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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended February 1, 2014
OR
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
No. 13-2721761
(State or other jurisdiction of
incorporation or organization)
(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
New York Stock Exchange
(Title of class)
(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.
NO YES Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Sections 15(d) of the Act.
NO YES 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 NO 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 NO 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. 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 Accelerated filer Non-accelerated filer (Do not check if a smaller reporting company)
Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
YES NO The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant as of August 3, 2013 was
$3,602,480,041.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 193,824,031
Common Shares were outstanding at March 10, 2014.
DOCUMENTS INCORPORATED BY REFERENCE
Part III — Proxy Statement for 2014 Annual Meeting of Stockholders, in part, as indicated.
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
TABLE OF CONTENTS
Page
Number
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
3
10
14
14
15
15
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART II
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Consolidated Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
16
19
20
35
36
70
70
72
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
72
72
72
72
72
Item 15.
Exhibits, Financial Statement Schedules
PART IV
72
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PART I
ITEM 1.
BUSINESS.
General
American Eagle Outfitters, Inc., a Delaware corporation (the “Company”), operates under the American Eagle Outfitters ® and aerie ® by
American Eagle Outfitters ® brands. Founded in 1977, we are a leading global specialty retailer offering high-quality, on-trend clothing,
accessories and personal care products at affordable prices.
We have company operated stores in the United States, Canada, Mexico, Hong Kong and China. American Eagle Outfitters ® and aerie ®
merchandise is also available at international store locations managed by third party operators. As of February 1, 2014, we operated 944
American Eagle Outfitters stores and 122 aerie stand-alone stores. Our third party operated store base has grown to 66 stores in 12 countries and
products purchased through our online business, AEO Direct, ship to 81 countries worldwide.
We operated the 77kids by American Eagle Outfitters ® brand until the exit of the business during Fiscal 2012. Our Consolidated Financial
Statements reflect the results of 77kids as discontinued operations for all periods presented.
As used in this report, all references to “we,” “our” and the “Company” refer to American Eagle Outfitters, Inc. and its wholly owned
subsidiaries. “American Eagle Outfitters,” “AEO” and the “AEO Brand” refer to our company operated American Eagle Outfitters stores.
“aerie” refers to our aerie ® by American Eagle Outfitters ® stores. “AEO Direct” refers to our e-commerce operations, ae.com and aerie.com.
Our financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2014” refers to the 52
week period ending January 31, 2015. “Fiscal 2013” refers to the 52 week period ended February 1, 2014. “Fiscal 2012” refers to the 53 week
period ended February 2, 2013. “Fiscal 2011,” “Fiscal 2010” and “Fiscal 2009” refer to the 52 week periods ended January 28, 2012, January 29,
2011 and January 30, 2010, respectively.
Information concerning our segments and certain geographic information is contained in Note 2 of the Consolidated Financial Statements
included in this Form 10-K and is incorporated herein by reference. Additionally, a five-year summary of certain financial and operating
information can be found in Part II, Item 6, Selected Consolidated Financial Data, of this Form 10-K. See also Part II, Item 8, Financial
Statements and Supplementary Data.
Brands
AEO Brand
The American Eagle Outfitters ® brand targets 15 to 25 year old men and women. Denim is the cornerstone of the American Eagle
Outfitters ® product assortment, which is complemented by other key categories including sweaters, fleece, outerwear, graphic t-shirts, footwear
and accessories. American Eagle Outfitters ® is honest, real, individual and fun. American Eagle Outfitters ® is priced to be worn by everyone,
everyday, delivering value through quality and style.
Gaining market share through differentiated fashion in key categories, such as knit tops and fleece, is a primary focus within the AEO
Brand. In addition, we seek to build upon our leading position in denim. Delivering value, variety and versatility to our customers remains a top
priority. We strive to offer value at all levels of the assortment, punctuated with promotions. We are working to reduce production lead-times, to
enable us to react more quickly to emerging trends. Finally, we continue to innovate our store experience to be more impactful from front to
back.
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aerie by American Eagle Outfitters
The aerie ® by American Eagle Outfitters ® (“aerie”) brand is a collection of intimates and personal care products for the AEO ® girl. The
collection is available in 122 stand-alone aerie stores throughout the United States and Canada, online at aerie.com and at select American Eagle
Outfitters ® stores. aerie, with intimates at the core, is beautiful, feminine, soft, sensuous, yet comfortable.
Growth Strategy
We are focused on delivering results through our five near-term priorities: (1) driving a competitive top line; (2) generating margin flowthrough from improved inventory management; (3) rebalancing our store fleet; (4) accelerating our online business; and (5) gaining leverage on
our infrastructure.
Our strategic plan is built around the following pillars:
• Fortify our brands, processes and capabilities;
• Grow North America through under-penetrated U.S. markets, factory stores, Mexico and e-commerce;
• Transform our Company into an omni-channel retailer with both domestic and international presence; and
• Return value to our shareholders through profitable growth.
AEO Direct
We sell merchandise via our e-commerce operations, ae.com and aerie.com, which are online extensions of the lifestyle that we convey in
our stores. In addition to purchasing items online, customers can experience AEO Direct in-store through our Store-to-Door program. This
program enables store associates to sell any item available online to an in-store customer in a single transaction. Customers are taking advantage
of Store-to-Door by purchasing extended sizes that are not available in-store, as well as finding a certain size or color that happens to be out-ofstock at the time of their visit. The ordered items are shipped to the customer’s home free of charge.
We are focused on delivering an omni-channel approach to customer engagement, which will eventually lead to a single view of the
customer and inventory. We have made investments including a re-launched mobile app and enhanced websites. We will continue to invest in
initiatives geared towards integration of our shopping channels. In Fiscal 2014, we will be capable of fulfilling online orders at stores through
our Buy Online Ship from Store program and we plan to enhance our websites, increase CRM capabilities through personalization, segmentation
and customer lifecycle management.
International Operations
We have agreements with multiple third party operators to expand our brands internationally. Through these agreements, a series of
franchised, licensed or other brand-dedicated American Eagle Outfitters stores have opened and will continue to open in areas including Eastern
Europe, the Middle East, Central and South America, Northern Africa and parts of Asia. These agreements do not involve a significant capital
investment or operational involvement from the Company. We continue to increase the number of countries in which we enter into these types of
arrangements as part of our strategy to expand internationally. As of February 1, 2014, we had 66 stores operated by our third party operators in
12 countries. International third party operated stores are not included in the consolidated store data or the total gross square feet calculation.
As of February 1, 2014, we had 96 company-operated stores in Canada, six in Mexico, three in Hong Kong, four in China and six in Puerto
Rico. We continue to evaluate further opportunities to expand internationally, which may include additional company-operated stores in Mexico,
Asia and the United Kingdom as well as stores operated by third party operators under license, franchise and/or joint venture agreements.
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Real Estate
We remain focused on real-estate strategies to grow our business and strengthen our financial performance utilizing our most productive
formats in the right markets, including AEO Factory stores and aerie side-by-side locations.
At the end of Fiscal 2013, we operated in all 50 states, Puerto Rico, Canada, Mexico, Hong Kong and China. During Fiscal 2013, we
opened 58 new stores, consisting largely of AEO Factory stores and acquired 6 franchised AEO Brand stores in Hong Kong and China. These
store openings, offset by 42 store closings, increased our total store base to 1,066 stores.
Our stores average approximately 6,100 gross square feet and approximately 4,900 on a selling square foot basis. Our gross square footage
increased by approximately 5% during Fiscal 2013.
During Fiscal 2013, we renovated a total of 56 AEO stores through remodels, refurbishes and refreshes. We evaluate each store and
determine the appropriate capital spend based on financial performance and non-financial factors including the location and condition of the
store, the center and competitors. Remodels result in a newly constructed store, sometimes larger in size, in the most current store design
including new storefront, floors, fixtures, marketing and lighting. Refurbishes consist of selective changes that include new store front, floors
and fixtures. Refreshes include certain aspects of our current store format, including paint and new fixtures.
In Fiscal 2014, we plan to open approximately 25 AEO stores in the Factory store format in North America and continue our international
expansion in Mexico, Asia and the United Kingdom. We also plan to remodel and refurbish approximately 45 existing AEO stores and close
approximately 15 to 20 AEO stores and 25 to 30 aerie stores. Our square footage is expected to increase slightly in Fiscal 2014.
The table below shows certain information relating to our historical store growth from continuing operations.
Consolidated stores at beginning of period
Consolidated stores opened during the period
Consolidated stores closed during the period
Total consolidated stores at end of period
AEO Brand stores at beginning of period
AEO Brand stores opened during the period
AEO Brand stores closed during the period
Total AE Brand stores at end of period
Fiscal
2013
Fiscal
2012
Fiscal
2011
Fiscal
2010
Fiscal
2009
1,044
64
(42)
1,066
1,069
16
(41)
1,044
1,077
21
(29)
1,069
1,075
25
(23)
1,077
1,070
29
(24)
1,075
Fiscal
2013
Fiscal
2012
Fiscal
2011
Fiscal
2010
Fiscal
2009
893
64
(13)
944
Fiscal
2013
aerie stores at beginning of period
aerie stores opened during the period
aerie stores closed during the period
Total aerie stores at end of period
151
—
(29)
122
5
911
16
(34)
893
Fiscal
2012
158
—
(7)
151
929
11
(29)
911
Fiscal
2011
148
10
—
158
938
14
(23)
929
Fiscal
2010
137
11
—
148
954
8
(24)
938
Fiscal
2009
116
21
—
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Consolidated Store Locations
As of February 1, 2014, we operated 1,066 stores in the United States, Canada, Mexico, Hong Kong and China under the American Eagle
Outfitters and aerie brands as shown below:
United States, including the Commonwealth of Puerto Rico — 957 stores
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
16
5
13
8
66
11
14
5
57
34
4
4
34
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
22
12
9
14
13
6
21
31
29
18
9
18
2
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Puerto Rico
6
4
10
27
3
64
29
4
36
13
11
61
6
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
3
17
3
26
72
10
2
26
19
9
19
2
Canada — 96 stores
Alberta
British Columbia
Manitoba
12
13
2
New Brunswick
Newfoundland
Nova Scotia
3
1
3
Ontario
Quebec
Saskatchewan
50
10
2
International — 13 stores
China
4
Hong Kong
3
Mexico
6
Purchasing
We purchase merchandise from suppliers who either manufacture their own merchandise, supply merchandise manufactured by others or
both. During Fiscal 2013, we purchased substantially all of our merchandise from non-North American suppliers.
All of our merchandise suppliers must agree to the terms and conditions of our Master Purchase Agreement (MPA) and to conduct
business with us in accordance with the policies and procedures set forth in our Corporate Vendor Manual (the “Manual”). The Manual includes,
but is not limited to, policies and procedures covering the following topics: social responsibility; quality assurance; product safety and testing;
product labeling and other regulatory requirements; supply chain security; our intellectual property; and our shipping process.
We maintain a quality control department at our distribution centers to inspect incoming merchandise shipments for uniformity of sizes and
colors and for overall quality of manufacturing. Periodic inspections are also made by our employees and agents at manufacturing facilities to
identify quality issues prior to shipment of merchandise.
Corporate Responsibility
We are firmly committed to the principle that the people who make our clothes should be treated with dignity and respect. We seek to work
with apparel suppliers throughout the world who share our commitment to providing safe and healthy workplaces. At a minimum, we require our
suppliers to maintain a workplace environment that complies with local legal requirements and meets universally-accepted human rights
standards.
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Our Vendor Code of Conduct (the “Code”), which is based on universally-accepted human rights principles, sets forth our expectations for
suppliers. The Code must be posted in every factory that manufactures our clothes in the local language of the workers. All suppliers must agree
to abide by the terms of our Code before we will place production with them.
We maintain an extensive factory inspection program to monitor compliance with our Code. New garment factories must pass an initial
inspection in order to do business with us. Once new factories are approved, 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 review the outcome of these inspections with
factory management with the goal of helping them to continuously improve their performance. Although our primary goal is to remediate issues
and build long term relationships with our vendors, in cases where a factory is unable or unwilling to meet our standards, we will take steps up to
and including the severance of our business relationship.
In July 2013, AEO signed the Accord on Fire and Building Safety, aligning with nearly 100 brands, non-governmental organizations
(NGOs) and trade unions, to improve workplace safety in Bangladesh. The International Labor Organization (ILO), an organization that gives
equal voice to workers, employers and unions, is Chair of the Steering Committee of the Accord. The Accord is a five-year program that will
establish in-factory training; facilitate the creation of factory health and safety committees; review existing building regulations and
enforcement; and develop a worker complaint process and mechanism for workers to report health and safety risks. AEO is also engaged with
the ILO on Better Work programs in Cambodia, Haiti, Indonesia and Vietnam and is a member of the Better Work Buyers Partners.
Security Compliance
During recent years, there has been an increasing focus within the international trade community on concerns related to global terrorist
activity and protecting the supply chain. Various security issues and other terrorist threats have brought increased demands from the Bureau of
Customs and Border Protection (“CBP”) and other agencies within the Department of Homeland Security that importers take responsible action
to secure their supply chains. We have been a certified member of the Customs — Trade Partnership Against Terrorism program (“C-TPAT”)
since 2004. C-TPAT is a voluntary program offered by CBP in which an importer agrees to work with CBP to strengthen overall supply chain
security. As part of this program, we are subject to validations by CBP.
Historically, we took significant steps to expand the scope of our security procedures, including, but not limited to: a significant increase in
the number of factory audits performed; a revision of the factory audit format to include a review of all critical security issues as defined by
CBP; a requirement that all of our international logistics partners, including forwarders, consolidators, shippers and brokers be certified members
of C-TPAT; and pre-inspections of all potential production facilities. Additionally, we also evaluate additional oversight options for high-risk
security countries and among other things, implemented full third-party audits on an annual basis. In Fiscal 2013, we took the audits one step
further, and conducted security audits of our own to validate the results we receive from the third-party audits. We also implemented security
training for our domestic logistics partners, along with conducting periodic audits on their facilities as well.
Trade Compliance
We act as the importer of record for substantially all of the merchandise we purchase overseas from foreign suppliers. Accordingly, we
have an affirmative obligation to comply with the rules and regulations established for importers by the CBP regarding issues such as
merchandise classification, valuation and country of origin. We have developed and implemented a comprehensive series of trade compliance
procedures to assure that we adhere to all CBP requirements. In its most recent review and audit of our import operations and procedures, CBP
found no material, unacceptable risks of non-compliance.
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In addition to CBP requirements, we also ensure compliance with all other government agencies and their corresponding regulations
including but not limited to the Federal Trade Commission (FTC), the Consumer Product Safety Commission (CPSC), the Food and Drug
Administration (FDA) and U.S. Fish and Wildlife services. We have policies and procedures in place for labeling, packaging, product testing,
obtaining required documentation and making appropriate declarations to reduce the risk of non-compliance.
Product Safety
We are strongly committed to the safety and well being of our customers. We require our products to meet applicable laws and regulations.
In certain cases, we also voluntarily adopt industry standards and best practices that may be higher than legally required or where no clear laws
exist.
To ensure compliance with our product safety standards, we maintain an extensive set of testing protocols for each category of products.
All of the products we sell are tested by an independent testing laboratory in accordance with applicable regulatory requirements. In rare cases
where a safety issue has been discovered in a product that has reached our store shelves, we respond with a comprehensive recall process.
Merchandise Inventory, Replenishment and Distribution
Merchandise is generally shipped directly from our vendors and routed through third-party transloaders at key ports of entry to our U.S.
distribution centers in Warrendale, Pennsylvania and Ottawa, Kansas, or to our Canadian distribution center in Mississauga, Ontario.
Additionally, an increasing amount of product is shipped directly to stores from our transloaders, by-passing our distribution centers which
reduces transit times and lowers operating costs. In 2013, we opened third-party distribution centers in Mexico City, Hong Kong and Shanghai,
to support our Mexico and Asian international store and e-commerce growth. We will open a new 1,000,000 square foot omni-channel
distribution center in Hazleton, PA in July 2014, and phase out our distribution center in Warrendale, Pennsylvania in 2015.
Upon receipt at one of our distribution centers, merchandise is processed and prepared for shipment to the stores or forwarded to a
warehouse holding area to be used for store sales replenishment. The allocation of merchandise among stores varies based upon a number of
factors, including geographic location, customer demographics and store size. Merchandise is shipped to our stores two to five times per week
depending upon the season and store requirements. Our current e-commerce distribution center, located in Ottawa, Kansas, ships merchandise
directly to customers in all 50 states and 81 countries worldwide.
Customer Credit
We offer a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”) under the AEO and aerie
brands. These credit cards are issued by a third-party bank (the “Bank”), and we have no liability to the Bank for bad debt expense, provided that
purchases are made in accordance with the Bank’s procedures. Once a customer is approved to receive the AEO Visa Card or the AEO Credit
Card and the card is activated, the customer is eligible to participate in our credit card rewards program. Customers who make purchases at AEO
and aerie earn discounts in the form of savings certificates when certain purchase levels are 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. AEO
Credit Card holders will also receive special promotional offers and advance notice of all American Eagle Outfitters in-store sales events. The
AEO Credit Card is accepted at all of our U.S. stores and at ae.com and aerie.com. The AEO Visa Card is accepted in all of our stores and AEO
Direct sites as well as merchants worldwide that accept Visa ® .
Competition
The retail apparel industry, including retail stores and e-commerce, is highly competitive. We compete with various individual and chain
specialty stores, as well as the casual apparel and footwear departments of department stores and discount retailers, primarily on the basis of
quality, fashion, service, selection and price.
