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American Eagle Outfitters Reports 62% Increase In Second Quarter EPS

Stocks in this article: AEO

Conference Call and Supplemental Financial Information

Today, management will host a conference call and real time webcast at 9:00 a.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.ae.com to access the webcast and audio replay. Also, a financial results presentation is posted on the company’s website.

Non-GAAP Measures

This press release includes information on non-GAAP financial measures (“non-GAAP” or “adjusted”), including earnings per share information and the consolidated results of operations excluding non-GAAP items. These financial measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies. The company believes that this non-GAAP information is useful as an additional means for investors to evaluate the company’s operating performance, when reviewed in conjunction with the company’s GAAP financial statements. These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the company’s business and operations.

About American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle Outfitters® and Aerie® brands. The company operates more than 1,000 stores in North America, and ships to 77 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at 39 international franchise stores in 12 countries. For more information, please visit www.ae.com.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release contains forward-looking statements, which represent our expectations or beliefs concerning future events, specifically regarding third quarter and fiscal 2012 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on factors beyond the company's control. Such factors include, but are not limited to the risk that the company’s operating, financial and capital plans may not be achieved and the risks described in the Risk Factor Section of the company's Form 10-K and Form 10-Q filed with the Securities and Exchange Commission. Accordingly, the company's future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. The company does not undertake to publicly update or revise its forward-looking statements even if future changes make it clear that projected results expressed or implied will not be realized.

     
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
 
 
July 28, January 28, July 30,
2012 2012 2011
(unaudited) (unaudited)
 
ASSETS
Cash and cash equivalents $ 696,077 $ 719,545 $ 389,299
Short-term investments 5,995 25,499 124,697
Merchandise inventory 462,013 367,514 457,282
Assets held for sale 9,985 10,912 12,960
Accounts receivable 40,202 40,310 31,530
Prepaid expenses and other 76,584 74,947 90,788
Deferred income taxes 55,607 48,761 48,585
Total current assets 1,346,463 1,287,488 1,155,141
Property and equipment, net 544,751 582,162 635,540
Intangible assets, net 38,682 39,832 40,295
Goodwill 11,445 11,469 11,668
Non-current deferred income taxes 22,477 13,467 2,460
Other assets 15,064 16,384 21,398
Total Assets $ 1,978,882 $ 1,950,802 $ 1,866,502
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 171,655 $ 183,783 $ 187,572
Accrued compensation and payroll taxes 54,168 42,625 24,928
Accrued rent 78,514 76,921 72,477
Accrued income and other taxes 15,822 20,135 13,998
Unredeemed gift cards and gift certificates 24,342 44,970 26,542
Current portion of deferred lease credits 14,679 15,066 15,938
Other current liabilities and accrued expenses 26,694 21,901 21,037
Total current liabilities 385,874 405,401 362,492
Deferred lease credits 69,598 71,880 77,925
Non-current accrued income taxes 26,285 35,471 38,256
Other non-current liabilities 18,711 21,199 20,842
Total non-current liabilities 114,594 128,550 137,023
Commitments and contingencies - - -
Preferred stock - - -
Common stock 2,496 2,496 2,496
Contributed capital 574,671 552,797 546,677
Accumulated other comprehensive income 28,073 28,659 32,692
Retained earnings 1,770,546 1,771,464 1,713,778
Treasury stock (897,372) (938,565) (928,656)
Total stockholders' equity 1,478,414 1,416,851 1,366,987
Total Liabilities and Stockholders' Equity $ 1,978,882 $ 1,950,802 $ 1,866,502
 
Current Ratio 3.49 3.18 3.19
 
         
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
 
13 Weeks Ended (GAAP Basis)
July 28, % of July 30, % of
2012   Sales   2011     Sales
 
Net sales $ 739,680 100.0 % $ 669,120 100.0 %
Cost of sales, including certain buying,
occupancy and warehousing expenses 463,116     62.6 %       432,942       64.7 %
Gross profit 276,564 37.4 % 236,178 35.3 %
Selling, general and administrative expenses 182,125 24.6 % 163,113 24.4 %
Depreciation and amortization 32,643     4.4 %       34,997       5.2 %
Operating income 61,796 8.4 % 38,068 5.7 %
Other (expense) income, net (343 )   -0.1 %       1,431       0.2 %
Income before income taxes 61,453 8.3 % 39,499 5.9 %
Provision for income taxes 18,607     2.5 %       14,407       2.2 %
Income from continuing operations 42,846 5.8 % 25,092 3.7 %
Loss from discontinued operations, net of tax (23,819 )   -3.2 %       (5,423 )     -0.8 %
Net income $ 19,027     2.6 %     $ 19,669       2.9 %
 
