payments were authorized by the Compensation Committee under the
Abercrombie & Fitch Co. Incentive Compensation Performance Plan (the "Plan").
Each executive's incentive target is a percentage of the executive's base salary
and the amount of the bonus payment could range from zero to double the
incentive target, based upon the extent to which the pre-established semi-annual
financial goals are met or exceeded. The goals under the Plan for the six-month
period ending January 29, 2005 were based on the net income of the Registrant
for that period. Cash bonus payments were made to the following executive
officers in the following amounts:
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Name and Principal Position Six-Month Cash Incentive Award
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Michael S. Jeffries, Chairman & Chief $1,728,000
Executive Officer
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Robert Singer, Executive Vice President, Chief $1,063,200
Operating Officer
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Diane Chang, Senior Vice President - $675,000
Sourcing
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Leslie K. O'Neill, Senior Vice President - $540,000
Planning and Allocation
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David Leino, Senior Vice President - Stores $285,000
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Also as a result of the approval of the Registrant financial results
for the fiscal year ended January 29, 2005 at the meeting of the Board of
Directors on February 14, 2005, grants of restricted shares of the Registrant's
common stock ("Restricted Shares") were made to each of the Registrant's named
executive officers (other than Mr. Jeffries) and certain other individuals on
February 15, 2005. These Restricted Shares were authorized by the Compensation
Committee of the Board of Directors under the 1998 Restatement of the 1996 Stock
Option and Performance Incentive Plan. Award opportunities for each eligible
participant were based on guidelines, which include the individual's
responsibility level, competitive practices, and the market price of the
Registrant's common stock, and the final award amount was based on the
achievement of net income goals for fiscal year 2004. These Restricted Shares
vest, subject to continued employment, as follows: 10% on the grant date and
20%, 30% and 40% on each of the first, second and third anniversaries of the
grant date, respectively. In the event of a termination of employment of the
participant other than as a result of death or total disability, the participant
forfeits any unvested Restricted Shares. In the event of death or total
disability of the participant or upon a change of control of the Registrant, all
Restricted Shares immediately vest. Grants were made to the following executive
officers in the following amounts:
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Name and Principal Position Number of Restricted Shares
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Michael S. Jeffries, Chairman & Chief 0
Executive Officer
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Robert Singer, Executive Vice President, Chief 2,077
Operating Officer
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Diane Chang, Senior Vice President - 12,000
Sourcing
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Leslie K. O'Neill, Senior Vice President - 12,000
Planning and Allocation
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David Leino, Senior Vice President - Stores 8,000
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Item 2.02. Results of Operations and Financial Condition.
On February 15, 2005, the Registrant issued a press release (the
"Release") announcing the Registrant's unaudited financial results for the
thirteen weeks and the fiscal year ended January 29, 2005, restated financial
results for the thirteen weeks and the fiscal year ended January 31, 2004, and
its outlook for the fiscal year ending January 28, 2006. A copy of the Release
is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated
herein by reference.
In addition, the Registrant's management conducted a conference call on
February 15, 2005 at approximately 4:30 p.m., Eastern Time, to review the
aforementioned financial results. An audio replay of the conference call will be
available through March 1, 2005. To listen to the replay, dial (888) 203-1112 or
internationally at (719) 457-0820 followed by the conference ID number 718076.
An audio replay of the conference call will also be available at
www.abercrombie.com. A copy of the conference call transcript is furnished as
Exhibit 99.2 to this Current Report on Form 8-K and incorporated herein by
reference. The Registrant made available in conjunction with its February 15,
2005 conference call additional quarterly financial information as of and for
the interim periods during the fiscal years ended January 29, 2005, January 31,
2004, February 1, 2003 and February 2, 2002. This additional quarterly financial
information, updated for the February 18, 2005 restatement described below, is
furnished as Exhibit 99.3 to this Current Report on Form 8-K and incorporated
herein by reference.