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Trademarks and Service Marks
We have registered AMERICAN EAGLE OUTFITTERS ® , AMERICAN EAGLE ® , AE ® , AEO ® , LIVE YOUR LIFE ® , aerie ® and the
Flying Eagle Design with the United States Patent and Trademark Office. We also have registered or have applied to register these trademarks
with the registries of the foreign countries in which our stores and/or manufacturers are located and/or where our product is shipped.
We have registered AMERICAN EAGLE OUTFITTERS ® , AMERICAN EAGLE ® , AEO ® , LIVE YOUR LIFE ® , aerie ® and the
Flying Eagle Design with the Canadian Intellectual Property Office. In addition, we have acquired rights in AE TM for clothing products and
registered AE ® in connection with certain non-clothing products.
In the United States and in other countries around the world, we also have registered, or have applied to register, a number of other marks
used in our business, including our pocket stitch designs and the aerie Bird design.
These registered trademarks are renewable indefinitely, and their registrations are properly maintained in accordance with the laws of the
country in which they are registered. We believe that the recognition associated with these trademarks makes them extremely valuable and,
therefore, we intend to use and renew our trademarks in accordance with our business plans.
Employees
As of February 1, 2014, we had approximately 40,000 employees in the United States, Canada, Mexico, Hong Kong and China, of whom
approximately 33,000 were part-time and seasonal hourly employees. We consider our relationship with our employees to be good.
Seasonality
Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and
fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively. As a result of
this seasonality, any factors negatively affecting us during the third and fourth fiscal quarters of any year, including adverse weather or
unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year.
Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of
new store openings, the acceptability of seasonal merchandise offerings, the timing and level of markdowns, store closings and remodels,
competitive factors, weather and general economic conditions.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports are
available, free of charge, under the “About AEO, Inc.” section of our website at www.ae.com. These reports are available as soon as reasonably
practicable after such material is electronically filed with the Securities and Exchange Commission (the “SEC”).
Our corporate governance materials, including our corporate governance guidelines, the charters of our audit, compensation, and
nominating and corporate governance committees, and our code of ethics may also be found under the “About AEO, Inc.” section of our website
at www.ae.com. Any amendments or waivers to our code of ethics will also be available on our website. A copy of the corporate governance
materials is also available upon written request.
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Additionally, our investor presentations are available under the “About AEO, Inc.” section of our website at www.ae.com. These
presentations are available as soon as reasonably practicable after they are presented at investor conferences.
Certifications
As required by the New York Stock Exchange (“NYSE”) Corporate Governance Standards Section 303A.12(a), on June 20, 2013 our
Chief Executive Officer submitted to the NYSE a certification that he was not aware of any violation by the Company of NYSE corporate
governance listing standards. Additionally, we filed with this Form 10-K, the Principal Executive Officer and Principal Financial Officer
certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
ITEM 1A.
RISK FA CTORS
Our ability to anticipate and respond to changing consumer preferences, fashion trends and a competitive environment in a timely
manner
Our future success depends, in part, upon our ability to identify and respond to fashion trends in a timely manner. The specialty retail
apparel business fluctuates according to changes in the economy and customer preferences, dictated by fashion and season. These fluctuations
especially affect the inventory owned by apparel retailers because merchandise typically must be ordered well in advance of the selling season.
While we endeavor to test many merchandise items before ordering large quantities, we are still susceptible to changing fashion trends and
fluctuations in customer demands.
In addition, the cyclical nature of the retail business requires that we carry a significant amount of inventory, especially during our peak
selling seasons. We enter into agreements for the manufacture and purchase of our private label apparel well in advance of the applicable selling
season. As a result, we are vulnerable to changes in consumer demand, pricing shifts and the timing and selection of merchandise purchases. The
failure to enter into agreements for the manufacture and purchase of merchandise in a timely manner could, among other things, lead to a
shortage of inventory and lower sales. Changes in fashion trends, if unsuccessfully identified, forecasted or responded to by us, could, among
other things, lead to lower sales, excess inventories and higher markdowns, which in turn could have a material adverse effect on our results of
operations and financial condition.
The effect of economic pressures and other business factors
The success of our operations depends to a significant extent upon a number of factors relating to discretionary consumer spending,
including economic conditions affecting disposable consumer income such as payroll taxes, employment, consumer debt, interest rates, increases
in energy costs and consumer confidence. There can be no assurance that consumer spending will not be further negatively affected by general,
local or international economic conditions, thereby adversely impacting our business and results of operations.
Our ability to react to raw material cost, labor and energy cost increases
Increases in our costs, such as raw materials, labor and energy may reduce our overall profitability. Specifically, fluctuations in the cost
associated with the manufacture of merchandise we purchase from our suppliers impacts our cost of sales. We have strategies in place to help
mitigate these costs and our overall profitability depends on the success of those strategies. Additionally, increases in other costs, including labor
and energy, could further reduce our profitability if not mitigated.
Our ability to rebalance our store fleet and grow through new store openings and existing store remodels and expansions
Our growth and success will depend in part on our ability to rebalance our store fleet and expand and remodel existing stores on a timely
and profitable basis. During Fiscal 2014, we plan to open approximately 25
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new American Eagle Outfitters stores in the Factory store format in North America and continue our international expansion in Mexico, Asia
and the United Kingdom. Additionally, we plan to remodel and refurbish 45 existing American Eagle Outfitters stores during Fiscal 2014.
Accomplishing our new and existing store rebalancing and expansion goals will depend upon a number of factors, including the ability to obtain
suitable sites for new and expanded stores at acceptable costs, the hiring and training of qualified personnel, particularly at the store management
level, the integration of new stores into existing operations and the expansion of our buying and inventory capabilities. There can be no
assurance that we will be able to achieve our store expansion and rebalancing goals, manage our growth effectively, successfully integrate the
planned new stores into our operations or operate our new and remodeled stores profitably.
Our efforts to expand internationally
We are actively pursuing additional international expansion initiatives, which include wholly-owned stores and stores operated by third
parties in select international markets. The effect of these arrangements on our business and results of operations is uncertain and will depend
upon various factors, including the demand for our products in new markets internationally. Furthermore, although we provide store operation
training, literature and support, to the extent that the franchisee, licensee or other operator does not operate its stores in a manner consistent with
our requirements regarding our brand and customer experience standards, our business results and the value of our brand could be negatively
impacted.
A failure to properly implement our expansion initiatives, or the adverse impact of political or economic risks in these international
markets, could have a material adverse effect on our results of operations and financial condition. We have limited prior experience operating
internationally, where we face established competitors. In many of these locations, the real estate, labor and employment, transportation and
logistics and other operating requirements differ dramatically from those in the locations where we have more experience. Consumer demand
and behavior, as well as tastes and purchasing trends, may differ substantially, and as a result, sales of our products may not be successful, or the
margins on those sales may not be in line with those we currently anticipate. Any differences that we encounter as we expand internationally
may divert financial, operational and managerial resources from our existing operations, which could adversely impact our financial condition
and results of operations. In addition, we are increasingly exposed to foreign currency exchange rate risk with respect to our revenue, profits,
assets, and liabilities denominated in currencies other than the U.S. dollar. We may in the future use instruments to hedge certain foreign
currency risks; however, these measures may not succeed in offsetting all of the negative impact of foreign currency rate movements on our
business and results of operations.
As we pursue our international expansion initiatives, we are subject to certain laws, including the Foreign Corrupt Practices Act, as well as
the laws of the foreign countries in which we operate. Violations of these laws could subject us to sanctions or other penalties that could have an
adverse effect on our reputation, operating results and financial condition.
Our ability to achieve planned store financial performance
The results achieved by our stores may not be indicative of long-term performance or the potential performance of stores in other locations.
The failure of stores to achieve acceptable results could result in additional store asset impairment charges, which could adversely affect our
results of operations and financial condition.
Our international merchandise sourcing strategy
Our 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 disruption of imports, including the insolvency of a significant supplier or a major labor dispute, could have an
adverse effect
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on our operations. Other events that could also cause a disruption of imports include the imposition of additional trade law provisions or import
restrictions, such as increased duties, tariffs, anti-dumping provisions, increased United States Customs and Border Protection (CBP)
enforcement actions, or political or economic disruptions.
We have a Vendor Code of Conduct (the “Code”) that provides guidelines for all of our vendors regarding working conditions,
employment practices and compliance with local laws. A copy of the Code is posted on our website, www.ae.com , and is also included in our
vendor manual in English and multiple other languages. We have a factory compliance program to audit for compliance with the Code.
However, there can be no assurance that all violations can be eliminated in our supply chain. Publicity regarding violation of our Code or other
social responsibility standards by any of our vendor factories could adversely affect our reputation, sales and financial performance.
We believe that there is a risk of terrorist activity on a global basis. Such activity might take the form of a physical act that impedes the
flow of imported goods or the insertion of a harmful or injurious agent to an imported shipment. We have instituted policies and procedures
designed to reduce the chance or impact of such actions. Examples include, but are not limited to, factory audits and self-assessments, including
audit protocols on all critical security issues; the review of security procedures of our other international trading partners, including forwarders,
consolidators, shippers and brokers; and the cancellation of agreements with entities who fail to meet our security requirements. In addition, CBP
has recognized us as a validated participant of the Customs — Trade Partnership Against Terrorism program, a voluntary program in which an
importer agrees to work with customs to strengthen overall supply chain security. However, there can be no assurance that terrorist activity can
be prevented entirely and we cannot predict the likelihood of any such activities or the extent of their adverse impact on our operations.
Our reliance on external vendors
Given the volatility and risk in the current markets, our reliance on external vendors leaves us subject to certain risks should one or more of
these external vendors become insolvent. Although we monitor the financial stability of our key vendors and plan for contingencies, the financial
failure of a key vendor could disrupt our operations and have an adverse effect on our cash flows, results of operations and financial condition.
Seasonality
Historically, our operations have been seasonal, with a large portion of total net revenue and operating income occurring in the third and
fourth fiscal quarters, reflecting increased demand during the back-to-school and year-end holiday selling seasons, respectively. As a result of
this seasonality, any factors negatively affecting us during the third and fourth fiscal quarters of any year, including adverse weather or
unfavorable economic conditions, could have a material adverse effect on our financial condition and results of operations for the entire year.
Our quarterly results of operations also may fluctuate based upon such factors as the timing of certain holiday seasons, the number and timing of
new store openings, the acceptability of seasonal merchandise offerings, the timing and level of markdowns, store closings and remodels,
competitive factors, weather and general economic conditions.
Our reliance on our ability to implement and sustain information technology systems
We regularly evaluate our information technology systems and are currently implementing modifications and/or upgrades to the
information technology systems that support our business. Modifications include replacing legacy systems with successor systems, making
changes to legacy systems or acquiring new systems with new functionality. We are aware of inherent risks associated with replacing and
modifying these systems, including inaccurate system information and system disruptions. We believe we are taking appropriate action to
mitigate the risks through testing, training, staging implementation and in-sourcing certain processes, as well as securing appropriate commercial
contracts with third-party vendors supplying such replacement and redundancy technologies. Information technology system disruptions and
inaccurate system information, if not anticipated and appropriately mitigated, could have a material adverse effect on our results of operations.
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Our ability to safeguard against security breaches with respect to our information technology systems
Our business employs systems and websites that allow for the storage and transmission of proprietary or confidential information regarding
our business, customers and employees including credit card information. Security breaches could expose us to a risk of loss or misuse of this
information and potential liability. We may not be able to anticipate or prevent rapidly evolving types of cyber-attacks. Actual or anticipated
attacks may cause us to incur increasing costs including costs to deploy additional personnel and protection technologies, train employees and
engage third party experts and consultants. Advances in computer capabilities, new technological discoveries or other developments may result
in the technology used by us to protect transaction or other data being breached or compromised. Data and security breaches can also occur as a
result of non-technical issues including intentional or inadvertent breach by employees or persons with whom we have commercial relationships
that result in the unauthorized release of personal or confidential information. Any compromise or breach of our security could result in a
violation of applicable privacy and other laws, significant legal and financial exposure and a loss of confidence in our security measures, which
could have an adverse effect on our results of operations and our reputation.
Our reliance on key personnel
Our success depends to a significant extent upon our ability to attract and retain qualified key personnel, including senior management.
Collective or individual changes in our senior management and other key personnel could have an adverse effect on our ability to determine and
execute our strategies, which could adversely affect our business and results of operations. There is a high level of competition for senior
management and other key personnel, and we cannot be assured we will be able to attract, retain and develop a sufficient number of qualified
senior managers and other key personnel.
Failure to comply with regulatory requirements
As a public company, we are subject to numerous regulatory requirements, including those imposed by the Sarbanes-Oxley Act of 2002,
the SEC and the NYSE. In addition, we are subject to numerous domestic and foreign laws and regulations affecting our business, including
those related to labor, employment, worker health and safety, competition, privacy, consumer protection, import/export and anti-corruption,
including the Foreign Corrupt Practices Act. Although we have put 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 our common stock. Regulatory developments regarding
the use of “conflict minerals,” certain minerals originating from the Democratic Republic of Congo and adjoining countries, could affect the
sourcing and availability of raw materials used by suppliers and subject us to costs associated with the regulations, including for the diligence
pertaining to the presence of any conflict minerals used in our products, possible changes to products, processes or sources of our inputs, and
reporting requirements.
Our ability to obtain and/or maintain our credit facilities
We believe that we have sufficient cash flows from operating activities to meet our operating requirements. In addition, the banks
participating in our various credit facilities are currently rated as investment grade. On March 2, 2012, we entered into a five-year, $150.0
million syndicated, unsecured, revolving credit agreement (“Credit Agreement”). Our Credit Agreement, as amended, contains financial
covenants that require us to maintain certain coverage and leverage ratios. To the extent we do not comply with the required covenants and are
unable to obtain a waiver or amendment, our access to the Credit Agreement may be limited. Although we expect to continue to generate
positive cash flow despite the current economy, there can be no assurance that we will be able to successfully generate positive cash flow in the
future. Continued negative trends in the credit markets and/or continued financial institution failures could lead to lowered credit availability as
well as difficulty in obtaining financing. In the event of limitations on our access to credit facilities, our liquidity, continued growth and results
of operations could be adversely affected.
13
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Other risk factors
Additionally, other factors could adversely affect our financial performance, including factors such as: our ability to successfully acquire
and integrate other businesses; any interruption of our key infrastructure systems, including exceeding capacity in our distribution centers; any
disaster or casualty resulting in the interruption of service from our distribution centers or in a large number of our stores; any interruption of our
business related to an outbreak of a pandemic disease in a country where we source or market our merchandise; changes in weather patterns; the
effects of changes in current exchange rates and interest rates; and international and domestic acts of terror.
The impact of any of the previously discussed factors, some of which are beyond our control, may cause our actual results to differ
materially from expected results in these statements and other forward-looking statements we may make from time-to-time.
ITEM 1B.
UNRES OLVED STAFF COMMENTS.
Not applicable.
ITEM 2.
PR OPERTIES.
We own two buildings in urban Pittsburgh, Pennsylvania which house our corporate headquarters. These buildings total 186,000 square
feet and 150,000 square feet, respectively. We lease one location near our headquarters, which is used primarily for store and corporate support
services, totaling approximately 51,000 square feet. This lease expires in 2022.
We rent approximately 131,000 square feet of office space in New York, New York for our designers and sourcing and production teams.
The lease for this space expires in May 2016. We also lease an additional 35,000 square feet of office space in New York, New York, with
various terms expiring through 2018.
We lease 9,200 square feet of office space in San Francisco, California that functions as a technology center for our engineers and digital
marketing team focused on our omni-channel strategy. The lease for this space expires in 2018.
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 in 2017 and 11,300 square feet in Shanghai, China expiring in 2017.
We own a distribution facility in Ottawa, Kansas consisting of approximately 1,220,000 total square feet. This facility is used to support
new and existing growth initiatives, including AEO Direct and aerie.
We own a 423,000 square foot building located in a suburban area near Pittsburgh, Pennsylvania, which houses a distribution center and
contains approximately 120,000 square feet of office space. On September 5, 2013 we announced plans to close this facility and transfer
operations to a new facility that is being constructed in Hazleton, Pennsylvania. Please refer to Note 17 to the Consolidated Financial Statements
for additional information. In the same suburban area near Pittsburgh, Pennsylvania, we own a 45,000 square foot building, which houses our
data center and additional office space and lease an additional location of approximately 18,000 square feet, which is used for storage space. This
lease expires in 2015.
We lease a building in Mississauga, Ontario with approximately 294,000 square feet, which houses our Canadian distribution center. The
lease expires in 2017.
We lease our flagship store in the Times Square area of New York, New York. The 25,000 square foot location has an initial term of
15 years with three options to renew for five years each. This flagship store opened in November 2009 and the initial lease term expires in 2024.
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All of our stores are leased and generally have initial terms of 10 years. Certain leases also include early termination options, which can be
exercised under specific conditions. Most of these leases provide for base rent and require the payment of a percentage of sales as additional
contingent rent when sales reach specified levels. Under our store leases, we are typically responsible for tenant occupancy costs, including
maintenance and common area charges, real estate taxes and certain other expenses. We have generally been successful in negotiating renewals
as leases near expiration.
ITEM 3.
LEGAL PR OCEEDINGS.
We are a party to various legal actions incidental to 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
15
Table of Contents
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Our common stock is traded on the NYSE under the symbol “AEO”. As of March 10, 2014, there were 537 stockholders of record.
