American Eagle Outfitters 2015 Annual Report Download

Download and view the complete annual report

Please find the complete 2015 American Eagle Outfitters annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 72

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
xx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended January 30, 2016
OR
oo TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-33338
American Eagle Outfitters, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
No. 13-2721761
(I.R.S. Employer
Identification No.)
 
77 Hot Metal Street, Pittsburgh, PA 15203-2329
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code:
(412) 432-3300
Securities registered pursuant to Section 12(b) of the Act:
Common Shares, $0.01 par value
(Title of class)
New York Stock Exchange
(Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Sections 15(d) of the Act. YES o NO x
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at
the past 90 days. YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). YES x NO o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company) Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO x
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of August 1, 2015 was $3,211,142,684.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 180,659,762 Common Shares
were outstanding at March 7, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
Part III — Proxy Statement for 2016 Annual Meeting of Stockholders, in part, as indicated.

Table of contents

  • Page 1
    ...principal executive offices) Delaware (I.R.S. Employer Identification No.) No. 13-2721761 15203-2329 (Zip Code) 77 Hot Metal Street, Pittsburgh, PA Registrant's telephone number, including area code: (412) 432-3300 Securities registered pursuant to Section 12(b) of the Act: Common Shares...

  • Page 2
    ...Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial...

  • Page 3
    ... and internationally. We offer a broad assortment of apparel and accessories for men and women under the American Eagle Outfitters brand, and intimates, apparel and personal care products for women under the Aerie brand. AEO Inc. operates stores in the United States, Canada, Mexico, Hong Kong, China...

  • Page 4
    ... Fiscal 2015. Company-Owned Stores Our Company-owned retail stores are located in shopping malls, lifestyle centers and street locations in the U.S., Canada, Mexico, China, Hong Kong and the United Kingdom. Stores are located in high-traffic locations in most retail centers in which we operate. The...

  • Page 5
    ... Code of Conduct. New garment factories must pass an initial inspection in order to do business with us and we continue to review their social compliance performance both through internal audits by our compliance team and through the use of third-party monitors. We strive to partner with suppliers...

  • Page 6
    ... United States, Canada, Mexico, Hong Kong, China and the United Kingdom of whom approximately 31,300 were part-time and seasonal hourly employees. Executive Officers of the Registrant Mary M. Boland, age 58, has served as our Executive Vice President, Chief Financial and Administrative Officer, and...

  • Page 7
    ..., age 42, has served as our Executive Vice President and Chief Operations Officer since June 2012. Prior thereto, he served as our Executive Vice President and Chief Operating Officer, New York Design Center, from April 2009 to June 2012, as Senior Vice President and Chief Supply Chain Officer from...

  • Page 8
    ... expand and remodel existing stores on a timely and profitable basis. During Fiscal 2016, we plan to open approximately 15 to 20 new American Eagle Outfitters stores and approximately 10 new Aerie stores in North America and continue our international expansion. Additionally, we plan to remodel and...

  • Page 9
    ... merchandise is manufactured by suppliers worldwide. Although we purchase a significant portion of our merchandise through a single international buying agent, we do not maintain any exclusive commitments to purchase from any one vendor. Because we have a global supply chain, any event causing the...

  • Page 10
    ... into place policies and procedures aimed at ensuring legal and regulatory compliance, our employees, subcontractors, vendors and suppliers could take actions that violate these requirements, which could have a material adverse effect on our reputation, financial condition and on the market price of...

  • Page 11
    ... as a technology center for our engineers and digital marketing team focused on our omni-channel strategy. The lease for this space expires in 2019. We also lease offices in international locations including 5,800 square feet in Mexico City expiring in 2020, 15,400 square feet in Hong Kong expiring...

  • Page 12
    ... our business, including certain actions in which we are the plaintiff. At this time, our management does not expect the results of any of the legal actions to be material to our financial position or results of operations. Item 4. Mine Safety Disclosures. Not Applicable PART II Item 5. Market...

  • Page 13
    ...such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange...points are based on the closing price on the last trading day of the fiscal year indicated. American Eagle Outfitters, Inc. S&P Midcap 400 Dynamic Retail...

  • Page 14
    ... warrants and other rights. Unregistered Sale of Equity Securities and Use of Proceeds On November 2, 2015, the Company issued 197,496 shares of common stock, with the approximate value of $3,087,000, to certain former stockholders of Tailgate Clothing Company, Corp. ("Tailgate") in connection with...

