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APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A-5 AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Operations February 3, 2018 3,795,549 For the Years
APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A-5 AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Operations February 3, 2018 3,795,549 For the Years Ended January 28, 2017 $ 3,609,865 January 30 2016 3,521,848 $ (In thousands, except per share amounts) Total net revenue Cost of sales, including certain buying, occupancy and warehousing expenses Gross profit Selling, general and administrative expenses Impairment and restructuring charges Depreciation and amortization expense Operating income Other (expense) income, net Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations, net of tax Net income 2,425,044 1,370,505 879,685 20,611 167,421 302,788 (15,615) 287,173 83,010 204,163 2,242,938 1,366,927 857,562 21,166 156,723 331,476 3,786 335,262 122,813 212,449 2,219,114 1,302,734 834,700 0 148,156 319,878 1,993 321,871 108,580 213,291 4,847 218,138 204,163 $ 212,449 1.15 $ 1.17 1.10 0.02 1.12 1.15 $ 1.17 Basic income per common share: Income from continuing operations Discontinued operations Basic net income per common share Diluted income per common share: Income from continuing operations Discontinued operations Diluted net income per common share $ $ 1.13 $ 1.16 1.09 0.02 1.11 1.13 $ 1.16 $ Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted 177,938 180, 156 181,429 183,835 194,351 196,237 Refer to Notes to Consolidated Financial Statements A-8 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Cash Flows February 3, 2018 For the Years Ended January 28, 2017 January 30, 2016 204,163 $ 212,449 $ 218,138 (4,847) 213,291 204,163 $ 212,449 $ 169,473 16,890 44,312 (5.616) 158,174 29,137 14,838 (835) 20,576 148,858 34,977 4,680 2.977 (9.422) (In thousands) Operating activities: Net income Gain from discontinued operations, net of tax Income from continuing operations Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Share-based compensation Deferred income taxes Foreign currency transaction (gain) loss Loss on impairment of assets Gain on sale of assets Changes in assets and liabilities: Merchandise inventory Accounts receivable Prepaid expenses and other Other assets Accounts payable Unredeemed gift cards and gift certificates Deferred lease credits Accrued compensation and payroll taxes Accrued income and other taxes Accrued liabilities Total adjustments Net cash provided by operating activities from continuing operations Investing activities: Capital expenditures for property and equipment Acquisitions and purchase of long-lived assets in business combination Proceeds from sale of assets Acquisition of intangible assets Net cash used for investing activities from continuing operations Financing activities: Payments on capital leases and other Repurchase of common stock as part of publicly announced 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 Net cash used for operating activities Net cash used for investing activities Net cash used for financing activities Effect of exchange rates on cash Net cash used for discontinued operations Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - beginning of period Cash and cash equivalents - end of period (35,912) 8,837 (399) 5,317 (16,663) (874) 984 1,289 565 2,060 190,263 394,426 (53,613) (7,705) (332) (6,705) 52,347 4,465 (5,229) (25.809) (10,695) (15,467 153,147 365,596 (22,259) (10,093) (7,027) (10,017) (3.189 755 (4,099 34.234 (17.615) (14,133) 128.627 341,918 (169,469) (161.494) (153,256) (10,442) 12,579 (2.382) (153,501) (2,681 (172.150) (1,528 (163,022) (4.375) (3,384) (87.682) (12,513) 3.355 (7,635) (227,071) (5.163) 7,283 657 (97,237 (329,166 (3,076 (7,032) 16,260 763 (90,680 (85,064) 1,036 (88,548) (188,772) 1,496 (6.805) 35,000 378,613 413,613 118,546 260,067 378,613 (6,805 (150,630) 410.697 260.067 $ Refer to Notes to Consolidated Financial Statements A-14 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report For the Years Ended February 3, January 28, January 30, 2018 2017 2016 $ 158,969 $ 152,644 $ 140,616 (In thousands) Depreciation expense Additionally, during Fiscal 2017, Fiscal 2016 and Fiscal 2015, the Company recorded $6.0 million, $1.5 million and $4.8 million, respectively, related to asset write-offs within depreciation and amortization expense. 