However, when including associates who own shares through our employee stock purchase plan, and others holding shares in broker accounts
under street name, we estimate the stockholder base at approximately 50,000. The following table sets forth the range of high and low closing
prices of the common stock as reported on the NYSE during the periods indicated.
Market Price
For the Quarters Ended
High
Low
February 1, 2014
November 2, 2013
August 3, 2013
May 4, 2013
February 2, 2013
October 27, 2012
July 28, 2012
April 28, 2012
$16.52
$19.97
$20.48
$22.55
$21.45
$23.80
$20.92
$18.43
$12.77
$13.24
$17.62
$18.38
$18.49
$19.89
$17.89
$13.58
Cash Dividends per
Common Share
$
$
$
$
$
$
$
$
0.125
0.125
0.125
0.00
0.22
1.61
0.11
0.11
During Fiscal 2013 and Fiscal 2012, we paid quarterly dividends as shown in the table above. No cash dividends per common share were
paid for the quarter ended May 4, 2013 as the dividend payment was accelerated and included in the cash dividends for the quarter ended
February 2, 2013. Cash dividends per common share for the quarter ended October 27, 2012 included a special cash dividend of $1.50 per
common share. The payment of future dividends is at the discretion of our Board of Directors (the “Board”) and is based on future earnings, cash
flow, financial condition, capital requirements, changes in U.S. taxation and other relevant factors. It is anticipated that any future dividends paid
will be declared on a quarterly basis.
16
Table of Contents
Performance Graph
The following Performance Graph and related information shall not be deemed “soliciting material” or to be filed with the SEC, nor shall
such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each
as amended, except to the extent that we specifically incorporate it by reference into such filing.
The following graph compares the changes in the cumulative total return to holders of our common stock with that of the S&P Midcap 400
and the Dynamic Retail Intellidex. The comparison of the cumulative total returns for each investment assumes that $100 was invested in our
common stock and the respective index on January 31, 2009 and includes reinvestment of all dividends. The plotted 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 Intellidex
17
1/31/09
1/30/10
1/29/11
1/28/12
2/2/13
2/1/14
100.00
100.00
100.00
181.15
143.36
121.74
176.36
191.33
136.45
175.13
196.51
156.71
277.97
232.98
188.02
190.90
283.92
225.21
Table of Contents
The following table provides information regarding our repurchases of common stock during the three months ended February 1, 2014.
Issuer Purchases of Equity Securities
Period
Month #1 (November 3, 2013
through November 30, 2013)
Month #2 (December 1, 2013
through January 4, 2014)
Month #3 (January 5, 2014 through
February 1, 2014)
Total
Total
Number of
Shares Purchased
(1)
Average
Price Paid
Per Share
(2)
Total Number of
Shares Purchased as
Part of Publicly
Announced Programs
(1)(3)
Maximum Number of
Shares that May
Yet be Purchased
Under the Program
(3)
—
$
—
—
18,400,000
—
$
—
—
18,400,000
—
—
$
$
—
—
—
—
18,400,000
18,400,000
(1)
There were no shares repurchased as part of our publicly announced share repurchase program during the three months ended February 1,
2014 and there were no shares repurchased for the payment of taxes in connection with the vesting of share-based payments.
(2)
Average price paid per share excludes any broker commissions paid.
(3)
In January 2013, our Board authorized the repurchase of 20.0 million shares of our common stock. The authorization of the remaining
18.4 million shares that may yet be purchased expires on January 28, 2017.
The following table sets forth additional information as of the end of Fiscal 2013, about shares of our common stock that may be issued
upon the exercise of options and other rights under our existing equity compensation plans and arrangements, divided between plans approved
by our stockholders and plans or arrangements not submitted to our stockholders for approval. The information includes the number of shares
covered by and the weighted average exercise price of, outstanding options and other rights and the number of shares remaining available for
future grants excluding the shares to be issued upon exercise of outstanding options, warrants and other rights.
Equity Compensation Plan Table
Equity compensation plans approved by
stockholders
Equity compensation plans not approved
by stockholders
Total
(1)
Column (a)
Column (b)
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights(1)
Weighted-average
exercise price of
outstanding options,
warrants and
rights(1)
Column (c)
Number of securities
remaining available
for issuance under
equity compensation
plans (excluding
securities reflected
in column (a))(1)
3,925,333
$
17.65
18,186,587
—
3,925,333
$
—
17.65
—
18,186,587
Equity compensation plans approved by stockholders include the 1999 Stock Incentive Plan and the 2005 Stock Award and Incentive Plan,
as amended (the “2005 Plan”).
18
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ITEM 6.
SELECTED CONSOLIDA TED FINANCIAL DATA.
The following Selected Consolidated Financial Data should be read in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” included under Item 7 below and the Consolidated Financial Statements and Notes thereto,
included in Item 8 below. Most of the selected Consolidated Financial 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 January 29, 2011 and January 30, 2010 and the selected Consolidated Balance Sheet data as of January 28, 2012, January 29, 2011,
and January 30, 2010 are derived from audited Consolidated Financial Statements not included herein.
(In thousands, except per share amounts, ratios and
other financial information)
Summary of Operations (2)
Total net revenue
Comparable sales increase
(decrease)(3)
Gross profit
Gross profit as a percentage of net sales
Operating income
Operating income as a percentage of net sales
Income from continuing operations
Income from continuing operations as a percentage of
net sales
Per Share Results
Income from continuing operations per common sharebasic
Income from continuing operations per common sharediluted
Weighted average common shares outstanding — basic
Weighted average common shares outstanding —
diluted
Cash dividends per common share
Balance Sheet Information
Total cash and short-term investments
Long-term investments
Total assets
Short-term debt
Long-term debt
Stockholders’ equity
Working capital
Current ratio
Average return on stockholders’ equity
Other Financial Information (2)
Total stores at year-end
Capital expenditures
Net sales per average selling square
foot(4)
Total selling square feet at end of period
Net sales per average gross square
foot(4)
Total gross square feet at end of period
Number of employees at end of period
February 1,
2014
February 2,
2013
For the Years Ended(1)
January 28,
2012
January 29,
2011
January 30,
2010
$3,305,802
$3,475,802
$3,120,065
$2,945,294
$2,927,730
(6)%
$1,113,999
33.7%
$ 141,055
4.3%
$ 82,983
9%
$1,390,322
40.0%
$ 394,606
11.4%
$ 264,098
4%
$1,144,594
36.7%
$ 269,335
8.6%
$ 175,279
(1)%
$1,182,151
40.1%
$ 339,552
11.5%
$ 195,731
(3)%
$1,182,139
40.4%
$ 325,713
11.1%
$ 228,298
7.6%
5.6%
2.5%
6.7%
7.8%
$
0.43
$
1.35
$
0.90
$
0.98
$
1.11
$
0.43
192,802
$
1.32
196,211
$
0.89
194,445
$
0.97
199,979
$
1.09
206,171
$
194,475
0.375
$
200,665
2.05
$
196,314
0.44
201,818
0.93
209,512
0.40
$ 630,992
$
—
$1,756,053
$
—
$
—
$1,221,187
$ 705,898
2.62
17.6%
1,066
$ 278,499
$
$
547
5,205,948
$
602
4,962,923
$
547
5,028,493
$
526
5,026,144
$
526
4,981,595
$
444
6,503,486
40,400
$
489
6,023,278
40,100
$
438
6,290,284
39,600
$
422
6,288,425
39,900
$
422
6,215,355
38,800
19
$
1,069
89,466
$ 734,695
$
5,915
$1,879,998
$
—
$
—
$1,351,071
$ 786,573
3.03
9.6%
$
$ 428,935
$
—
$1,694,164
$
—
$
—
$1,166,178
$ 508,082
2.22
7.0%
1,044
93,939
$ 745,044
$
847
$1,950,802
$
—
$
—
$1,416,851
$ 882,087
3.18
11.0%
$
$
1,077
75,904
$ 698,635
$ 197,773
$2,138,148
$ 30,000
$
—
$1,578,517
$ 758,075
2.85
11.3%
1,075
$ 126,598
Table of Contents
(1)
Except for the fiscal year ended February 2, 2013, which includes 53 weeks, all fiscal years presented include 52 weeks.
(2)
All amounts presented are from continuing operations and exclude 77kids’ and MARTIN+OSA’s results of operations for all periods.
Refer to Note 15 to the accompanying Consolidated Financial Statements for additional information regarding the discontinued operations
of 77kids.
(3)
The comparable sales increase for the period ended February 2, 2013 is compared to the corresponding 53 week period in Fiscal 2011.
Additionally, comparable sales for all periods include AEO Direct sales.
(4)
Total net revenue per average square foot is calculated using retail store sales for the year divided by the straight average of the beginning
and ending square footage for the year.
ITEM 7.
MANA GEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of financial condition and results of operations are based upon our Consolidated Financial
Statements and should be read in conjunction with those statements and notes thereto.
This report contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events,
including the following:
• the planned opening of approximately 25 AEO stores in the Factory store format in North America and continued international
expansion in Mexico, Asia and the United Kingdom during Fiscal 2014;
• the success of our efforts to expand internationally, engage in future franchise/license agreements, and/or growth through acquisitions or
joint ventures;
• the selection of approximately 45 American Eagle Outfitters stores in the United States and Canada for remodeling and refurbishing
during Fiscal 2014;
• the potential closure of approximately 15 to 20 American Eagle Outfitters and 25 to 30 aerie stores in the United States and Canada
during Fiscal 2014;
• the planned opening of approximately 40 new international third party operated American Eagle Outfitters stores during Fiscal 2014;
• 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 a dividend in future periods;
• the possibility that our credit facilities may not be available for future borrowings;
• the possibility that rising prices of raw materials, labor, energy and other inputs to our manufacturing process, if unmitigated, will have
a significant impact to our profitability; and
• the possibility that we may be required to take additional store impairment charges related to underperforming stores.
We caution that these forward-looking statements, and those described elsewhere in this report, involve material risks and uncertainties and
are subject to change based on factors beyond our control, as discussed within Part I, Item 1A of this Form 10-K. Accordingly, our future
performance and financial results may differ materially from those expressed or implied in any such forward-looking statement.
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Table of Contents
Critical Accounting Policies
Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States
(“GAAP”), which require us to make estimates and assumptions that may affect the reported financial condition and results of operations should
actual results differ from these estimates. We base our estimates and assumptions on the best available information and believe them to be
reasonable for the circumstances. We believe that of our significant accounting policies, the following involve a higher degree of judgment and
complexity. Refer to Note 2 to the Consolidated Financial Statements for a complete discussion of our significant accounting policies.
Management has reviewed these critical accounting policies and estimates with the Audit Committee of our Board.
Revenue Recognition. We record revenue for store sales upon the purchase of merchandise by customers. Our e-commerce operation
records revenue upon the estimated customer receipt date of the merchandise. Revenue is not recorded on the purchase of gift cards. A current
liability is recorded upon purchase, and revenue is recognized when the gift card is redeemed for merchandise.
Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The estimated
sales return reserve is based on projected merchandise returns determined through the use of historical average return percentages. We do not
believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to calculate our sales
return reserve. However, if the actual rate of sales returns increases significantly, our operating results could be adversely affected.
We estimate gift card breakage and recognize revenue in proportion to actual gift card redemptions as a component of total net revenue.
We determine an estimated gift card breakage rate by continuously evaluating historical redemption data and the time when there is a remote
likelihood that a gift card will be redeemed.
We recognize royalty revenue generated from our franchise agreements based upon a percentage of merchandise sales by the franchisee.
This revenue is recorded as a component of total net revenue when earned.
Merchandise Inventory. Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average
cost includes merchandise design and sourcing costs and related expenses. We record merchandise receipts at the time which both title and risk
of loss for the merchandise transfers to us.
We review our inventory in order to identify slow-moving merchandise and generally use markdowns to clear merchandise. Additionally,
we estimate a markdown reserve for future planned markdowns related to current inventory. If inventory exceeds customer demand for reasons
of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined
that the inventory in stock will not sell at its currently ticketed price, additional markdowns may be necessary. These markdowns may have a
material adverse impact on earnings, depending on the extent and amount of inventory affected.
We estimate an inventory shrinkage reserve for anticipated losses for the period between the last physical count and the balance sheet date.
The estimate for the shrinkage reserve is calculated based on historical percentages and can be affected by changes in merchandise mix and
changes in actual shrinkage trends. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates
or assumptions we use to calculate our inventory shrinkage reserve. However, if actual physical inventory losses differ significantly from our
estimate, our operating results could be adversely affected.
Asset Impairment. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”)
360, Property, Plant, and Equipment (“ASC 360”), we evaluate long-lived assets for impairment at the individual store level, which is the lowest
level at which individual cash flows can be identified. Impairment losses are recorded on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of the assets. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an
impairment loss is recorded separately as a component of operating income under loss on impairment of assets.
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Our impairment loss calculations require management to make assumptions and to apply judgment to estimate future cash flows and asset
fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows. We
do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived
asset impairment losses. However, if actual results are not consistent with our estimates and assumptions, our operating results could be
adversely affected.
Share-Based Payments. We account for share-based payments in accordance with the provisions of ASC 718, Compensation — Stock
Compensation (“ASC 718”). To determine 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 options before exercising them (the “expected term”) and the estimated volatility of
the price of our common stock over the expected term.
We calculate a weighted-average expected term based on historical experience. Expected stock price volatility is based on a combination
of historical volatility of our common stock and implied volatility. We chose to use a combination of historical and implied volatility as we
believe that this combination is more representative of future stock price trends than historical volatility alone. Changes in these assumptions can
materially affect the estimate of the fair value of our share-based payments and the related amount recognized in our Consolidated Financial
Statements.
Income Taxes. We calculate income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset
and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated
Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred
tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in
effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets
when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in our level and composition of
earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits, may materially impact the effective income tax
rate.
We evaluate our income tax positions in accordance with ASC 740 which prescribes a comprehensive model for recognizing, measuring,
presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to
file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely
than not” that the position is sustainable based on its technical merits.
The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to
establish a valuation allowance require management to make estimates and assumptions. We believe that our assumptions and estimates are
reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities,
valuation allowances or net income.
Key Performance Indicators
Our management evaluates the following items, which are considered key performance indicators, in assessing our performance:
Comparable sales — Comparable sales provide a measure of sales growth for stores and channels open at least one year over the
comparable prior year period. In fiscal years following those with 53 weeks, including Fiscal 2013, the prior year period is shifted by one
week to compare similar calendar weeks. A store is included in comparable sales in the thirteenth month of operation. However, stores that
have a gross square footage increase of 25% or greater due to a remodel are removed from the comparable sales base, but are included in
total sales. These stores are returned to the comparable sales base in the thirteenth month
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following the remodel. Sales from American Eagle Outfitters and aerie stores, as well as sales from AEO Direct, are included in total
comparable sales. Sales from franchise stores are not included in comparable sales. Individual American Eagle Outfitters and aerie brand
comparable sales disclosures represent sales from stores and AEO Direct.
We began to include AEO Direct sales in the individual American Eagle Outfitters and aerie brand comparable sales metric in Fiscal
2013 for the following reasons:
• our approach to customer engagement is “omni-channel”, which provides a seamless customer experience through both traditional
and non-traditional channels, including four wall store locations, web, mobile/tablet devices, social networks, email, in-store
displays and kiosks;
• shopping behavior has continued to evolve across multiple channels that work in tandem to meet all customer needs. Management
believes that presenting a brand level performance metric that includes all channels (i.e., stores and AEO Direct) to be the most
appropriate, given customer behavior.
Our management considers comparable sales to be an important indicator of our current performance. Comparable sales results are
important to achieve leveraging of our costs, including store payroll, store supplies, rent, etc. Comparable sales also have a direct impact
on our total net revenue, cash and working capital.
Gross profit — Gross profit measures whether we are optimizing the price and inventory levels of our merchandise and achieving an
optimal level of sales. Gross profit is the difference between total net revenue and cost of sales. Cost of sales consists of: merchandise
costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage, certain promotional costs and
buying, occupancy and warehousing costs. Design costs consist of: compensation, rent, depreciation, 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 space; freight
from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and
inspection costs; and shipping and handling costs related to our e-commerce operation. The inability to obtain acceptable levels of sales,
initial markups or any significant increase in our use of markdowns could have an adverse effect on our gross profit and results of
operations.
Operating income — Our management views operating income as a key indicator of our success. The key drivers of operating
income are comparable sales, gross profit, our ability to control selling, general and administrative expenses, and our level of capital
expenditures. Management also uses earnings before interest and taxes as an indicator of successful operating results.
Return on invested capital — Our management uses return on invested capital as a key measure to assess our efficiency at allocating
capital to profitable investments. This measure is critical in determining which strategic alternatives to pursue.
Store productivity — Store productivity, including total net revenue per average square foot, sales per productive hour, average unit
retail price (“AUR”), conversion rate, the number of transactions per store, the number of units sold per store and the number of units per
transaction, is evaluated by our management in assessing our operational performance.
Inventory turnover — Our management evaluates inventory turnover as a measure of how productively inventory is bought and sold.
Inventory turnover is important as it can signal slow moving inventory. This can be critical in determining the need to take markdowns on
merchandise.
Cash flow and liquidity — Our management evaluates cash flow from operations, investing and financing in determining the
sufficiency of our cash position. Cash flow from operations has historically been sufficient to cover our uses of cash. Our management
believes that cash flow from operations will be sufficient to fund anticipated capital expenditures and working capital requirements.