Basic income per common share:
Income from continuing operations $ 0.22 $ 0.13
Loss from discontinued operations (0.12 )   (0.03 )
Net income per basic share $ 0.10   $ 0.10  
 
Diluted income per common share:
Income from continuing operations $ 0.21 $ 0.13
Loss from discontinued operations (0.12 )   (0.03 )
Net income per diluted share $ 0.09   $ 0.10  
 
Weighted average common shares
outstanding - basic 196,160 194,909
Weighted average common shares
outstanding - diluted 199,807 196,578
 
26 Weeks Ended (GAAP Basis)
July 28, % of July 30, % of
2012   Sales     2011     Sales
 
Net sales $ 1,448,375 100.0 % $ 1,272,204 100.0 %
Cost of sales, including certain buying,
occupancy and warehousing expenses 896,898     61.9 %       802,207       63.1 %
Gross profit 551,477 38.1 % 469,997 36.9 %
Selling, general and administrative expenses 360,664 24.9 % 318,365 25.0 %
Depreciation and amortization 64,709     4.5 %       69,433       5.5 %
Operating income 126,104 8.7 % 82,199 6.4 %
Other income, net 3,164     0.2 %       5,943       0.5 %
Income before income taxes 129,268 8.9 % 88,142 6.9 %
Provision for income taxes 42,387     2.9 %       31,179       2.4 %
Income from continuing operations 86,881 6.0 % 56,963 4.5 %
Loss from discontinued operations, net of tax (28,157 )   -1.9 %       (8,969 )     -0.7 %
Net income $ 58,724     4.1 %     $ 47,994       3.8 %
 
Basic income per common share:
Income from continuing operations $ 0.44 $ 0.29
Loss from discontinued operations (0.14 )   (0.05 )
Net income per basic share $ 0.30   $ 0.24  
 
Diluted income per common share:
Income from continuing operations $ 0.44 $ 0.29
Loss from discontinued operations (0.14 )   (0.05 )
Net income per diluted share $ 0.30   $ 0.24  
 
Weighted average common shares
outstanding - basic 195,525 194,800
Weighted average common shares
outstanding - diluted 198,329 196,626
 
     
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
 
26 Weeks Ended
July 28, July 30,
2012 2011
Operating activities:
Net income $ 58,724 $ 47,994
Loss from discontinued operations 28,157   8,969  
Income from continuing operations 86,881 56,963

Adjustments to reconcile income from continuing operations to net cash fromoperating activities of continuing operations:

Depreciation and amortization 65,761 70,742
Share-based compensation 28,029 5,523
Provision for deferred income taxes (16,556 ) 16,389
Tax benefit from share-based payments 4,396 290
Excess tax benefit from share-based payments (2,894 ) (152 )
Foreign currency transaction loss 472 219
Loss on impairment of assets 514 -
Changes in assets and liabilities:
Merchandise inventory (94,762 ) (162,081 )
Accounts receivable (532 ) 6,650
Prepaid expenses and other (739 ) (36,450 )
Other assets 808 (2,767 )
Accounts payable (5,519 ) 21,694
Unredeemed gift cards and gift certificates (20,620 ) (14,630 )
Deferred lease credits (2,592 ) (2,719 )
Accrued compensation and payroll taxes 10,871 (10,166 )
Accrued income and other taxes (15,028 ) (17,567 )
Accrued liabilities 9,256   689  
Total adjustments (39,135 ) (124,336 )
Net cash provided by (used for) operating activities from continuing operations $ 47,746 $ (67,373 )
Investing activities:
Capital expenditures for property and equipment (48,240 ) (56,212 )
Acquisition of intangible assets (674 ) (33,545 )
Purchase of available-for-sale securities (570 ) (166,443 )
Sale of available-for-sale securities 20,592   115,229  
Net cash used for investing activities from continuing operations $ (28,892 ) $ (140,971 )
Financing activities:
Payments on capital leases (1,666 ) (1,556 )
Repurchase of common stock from employees (4,108 ) (2,189 )
Net proceeds from stock options exercised 18,495 2,659
Excess tax benefit from share-based payments 2,894 152
Cash dividends paid (43,108 ) (42,869 )
Net cash used for financing activities from continuing operations $ (27,493 ) $ (43,803 )
Effect of exchange rates on cash (517 ) 848  
 