8. Intangible Assets Intangible assets include costs to acquire and register the Company's trademark assets. February 3, 2018 and January 28, 2017: The following table represents intangible assets as of $ (In thousands) Trademarks, at cost Less: Accumulated amortization Intangible assets, net February 3, January 28, 2018 2017 70,322 $ 68,978 (23,656) (19,605) 46,666 $ 49,373 $ Amortization expense is summarized as follows: (In thousands) Amortization expense For the Years Ended February 3, January 28, January 30, 2018 2017 2016 $ 4,551 $ 4,007 $ 3,483 The table below summarizes the estimated future amortization expense for intangible assets existing as of February 3, 2018 for the next five Fiscal Years: (In thousands) 2018 2019 2020 2021 2022 100000 Future Amortization 3,732 3,732 3,059 2,732 2,730 A-15 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A summary of fixed minimum and contingent rent expense for all operating leases follows: February 3, 2018 For the Years Ended January 28, 2017 January 30, 2016 298,458 $ 9,566 286,850 $ 8,519 282,300 9,035 (In thousands) Store rent: Fixed minimum Contingent Total store rent, excluding common area maintenance charges, real estate taxes and certain other expenses Offices, distribution facilities, equipment and other Total rent expense $ 308,025 $ 26,960 334,985 $ 295,369 $ 18,172 313,541 $ 291,335 16,063 307, 398 $ In addition, the Company is typically responsible under its store, office and distribution center leases for tenant occupancy costs, including maintenance costs, common area charges, real estate taxes and certain other expenses. The table below summarizes future minimum lease obligations, consisting of fixed minimum rent, under operating leases in effect at February 3, 2018: (In thousands) Fiscal years: 2018 2019 2020 2021 2022 Thereafter Total Future Minimum Lease Obligations $ 286,300 $ 252, 150 $ 229,056 $ 202,605 $ 168,993 $ 435,616 $ 1,574,720 Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1-a. Calculate the current ratio for the past two years. (Round your answers to 2 decimal places.) 2018 2017 Current Ratio 1-b. Did the current ratio improve or weaken in the more recent year? es Improve O Weaken 2-a. Calculate the acid-test (quick) ratio for the past two years. (Round your answers to 2 decimal places.) 2018 2017 Acid-Test Ratio 2-b. Did the acid-test ratio improve or weaken in the more recent year? Improve Weaken 3. If American Eagle used $100 million in cash to pay $100 million in accounts payable, how would its current ratio and acid-test ratio change? (Round your answers to 2 decimal places.) Before After Current Ratio Acid-Test Ratio APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A-5 AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Operations February 3, 2018 3,795,549 For the Years Ended January 28, 2017 $ 3,609,865 January 30 2016 3,521,848 $ (In thousands, except per share amounts) Total net revenue Cost of sales, including certain buying, occupancy and warehousing expenses Gross profit Selling, general and administrative expenses Impairment and restructuring charges Depreciation and amortization expense Operating income Other (expense) income, net Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations, net of tax Net income 2,425,044 1,370,505 879,685 20,611 167,421 302,788 (15,615) 287,173 83,010 204,163 2,242,938 1,366,927 857,562 21,166 156,723 331,476 3,786 335,262 122,813 212,449 2,219,114 1,302,734 834,700 0 148,156 319,878 1,993 321,871 108,580 213,291 4,847 218,138 204,163 $ 212,449 1.15 $ 1.17 1.10 0.02 1.12 1.15 $ 1.17 Basic income per common share: Income from continuing operations Discontinued operations Basic net income per common share Diluted income per common share: Income from continuing operations Discontinued operations Diluted net income per common share $ $ 1.13 $ 1.16 1.09 0.02 1.11 1.13 $ 1.16 $ Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted 177,938 180, 156 181,429 183,835 194,351 196,237 Refer to Notes to Consolidated Financial Statements A-8 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Cash Flows February 3, 2018 For the Years Ended January 28, 2017 January 30, 2016 204,163 $ 212,449 $ 218,138 (4,847) 213,291 204,163 $ 212,449 $ 169,473 16,890 44,312 (5.616) 158,174 29,137 14,838 (835) 20,576 148,858 34,977 4,680 2.977 (9.422) (In thousands) Operating activities: Net income Gain from discontinued operations, net of tax Income from continuing operations Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization Share-based compensation Deferred income taxes Foreign currency transaction (gain) loss Loss on impairment of assets Gain on sale of assets Changes in assets and liabilities: Merchandise inventory Accounts receivable Prepaid expenses and other Other assets Accounts payable Unredeemed gift cards and gift certificates Deferred lease credits Accrued compensation and payroll taxes Accrued income and other taxes Accrued