Our management’s goals are to drive improvements to our gross profit performance, bring greater consistency to our results and to
deliver profitable growth over the long term.
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Results of Operations
Overview
Our Fiscal 2013 results reflected weak store traffic in North America and a high level of promotional activity, which negatively impacted
both comparable sales and margins.
Total net revenue for the 52 week year decreased 5% to $3.306 billion, compared to $3.476 billion for the 53 week period last year. Total
comparable sales for the 52 week year decreased 6% over the corresponding 52 week period last year, with negative comparable sales in all
quarters. By brand, including the respective AEO Direct sales, AEO Brand comparable sales decreased 7% and aerie Brand decreased 2%.
Continued competitive pressures and a challenging macroeconomic environment led to increased markdown rates, resulting in a lower
gross margin in Fiscal 2013. Gross margin decreased 630 basis points to 33.7%, compared to 40.0% last year.
Operating income for the year was $141.1 million, which includes $92.6 million in pre-tax impairment charges, asset write-offs and
corporate charges. Income from continuing operations was $0.43 per diluted share this year, compared to income from continuing operations of
$1.32 per diluted share last year. On an adjusted basis, income from continuing operations this year was $0.74 per diluted share, which excludes
a ($0.31) per diluted share impact from impairment charges, fabric charges, corporate and store asset write-offs, employee costs and tax related
items. This compares to adjusted income from continuing operations last year of $1.39 per diluted share, which excludes a ($0.13) per diluted
share impact from impairment charges, asset write-offs and employee costs and a $0.06 per diluted share tax benefit from audit settlements.
The preceding paragraph contains non-GAAP financial measures (“non-GAAP” or “adjusted”), comprised of earnings per share
information excluding non-GAAP items. This financial measure is not based on any standardized methodology prescribed by U.S. generally
accepted accounting principles (“GAAP”) and is not necessarily comparable to similar measures presented by other companies. We believe that
this non-GAAP information is useful as an additional means for investors to evaluate our operating performance, when reviewed in conjunction
with our GAAP financial statements. These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively
in evaluating our business and operations. The table below reconciles the GAAP financial measure to the non-GAAP financial measure
discussed above.
For the Fiscal Years Ended
February 1,
2014
Income from continuing operations per diluted share — GAAP Basis
Add: Asset Impairments(1)
Add: Asset write-offs and corporate charges(2)
Add: Tax related items(3)
Income from continuing operations per diluted share — Non-GAAP Basis
$
$
0.43
0.14
0.16
0.01
0.74
February 2,
2013
$
$
1.32
0.11
0.02
(0.06)
1.39
(1)- Asset impairment costs for the 52 weeks ended February 1, 2014 consist of $44.5 million of pre-tax asset impairments for AEO and aerie
brand retail stores and the Warrendale Distribution Center. Assets impairment costs for the 53 weeks ended February 2, 2013 consist of
$34.9 million of pre-tax asset impairments for AEO and aerie brand retail stores.
(2)- Asset write-offs and corporate charges for the 52 weeks ended February 1, 2014 consist of $49.4 million of pre-tax charges. Comprising
this amount are $24.1 million of charges relating to fabric and product liabilities and the discontinuation of the AE Performance line, $14.3
million of corporate and store asset write-offs, $6.3 million for the write down in value of the Company’s corporate jet and $4.7 million of
employee severance and related costs. Asset write-offs and corporate charges for the 53 weeks ended February 2, 2013 consist of $7.6
million of pre-tax employee severance and related costs and asset write-offs.
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(3)- Tax related items for the 52 weeks ended February 1, 2014 were $2.8 million from recording an international valuation allowance, net of
tax benefits from changes in tax reserves, compared to $11.8 million of tax benefits from audit settlements last year.
We ended Fiscal 2013 with $428.9 million in cash and short-term investments, a decrease of $202.1 million from last year. During the
year, we generated $229.9 million of cash from operations. The cash from operations was offset by $278.5 million of capital expenditures,
dividend payments of $72.3 million and share repurchases of $33.1 million. Merchandise inventory at the end of Fiscal 2013 was $291.5 million,
a decrease of 16% on a cost per square foot basis, reflecting improved inventory turns and the impact of a change in ownership terms.
The following table shows, for the periods indicated, 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
Loss on impairment of assets
Depreciation and amortization expense
Operating income
Other income, net
Income before income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations, net of tax
Net income
February 1,
For the Fiscal Years Ended
February 2,
January 28,
2014
2013
2012
100.0%
100.0%
100.0%
66.3
33.7
24.1
1.3
4.0
4.3
—
4.3
1.8
2.5
—
2.5%
60.0
40.0
24.0
1.0
3.6
11.4
0.2
11.6
4.0
7.6
(0.9)
6.7%
63.3
36.7
23.0
0.6
4.5
8.6
0.2
8.8
3.2
5.6
(0.7)
4.9%
Comparison of Fiscal 2013 to Fiscal 2012
Total Net Revenue
Total net revenue for the 52 week year decreased 5% to $3.306 billion compared to $3.476 billion for the 53 week period last year. For
Fiscal 2013, total comparable sales decreased 6% compared to a 9% increase for the corresponding 52 week period last year. By brand, including
the respective AEO Direct revenue, American Eagle Outfitters brand comparable sales decreased 7%, or $199.7 million, and aerie brand
decreased 2%, or $3.5 million. AEO men’s comparable sales decreased in the mid single-digits and AEO women’s comparable sales decreased
in the high single-digits.
For the year, store transactions and AUR decreased in the mid single-digits. Units per transaction decreased in the low-single digits,
leading to the overall 6% comparable sales decrease.
Gross Profit
Gross profit decreased 20% to $1.114 billion from $1.390 billion in Fiscal 2012. On a consolidated basis, gross profit as a percent to total
net revenue decreased by 630 basis points to 33.7% from 40.0% last year. Included in gross profit this year were $24.1 million of pre-tax charges
related to fabric and product liabilities and the discontinuation of the AE Performance line and $4.5 million of corporate and store asset writeoffs.
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Favorable product costs provided 120 basis points of improvement, offset by 510 basis points of decline due to higher markdowns and 70 basis
points from the previously discussed pre-tax charges related to fabric and product liabilities and corporate and store asset write-offs. Buying,
occupancy and warehousing costs (“BOW”) deleveraged as a rate to total net revenue as a result of higher delivery costs and the deleveraging of
rent costs on the comparable sales decrease.
There was net benefit of $6.9 million of share-based payment expense included in gross profit this year compared to $34.5 million of
share-based payment expense last year. The net benefit this year is due to a reversal of previously recorded performance-based expense resulting
from current business performance compared to targets.
Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as
well as design costs in cost of sales. Other retailers may exclude a portion of these costs from cost of sales, including them in a line item such as
selling, general and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy
regarding cost of sales, including certain buying, occupancy and warehousing expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expense decreased 5% to $796.5 million, compared to $834.6 million last year, and includes $7.8
million of pre-tax asset write-offs and employee related costs. Last year, selling, general and administrative expense included $6.0 million of
pre-tax employee related costs. As a rate to total net revenue, selling, general and administrative expenses increased 10 basis points to 24.1%,
compared to 24.0% last year. Lower incentives costs, including a benefit from the reversal of previously recorded performance-based equity
compensation expense, were partially offset by incremental costs related to filling open positions at the corporate office and expenses related to
the opening of factory stores and our omni-channel initiatives.
There was $0.3 million of share-based payment expense, consisting of time and performance-based awards, included in selling, general
and administrative expenses this year compared to $31.9 million last year.
Loss on Impairment of Assets
The loss on impairment of assets of $44.5 million consists of $25.2 million for the impairment of 69 retail stores and $19.3 million for our
Warrendale, Pennsylvania Distribution Center. Please refer to Note 17 to the Consolidated Financial Statements for additional information
pertaining to the Warrendale Distribution Center. The retail store impairments were recorded based on the results of our evaluation of stores that
considered performance during the holiday selling season and a significant portfolio review in the fourth quarter of Fiscal 2013 that took into
account current and future performance projections and strategic real estate initiatives. We determined that these stores would not be able to
generate sufficient cash flow over the expected remaining lease term to recover the carrying value of the respective stores assets. In Fiscal 2012,
the loss on impairment of assets was $34.9 million relating to 52 retail stores.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to $132.0 million from $126.2 million last year, driven by corporate and store asset writeoffs. As a rate to total net revenue, depreciation and amortization increased to 4.0% from 3.6% last year as a result of the lower total net revenue
and an increase in depreciation and amortization expense this year. Depreciation and amortization includes $11.7 million of asset write-offs in
Fiscal 2013 and $0.7 million of asset write-offs in Fiscal 2012.
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Other Income, Net
Other income was $1.0 million this year, compared to income of $7.4 million last year, primarily as a result of settlement recoveries
received last year from auction rate securities that were previously held.
Provision for Income Taxes
The effective income tax rate from continuing operations increased to approximately 42% in Fiscal 2013 from 34% in Fiscal 2012. The
higher effective income tax rate in Fiscal 2013 was primarily due to valuation allowances on foreign losses, an overall decrease in income levels,
and a greater benefit for federal and state income tax settlements in 2012.
Refer to Note 14 to the Consolidated Financial Statements for additional information regarding our accounting for income taxes.
Income from Continuing Operations
Income from continuing operations for Fiscal 2013 was $83.0 million, or $0.43 per diluted share. This includes $60.9 million, or ($0.31)
per diluted share, of after-tax impairment charges, asset write-offs, corporate charges and tax related items. Income from continuing operations
for Fiscal 2012 was $264.1 million, or $1.32 per diluted share, and includes $11.8 million, or $0.06 per diluted share, of tax benefits and $26.4
million, or ($0.13) per diluted share, of after-tax impairment charges, asset write-offs and employee costs.
Loss from Discontinued Operations
We completed the sale of the 77kids stores and related e-commerce operations during Fiscal 2012. Accordingly, the after-tax operating
results appear in Loss from Discontinued Operations on the Consolidated Statements of Operations for all periods presented. Loss from
Discontinued Operations, net of tax, was $32.0 million for Fiscal 2012, which included both operating losses and closure charges.
Refer to Note 15 to the Consolidated Financial Statements for additional information regarding the discontinued operations of 77kids.
Net Income
Net income decreased to $83.0 million in Fiscal 2013 from $232.1 million in Fiscal 2012. As a percent to total net revenue, net income was
2.5% and 6.7% for Fiscal 2013 and Fiscal 2012, respectively. Net income per diluted share was $0.43, compared to $1.16 last year. The change
in net income was attributable to the factors noted above.
Comparison of Fiscal 2012 to Fiscal 2011
Total Net Revenue
Total net revenue for the 53 week year increased 11% to $3.476 billion compared to $3.120 billion for the 52 week year in Fiscal 2011. For
Fiscal 2012, total comparable sales increased 9% compared to a 4% increase for the corresponding 53 week period in Fiscal 2011. By brand,
including the respective AEO Direct revenue, American Eagle Outfitters brand comparable sales increased 9%, or $254.2 million, and aerie
brand increased 11%, or $22.6 million. AEO men’s comparable sales increased in the high single-digits and AEO women’s comparable sales
increased in the low double-digits.
For Fiscal 2012, store transactions and AUR increased in the low single-digits. Units per transaction increased in the mid-single digits,
leading to the overall 9% comparable sales increase.
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Gross Profit
Gross profit increased 21% to $1.390 billion from $1.145 billion in Fiscal 2011. On a consolidated basis, gross profit as a percent to total
net revenue increased by 330 basis points to 40.0% from 36.7% in Fiscal 2011. The percentage increase was attributed to a 130 basis point
improvement in merchandise costs, a 120 basis point improvement in overall markdowns and an 80 basis point decrease in BOW costs, as a
percent to total net revenue. The decrease in merchandise costs was primarily the result of average unit cost decreases, driven by improved
cotton economics and improved inventory management principles. Less promotional activity lead to overall improvement in markdowns. BOW
costs improved as a rate to total net revenue as a result of the leveraging of our rent costs on the 9% increase in comparable sales for the year.
There was $34.5 million of share-based payment expense, consisting of both time and performance-based awards, included in gross profit
in Fiscal 2012 compared to $5.3 million in Fiscal 2011.
Our gross profit may not be comparable to that of other retailers, as some retailers include all costs related to their distribution network, as
well as design costs in cost of sales. Other retailers may exclude a portion of these costs from cost of sales, including them in a line item such as
selling, general and administrative expenses. Refer to Note 2 to the Consolidated Financial Statements for a description of our accounting policy
regarding cost of sales, including certain buying, occupancy and warehousing expenses.
Selling, General and Administrative Expenses
Selling, general and administrative expense increased 16% to $834.6 million, compared to $718.1 million in Fiscal 2011, and includes $6.0
million of pre-tax severance and related employee costs. In Fiscal 2011, selling, general and administrative expense included $5.5 million of
executive transition costs. As a rate to total net revenue, selling, general and administrative expenses increased 100 basis points to 24.0%,
compared to 23.0% in Fiscal 2011. The increase in the rate was driven primarily by incremental incentive costs and variable selling expenses
related to our strong top-line results, and advertising investments in the AEO Brand.
There was $31.9 million of share-based payment expense, consisting of time and performance-based awards, included in selling, general
and administrative expenses in Fiscal 2012 compared to $6.5 million in Fiscal 2011.
Loss on Impairment of Assets
The loss on impairment of assets of $34.9 million, of which $34.4 million was recorded in the fourth quarter of Fiscal 2012, resulted from
our evaluation of stores and considered performance during the important holiday selling season as well as strategic decisions made in the fourth
quarter of Fiscal 2012 regarding the rebalancing of our store fleet. This impairment consisted of 52 retail stores. In Fiscal 2011, the loss on
impairment of assets was $19.2 million.
Depreciation and Amortization Expense
Depreciation and amortization expense decreased to $126.2 million from $138.0 million in Fiscal 2011, due primarily to the maturing of
assets. As a rate to total net revenue, depreciation and amortization decreased to 3.6% from 4.5% in Fiscal 2011 as a result of the higher total net
revenue and an $11.8 million reduction in depreciation and amortization expense in Fiscal 2012. Depreciation and amortization includes $0.7
million of asset write-offs in the second quarter of Fiscal 2012.
Other Income, Net
Other income was $7.4 million in Fiscal 2012, compared to income of $5.9 million in Fiscal 2011, primarily as a result settlement
recoveries in both years received from auction rate securities that were previously held.
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Provision for Income Taxes
The effective income tax rate from continuing operations decreased to approximately 34% in Fiscal 2012 from 36% in Fiscal 2011. The
lower effective income tax rate in Fiscal 2012 was primarily due to federal and state income tax settlements and other changes in income tax
reserves.
Refer to Note 14 to the Consolidated Financial Statements for additional information regarding our accounting for income taxes.
Income from Continuing Operations
Income from continuing operations for Fiscal 2012 was $264.1 million, or $1.32 per diluted share. This includes $11.8 million, or $0.06
per diluted share, of tax benefits and $26.4 million, or ($0.13) per diluted share, of after-tax asset impairments, asset write-offs and corporate
charges. Income from continuing operations for Fiscal 2011 was $175.3 million, or $0.89 per diluted share, and included $15.7 million, or
($0.08) per diluted share, of after-tax store impairment and executive transition costs.
Loss from Discontinued Operations
We completed the sale of the 77kids stores and related e-commerce operations during Fiscal 2012. Accordingly, the after-tax operating
results appear in Loss from Discontinued Operations on the Consolidated Statements of Operations for all periods presented. Loss from
Discontinued Operations, net of tax, was $32.0 million for Fiscal 2012, which included both operating losses and closure charges, and $23.6
million for Fiscal 2011, which includes operating losses only.
Refer to Note 15 to the Consolidated Financial Statements for additional information regarding the discontinued operations of 77kids.
Net Income
Net income increased to $232.1 million in Fiscal 2012 from $151.7 million in Fiscal 2011. As a percent to total net revenue, net income
was 6.7% and 4.9% for Fiscal 2012 and Fiscal 2011, respectively. Net income per diluted share was $1.16, compared to $0.77 last year. The
change in net income was attributable to the factors noted above, including the impact of the discontinued operations of 77kids.
Fair Value Measurements
ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about
fair value measurements. Fair value is defined under 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 minimize the use of
unobservable inputs. In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.
The tiers include:
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
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• Level 3 — Unobservable inputs (i.e., projections, estimates, interpretations, etc.) that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
As of February 1, 2014, we held certain assets that are required to be measured at fair value on a recurring basis. These include cash
equivalents and investments.
In accordance with ASC 820, the following table represents the fair value hierarchy for our financial assets (cash equivalents and
investments) measured at fair value on a recurring basis as of February 1, 2014:
Fair Value Measurements at February 1, 2014
Quoted Market
Prices in Active
Markets for
Identical Assets
(In thousands)
Cash and cash equivalents
Cash
Treasury bills
Money-market
Total cash and cash equivalents
Short-term investments
Treasury bills
Total short-term investments
Total
Percent to total
Carrying Amount
$
$
$
$
$
(Level 1)
330,013
63,224
25,696
418,933
$
10,002
10,002
428,935
100.0%
$
$
$
$
Significant Other
Significant
Unobservable
Observable
Inputs (Level 2)
Inputs
(Level 3)
330,013
63,224
25,696
418,933
$
10,002
10,002
428,935
100.0%
$
$
$
$
—
—
—
—
$
—
—
—
—%
$
$
$
$
—
—
—
—
—
—
—
—%
In the event we hold Level 3 investments, we would use a discounted cash flow (“DCF”) model to assess fair value.
