American Eagle Outfitters Reports 62% Increase In Second Quarter EPS

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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