American Eagle Outfitters, Inc. (AEO) STATEMENT OF STOCKHOLDERS' EQUITY For the year ended January 28, 2012 (In thousands) Shares Accumulated Common Contributed Out- standing Stock Capital (Par) (APIC) Retained Treasury Earnings Stock (2) Comprehen- Other Total Stockholders' (1) Equity sive Income Balance at January 29, 2011 194,366 $2,496 $546,597 $1,711,929 $(938,023) $28,072 $1,351,071 Stock awards 10.532 10,532 Repurchase of (1,510) common stock (17,349) (17,349) Reissuance of 992 6,549 6549 treasury stock Net income 151,705 151,705 Other comprehensive 587 587 income, net of tax Cash dividends (87,909) Other (3) (4,332) (4,261) 10,258 (87,909) 1,665 Balance at January 28, 2012 193,848 $2,496 $552,797 $1,771,464 $(938,565) $28,659 $1,416,851 1. $0.01 par value common stock at January 28, 2012: 600,000 authorized, 249,566 issued and 193,848 outstanding. $0.01 par value common stock at January 29, 2011: 600,000 authorized, 249,566 issued and 194,366 outstanding. $0.01 par value preferred stock at January 28, 2012 and January 29, 2011: 5,000 authorized, with none issued or outstanding, 2. Treasury stock: 55,718 shares and 55,200 shares [in treasury] at January 28, 2012and January 29, 2011, respectively. During Fiscal 2011, 922 shares were reissued from treasury stock for the issuance of share-based payments. 3. Reclassified amounts for easier understanding in this text. ACTIVITY 36 Purpose: STATEMENT OF STOCKHOLDERS' EQUITY Interpret an increase and decrease in Stockholders' Equity. Understand preferred and common stock dividends. Compute shares outstanding after a stock split. Retained earnings (RE) are net income earned by the company since its incorporation and not yet distributed as dividends. It is increased by net income, the earnings of this accounting period, and decreased by dividends, a distribution of earnings. Beginning Retained Earnings + Net Income - Dividends = Ending Retained Earnings Refer to the Statement of Stockholders' Equity for American Eagle Outfitters (AEO), Inc. and accompanying notes presented on page 107 to answer the following questions. Q1 20 Q2 For fiscal year ended on January 28, 2012 for AEO: Beginning Retained Earnings, (January 29/January 28), 2011. + Net income -Dividends - Other = Ending Retained Earnings, January 28, 2012 On January 28, 2012 stockholders' equity totaled. shareholders. thousand thousand thousand (4,261) thousand thousand thousand, which is the amount of business assets owned by Q3 a. b. Assume that AEO issued 1 million shares of preferred stock with a dividend rate of $5 per share. Preferred shareholders would expect to receive_ million in dividends each year. (Preferred / Common) shareholders always receive their dividends first; this is part of the "preferred" treatment. Therefore, if the Board of Directors declared an $80 million dividend, preferred shareholders would receive million in dividends and common shareholders would receive million in dividends. C. (Preferred / Common) stock usually has a stated dividend rate. Q4 a. A company has 170 million common shares outstanding. b. C. Assume there is a two-for-one stock split, after the stock split there would be (113/170/255 / 340/510) million common shares outstanding. Assume there is a three-for-two stock split, after the stock split there would be (113/170/255/340/510) million common shares outstanding. Because shareholders maintain the same proportionate share of a company's wealth before and after a stock split, the stock split (increases / decreases / has no effect) on shareholder wealth. Under International Financial Reporting Standards (IFRS), preferred stock would be classified as (a liability/stockholders' equity) and the preferred dividend reported as (interest / dividends) on the income statement. For each of the following events, identify the effect on stockholders' equity. Q5 a. Net income (increases / decreases / has no effect on) stockholders' equity. b. Cash dividends (increase/decrease / have no effect on) stockholders' equity. Q6 C. Repurchase of treasury stock (increases / decreases / has no effect on) stockholders' equity. d. Reissue of treasury stock (increases/decreases/ has no effect on) stockholders' equity. (Common / Preferred / Treasury) stock is publicly traded, meaning the shares are bought and sold on public stock exchanges such as the New York Stock Exchange and NASDA