Refer to Notes 3 and 4 to the Consolidated Financial Statements for additional information on our investment securities, including a
description of the securities.
Liquidity and Capital Resources
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, the purchase of short-term investments and the return of value to
shareholders through the repurchase of common stock and the payment of dividends. Historically, these uses of cash have been funded with cash
flow from operations and existing cash on hand. Additionally, our uses of cash include the development of the aerie brand and our international
expansion efforts. We expect to be able to fund our future cash requirements in North America through current cash holdings as well as cash
generated from operations. In the future, we expect that our uses of cash will also include further expansion of our brands internationally.
Our growth strategy includes fortifying our brands and the further international expansion or acquisitions. We periodically consider and
evaluate these options to support future growth. In the event we do pursue such options, we could require additional equity or debt financing.
There can be no assurance that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase
our profitability.
The following sets forth certain measures of our liquidity:
February 1,
Working Capital (in 000’s)
Current Ratio
30
February 2,
2014
2013
$ 508,082
2.22
$ 705,898
2.62
Table of Contents
The $197.8 million decrease in our working capital and corresponding decrease in the current ratio as of February 1, 2014 compared to
February 2, 2013, related primarily to our use of cash for investing and financing activities, offset by net income, net of non-cash adjustments.
Investing and financing activities primarily include capital expenditures, sale of available-for-sale securities, the payment of dividends and the
repurchase of common stock. In Fiscal 2013, we paid $0.375 per share of dividends for a total of $72.3 million, which does not include a first
quarter dividend as it was accelerated and paid in Fiscal 2012, and repurchased 1.6 million shares of our common stock for $33.1 million.
Cash Flows from Operating Activities of Continuing Operations
Net cash provided by operating activities totaled $229.9 million during Fiscal 2013, compared to $499.7 million during Fiscal 2012 and
$278.1 during Fiscal 2011. Our major source of cash from operations was merchandise sales and a reduction in our overall inventory balance.
Our primary outflows of cash from operations were for the payment of operational costs. The year-over-year decrease in cash flows from
operations this year was primarily driven by the decrease in income from continuing operations, net of non-cash adjustments, as a result of the
5% decrease in total net revenue and decline in gross margin resulting from increased promotional activity. Merchandise inventory at the end of
Fiscal 2013 was $291.5 million, a decrease of 16% on a cost per square foot basis. The decrease reflects a high single-digit decrease in the
number of units per square foot.
Cash Flows from Investing Activities of Continuing Operations
Investing activities for Fiscal 2013 included $278.5 million in capital expenditures for property and equipment, $20.8 million for the
purchase of assets related to our international expansion strategy, $52.1 million of investment purchases, partially offset by $162.8 million of
proceeds from the sale of investments classified as available-for-sale. Investing activities for Fiscal 2012 included $93.9 million in capital
expenditures for property and equipment, $111.1 million of investment purchases, partially offset by $15.5 million of proceeds from the sale of
investments classified as available-for-sale. Investing activities for Fiscal 2011 included $89.5 million in capital expenditures for property and
equipment, $34.2 million for the acquisition of intangible assets primarily related to our international expansion strategy and $193.9 million of
investment purchases fully offset by $240.8 million of proceeds from the sale of investments classified as available-for-sale. For further
information on capital expenditures, refer to the Capital Expenditures for Property and Equipment caption below.
Cash Flows from Financing Activities of Continuing Operations
During Fiscal 2013, cash used for financing activities resulted primarily from $72.3 million for the payment of dividends, $33.1 million for
the repurchase of 1.6 million shares as part of our publicly announced repurchase program and $23.4 million for the repurchase of common stock
from employees for the payment of taxes in connection with the vesting of share-based payments. During Fiscal 2012, cash used for financing
activities resulted primarily from $403.5 million for the payment of dividends and $173.6 million for the repurchase of 8.4 million shares as part
of our publicly announced repurchase program. During Fiscal 2011, cash used for financing activities resulted primarily from $85.6 million for
the payment of dividends and $15.2 million for the repurchase of 1.4 million shares as part of our publicly announced repurchase program.
Cash returned to shareholders through dividends and share repurchases was $105.3 million and $577.0 million in Fiscal 2013 and Fiscal
2012, respectively.
ASC 718 requires that cash flows resulting from the benefits of tax deductions in excess of recognized compensation cost for share-based
payments be classified as financing cash flows. Accordingly, for Fiscal 2013, Fiscal 2012 and Fiscal 2011, the excess tax benefits from sharebased payments of $8.8 million, $13.3 million and $0.4 million, respectively, are classified as financing cash flows.
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Capital Expenditures for Property and Equipment
Fiscal 2013 capital expenditures were $278.5 million, compared to $93.9 million in Fiscal 2012. Fiscal 2013 expenditures included
$98.4 million related to investments in our AEO stores, including 58 new AEO stores, 56 remodeled and refurbished stores, and fixtures and
visual investments. Additionally, we continued to support our infrastructure growth by investing in information technology ($69.7 million), the
improvement of our distribution centers and construction of a new distribution center ($83.2 million) and investments in e-commerce ($11.9
million) and other home office projects ($15.3 million).
For Fiscal 2014, we expect capital expenditures to be approximately $230 million related to the continued construction of our new
distribution center to support our expansion efforts, stores, information technology upgrades to support growth and investments in e-commerce.
New store growth is primarily related to AEO Factory stores, which are among our most productive format, and new wholly-owned international
locations in Mexico, Asia and the United Kingdom. Additionally, we plan to remodel and refurbish approximately 45 AEO stores.
Credit Facilities
On March 2, 2012, we entered into a five-year, $150.0 million syndicated, unsecured, revolving credit agreement (the “Credit
Agreement”). The primary purpose of the Credit Agreement is to provide additional access to capital for general corporate purposes, growth
initiatives and the issuance of letters of credit.
The Credit Agreement, as amended, contains financial covenants that require us to maintain certain coverage and leverage ratios, and
various customary affirmative and negative covenants such as the ability to incur additional debt not otherwise permitted under the Credit
Agreement.
The Credit Agreement has various borrowing options, including rates of interest that are based on (i) an Adjusted London Interbank
Offered Rate (“LIBOR” as defined in the Credit Agreement) plus a margin ranging from 1.00% to 1.75% based on a defined leverage ratio,
payable at the end of the applicable interest period; and (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00%
to 0.75% based on a defined leverage ratio, payable quarterly.
Under the Credit Agreement, we are also required to pay a commitment fee ranging from 0.175% to 0.30%, based on the defined leverage
ratio, on the unused portion of the total lender commitments.
As of February 1, 2014, we were in compliance with the Credit Agreement had $8.2 million outstanding in letters of credit and no
borrowings.
The Credit Agreement replaced uncommitted demand lines in the aggregate amount of $110.0 million United States dollars (“USD”) and
$25.0 million Canadian dollars (“CAD”).
Additionally, we have borrowing agreements with two separate financial institutions under which we may borrow an aggregate of
$155.0 million USD for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit
facilities is subject to acceptance by the respective financial institutions. As of February 1, 2014, we had outstanding trade letters of credit of
$27.5 million.
Stock Repurchases
During Fiscal 2013, as part of our publicly announced share repurchase program, we repurchased 1.6 million shares for approximately
$33.1 million, at a weighted average price of $20.66 per share. During Fiscal 2012, as part of our publicly announced share repurchase program,
we repurchased 8.4 million shares for approximately $173.6 million, at a weighted average price of $20.65 per share. As of February 1, 2014, we
had 18.4 million shares remaining authorized for repurchase under the program authorized by our Board in January 2013. The program
authorized 20.0 million shares under a share repurchase program which expires on January 28, 2017.
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During Fiscal 2013, Fiscal 2012 and Fiscal 2011, we repurchased approximately 1.1 million, 0.3 million and 0.1 million shares,
respectively, from certain employees at market prices totaling $23.4 million, $4.1 million and $2.2 million, respectively. These shares were
repurchased for the payment of taxes, not in excess of the minimum statutory withholding requirements, in connection with the vesting of sharebased payments, as permitted under the 2005 Stock Award and Incentive Plan, as amended.
The aforementioned share repurchases have been recorded as treasury stock.
Dividends
On December 4, 2012, our Board accelerated the payment of the first quarter 2013 dividend. This dividend was paid on December 28,
2012. In March 2013, our Board raised our quarterly dividend to $0.125 per share, a 14% increase. Due to the early payment of our Fiscal 2013
first quarter dividend, the increased dividend distribution began in the second quarter of Fiscal 2013. During Fiscal 2013, three quarterly
dividends of $0.125 per share were paid. An $0.11 per share dividend was paid for each quarter of Fiscal 2012. Additionally, during the third
quarter of Fiscal 2012, our Board declared and paid a $1.50 per share special cash dividend. 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 and other relevant
factors. It is anticipated that any future dividends paid will be declared on a quarterly basis.
Obligations and Commitments
Disclosure about Contractual Obligations
The following table summarizes our significant contractual obligations as of February 1, 2014:
(In thousands)
Operating Leases(1)
Unrecognized Tax Benefits(2)
Purchase Obligations(3)
Total Contractual Obligations
Total
Less than
1 Year
$1,755,562
16,543
488,008
$2,260,113
$273,827
—
466,603
$740,430
Payments Due by Period
1-3
Years
$495,638
—
16,581
$512,219
3-5
Years
More than
5 Years
$384,163
—
2,613
$386,776
$601,934
16,543
2,211
$620,688
(1)
Operating lease obligations consist primarily of future minimum lease commitments related to store operating leases (Refer to Note 10 to
the Consolidated Financial Statements). Operating lease obligations do not include common area maintenance, insurance or tax payments
for which we are also obligated.
(2)
The amount of unrecognized tax benefits as of February 1, 2014 was $16.5 million, including approximately $1.9 million of accrued
interest and penalties. Unrecognized tax benefits are positions taken or expected to be taken on an income tax return that may result in
additional payments to tax authorities. The unrecognized tax benefits of $16.5 million are included in the “More than 5 Years” column as
we are not able to reasonably estimate the timing of the potential future payments.
(3)
Purchase obligations primarily include binding commitments to purchase merchandise inventory, as well as other legally binding
commitments, made in the normal course of business that are enforceable and specify all significant terms. Included in the above purchase
obligations are inventory commitments guaranteed by outstanding letters of credit, as shown in the table below.
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Disclosure about Commercial Commitments
The following table summarizes our significant commercial commitments as of February 1, 2014:
(In thousands)
Total
Amount
Committed
Trade Letters of Credit(1)
Standby Letters of Credit(2)
Total Commercial Commitments
$ 27,461
8,172
$ 35,633
Amount of Commitment Expiration Per Period
More than
Less than
1 Year
$
$
27,461
8,172
35,633
1-3
Years
3-5
Years
—
—
—
—
—
—
5 Years
—
—
—
(1)
Trade letters of credit represent commitments, guaranteed by a bank, to pay vendors for merchandise, as well as other commitments, upon
presentation of documents demonstrating that the merchandise has shipped.
(2)
Standby letters of credit represent commitments, guaranteed by a bank, to pay landlords or vendors to the extent previously agreed criteria
are not met.
Guarantees
In connection with the exit of the 77kids business, we are secondarily liable for obligations under the lease agreements for 21 store leases
assumed by the third party purchaser. These obligations will remain in effect until the leases expire through 2022, unless we are otherwise
released by the applicable landlord. In the event that the third party purchaser does not fulfill its obligations under any of the leases and we are
required to make any such payments, we would seek full reimbursement from the third party purchaser in accordance with the asset purchase
agreement. The third party purchaser has provided a stand-by letter of credit to us in order to secure payment of obligations under the leases.
In accordance with ASC 460, Guarantees (“ASC 460”), as we became secondarily liable under the leases at the time that we transferred
them to the third party, no amounts have been accrued in our Consolidated Financial Statements related to these guarantees.
Off-Balance Sheet Arrangements
We are not a party to any off-balance sheet arrangements.
Recent Accounting Pronouncements
Recent accounting pronouncements are disclosed in Note 2 of the 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, energy and other inputs to the
manufacture of our merchandise, could negatively impact our business and the industry in the future.
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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 interest rates or foreign currency exchange rates
over the next year.
Interest Rate Risk
Our earnings are not materially affected by changes in market interest rates as a result of our short-term investments. If our Fiscal 2013
average yield rate decreases by 10% in Fiscal 2014, our income before taxes will decrease by approximately $0.1 million. Comparatively, if our
Fiscal 2012 average yield rate had decreased by 10% in Fiscal 2013, our income before taxes would have decreased by approximately
$0.1 million. These amounts are determined by considering the impact of the hypothetical yield rates on our cash and investment balances and
assumes no change in our investment structure.
Foreign Exchange Rate Risk
We are exposed to the impact of foreign exchange rate risk primarily through our Canadian operations where the functional currency is the
Canadian dollar. The impact of all other foreign currencies is currently immaterial to our financial results. We do not utilize hedging instruments
to mitigate foreign currency exchange risks. We believe our foreign currency translation risk is minimal as a hypothetical 10% change in the
Canadian foreign exchange rate would not materially affect our results of operations or cash flows.
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Table of Contents
ITEM 8.
FIN ANCIAL STATEMENTS 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 Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
37
38
39
40
41
42
43
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Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
American Eagle Outfitters, Inc.
We have audited the accompanying consolidated balance sheets of American Eagle Outfitters, Inc. as of February 1, 2014 and February 2,
2013, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three
years in the period ended February 1, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of
American Eagle Outfitters, Inc. at February 1, 2014 and February 2, 2013, and the consolidated results of its operations and its cash flows for
each of the three years in the period ended February 1, 2014, in conformity with U.S. generally accepted accounting principles.
We 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 February 1, 2014, based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report
dated March 13, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
March 13, 2014
37
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
February 1,
2014
February 2,
2013
$ 418,933
10,002
291,541
73,882
83,724
45,478
923,560
637,417
49,271
13,530
24,835
45,551
$1,694,164
$ 509,119
121,873
332,452
46,321
73,805
58,230
1,141,800
509,633
38,136
11,484
31,282
23,718
$1,756,053
$ 203,872
23,560
76,397
5,778
47,194
13,293
45,384
415,478
$ 176,874
65,533
77,873
29,155
46,458
13,381
26,628
435,902
59,510
16,543
36,455
112,508
—
59,571
19,011
20,382
98,964
—
—
—
(In thousands, except per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Merchandise inventory
Accounts receivable
Prepaid expenses and other
Deferred income taxes
Total current assets
Property and equipment, at cost, net of accumulated depreciation
Intangible assets, at cost, net of accumulated amortization
Goodwill
Non-current deferred income taxes
Other assets
Total assets
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; 193,149 and 192,604
shares outstanding, respectively
Contributed capital
Accumulated other comprehensive income
Retained earnings
Treasury stock, 56,417 and 56,962 shares, respectively, at cost
Total stockholders’ equity
Total liabilities and stockholders’ equity
Refer to Notes to Consolidated Financial Statements
38
2,496
573,008
12,157
1,569,851
(991,334)
1,166,178
$1,694,164
2,496
627,065
29,297
1,553,058
(990,729)
1,221,187
$1,756,053
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(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
Loss on impairment of assets
Depreciation and amortization expense
Operating income
Other income, net
Income before income taxes
Provision for income taxes
Income from continuing operations
Loss from discontinued operations, net of tax
Net income
Basic income per common share:
Income from continuing operations
Loss from discontinued operations
Basic net income per common share
Diluted income per common share:
Income from continuing operations
Loss from discontinued operations
Diluted net income per common share
Weighted average common shares outstanding — basic
Weighted average common shares outstanding — diluted
February 1,
2014
For the Years Ended
February 2,
2013
January 28,
2012
$3,305,802
2,191,803
1,113,999
796,505
44,465
131,974
141,055
1,022
142,077
59,094
82,983
—
$ 82,983
$ 3,475,802
2,085,480
1,390,322
834,601
34,869
126,246
394,606
7,432
402,038
137,940
264,098
(31,990)
$ 232,108
$ 3,120,065
1,975,471
1,144,594
718,123
19,178
137,958
269,335
5,874
275,209
99,930
175,279
(23,574)
$ 151,705
$
$
($
$
$
($
$
$
$
0.43
—
$
0.43
192,802
194,475
Refer to Notes to Consolidated Financial Statements
39
0.43
—
0.43
$
$
1.35
0.16)
1.19
1.32
(0.16)
1.16
196,211
200,665
$
$
0.90
0.12)
0.78
0.89
(0.12)
0.77
194,445
196,314
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
February 1,
(In thousands)
Net income
Other comprehensive (loss) income:
Foreign currency translation (loss) gain
Other comprehensive (loss) income
Comprehensive income
Refer to Notes to Consolidated Financial Statements
40
For the Years Ended
February 2,
January 28,
2014
2013
2012
$ 82,983
$ 232,108
$ 151,705
(17,140)
(17,140)
$ 65,843
638
638
$ 232,746
587
587
$ 152,292
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except per share amounts)
Balance at January 29, 2011
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 income, net of tax
Cash dividends and dividend equivalents ($0.44 per
share)
Balance at January 28, 2012
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 income, net of tax
Cash dividends and dividend equivalents ($2.05 per
share)
Balance at February 2, 2013
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 income, net of tax
Cash dividends and dividend equivalents ($0.375 per
share)
Balance at February 1, 2014
Shares
Outstanding
(1)
Common
Stock
Contributed
Capital
Retained
Earnings
194,366
—
$ 2,496
—
$ 546,597
10,532
$1,711,929
—
(1,365)
(145)
992
—
—
—
193,848
—
(8,407)
(280)
7,443
—
—
—
192,604
—
(1,600)
(1,059)
3,204
—
—
—
193,149
—
—
—
—
—
—
$ 2,496
—
—
—
—
—
—
—
$ 2,496
—
—
—
—
—
—
—
$ 2,496
—
—
(5,997)
—
—
1,665
$ 552,797
76,108
—
—
(11,054)
—
—
9,214
$ 627,065
1,184
—
—
(56,706)
—
—
1,465
$ 573,008
—
—
(4,261)
151,705
—
Treasury
Stock(2)
Accumulated
Other
Comprehensive
Income
(Loss)
$(938,023) $
—
(15,160)
(2,189)
16,807
—
—
(87,909)
—
$1,771,464 $(938,565) $
—
—
—
—
(36,213)
232,108
—
(173,554)
(4,125)
125,515
—
—
(414,301)
—
$1,553,058 $(990,729) $
—
—
—
—
6,090
82,983
—
(33,051)
(23,385)
55,831
—
—
(72,280)
—
$1,569,851 $(991,334) $
28,072
—
Stockholders’
Equity
$1,351,071
10,532
—
—
—
—
587
(15,160)
(2,189)
6,549
151,705
587
—
28,659
—
(86,244)
$1,416,851
76,108
—
—
—
—
638
(173,554)
(4,125)
78,248
232,108
638
—
29,297
—
(405,087)
$1,221,187
1,184
—
—
—
—
(17,140)
—
12,157
(33,051)
(23,385)
5,215
82,983
(17,140)
(70,815)
$1,166,178
(1)
600,000 authorized, 249,566 issued and 193,149 outstanding, $0.01 par value common stock at February 1, 2014; 600,000 authorized,
249,566 issued and 192,604 outstanding, $0.01 par value common stock at February 2, 2013; 600,000 authorized, 249,566 issued and
193,848 outstanding, $0.01 par value common stock at January 28, 2012. The Company has 5,000 authorized, with none issued or
outstanding, $0.01 par value preferred stock at February 1, 2014, February 2, 2013 and January 28, 2012.