liabilities Total adjustments Net cash provided by operating activities from continuing operations Investing activities: Capital expenditures for property and equipment Acquisitions and purchase of long-lived assets in business combination Proceeds from sale of assets Acquisition of intangible assets Net cash used for investing activities from continuing operations Financing activities: Payments on capital leases and other Repurchase of common stock as part of publicly announced 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 Net cash used for operating activities Net cash used for investing activities Net cash used for financing activities Effect of exchange rates on cash Net cash used for discontinued operations Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - beginning of period Cash and cash equivalents - end of period (35,912) 8,837 (399) 5,317 (16,663) (874) 984 1,289 565 2,060 190,263 394,426 (53,613) (7,705) (332) (6,705) 52,347 4,465 (5,229) (25.809) (10,695) (15,467 153,147 365,596 (22,259) (10,093) (7,027) (10,017) (3.189 755 (4,099 34.234 (17.615) (14,133) 128.627 341,918 (169,469) (161.494) (153,256) (10,442) 12,579 (2.382) (153,501) (2,681 (172.150) (1,528 (163,022) (4.375) (3,384) (87.682) (12,513) 3.355 (7,635) (227,071) (5.163) 7,283 657 (97,237 (329,166 (3,076 (7,032) 16,260 763 (90,680 (85,064) 1,036 (88,548) (188,772) 1,496 (6.805) 35,000 378,613 413,613 118,546 260,067 378,613 (6,805 (150,630) 410.697 260.067 $ Refer to Notes to Consolidated Financial Statements A-14 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report For the Years Ended February 3, January 28, January 30, 2018 2017 2016 $ 158,969 $ 152,644 $ 140,616 (In thousands) Depreciation expense Additionally, during Fiscal 2017, Fiscal 2016 and Fiscal 2015, the Company recorded $6.0 million, $1.5 million and $4.8 million, respectively, related to asset write-offs within depreciation and amortization expense. 8. Intangible Assets Intangible assets include costs to acquire and register the Company's trademark assets. February 3, 2018 and January 28, 2017: The following table represents intangible assets as of $ (In thousands) Trademarks, at cost Less: Accumulated amortization Intangible assets, net February 3, January 28, 2018 2017 70,322 $ 68,978 (23,656) (19,605) 46,666 $ 49,373 $ Amortization expense is summarized as follows: (In thousands) Amortization expense For the Years Ended February 3, January 28, January 30, 2018 2017 2016 $ 4,551 $ 4,007 $ 3,483 The table below summarizes the estimated future amortization expense for intangible assets existing as of February 3, 2018 for the next five Fiscal Years: (In thousands) 2018 2019 2020 2021 2022 100000 Future Amortization 3,732 3,732 3,059 2,732 2,730 A-15 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A summary of fixed minimum and contingent rent expense for all operating leases follows: February 3, 2018 For the Years Ended January 28, 2017 January 30, 2016 298,458 $ 9,566 286,850 $ 8,519 282,300 9,035 (In thousands) Store rent: Fixed minimum Contingent Total store rent, excluding common area maintenance charges, real estate taxes and certain other expenses Offices, distribution facilities, equipment and other Total rent expense $ 308,025 $ 26,960 334,985 $ 295,369 $ 18,172 313,541 $ 291,335 16,063 307, 398 $ In addition, the Company is typically responsible under its store, office and distribution center leases for tenant occupancy costs, including maintenance costs, common area charges, real estate taxes and certain other expenses. The table below summarizes future minimum lease obligations, consisting of fixed minimum rent, under operating leases in effect at February 3, 2018: (In thousands) Fiscal years: 2018 2019 2020 2021 2022 Thereafter Total Future Minimum Lease Obligations $ 286,300 $ 252, 150 $ 229,056 $ 202,605 $ 168,993 $ 435,616 $ 1,574,720 Financial information for American Eagle is presented in Appendix A at the end of the book. Required: 1-a. Calculate the current ratio for the past two years. (Round your answers to 2 decimal places.) 2018 2017 Current Ratio 1-b. Did the current ratio improve or weaken in the more recent year? es Improve O Weaken 2-a. Calculate the acid-test (quick) ratio for the past two years. (Round your answers to 2 decimal places.) 2018 2017 Acid-Test Ratio 2-b. Did the acid-test ratio improve or weaken in the more recent year? Improve Weaken 3. If American Eagle used $100 million in cash to pay $100 million in accounts payable, how would its current ratio and acid-test ratio change? (Round your answers to 2 decimal places.) Before After Current Ratio Acid-Test Ratio
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