Abercrombie & Fitch direct-to-consumer net sales declines
17 Aug '09
5 min read
Net interest income for the second quarter was $1.8 million, flat compared to the same period last year.
Loss before income taxes for the second quarter was $19.8 million, inclusive of $24.4 million pre-tax charges associated with the exit of RUEHL and related store asset impairment charges.
Income tax expense for the second quarter was $7.0 million, which was comprised of $11.5 million of expense related to a true-up of the first quarter income tax provision and $4.5 million of benefit associated with the second quarter loss before income taxes. The income tax true-up, as calculated in accordance with Financial Accounting Standards Interpretation No. 18, "Accounting for Taxes in Interim Periods," was the result of a reduction of the estimated annual effective tax rate as determined in the second quarter. The lower projected rate is primarily due to a higher proportion of projected income before income taxes coming from international operations with a lower overall effective rate, and a lower proportion of projected income before income taxes coming from domestic operations, partially resulting from the second quarter charges associated with the closure of RUEHL.
The Company ended the second quarter with $366.5 million in cash and cash equivalents, and outstanding debt and letters of credit of $79.6 million. During the quarter, the Company repaid US dollar denominated borrowings of $100 million outstanding under the credit agreement and, separately, drew down approximately $37 million in foreign currency denominated borrowings to fund international lease and capital expenditure commitments.
RUEHL Update As previously announced, on June 16, 2009 the Board of Directors approved the closure of the Company's 29 RUEHL branded stores and related direct-to-consumer operations. The Company anticipates the closure will be substantially complete by the end of the current fiscal year.
The Company continues to expect that it will incur aggregate incremental net pre-tax charges to exit RUEHL of approximately $65 million, of which the Company incurred $23.6 million in the second quarter. The estimate of total charges is based on a number of significant assumptions and could change materially. The remaining charges are expected to be substantially recognized during the remaining two quarters of Fiscal 2009 in accordance with applicable accounting standards.
In addition to the $23.6 million exit costs, the Company incurred store asset impairment charges related to RUEHL of $50.7 million and $0.8 million in the first and second quarters of Fiscal 2009, respectively.