(2)
56,417 shares, 56,962 shares, and 55,718 shares at February 1, 2014, February 2, 2013 and January 28, 2012, respectively. During Fiscal
2013, Fiscal 2012, and Fiscal 2011, 3,204 shares, 7,443 shares, and 992 shares, respectively, were reissued from treasury stock for the
issuance of share-based payments.
Refer to Notes to Consolidated Financial Statements
41
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Net income
Loss 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
Provision for deferred income taxes
Tax benefit from share-based payments
Excess tax benefit from share-based payments
Foreign currency transaction loss (gain)
Loss on impairment 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
February 1,
For the Years Ended
February 2,
January 28,
2014
2013
2012
$
$
82,983
—
82,983
$
$
232,108
31,990
264,098
$
$
151,705
23,574
175,279
134,047
(6,541)
20,187
8,746
(8,833)
1,378
44,465
128,397
66,349
(31,418)
14,050
(13,279)
100
34,869
140,502
11,724
4,207
356
(373)
(325)
19,718
40,148
(29,511)
(10,844)
(36,089)
28,568
1,269
583
(42,465)
(25,840)
27,605
146,873
229,856
35,202
(6,664)
404
(8,165)
(10,468)
1,473
(11,073)
23,018
(7,408)
20,186
235,573
499,671
(73,850)
(3,226)
(21,051)
2,445
16,636
3,981
(9,111)
7,576
(14,566)
18,215
102,858
278,137
Investing activities:
Capital expenditures for property and equipment
Purchase of long-lived assets in a business combination
Acquisition of intangible assets
Purchase of available-for-sale securities
Sale of available-for-sale securities
Net cash (used for) provided by investing activities from continuing operations
(278,499)
(20,751)
(6,835)
(52,065)
162,785
(195,365)
(93,939)
—
(1,125)
(111,086)
15,500
(190,650)
(89,466)
—
(34,181)
(193,851)
240,797
(76,701)
Financing activities:
Payments on capital leases
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 used to net settle equity awards
Cash dividends paid
Net cash used for financing activities from continuing operations
(2,839)
(33,051)
(23,386)
6,197
8,833
—
(72,280)
(116,526)
(3,066)
(173,554)
(4,125)
76,401
13,279
(3,256)
(15,160)
(2,189)
5,098
373
—
(85,592)
(100,726)
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
(8,151)
—
—
—
—
—
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents — beginning of period
Cash and cash equivalents — end of period
$
$
Refer to Notes to Consolidated Financial Statements
42
(90,186)
509,119
418,933
(403,490)
(494,555)
504
798
(24,616)
(780)
—
—
(25,396)
(210,426)
719,545
$ 509,119
(38,881)
(10,675)
—
—
(49,556)
$
51,952
667,593
719,545
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED FEBRUARY 1, 2014
1.
Business Operations
American Eagle Outfitters, Inc. (the “Company”), a Delaware corporation, operates under the American Eagle Outfitters ® (“AEO”) and
aerie
American Eagle Outfitters ® (“aerie”) brands. The Company operated 77kids by American Eagle Outfitters ® (“77kids”) until its exit in
Fiscal 2012.
® by
Founded in 1977, American Eagle Outfitters is a leading apparel and accessories retailer that operates more than 1,000 retail stores in the
U.S. and internationally, and online at ae.com. Through its family of 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.
Merchandise Mix
The following table sets forth the approximate consolidated percentage of total net revenue from continuing operations attributable to each
merchandise group for each of the periods indicated:
February 1,
2014
Men’s apparel and accessories
Women’s apparel and accessories (excluding aerie)
aerie
Total
2.
40%
52%
8%
100%
For the Years Ended
February 2,
2013
39%
52%
9%
100%
January 28,
2012
40%
51%
9%
100%
Summary of Significant Accounting Policies
Principles of Consolidation
The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation. At February 1, 2014, the Company operated in one reportable segment.
The Company exited its 77kids brand in Fiscal 2012. These Consolidated Financial Statements reflect the results of 77kids as discontinued
operations for all periods presented.
Fiscal Year
Our financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2014” refers to the 52
week period ending January 31, 2015. “Fiscal 2013” refers to the 52 week period ended February 1, 2014. “Fiscal 2012” refers to the 53 week
period ended February 2, 2013. “Fiscal 2011,” “Fiscal 2010” and “Fiscal 2009” refer to the 52 week periods ended January 28, 2012, January 29,
2011 and January 30, 2010, respectively.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
(“GAAP”) requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews its estimates based on currently
available information. Changes in facts and circumstances may result in revised estimates.
43
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-02,
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). ASU 2013-02 requires an entity to
provide additional information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an
entity is required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated
other comprehensive income by the respective line items of net income. ASU 2013-02 is effective prospectively for reporting periods beginning
after December 15, 2012. ASU 2013-02 does not change the current requirements for reporting net income or other comprehensive income.
Because the standard only affects the presentation of comprehensive income and does not impact what is included in comprehensive income,
ASU 2013-02 did not have a significant impact on the Company’s Consolidated Financial Statements.
In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net
Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 requires an entity to
present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset
for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. To the extent a net operating loss carryforward, a similar tax
loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional
income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to
use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the
financial statements as a liability and should not be combined with deferred tax assets. ASU No. 2013-11 is effective for financial statements
issued for annual reporting periods beginning after December 15, 2013 and interim periods within those years. The adoption of ASU 2013-11
will not have a significant impact on Company’s Consolidated Financial Statements.
Foreign Currency Translation
In accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters , assets and liabilities denominated in
foreign currencies were translated into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance
sheet date. Revenues and expenses denominated in foreign currencies were translated into USD at the monthly average exchange rates for the
period. Gains or losses resulting from foreign currency transactions are included in the results of operations, whereas, related translation
adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income (refer to Note 11 to
the Consolidated Financial Statements).
Cash and Cash Equivalents, Short-term Investments and Long-term Investments
Cash includes cash equivalents. The Company considers all highly liquid investments purchased with a remaining maturity of three months
or less to be cash equivalents.
As of February 1, 2014 and February 2, 2013, short-term investments include treasury bills and term-deposits purchased with a maturity of
greater than three months, but less than one year.
Long-term investments are included within other assets on the Company’s Consolidated Balance Sheets. As of February 1, 2014 and
February 2, 2013, the Company held no long-term investments.
Unrealized gains and losses on the Company’s available-for-sale securities are excluded from earnings and are reported as a separate
component of stockholders’ equity, within accumulated other comprehensive income, until realized. The components of other-than-temporary
impairment (“OTTI”) losses related to credit losses are
44
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
considered by the Company to be realized and are recorded in earnings. When available-for-sale securities are sold, the cost of the securities is
specifically identified and is used to determine any realized gain or loss.
Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents and investments.
Other-than-Temporary Impairment
The Company evaluates its investments for impairment in accordance with ASC 320, Investments — Debt and Equity Securities (“ASC
320”). ASC 320 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary,
and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. If, after
consideration of all available evidence to evaluate the realizable value of its investment, impairment is determined to be other-than-temporary,
then an impairment loss is recognized in the Consolidated Statement of Operations equal to the difference between the investment’s cost and its
fair value. Additionally, ASC 320 requires additional disclosures relating to debt and equity securities both in the interim and annual periods as
well as requires the Company to present total OTTI with an offsetting reduction for any non-credit loss impairment amount recognized in other
comprehensive income (“OCI”).
There was no net impairment loss recognized in earnings for all years presented.
Merchandise Inventory
Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise
design and sourcing costs and related expenses. The Company records merchandise receipts at the time which both title and risk of loss for the
merchandise transfers to the Company.
The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise.
Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns
may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer
acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such
markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected. The Company also
estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve,
based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.
Property and Equipment
Property and equipment is recorded on the basis of cost with depreciation computed utilizing the straight-line method over the assets’
estimated useful lives. The useful lives of our major classes of assets are as follows:
Buildings
Leasehold improvements
Fixtures and equipment
25 years
Lesser of 10 years or the term of the lease
5 years
In accordance with ASC 360, Property, Plant, and Equipment , the Company’s management evaluates the value of leasehold
improvements and store fixtures associated with retail stores, which have been open for a period of time sufficient to reach maturity. The
Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be
identified. Impairment
45
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of the assets. When events such as these
occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded separately as a component of operating
income under loss on impairment of 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 a loss on impairment of assets in
the Consolidated Statements of Operations. The retail store impairments were recorded based on the results of the Company’s evaluation of
stores that considered performance during the holiday selling season and a significant portfolio review in the fourth quarter of Fiscal 2013 that
considered current and future performance projections and strategic real estate initiatives. The Company determined that these stores would not
be able to generate sufficient cash flow over the expected remaining lease term to recover the carrying value of the respective stores assets.
During Fiscal 2012, the Company recorded asset impairment charges of $34.9 million consisting of the impairment of 52 retail stores,
which is recorded as a loss on impairment of assets in the Consolidated Statements of Operations. This impairment was recorded based on the
results of the Company’s evaluation of stores that considered performance during the holiday selling season and strategic decisions made in the
fourth quarter of Fiscal 2012 regarding the rebalancing of our store fleet. The Company determined that these stores would not be able to
generate sufficient cash flow over the expected remaining lease term to recover the carrying value of the respective stores assets. Additionally,
the Company recorded $16.6 million of store asset impairment charges related to 77kids stores, which is recorded in Discontinued Operations.
During Fiscal 2011, the Company recorded asset impairment charges of $19.2 million consisting of the impairment of 57 retail stores,
largely related to the aerie brand, which is recorded as a loss on impairment of assets in the Consolidated Statements of Operations. Based on the
Company’s review of the operating performance and projections of future performance of these stores, the Company determined that they would
not be able to generate sufficient cash flow over the life of the related leases to recover the Company’s initial investment in them. Additionally,
the Company recorded $1.6 million of store asset impairment charges related to two underperforming 77kids stores which is recorded in
Discontinued Operations.
Refer to Note 15 to the Consolidated Financial Statements for additional information regarding the discontinued operations for 77kids.
When the Company closes, remodels or relocates a store prior to the end of its lease term, the remaining net book value of the assets
related to the store is recorded as a write-off of assets within depreciation and amortization expense.
Refer to Note 7 to the Consolidated Financial Statements for additional information regarding property and equipment.
Goodwill
The Company’s goodwill is primarily related to the acquisition of its importing operations, Canadian business and recently acquired
operations in Hong Kong and China. In accordance with ASC 350, Intangibles- Goodwill and Other (“ASC 350”), the Company evaluates
goodwill for possible impairment on at least an annual basis and last performed an annual impairment test as of February 1, 2014. As a result of
the Company’s annual goodwill impairment test, the Company concluded that its goodwill was not impaired.
46
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Intangible Assets
Intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated
useful lives. The Company’s intangible assets, which primarily include trademark assets, are amortized over 15 to 25 years.
The Company evaluates intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the
carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated
by those assets. If the sum of the estimated future undiscounted cash flows are less than the carrying amounts of the assets, then the assets are
impaired and are adjusted to their estimated fair value. No intangible asset impairment charges were recorded during Fiscal 2013, Fiscal 2012 or
Fiscal 2011.
Refer to Note 8 to the Consolidated Financial Statements for additional information regarding intangible assets.
Deferred Lease Credits
Deferred lease credits represent the unamortized portion of construction allowances received from landlords related to the Company’s
retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its landlords as part of the
negotiated lease terms. The Company records a receivable and a deferred lease credit liability at the lease commencement date (date of initial
possession of the store). The deferred lease credit is amortized on a straight-line basis as a reduction of rent expense over the term of the original
lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the landlord.
Self-Insurance Liability
The Company is self-insured for certain losses related to employee medical benefits and worker’s compensation. Costs for self-insurance
claims filed and claims incurred but not reported are accrued based on known claims and historical experience. Management believes that it has
adequately reserved for its self-insurance liability, which is capped through the use of stop loss contracts with insurance companies. However,
any significant variation of future claims from historical trends could cause actual results to differ from the accrued liability.
Co-branded Credit Card and Customer Loyalty Program
The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”) under the
AEO and aerie brands. These credit cards are issued by a third-party bank (the “Bank”), and the Company has no liability to the Bank for bad
debt expense, provided that purchases are made in accordance with the Bank’s procedures. Once a customer is approved to receive the AEO
Visa Card or the AEO Credit Card and the card is activated, the customer is eligible to participate in the credit card rewards program. Customers
who make purchases at AEO and aerie earn discounts in the form of savings certificates when certain purchase levels are 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 to ASC 605-25, Revenue
Recognition, Multiple Element Arrangements (“ASC 605-25”). The Company believes that points earned under its point and loyalty programs
represent deliverables in a multiple element arrangement rather than a rebate or refund of cash. Accordingly, the portion of the sales revenue
attributed to the award points is deferred and
47
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
recognized when the award is redeemed or when the points expire. Additionally, credit card reward points earned on non-AEO or aerie
purchases are accounted for in accordance with ASC 605-25. As the points are earned, a current liability is recorded for the estimated cost of the
award, and the impact of adjustments is recorded in cost of sales.
The Company offers its customers the AEREWARDS ® loyalty program (the “Program”). Under the Program, customers accumulate
points based on purchase activity and earn rewards by reaching certain point thresholds during three-month earning periods. Rewards earned
during these periods are valid through the stated expiration date, which is approximately one month from the mailing date of the reward. These
rewards can be redeemed for a discount on a purchase of merchandise. Rewards not redeemed during the one-month redemption period are
forfeited. The Company determined that rewards earned using the Program should be accounted for in accordance with ASC 60525. Accordingly, the portion of the sales revenue attributed to the award credits is deferred and recognized when the awards are redeemed or
expire.
Income Taxes
The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and
liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial
Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets
and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the
years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is
more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of
earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits, may materially impact the Company’s effective
income tax rate.
The Company evaluates its income tax positions in accordance with ASC 740 which prescribes a comprehensive model for recognizing,
measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision
whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is
“more likely than not” that the position is sustainable based on its technical merits.
The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to
establish a valuation allowance require management to make estimates and assumptions. The Company believes that its assumptions and
estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and
liabilities, valuation allowances or net income.
Revenue Recognition
Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records
revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax
collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated
Balance Sheets.
48
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company
records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects
an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.
February 1,
2014
(In thousands)
Beginning balance
Returns
Provisions
Ending balance
$
4,481
(85,871)
83,595
$ 2,205
For the Years Ended
February 2,
2013
$
2,929
(86,895)
88,447
$ 4,481
January 28,
2012
$
3,663
(76,423)
75,689
$ 2,929
Revenue is not recorded on the purchase of gift cards. A current liability is recorded upon purchase, and revenue is recognized when the
gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the
amounts that will not be redeemed (“gift card breakage”), determined through 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.
The Company recognizes royalty revenue generated from its franchise agreements based upon a percentage of merchandise sales by the
franchisee. This revenue is recorded as a component of total net revenue when earned.
Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses
Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns,
shrinkage and certain promotional costs (collectively “merchandise costs”) and buying, occupancy and warehousing costs.