Cash flows of discontinued operations
Net cash used for operating activities (13,544 ) (17,606 )
Net cash used for investing activities (768 ) (9,389 )
Net cash used for financing activities - -
Effect of exchange rate on cash -   -  
Net cash used for discontinued operations $ (14,312 ) $ (26,995 )
 
Net decrease in cash and cash equivalents $ (23,468 ) $ (278,294 )
Cash and cash equivalents - beginning of period 719,545   667,593  
Cash and cash equivalents - end of period $ 696,077   $ 389,299  
 
             
AMERICAN EAGLE OUTFITTERS, INC.
GAAP TO NON-GAAP RECONCILIATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)
(unaudited)
 

13 Weeks Ended July 28, 2012

American Eagle Outfitters, Inc.

(GAAP Basis)

Tax Benefits (1) Restructuring Costs (1)  

American Eagle Outfitters, Inc.

(Non-GAAP Basis)

% of % of
      Sales             Sales
 
Net sales $ 739,680 100.0 % $ - $ - $ 739,680 100.0 %
Cost of sales, including certain buying, occupancy and warehousing expenses   463,116     62.6 %   -     -     463,116     62.6 %
Gross profit 276,564 37.4 % - - 276,564 37.4 %
Selling, general and administrative expenses 182,125 24.6 % - 4,367 177,758 24.0 %
Depreciation and amortization   32,643     4.4 %   -     710     31,933     4.3 %
Operating income (loss) 61,796 8.4 % - (5,077 ) 66,873 9.1 %
Other (expense) income, net   (343 )   -0.1 %   -     -     (343 )   -0.1 %
Income (loss) before income taxes 61,453 8.3 % - (5,077 ) 66,530 9.0 %
Provision (benefit) for income taxes   18,607     2.5 %   (4,411 )   (1,882 )   24,900     3.4 %
Income (loss) from continuing operations   42,846     5.8 %   4,411     (3,195 )   41,630     5.6 %
Loss from discontinued operations, net of tax   (23,819 )   -3.2 %   -     -     (23,819 )   -3.2 %
Net income (loss) $ 19,027     2.6 % $ 4,411   $ (3,195 ) $ 17,811     2.4 %
 
Basic income per common share
Income from continuing operations $ 0.22 $ 0.03 $ (0.02 ) $ 0.21
Loss from discontinued operations $ (0.12 )   $ 0.00   $ 0.00   $ (0.12 )
Basic income per common share $ 0.10 $ 0.03 $ (0.02 ) $ 0.09
 
Diluted income per common share
Income from continuing operations $ 0.21 $ 0.02 $ (0.02 ) $ 0.21
Loss from discontinued operations $ (0.12 )   $ 0.00   $ 0.00   $ (0.12 )
Diluted income per common share $ 0.09 $ 0.02 $ (0.02 ) $ 0.09
 
Weighted average common shares
outstanding - basic 196,160 196,160 196,160 196,160
Weighted average common shares
outstanding - diluted 199,807 199,807 199,807 199,807
 

 

(1)- Non-GAAP Items consist of $4.4 million of tax benefits from audit settlements, offset by $3.9 million of pre-tax severance and related costs and $1.2 million of pre-tax asset impairments and asset write offs.

   
AMERICAN EAGLE OUTFITTERS, INC.
COMPARABLE STORE SALES RESULTS BY BRAND
(unaudited)
 

Second Quarter Comparable Store Sales (1)

2012 2011
American Eagle Outfitters, Inc. (2) 9% 1%
 
AE Brand 7% 0%
aerie 13% -1%
AEO Direct (2) 28% 17%
 

YTD Second Quarter Comparable Store Sales (1)

2012 2011
American Eagle Outfitters, Inc. (2) 13% -3%
 
AE Brand 11% -4%
aerie 16% -4%
AEO Direct (2) 25% 9%
 

 

 

(1) Comparable store sales are from continuing operations and exclude 77kids.

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