  • Page 15
    ... Statements data presented below is derived from our Consolidated Financial Statements, if applicable, which are filed in response to Item 8 below. The selected Consolidated Statement of Operations data for the years ended February 2, 2013 and January 28, 2012 and the selected Consolidated Balance...

  • Page 16
    ...; the planned opening of approximately 30 new international third party operated American Eagle Outfitters stores during Fiscal 2016; the success of our core American Eagle Outfitters and Aerie brands through our omni-channel outlets within North America and internationally; the expected payment of...

  • Page 17
    ... the fair value of our stock option awards, we use the Black-Scholes option pricing model, which requires management to apply judgment and make assumptions to determine the fair value of our awards. These assumptions include estimating the length of time employees will retain their vested stock...

  • Page 18
    ... American Eagle Outfitters and Aerie brand comparable sales metric for the following reasons: · · Our approach to customer engagement is "omni-channel", which provides a seamless customer experience through both traditional and nontraditional channels, including four wall store locations, web...

  • Page 19
    ..., travel, supplies and samples. Buying, occupancy and warehousing costs consist of: compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office...

  • Page 20
    ..., the percentage relationship to total net revenue of the listed items included in our Consolidated Statements of Operations. Total net revenue Cost of sales, including certain buying, occupancy and warehousing expenses Gross profit Selling, general and administrative expenses Restructuring...

  • Page 21
    ...the sale of the previously closed Warrendale distribution center and savings from expense reduction initiatives. As a rate to total net revenue, selling, general and administrative expenses improved 90 basis points to 23.7%, compared to 24.6% last year. There was $14.0 million of share-based payment...

  • Page 22
    ... 2013. By brand, including the respective AEO Direct revenue, American Eagle Outfitters brand comparable sales decreased 6%, or $161.8 million, and Aerie brand increased 6%, or $10.1 million. AEO Brand men's comparable sales decreased in the high single-digits and AEO Brand women's comparable sales...

  • Page 23
    ... 69 retail stores and our Warrendale, Pennsylvania Distribution Center. Depreciation and Amortization Expense Depreciation and amortization expense increased to $141.2 million in Fiscal 2014 from $132.0 million in Fiscal 2013, driven by omni-channel and IT investments, new factory and international...

  • Page 24
    ... related items. Loss from Discontinued Operations We completed the sale of the 77kids stores and related e-commerce operations during 2012. Accordingly, the after-tax operating results appear in Loss from Discontinued Operations on the Consolidated Statements of Operations for all periods presented...

  • Page 25
    ... Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing stores, information technology upgrades, distribution center improvements and expansion and the return of value to shareholders through the repurchase of common stock and the payment of...

  • Page 26
    ... Operations During Fiscal 2015, cash used for financing activities resulted primarily from $227.1 million for the repurchase of shares as part of our publicly announced repurchase program, $97.2 million for the payment of dividends and $5.2 million for the repurchase of common stock from employees...

  • Page 27
    ... of $0.125 per share, payable on April 22, 2016 to stockholders of record at the close of business on April 8, 2016. The payment of future dividends is at the discretion of our Board and is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation...

  • Page 28
    ... Consolidated Financial Statements. Impact of Inflation Historically, increases in the price of raw materials used in the manufacture of merchandise we purchase from suppliers has negatively impacted our cost of sales. Future increases in these costs, in addition to increases in the price of labor...

  • Page 29
    Item 7A. Quantitative and Qualitative Disclosures about Market Risk We have market risk exposure related to interest rates and foreign currency exchange rates. Market risk is measured as the potential negative impact on earnings, cash flows or fair values resulting from a hypothetical change in ...

  • Page 30
    Item 8. Financial Statemen ts and Supplementary Data. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of ...

  • Page 31
    ...also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Eagle Outfitters, Inc.'s internal control over financial reporting as of January 30, 2016, based on criteria established in Internal Control - Integrated Framework issued by...

  • Page 32
    AMERICAN EAGLE OUTFITTERS, INC. Consolidated Balance Sheets January 30, 2016 (In thousands, except per share amounts) January 31, 2015 Assets Current assets: Cash and cash equivalents Merchandise inventory Accounts receivable Prepaid expenses and other Total current assets ...

  • Page 33
    AMERICAN EAGLE O UTFITTERS, INC. Consolidated Statements of Operations For the Years Ended January 30, 2016 January 31, 2015 February 1, 2014 (In thousands, except per share amounts) Total net revenue Cost of sales, including certain buying, occupancy and warehousing expenses Gross ...