Design costs are related to the Company’s Design Center operations and include compensation, travel, supplies and samples for our design
teams, as well as rent and depreciation for the Company’s Design Center. These costs are included in cost of sales as the respective inventory 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; freight from the Company’s distribution centers to the stores; compensation and supplies for the Company’s distribution centers,
including purchasing, receiving and inspection costs; and shipping and handling costs related to the Company’s e-commerce operation. Gross
profit is the difference between total net revenue and cost of sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and
related benefits associated with the Company’s stores and corporate headquarters. Selling, general and administrative expenses also include
advertising costs, supplies for the Company’s stores and home office, communication costs, travel and entertainment, leasing costs and services
purchased. Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for the Company’s
design, sourcing and importing teams, the Company’s buyers and the Company’s distribution centers as these amounts are recorded in cost of
sales.
49
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Advertising Costs
Certain advertising costs, including direct mail, in-store photographs and other promotional costs are expensed when the marketing
campaign commences. As of February 1, 2014 and February 2, 2013, the Company had prepaid advertising expense of $9.0 million and $8.4
million, respectively. All other advertising costs are expensed as incurred. The Company recognized $87.0 million, $90.0 million and $66.5
million in advertising expense during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively.
Store Pre-Opening Costs
Store pre-opening costs consist primarily of rent, advertising, supplies and payroll expenses. These costs are expensed as incurred.
Other Income, Net
Other income, net consists primarily of interest income/expense, foreign currency transaction gain/loss and realized investment
gains/losses.
Gift Cards
The value of a gift card is recorded as a current liability upon purchase and revenue is recognized when the gift card is redeemed for
merchandise. The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of
total net revenue. The Company determines an estimated gift card breakage rate by continuously evaluating historical redemption data and the
time when there is a remote likelihood that a gift card will be redeemed. The Company recorded gift card breakage of $7.3 million, $8.9 million
and $6.5 million during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively.
Legal Proceedings and Claims
The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450,
Contingencies (“ASC 450”), the Company records a reserve for estimated losses when the loss is probable and the amount can be reasonably
estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company
records the accrual at the low end of the range, in accordance with ASC 450. As the Company believes that it has provided adequate reserves, it
anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial
position, results of operations or consolidated cash flows of the Company.
Supplemental Disclosures of Cash Flow Information
The table below shows supplemental cash flow information for cash amounts paid during the respective periods:
(In thousands)
February 1,
2014
For the Years Ended
February 2,
2013
January 28,
2012
Cash paid during the periods for:
Income taxes
Interest
$ 65,496
$
387
$ 142,009
$
348
$ 99,756
$
—
50
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Segment Information
In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified three operating segments (American Eagle
Outfitters ® Brand retail stores, aerie ® by American Eagle Outfitters ® retail stores and AEO Direct) that reflect the Company’s operational
structure as well as the business’s internal view of analyzing results and allocating resources. All of the operating segments have been
aggregated and are presented as one reportable segment, as permitted by ASC 280.
The following tables present summarized geographical information:
(In thousands)
Total net revenue:
United States
Foreign(1)
Total net revenue
(1)
February 1,
2014
For the Years Ended
February 2,
2013
January 28,
2012
$2,954,636
351,166
$3,305,802
$3,131,233
344,569
$3,475,802
$2,810,560
309,506
$3,120,065
Amounts represent sales from American Eagle Outfitters and aerie international retail stores, AEO Direct sales that are billed to and/or
shipped to foreign countries and international franchise revenue.
(In thousands)
Long-lived assets, net:
United States
Foreign
Total long-lived assets, net
February 1,
February 2,
2014
2013
$ 618,715
81,503
$ 700,218
$ 483,706
75,547
$ 559,253
Reclassifications
Certain reclassifications have been made to the Consolidated Financial Statements for prior periods in order to conform to the current
period presentation.
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
3.
Cash and Cash Equivalents, Short-term Investments and Long-term Investments
The following table summarizes the fair market value of our cash and marketable securities, which are recorded on the Consolidated
Balance Sheets:
(In thousands)
Cash and cash equivalents:
Cash
Treasury bills
Money-market
Commercial paper
Total cash and cash equivalents
Short-term investments:
Treasury bills
Term-deposits
Total short-term investments
Total
February 1,
February 2,
2014
2013
$ 330,013
63,224
25,696
—
$ 418,933
$ 257,191
—
221,929
29,999
$ 509,119
$ 10,002
—
$ 10,002
$ 428,935
$ 109,305
12,568
$ 121,873
$ 630,992
Proceeds from the sale of available-for-sale securities were $162.8 million, $15.5 million and $240.8 million for Fiscal 2013, Fiscal 2012
and Fiscal 2011, respectively. The purchases of available-for-sale securities for Fiscal 2013, Fiscal 2012 and Fiscal 2011 were $52.1 million,
$111.1 million and $193.9 million, respectively. At February 1, 2014 and February 2, 2013, the fair value of all available for sale securities
approximated par, with no gross unrealized holding gains or losses.
4.
Fair Value Measurements
ASC 820, Fair Value Measurement Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in
accordance with GAAP, and expands disclosures about fair value measurements. Fair value is defined under 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 minimize the use of
unobservable inputs. In addition, ASC 820 establishes this three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value. These tiers include:
• Level 1 — Quoted prices in active markets for identical assets or liabilities.
• Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data for substantially the full term of the assets or liabilities.
• Level 3 — Unobservable inputs (i.e., projections, estimates, interpretations, etc.) that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of February 1, 2014 and February 2, 2013, the Company held certain assets that are required to be measured at fair value on a recurring
basis. These include cash equivalents and investments.
In accordance with ASC 820, the following tables represent the fair value hierarchy for the Company’s financial assets (cash equivalents
and investments) measured at fair value on a recurring basis as of February 1, 2014 and February 2, 2013:
Fair Value Measurements at February 1, 2014
Quoted Market
Prices in Active
Markets for
Identical Assets
(In thousands)
Cash and cash equivalents
Cash
Treasury bills
Money-market
Total cash and cash equivalents
Short-term investments
Treasury bills
Total short-term investments
Total
Carrying
Amount
(Level 1)
$330,013
63,224
25,696
$418,933
$
$ 10,002
$ 10,002
$428,935
Significant Other
Significant
Unobservable
Observable
Inputs (Level 2)
Inputs
(Level 3)
$
$
330,013
63,224
25,696
418,933
$
$
—
—
—
—
$
—
—
—
—
$
$
$
10,002
10,002
428,935
$
$
$
—
—
—
$
$
$
—
—
—
Fair Value Measurements at February 2, 2013
Quoted Market
Prices in Active
Markets for
Identical Assets
(In thousands)
Cash and cash equivalents
Cash
Money-market
Commercial paper
Total cash and cash equivalents
Short-term investments
Treasury bills
Term-deposits
Total short-term investments
Total
Carrying
Amount
(Level 1)
$257,191
221,929
29,999
$509,119
$
$109,305
12,568
$121,873
$630,992
$
$
$
$
Significant Other
Significant
Unobservable
Observable
Inputs (Level 2)
Inputs
(Level 3)
257,191
221,929
29,999
509,119
$
109,305
12,568
121,873
630,992
$
$
$
$
—
—
—
—
$
—
—
—
—
$
$
$
$
—
—
—
—
—
—
—
—
In the event the Company holds Level 3 investments, a discounted cash flow model is used to value those investments. There were no
Level 3 investments at February 1, 2014 or February 2, 2013.
Non-Financial Assets
The Company’s non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be
measured at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is required and the
Company is required to evaluate the non-financial instrument for
53
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
impairment, a resulting asset impairment would require that the non-financial asset be recorded at the estimated fair value. As a result of the
Company’s annual goodwill impairment test performed as of February 1, 2014, the Company concluded that its goodwill was not impaired.
Certain long-lived assets were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in ASC 820. During Fiscal
2013 and Fiscal 2012, certain long-lived assets related to the Company’s retail stores and Warrendale Distribution Center were determined to be
unable to recover their respective carrying values and were written down to their fair value, resulting in a loss of $44.5 million and $34.9 million,
respectively, which is recorded as a loss on impairment of assets within the Consolidated Statements of Operations. The fair value of the
impaired assets after the recorded loss is an immaterial amount.
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.
During Fiscal 2013, the Company announced plans to close its Warrendale Distribution Center. Certain long-lived assets, including the
Warrendale, Pennsylvania distribution center, were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in ASC 820.
Certain long-lived assets related to this distribution center were determined to be unable to recover their respective carrying values over their
remaining useful life and were written down to fair value. Refer to Note 16 to the Consolidated Financial Statements for additional information
regarding exit and disposal costs.
5.
Earnings per Share
The following is a reconciliation between basic and diluted weighted average shares outstanding:
(In thousands, except per share amounts)
Weighted average common shares outstanding:
Basic number of common shares outstanding
Dilutive effect of stock options and non-vested restricted stock
Dilutive number of common shares outstanding
February 1,
For the Years Ended
February 2,
January 28,
2014
2013
2012
192,802
1,673
194,475
196,211
4,454
200,665
194,445
1,869
196,314
Equity awards to purchase approximately 1.7 million, 1.5 million and 7.2 million shares of common stock during the Fiscal 2013, Fiscal
2012 and Fiscal 2011, respectively, were outstanding, but were not included in the computation of weighted average diluted common share
amounts as the effect of doing so would have been anti-dilutive.
Additionally, for Fiscal 2013, approximately 1.8 million of performance-based restricted stock awards were not included in the
computation of weighted average diluted common share amounts because the number of shares ultimately issued is contingent on the
Company’s performance compared to pre-established performance goals. For Fiscal 2012, there were no performance-based restricted stock
awards excluded in the computation of weighted average diluted common share amounts as they were probable of vesting.
54
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Refer to Note 12 to the Consolidated Financial Statements for additional information regarding share-based compensation.
6.
Accounts Receivable
Accounts receivable are comprised of the following:
February 1,
(In thousands)
Franchise receivable
Merchandise sell-offs
Credit card program receivable
Landlord construction allowances
Marketing cost reimbursements
Other Items
Total
7.
February 2,
2014
2013
$ 20,567
16,106
15,000
11,626
6,063
4,520
$ 73,882
$ 24,521
6,880
—
3,047
6,172
5,701
$ 46,321
Property and Equipment
Property and equipment consists of the following:
February 1,
2014
(In thousands)
Land
Buildings
Leasehold improvements
Fixtures and equipment
Construction in progress
Property and equipment, at cost
Less: Accumulated depreciation
Property and equipment, net
$
20,196
143,856
600,572
732,228
102,974
$1,599,826
(962,409)
$ 637,417
February 2,
2013
$
6,364
153,729
591,736
671,075
8,725
$1,431,630
(921,997)
$ 509,633
Depreciation expense is summarized as follows:
February 1,
(In thousands)
Depreciation expense
For the Years Ended
February 2,
January 28,
2014
2013
2012
$ 116,761
$ 122,756
$ 135,244
Additionally, during Fiscal 2013, Fiscal 2012 and Fiscal 2011, the Company recorded $14.6 million, $3.7 million and $3.4 million,
respectively, related to asset write-offs within depreciation and amortization expense.
55
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
8.
Intangible Assets
Intangible assets include costs to acquire and register the Company’s trademark assets. The following table represents intangible assets as
of February 1, 2014 and February 2, 2013:
February 1,
2014
2013
$ 58,121
(8,850)
$ 49,271
$ 44,272
(6,136)
$ 38,136
(In thousands)
Trademarks, at cost
Less: Accumulated amortization
Intangible assets, net
February 2,
Amortization expense is summarized as follows:
February 1,
For the Years Ended
February 2,
2014
(In thousands)
Amortization expense
$
2,714
January 28,
2013
$
2012
1,952
$
1,828
The table below summarizes the estimated future amortization expense for intangible assets existing as of February 1, 2014 for the next
five Fiscal Years:
Future
Amortization
(In thousands)
2014
2015
2016
2017
2018
9.
$
3,471
3,465
3,462
3,416
3,414
Other Credit Arrangements
On March 2, 2012, the Company entered into a five-year, $150.0 million syndicated, unsecured, revolving credit agreement (the “Credit
Agreement”). The primary purpose of the Credit Agreement is to provide additional access to capital for general corporate purposes, growth
initiatives and the issuance of letters of credit.
The Credit Agreement, as amended, contains financial covenants that require the Company to maintain certain coverage and leverage
ratios, and various customary affirmative and negative covenants such as the ability to incur additional debt not otherwise permitted under the
Credit Agreement.
The Credit Agreement has various borrowing options, including rates of interest that are based on (i) an Adjusted London Interbank
Offered Rate (“LIBOR” as defined in the Credit Agreement) plus a margin ranging from 1.00% to 1.75% based on a defined leverage ratio,
payable at the end of the applicable interest period; and (ii) a Base Rate (as defined in the Credit Agreement), plus a margin ranging from 0.00%
to 0.75% based on a defined leverage ratio, payable quarterly.
Under the Credit Agreement, the Company is also required to pay a commitment fee ranging from 0.175% to 0.30%, based on the defined
leverage ratio, on the unused portion of the total lender commitments.
As of February 1, 2014, the Company was in compliance with the terms of the Credit Agreement had $8.2 million outstanding in letters of
credit and no borrowings.
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Credit Agreement replaced uncommitted demand lines in the aggregate amount of $110.0 million United States dollars (“USD”) and
$25.0 million Canadian dollars (“CAD”).
Additionally, the Company has borrowing agreements with two separate financial institutions under which it may borrow an aggregate of
$155.0 million USD for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit
facilities is subject to acceptance by the respective financial institutions.
As of February 1, 2014, the Company had outstanding trade letters of credit of $27.5 million.
10.
Leases
The Company leases 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 additional contingent rent when sales exceed specified levels. Additionally, most leases contain construction
allowances and/or rent holidays. In recognizing landlord incentives and minimum rent expense, the Company amortizes the items on a straightline basis over the lease term (including the pre-opening build-out period).
A summary of fixed minimum and contingent rent expense for all operating leases follows:
(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
February 1,
For the Years Ended
February 2,
January 28,
2014
2013
2012
$ 260,668
6,576
$ 250,844
9,758
$ 246,096
7,618
$ 267,244
17,153
$ 284,397
$ 260,602
14,960
$ 275,562
$ 253,714
15,989
$ 269,703
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.
57
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The table below summarizes future minimum lease obligations, consisting of fixed minimum rent, under operating leases in effect at
February 2, 2013:
Future Minimum
Lease Obligations
(In thousands)
Fiscal years:
2014
2015
2016
2017
2018
Thereafter
Total
11.
$
273,827
261,828
233,810
206,934
177,229
601,934
1,755,562
$
Other Comprehensive Income
The accumulated balances of other comprehensive income included as part of the Consolidated Statements of Stockholders’ Equity follow:
Before
Tax
Amount
(In thousands)
Balance at January 29, 2011
Foreign currency translation gain
Balance at January 28, 2012
Foreign currency translation gain
Balance at February 2, 2013
Foreign currency translation loss
Balance at February 1, 2014
12.
$ 28,072
587
$ 28,659
638
$ 29,297
(17,140)
$ 12,157
Tax
Benefit
(Expense)
Accumulated
Other
Comprehensive
Income
$
$
$
$
$
—
—
—
—
—
—
—
$
$
$
28,072
587
28,659
638
29,297
(17,140)
12,157
Share-Based Payments
The Company accounts for share-based compensation under the provisions of ASC 718, Compensation — Stock Compensation (“ASC
718”), which requires the Company to measure and recognize compensation expense for all share-based payments at fair value. Total sharebased compensation expense included in the Consolidated Statements of Operations for Fiscal 2013 was a net benefit of $6.5 million ($4.1
million, net of tax). The net benefit is due to a reversal of previously recorded performance-based expense resulting from current business
performance compared to targets. Total share-based compensation expense included in the Consolidated Statements of Operations for Fiscal
2012 and Fiscal 2011 was $66.3 million ($40.9 million, net of tax) and $11.7 million ($7.2 million, net of tax), respectively.
ASC 718 requires recognition of compensation cost under a non-substantive vesting period approach for awards containing provisions that
accelerate or continue vesting upon retirement. Accordingly, for awards with such provisions, the Company recognizes compensation expense
over the period from the grant date to the date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period.
Additionally, for awards granted to retirement eligible employees, the full compensation cost of an award must be recognized immediately upon
grant.
58
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
At February 1, 2014, the Company had awards outstanding under two share-based compensation plans, which are described below.
Share-based compensation plans
2005 Stock Award and Incentive Plan
The 2005 Plan was approved by the stockholders on June 15, 2005. The 2005 Plan authorized 18.4 million shares for issuance, of which
6.4 million shares are available for full value awards in the form of restricted stock awards, restricted stock units or other full value stock awards
and 12.0 million shares are available for stock options, SAR, dividend equivalents, performance awards or other non-full value stock awards.
The 2005 Plan was subsequently amended in Fiscal 2009 to increase the shares available for grant to 31.9 million without taking into
consideration 9.1 million non-qualified stock options, 2.9 million shares of restricted stock and 0.2 million shares of common stock that had been
previously granted under the 2005 plan to employees and directors (without considering cancellations as of January 31, 2009 of awards for
2.9 million shares). The 2005 Plan provides that the maximum number of shares awarded to any individual may not exceed 6.0 million shares
per year for options and SAR and no more than 4.0 million shares may be granted with respect to each of restricted shares of stock and restricted
stock units plus any unused carryover limit from the previous year. The 2005 Plan allows the Compensation Committee of the Board to
determine which employees receive awards and the terms and conditions of the awards that are mandatory under the 2005 Plan. The 2005 Plan
provides for grants to directors who are not officers or employees of the Company, which are not to exceed 20,000 shares per year (not to be
adjusted for stock splits). Through February 1, 2014, 16.9 million non-qualified stock options, 9.2 million shares of restricted stock and
0.4 million shares of common stock had been granted under the 2005 Plan to employees and directors (without considering cancellations to date
of awards for 11.4 million shares). Approximately 95% of the options granted under the 2005 Plan vest over three years, 4% vest over one year
and 1% vest over five years. Options were granted for ten and seven year terms. Approximately 63% of the restricted stock awards are
performance-based and are earned if the Company meets established performance goals. The remaining 37% of the restricted stock awards are
time-based and vest over three years.
