Financial information for American Eagle is presented in Appendix A. Required: 1-a. The summary of significant accounting policies is located in note 2 to the financial statements. Locate the section on property and equipment. What depreciation method does American Eagle use? Straight-line method Double-declining method Both straight-line and accelerated methods 1-b. What are the estimated useful lives for buildings and for fixtures and equipment? Buildings Fixtures and equipment years years 2-a. Find note 7 for Property and Equipment. What are the cost and the book value of property and equipment for the year 2018? (Enter answers in thousands of dollars.) The cost of property and equipment is and the book value is 2-a. Find note 7 for Property and Equipment. What are the cost and the book value of property and equipment for the year 2018? (Enter answers in thousands of dollars.) The cost of property and equipment is and the book value is 2-b. What is the trend in depreciation expense for the past three years? Increase Decrease 5 3-a. Find note 8 for Intangible Assets. What intangible asset is listed? Trademarks Goodwill 3-b. What are listed as the cost and the book value of intangible assets for the year 2018? (Enter answers in thousands of dollars.) The cost is and the book value is 3-c. What is the trend in amortization expense for the past three years? February 3, 2018 January 28, 2017 $ in thousands, except per share amounts) Assets Current assets: Cash and cash equivalents Merchandise inventory Accounts receivable, net Prepaid expenses and other Total current assets Property and equipment, net of accumulated depreciation Intangible assets, net of accumulated amortization Goodwill Deferred income taxes Other assets Total assets 413,613 398,213 78,304 78,400 968,530 724,239 46,666 15,070 9,344 52,464 1,816,313 378,613 358,446 86,634 77,536 901.229 707,797 49,373 14,887 49,250 60,124 1,782,660 $ leal $ $ 236,703 54,324 83,312 12,781 52,347 11,203 34,551 485,221 246,204 54,184 78,619 12,220 52,966 12,780 36,810 493,783 Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued compensation and payroll taxes Accrued rent Accrued income and other taxes Unredeemed gift cards and gift certificates Current portion of deferred lease credits Other liabilities and accrued expenses Total current liabilities Non-current liabilities: Deferred lease credits Non-current accrued income taxes Other non-current liabilities Total non-current liabilities Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued: 177,316 and 181,886 shares outstanding, respectively Contributed capital Accumulated other comprehensive loss, net of tax Retained earnings Treasury stock, 72,250 and 67,680 shares, respectively, at cost Total stockholders' equity Total liabilities and stockholders' equity 47,977 7,269 29,055 84,301 45,114 4,537 34,657 84,308 2,496 593,770 (30,795) 1,883,592 (1,202,272) 1,246,791 1,816,313 2,496 603,890 (36,462) 1,775,775 (1,141,130) 1,204,569 1,782,660 $ $ Refer to Notes to Consolidated Financial Statements 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 Basic income per common share: Income from continuing operations Discontinued operations Basic net income per common share $ 1.15 $ 1.17 $ 1.10 0.02 1.12 $ 1.15 $ 1.17 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-6 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Comprehensive Income February 3, 2018 204,163 For the Years Ended January 28, 2017 $ 212,449 January 30 2016 218,138 $ $ (In thousands) Net income Other comprehensive gain (loss): Foreign currency translation gain (loss) Other comprehensive gain (loss) Comprehensive income 5,667 5,667 209,830 (6,594) (6,594) 205,855 (19,924) (19,924) 198,214 $ $ 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 taxos 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) (153,250 (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 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A-15 A summary of fixed minimum and contingent rent expense for all operating leases follows: $ $ For the Years Ended February 3, January 28, January 30, (In thousands) 2018 2017 2016 Store rent: Fixed minimum $ 298,458 $ 286,850 $ 282,300 Contingent 9,566 8,519 9,035 Total store rent, excluding common area maintenance charges, real estate taxes and certain other expenses $ 308,025 $ 295,369 S 291,335 Offices, distribution facilities, equipment and other 26,960 18,172 16,063 Total rent expense $ 334,985 $ 313,541 $ 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