  • Page 34
    AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Comprehensive Income January 30, 2016 For the Years Ended January 31, 2015 February 1, 2014 Net income ...22,101) (22,101) 58,221 $ (17,140) (17,140) 65,843 Refer to Notes to Consolidated Financial Statements 34

  • Page 35
    ... Balance at February 1, 2014 Stock awards Repurchase of common stock as part of publicly announced programs Repurchase of common stock from employees Reissuance of treasury stock Net income Other comprehensive loss Cash dividends and dividend equivalents ($0.50 per share) Balance at January 31, 2015...

  • Page 36
    ... programs Repurchase of common stock from employees Net proceeds from stock options exercised Excess tax benefit from share-based payments Cash dividends paid Net cash used for financing activities from continuing operations Effect of exchange rates on cash Cash flows of discontinued operations...

  • Page 37
    ...ae.com and aerie.com and international store locations managed by third-party operators. Through its brands, the Company offers high quality, on-trend clothing, accessories and personal care products at affordable prices. The Company's online business, AEO Direct, ships to 81 countries worldwide. On...

  • Page 38
    ...In May 2014, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"). ASU 2014-09 is a comprehensive new revenue recognition model that expands disclosure requirements and requires a company to...

  • Page 39
    ... of impairment charges related to corporate assets. During Fiscal 2013, the Company recorded asset impairment charges of $44.5 million consisting of $25.2 million for the impairment of 69 retail stores and $19.3 million for the Company's Warrendale, Pennsylvania Distribution Center, recorded as...

  • Page 40
    ... reached. Also, AEO Visa Card customers who make purchases at other retailers where the card is accepted earn additional discounts. Savings certificates are valid for 90 days from issuance. Points earned under the credit card rewards program on purchases at AEO and Aerie are accounted for by analogy...

  • Page 41
    ...historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company's gift card program, refer to the Gift Cards caption below. 41 Beginning balance Returns Provisions Ending...

  • Page 42
    ...is sold. Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel for the Company's buyers and certain senior merchandising executives; rent and utilities related to the Company's stores, corporate headquarters, distribution centers and other office space...

  • Page 43
    ... 2014 Cash paid during the periods for: Income taxes Interest $ $ 116,765 1,173 $ $ 38,501 638 $ $ 65,496 387 Segment Information In accordance with ASC 280, Segment Reporting ("ASC 280"), the Company has identified three operating segments (American Eagle Outfitters® Brand retail stores...

  • Page 44
    ...ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date. Financial Instruments Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and...

  • Page 45
    .... The fair value of the Company's stores were determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located...

  • Page 46
    ... the number of shares ultimately issued is contingent on the Company's performance compared to pre-established performance goals. Refer to Note 12 to the Consolidated Financial Statements for additional information regarding share-based compensation. 6. Accounts Receivable Accounts receivable...

  • Page 47
    ... all store premises, some of its office space and certain information technology and office equipment. The store leases generally have initial terms of 10 years and are classified as operating leases. Most of these store leases provide for base rentals and the payment of a percentage of sales as...

  • Page 48
    ... - Stock Compensation ("ASC 718"), which requires the Company to measure and recognize compensation expense for all share-based payments at fair value. Total share-based compensation expense included in the Consolidated Statements of Operations for Fiscal 2015 and Fiscal 2014 was $35.0 million ($23...

  • Page 49
    ... if the Company meets established performance goals. The remaining 38% of the restricted stock awards are time-based and vest over three years. The 2005 Plan terminated on May 29, 2014 with all rights of the awardees and all unexpired awards continuing in force and operation after the termination...

  • Page 50
    ... the 2005 Plan. Time-based stock option awards vest over the requisite service period of the award or to an employee's eligible retirement date, if earlier. Performance-based stock option awards vest over three years and are earned if the Company meets pre-established performance goals during each...

  • Page 51
    ... closing market price of the Company's common stock on the date of grant. A summary of the activity of the Company's restricted stock is presented in the following tables: Time-Based Restricted Stock Units For the year ended January 30, 2016 Weighted-Average Grant Date Shares Fair Value (Shares...

  • Page 52
    ... of age. In addition, full-time employees need to have completed 60 days of service and part-time employees must complete 1,000 hours worked to be eligible. Individuals can decline enrollment or can contribute up to 50% of their salary to the 401(k) plan on a pretax basis, subject to IRS limitations...

  • Page 53
    ...related to share-based payments, tax benefits have been recognized as contributed capital for Fiscal 2015, Fiscal 2014 and Fiscal 2013 in the ...distribution of the earnings in the form of dividends or otherwise, the Company would be subject to income and withholding taxes offset by foreign tax credits...