On February 18, 2005, the Registrant issued a press release (the
"Second Release") announcing a change in the unaudited results of operations for
the fourth quarter and year ended January 29, 2005, which were previously
announced on February 15, 2005, and a further restatement of certain historical
financial statements. A copy of the Second Release is furnished as Exhibit 99.4
to this Current Report on Form 8-K and incorporated herein by reference.
Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
(a) Adopting a recommendation of the Registrant's management, the Audit
Committee of the Board of Directors of the Registrant concluded on February 14
and 16, 2005 that:
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o The Registrant's consolidated financial statements as of
January 31, 2004 and February 1, 2003 and for the fiscal years
ended January 31, 2004, February 1, 2003 and February 2, 2002;
and
o The Registrant's consolidated financial statements as of and
for the interim periods ended October 30, 2004, July 31, 2004,
May 1, 2004, November 1, 2003, August 2, 2003, and May 3,
2003,
should be restated and that those previously filed financial statements should
no longer be relied upon.
The restatement is to correct errors in the manner in which the
Registrant accounted for properties leased by the Registrant for its stores.
Like many other publicly traded companies, the Registrant recently
reviewed its accounting practices with respect to leasing transactions. As a
result of this review, the Registrant determined on February 14, 2005, to
restate its consolidated financial statements for certain prior periods in order
to comply with Statement of Financial Accounting Standards No. 13, "Accounting
for Leases" and Financial Accounting Standards Board Technical Bulletin No.
88-1, "Issues Relating to Accounting for Leases." In prior periods, the
Registrant's consolidated balance sheets have reflected the unamortized portion
of construction allowances received from landlords of properties leased by the
Registrant for its stores, as a reduction of property and equipment instead of
as a deferred lease credit. Further, in prior periods, the Registrant's
consolidated statements of cash flows have reflected these construction
allowances as a reduction of capital expenditures within investing activities,
rather than as an increase in deferred lease credits within operating
activities.
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In addition, as a result of a further review and subsequent to the
Release issued on February 15, 2005, the Registrant determined on February 16,
2005, that its accounting for properties leased by the Registrant was also not
in compliance with Financial Accounting Standards Board Technical Bulletin No.
85-3, "Accounting for Operating Leases with Scheduled Rent Increases." In prior
periods, the Registrant had recognized the straight line expense for leases
beginning on the commencement date of the lease, which had the effect of
excluding the build-out period of its stores from the calculation of the period
over which it expenses rent.
The effect of the revised accounting for construction allowances on
the Registrant's January 31, 2004 consolidated balance sheet will be to increase
property and equipment and establish a corresponding deferred lease credit in
the amounts of $184.1 million and $187.5 million, respectively. The effect on
the Registrant's February 1, 2003 consolidated balance sheet will be similar
adjustments in the amounts of $150.0 million and $154.3 million, respectively.
The effect of the revised accounting for lease expenses during
build-out periods by the Registrant on the Registrant's January 29, 2005
consolidated balance sheet is expected to be an increase in accrued rent of
approximately $27.6 million and a decrease in deferred lease credits of
approximately $6.7 million. The impact on the Registrant's January 31, 2004
consolidated balance sheet will be a similar increase of approximately $25.2
million in accrued rent and a decrease in deferred lease credits of
approximately $6.1 million. The impact on the Registrant's February 1, 2003
consolidated balance sheet will be a similar increase of approximately $22.9
million in accrued rent and a decrease in deferred lease credits of
approximately $5.2 million.
The impact of the revised accounting for construction allowances on the
Registrant's consolidated statements of cash flow will be to increase both "net
cash provided by operating activities" and "net cash used for investing
activities" by equal amounts. These adjustments will be $60.6 million for the
fiscal year ended January 31, 2004, $54.3 million for the fiscal year ended
February 1, 2003, and $45.2 million for the fiscal year ended February 2, 2002.