  • Page 54
    ... is participating in the IRS's Compliance Assurance Process (CAP) for the tax years ended January 31, 2015 and January 30, 2016. The Company does not anticipate that any adjustments will result in a material change to its financial position, results of operations or cash flows. With respect to state...

  • Page 55
    ... Charges During Fiscal 2014, the Company undertook restructuring aimed at strengthening the store portfolio and reducing corporate overhead, including severance and office space consolidation. These changes are aimed at driving efficiencies and aligning investments in areas that help fuel...

  • Page 56
    ...2015, the Company completed the acquisition of Tailgate, which owns and operates Tailgate, a vintage, sports-inspired apparel brand with a college town store concept, and Todd Snyder New York, a premium menswear brand, for total consideration of $13.5 million, of which $10.4 million was paid in cash...

  • Page 57
    ... that are designed to provide reasonable assurance that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and...

  • Page 58
    ...assets and business acquired for Tailgate. Our independent registered public accounting firm that audited the financial statements included in this Annual Report issued an attestation report on our internal control over financial reporting. Changes in Internal Control Over Financial Reporting There...

  • Page 59
    ...respects, effective internal control over financial reporting as of January 30, 2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of American Eagle Outfitters, Inc...

  • Page 60
    ... Reporting Compliance," "Corporate Governance Information," and "Board Committees" in our Proxy Statement relating to our 2016 Annual Meeting of Stockholders is incorporated herein by reference. See also Part I, Item 1 under the caption "Executive Officers of the Registrant." Item 11. Executive...

  • Page 61
    ... June 25, 2010 (14) 2014 Stock Award and Incentive Plan (15) Credit Agreement, dated December 2, 2014, among American Eagle Outfitters Outfitters, Inc. and certain of its subsidiaries as borrowers, each lender from time to time party thereto, and HSBC Bank USA, N.A. as administrative agent for the...

  • Page 62
    ... of the Sarbanes-Oxley Act of 2002 Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the SarbanesOxley Act of 2002 Interactive Data File Previously filed as Exhibit 3.1 to the Form 10-Q dated August 4, 2007, filed September 6, 2007...

  • Page 63
    (b) Exhibits The exhibits to this report have been filed herewith. (c) Financial Statement Schedules None. 63

  • Page 64
    ... duly authorized. AMERICAN EAGLE OUTFITTERS, INC. By: /s/ Jay L. Schottenstein Jay L. Schottenstein Chief Executive Officer Dated March 10, 2016 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities...

  • Page 65
    ...LLC, a Delaware Limited Liability Company AEO Hong Kong Hold Co. LLC, a Delaware Limited Liability Company AEO International Corp., a Delaware Corporation AEO International Trading Corp., a Cayman Islands Exempted Company AEO Israeli Services Co, a Delaware Corporation AEO Management Co., a Delaware...

  • Page 66
    ...Outfitters Hong Kong Limited, a Hong Kong Limited Liability Company American Eagle Outfitters UK Limited, a United Kingdom Limited Liability Company Blue Heart Enterprises LLC, a Delaware Limited Liability Company Blue Star Imports Ltd., a Delaware Corporation Blue Star Imports, L.P., a Pennsylvania...

  • Page 67
    ... consolidated financial statements of American Eagle Outfitters, Inc. and the effectiveness of internal control over financial reporting of American Eagle Outfitters, Inc., included in this Annual Report (Form 10-K) for the year ended January 30, 2016. /s/ Ernst & Young LLP Pittsburgh, Pennsylvania...

  • Page 68
    ... Boland Title Chief Executive Officer, Chairman of the Board of Directors and Director (Principal Executive Officer) Chief Financial Officer and Chief Administrative Officer (Principal Financial Officer) Senior Vice President, Chief Accounting Officer (Principal Accounting Officer) Director...

  • Page 69
    CERTIFICATIONS I, Jay L. Schottenstein, certify that: 1. I have reviewed this Annual Report on Form 10-K of American Eagle Outfitters, Inc.; Exhibit 31.1 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to ...

  • Page 70
    CERTIFICATIONS I, Mary M. Boland, certify that: 1. I have reviewed this Annual Report on Form 10-K of American Eagle Outfitters, Inc.; Exhibit 31.2 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the ...

  • Page 71
    ... with the Annual Report of American Eagle Outfitters, Inc. (the "Company") on Form 10-K for the period ended January 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jay L. Schottenstein, Principal Executive Officer of the Company, certify to...

  • Page 72
    ...In connection with the Annual Report of American Eagle Outfitters, Inc. (the "Company") on Form 10-K for the period ended January 30, 2016 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mary M. Boland, Principal Financial Officer of the Company, certify to...