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There will be no impact on "net cash provided by operating activities"
during any of the years restated as a result of the revised accounting for lease
expenses during build-out periods.
The impact of the revised accounting for construction allowances on the
Registrant's net income is less than $1.0 million for each fiscal year being
restated.
The impact of the revised accounting for lease expenses during
build-out periods on the Registrant's consolidated statements of income is
expected to be a reduction of net income by approximately $1.1 million, $850
thousand, $850 thousand and $2.0 million for the fiscal years ended January 29,
2005, January 31, 2004, February 1, 2003 and February 2, 2002, respectively. The
estimated reduction in net income per diluted share outstanding would be $0.01
for each of the fiscal years ended January 29, 2005, January 31, 2004, there
would be no impact on net income per diluted share outstanding for the fiscal
year ended February 1, 2003, and $0.02 on net income per diluted share
outstanding for the fiscal year ended February 2, 2002.
The impact of the revised accounting for lease expenses during
build-out periods on the Registrant's consolidated statements of income for the
quarter ended January 29, 2005 and January 31, 2004, is expected to be a
reduction of net income by approximately $250 thousand and an increase of net
income by approximately $80 thousand, respectively. These changes in quarterly
net income are not expected to have an impact on net earnings per diluted share
outstanding.
The Audit Committee of the Registrant reviewed the accounting treatment
and disclosures referred to in this Item 4.02(a) and discussed such treatment
and disclosures with PricewaterhouseCoopers LLP, the Registrant's independent
registered public accounting firm.
In the Release issued on February 15, 2005, the Registrant announced
that it would be restating its consolidated financial statements to correct the
manner in which it accounted for construction allowances. In the Second Release
issued on February 18, 2005, the Registrant announced that it would be further
restating its consolidated financial statements to correct the manner in which
it recognized lease expenses during the build-out period of its stores.
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The Registrant will file the restated consolidated financial statements
as amendments to its periodic reports with the Securities and Exchange
Commission on the appropriate forms as soon as practicable.
Item 8.01. Other Events.
In the Release issued on February 15, 2005, the Registrant announced
that its Board of Directors had declared a quarterly dividend of $0.125 per
share in respect of the Registrant's Class A Common Stock. The dividend was
declared on February 14, 2005 and is payable on March 22, 2005 to stockholders
of record on March 1, 2005.
The Registrant's management conducted a conference call on February 15,
2005, at approximately 4:30 p.m., Eastern Time, to review the Registrant's
financial results for the thirteen weeks and the fiscal year ended January 29,
2005. Additionally, the Registrant's management addressed plans for the fiscal
year ended January 28, 2006 on the conference call. A copy of the transcript of
the conference call is furnished as Exhibit 99.2 to this Current Report on Form
8-K and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits:
Exhibit No. Description
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99.1 Press Release issued by Abercrombie & Fitch Co. on
February 15, 2005
99.2 Transcript of conference call held by management of
Abercrombie & Fitch Co. on February 15, 2005
99.3 Additional Quarterly Financial Information made
available by Abercrombie & Fitch Co. in conjunction
with conference call held on February 15, 2005,
updated for the February 18, 2005 restatement
99.4 Press Release issued by Abercrombie & Fitch Co. on
February 18, 2005
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[Remainder of page intentionally left blank;
signature on following page.]
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ABERCROMBIE & FITCH CO.
Dated: February 22, 2005 By: /s/ SUSAN J. RILEY
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Susan J. Riley
Senior Vice President-Chief
Financial Officer
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INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Press Release issued by Abercrombie & Fitch Co. on February
15, 2005
99.2 Transcript of conference call held by management of
Abercrombie & Fitch Co. on February 15, 2005
99.3 Additional Quarterly Financial Information made available by
Abercrombie & Fitch Co. in conjunction with conference call
held on February 15, 2005
99.4 Press Release issued by Abercrombie & Fitch Co. on February
18, 2005
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