1999 Stock Incentive Plan
The 1999 Stock Option Plan (the “1999 Plan”) was approved by the stockholders on June 8, 1999. The 1999 Plan authorized 18.0 million
shares for issuance in the form of stock options, stock appreciation rights (“SAR”), restricted stock awards, performance units or performance
shares. The 1999 Plan was subsequently amended to increase the shares available for grant to 33.0 million. Additionally, the 1999 Plan provided
that the maximum number of shares awarded to any individual may not exceed 9.0 million shares. The 1999 Plan allowed the Compensation
Committee to determine which employees and consultants received awards and the terms and conditions of these awards. The 1999 Plan
provided for a grant of 1,875 stock options quarterly (not to be adjusted for stock splits) to each director who is not an officer or employee of the
Company starting in August 2003. The Company ceased making these quarterly stock option grants in June 2005. Under this plan, 33.2 million
non-qualified stock options and 6.7 million shares of restricted stock were granted to employees and certain non-employees (without considering
cancellations to date of awards for 9.7 million shares). Approximately 33% of the options granted were to vest over eight years after the date of
grant but were accelerated as the Company met annual performance goals. Approximately 34% of the options granted under the 1999 Plan vest
over three years, 23% vest over five years and the remaining grants vest over one year. All options expire after 10 years. Performance-based
restricted stock was earned if the Company met established performance goals. The 1999 Plan terminated on June 15, 2005 with all rights of the
awardees and all unexpired awards continuing in force and operation after the termination.
59
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock Option Grants
The Company grants both time-based and performance-based stock options under 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 year.
A summary of the Company’s stock option activity under all plans for Fiscal 2013 follows:
Options
(In thousands)
Outstanding — January 28, 2012
Granted
Exercised(1)
Cancelled
Outstanding — February 2, 2013
Vested and expected to vest — February 2, 2013
Exercisable — February 2, 2013(2)
4,629
376
(605)
(475)
3,925
3,876
701
For the Year Ended February 1, 2014
WeightedWeightedAverage
Remaining
Average
Contractual
Exercise
Term
Price
(In years)
Aggregate
Intrinsic
Value
(In thousands)
$
$
$
$
$
$
$
$
$
$
16.29
22.55
10.27
17.68
17.65
17.59
11.74
2.6
2.6
3.8
1,255
1,255
1,255
(1)
Options exercised during Fiscal 2013 ranged in price from $4.24 to $19.28.
(2)
Options exercisable represent “in-the-money” vested options based upon the weighted average exercise price of vested options compared
to the Company’s stock price at February 1, 2014.
The weighted-average grant date fair value of stock options granted during Fiscal 2013, Fiscal 2012 and Fiscal 2011 was $4.17, $3.72 and
$4.73, respectively. The aggregate intrinsic value of options exercised during Fiscal 2013, Fiscal 2012 and Fiscal 2011 was $3.9 million, $57.4
million and $2.8 million, respectively. Cash received from the exercise of stock options and the actual tax benefit realized from share-based
payments was $6.2 million and $8.7 million, respectively, for Fiscal 2013. Cash received from the exercise of stock options and the actual tax
benefit realized from share-based payments was $76.4 million and $14.1 million, respectively, for Fiscal 2012. Cash received from the exercise
of stock options and the actual tax benefit realized from share-based payments was $5.1 million and $0.4 million, respectively, for Fiscal 2011.
The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following weightedaverage assumptions:
Black-Scholes Option Valuation Assumptions
February 1,
2014
Risk-free interest rates(1)
Dividend yield
Volatility factors of the expected market price of the
Company’s common stock(2)
Weighted-average expected term(3)
Expected forfeiture rate(4)
0.3%
2.0%
34.4%
2.5 years
8.0%
60
For the Years Ended
February 2,
2013
0.6%
2.8%
41.2%
4.0 years
8.0%
January 28,
2012
2.1%
2.6%
42.7%
5.0 years
8.0%
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(1)
Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options.
(2)
Based on a combination of historical volatility of the Company’s common stock and implied volatility.
(3)
Represents the period of time options are expected to be outstanding. The weighted average expected option term for the years ended
February 1, 2014, February 2, 2013 and January 28, 2012 were determined based on historical experience.
(4)
Based on historical experience.
As of February 1, 2014, there was $1.3 million of unrecognized compensation expense related to nonvested stock option awards that is
expected to be recognized over a weighted average period of 1.2 years.
Restricted Stock Grants
Time-based restricted stock awards are comprised of time-based restricted stock units. These awards vest over three years; however, they
may be accelerated to vest over one year if the Company meets pre-established performance goals in the year of grant. Time-based restricted
stock units receive dividend equivalents in the form of additional time-based restricted stock units, which are subject to the same restrictions and
forfeiture provisions as the original award.
Performance-based restricted stock awards include performance-based restricted stock units. These awards cliff vest at the end of a three
year period based upon the Company’s achievement of pre-established goals throughout the term of the award. Performance-based restricted
stock units receive dividend equivalents in the form of additional performance-based restricted stock units, which are subject to the same
restrictions and forfeiture provisions as the original award.
The grant date fair value of all restricted stock awards is based on the 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:
(Shares in thousands)
Nonvested — February 2, 2013
Granted
Vested
Cancelled/Forfeited
Nonvested — February 1, 2014
Time-Based Restricted Stock
Units
For the year ended
February 1, 2014
Weighted-Average
Grant Date
Shares
Fair Value
1,386
943
(1,057)
(117)
1,155
$
$
13.91
22.00
14.06
16.35
20.13
Performance-Based Restricted
Stock Units
For the year ended
February 1, 2014
Weighted-Average
Grant Date
Shares
Fair Value
2,086
912
(566)
(37)
2,395
$
$
14.91
21.75
17.39
19.89
16.85
As of February 1, 2014, there was $12.8 million of unrecognized compensation expense related to nonvested time-based restricted stock
unit awards that is expected to be recognized over a weighted average period of 2.0 years. Additionally, there was $0.7 million of unrecognized
compensation expense related to performance-based restricted stock unit awards which will be recognized as achievement performance goals are
probable over a one to three year period.
61
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of February 1, 2014, the Company had 18.2 million shares available for all equity grants.
13.
Retirement Plan and Employee Stock Purchase Plan
The Company maintains a profit sharing and 401(k) plan (the “Retirement Plan”). Under the provisions of the Retirement Plan, full-time
employees and part-time employees are automatically enrolled to contribute 3% of their salary if they have attained 20 1 / 2 years 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. After one year of service, the Company will match 100% of the first 3% of pay plus an additional 50% of the next 3% of pay that is
contributed to the plan. Contributions to the profit sharing plan, as determined by the Board, are discretionary. The Company recognized $9.6
million, $15.8 million and $8.7 million in expense during Fiscal 2013, Fiscal 2012 and Fiscal 2011, respectively, in connection with the
Retirement Plan.
The Employee Stock Purchase Plan is a non-qualified plan that covers all full-time employees and part-time employees who are at least
18 years old and have completed 60 days of service. Contributions are determined by the employee, with the Company matching 15% of the
investment up to a maximum investment of $100 per pay period. These contributions are used to purchase shares of Company stock in the open
market.
14.
Income Taxes
The components of income before income taxes from continuing operations were:
(In thousands)
February 1,
2014
For the Years Ended
February 2,
2013
January 28,
2012
U.S.
Foreign
Total
$ 157,669
(15,592)
$ 142,077
$ 381,131
20,907
$ 402,038
$ 256,352
18,857
$ 275,209
62
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The significant components of the Company’s deferred tax assets and liabilities were as follows:
(In thousands)
Deferred tax assets:
Rent
Deferred compensation
Capital loss carryforward
Foreign tax credits
Inventories
Accruals not currently deductible
State tax credits
Net operating loss
Foreign and state income taxes
Loyalty reserve
Employee compensation and benefits
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Property and equipment
Prepaid expenses
Other
Total deferred tax liabilities
Total deferred tax assets, net
Classification in the Consolidated Balance Sheet:
Current deferred tax assets
Noncurrent deferred tax assets
Total deferred tax assets
63
February 1,
2014
February 2,
2013
$ 27,458
22,654
16,207
13,436
11,234
9,059
6,215
4,226
3,255
3,196
2,799
968
120,707
(20,601)
$ 100,106
$ 27,208
38,770
15,986
16,874
8,575
3,098
5,770
985
3,959
2,253
18,738
3,901
146,117
(15,986)
$ 130,131
$ (23,595)
(4,544)
(1,654)
$ (29,793)
$ 70,313
$ (35,130)
(3,068)
(2,421)
$ (40,619)
$ 89,512
$ 45,478
24,835
$ 70,313
$ 58,230
31,282
$ 89,512
Table of Contents
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The net decrease in deferred tax assets and liabilities was primarily due to a decrease in the deferred tax assets for deferred compensation
and accrual of employee compensation and benefits.
Significant components of the provision for income taxes from continuing operations were as follows:
(In thousands)
Current:
Federal
Foreign taxes
State
Total current
Deferred:
Federal
Foreign taxes
State
Total deferred
Provision for income taxes
February 1,
For the Years Ended
February 2,
January 28,
2014
2013
2012
$ 29,794
(50)
9,162
38,906
$ 143,612
6,939
18,845
169,396
$ 76,389
6,621
12,801
95,811
$ 20,611
695
(1,118)
20,188
$ 59,094
$ (26,063)
(1,486)
(3,907)
(31,456)
$ 137,940
$
7,077
(1,120)
(1,838)
4,119
$ 99,930
As a result of additional tax deductions related to share-based payments, tax benefits have been recognized as contributed capital for Fiscal
2013, Fiscal 2012 and Fiscal 2011 in the amounts of $8.7 million, $14.1 million and $0.4 million, respectively.
The Company plans to indefinitely reinvest the accumulated earnings since Fiscal 2009 of our Canadian subsidiaries outside of the United
States. Accordingly, no provision for U.S. income taxes has been provided thereon. Upon 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. As of February 1, 2014 and February 2,
2013, the unremitted earnings of our Canadian subsidiaries were approximately $74 million (USD) and $88 million (USD), respectively.
Determination of the amount of unrecognized deferred U.S. income tax liability on these unremitted earnings is not practicable because of the
complexities associated with this hypothetical calculation.
As of February 1, 2014, the Company had deferred tax assets related to state and foreign net operating loss carryovers that could be utilized
to reduce future years’ tax liabilities, totaling $4.2 million. A portion of these net operating loss carryovers begin expiring in the year 2018 and
some have an indefinite carryforward period. Management believes it is more likely than not that the foreign net operating loss carryovers will
not reduce future years’ tax liabilities in certain foreign jurisdictions. As such a valuation allowance of $3.8 million has been recorded on the
deferred tax assets related to the foreign net operating loss carryovers.
As of February 1, 2014, the gross amount of unrecognized tax benefits was $14.6 million, of which $9.7 million would affect the effective
income tax rate if recognized. The gross amount of unrecognized tax benefits as of February 2, 2013 was $17.3 million, of which $11.3 million
would affect the effective income tax rate if recognized.
64
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The following table summarizes the activity related to our unrecognized tax benefits:
February 1,
(In thousands)
Unrecognized tax benefits, beginning of the year balance
Increases in tax positions of prior periods
Decreases in tax positions of prior periods
Increases in current period tax positions
Settlements
Lapse of statute of limitations
Unrecognized tax benefits, end of the year balance
For the Years Ended
February 2,
January 28,
2014
2013
2012
$ 17,250
440
(4,930)
2,294
—
(453)
$ 14,601
$ 31,578
—
(10,385)
2,458
(4,809)
(1,592)
$ 17,250
$ 31,108
932
(2,106)
2,782
(1,073)
(65)
$ 31,578
Unrecognized tax benefits decreased by $2.6 million during Fiscal 2013, decreased $14.3 million during Fiscal 2012 and increased by $0.5
million during Fiscal 2011. The unrecognized tax benefit changes were primarily related to federal and state income tax settlements and other
changes in income tax reserves. Over the next twelve months the Company believes it is reasonably possible the unrecognized tax benefits could
decrease by as much as $8.0 million as the result of federal and state tax settlements, statute of limitations lapses, and other changes to the
reserves.
The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest and
penalties related to unrecognized tax benefits included in the Consolidated Balance Sheet were $1.9 million and $1.8 million as of February 1,
2014 and February 2, 2013, respectively. During Fiscal 2012, the Company recognized a net benefit of $4.8 million in the provision for income
taxes related to the reversal of accrued interest and penalties primarily due to federal and state income tax settlements. An immaterial amount of
interest and penalties were recognized in the provision for income taxes during Fiscal 2013 and Fiscal 2011.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The
Internal Revenue Service (“IRS”) examination of the Company’s U.S. federal income tax returns for the tax year ended January 2010 was
completed in December 2012. Accordingly, all years prior to January 2011 are no longer subject to U.S. federal income tax examinations by tax
authorities. An IRS examination of the January 2012 federal income tax return was substantially completed as of February 1, 2014. Additionally,
the Company is participating in the IRS’s Compliance Assurance Process (CAP) for the year ended February 1, 2014. The Company does not
anticipate that any adjustments will result in a material change to its financial position, results of operations or cash flow. With respect to state
and local jurisdictions and countries outside of the United States, with limited exceptions, generally, the Company and its subsidiaries are no
longer subject to income tax audits for tax years before 2007. Although the outcome of tax audits is always uncertain, the Company believes that
adequate amounts of tax, interest and penalties have been provided for any adjustments that are expected to result from these years.
The Company has foreign tax credit carryovers in the amount of $13.4 million and $16.9 million as of February 1, 2014 and February 2,
2013, respectively. The foreign tax credit carryovers expire in Fiscal 2019 to the extent not utilized. No valuation allowance has been recorded
on the foreign tax credit carryovers as the Company believes it is more likely than not the foreign tax credits will be utilized prior to expiration.
The Company has been certified to qualify for nonrefundable incentive tax credits in Kansas for expenditures related to the Ottawa, Kansas
distribution center. As a result, the Company has a deferred tax asset
65
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
related to Kansas income tax credit carryforwards of $6.2 million (net of federal income taxes) as of February 1, 2014 and $5.8 million (net of
federal income taxes) as of February 2, 2013. These income tax credits can be utilized to offset future Kansas income taxes and have a
carryforward period of 10-16 years. They will begin to expire in Fiscal 2018.
The Company has capital loss carryovers in the amount of $16.2 million and $16.0 million as of February 1, 2014 and February 2, 2013,
respectively. These capital losses are subject to a three year carryback period and a five year carryforward period for tax purposes. The capital
losses generally will expire in Fiscal 2014 and Fiscal 2015. Due to the contingencies related to the future use of these capital losses, we believe it
is more likely than not that the full benefit of this asset will not be realized within the carryforward period. Thus, the Company has recorded a
valuation allowance on the capital loss carryovers.
A reconciliation between the statutory federal income tax rate and the effective income tax rate from continuing operations follows:
Federal income tax rate
State income taxes, net of federal income tax effect
Valuation allowance changes, net
Tax settlements
Other
15.
February 1,
For the Years Ended
February 2,
January 28,
2014
2013
2012
35%
4
4
(2)
1
42%
35%
3
(1)
(3)
—
34%
35%
3
(1)
(1)
—
36%
Discontinued Operations
In Fiscal 2012, the Company announced plans to exit the 77kids business, which included all 22 stores and related e-commerce operations.
These Consolidated Financial Statements reflect the results of 77kids as a discontinued operation for all periods presented. Additionally, the third
party purchaser has assumed certain liabilities associated with the 77kids business and paid the Company an amount equal to 65% of the cost of
the acquired inventory.
In connection with the exit of the 77kids business, the Company is secondarily liable for obligations under the lease agreements for 21
store leases assumed by the third party purchaser. These obligations will remain in effect until the leases expire through 2022, unless the
Company otherwise is released by the applicable landlord. In the event that the third party purchaser does not fulfill its obligations under any of
the leases and the Company is required to make any such payments, the Company would seek full reimbursement from the third party purchaser
in accordance with the asset purchase agreement. The third party purchaser has provided a stand-by letter of credit to the Company in order to
secure payment of obligations under the leases.
In accordance with ASC 460, Guarantees (“ASC 460”), as we became secondarily liable under the leases at the time that we transferred
them to the third party, no amounts have been accrued in our Consolidated Financial Statements related to these guarantees.
66
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Costs associated with exit or disposal activities are recorded when incurred. A summary of the pre-tax exit and disposal costs recognized
within Loss from Discontinued Operations on the Consolidated Income Statement for 77kids are as follows. There were no exit or disposal costs
recognized in Fiscal 2013 or Fiscal 2011 related to 77kids.
For the Year Ended
February 2,
2013
(In thousands)
Non-cash charges
Asset impairments
Cash charges
Lease-related charges
Inventory charges
Severence charges
Total charges
$
16,623
$
7,768
10,237
3,439
38,067
$
A rollforward of the liabilities for the exit of the 77kids brand recognized in the Consolidated Balance Sheets is as follows:
February 2,
2013
(In thousands)
Accrued liability as of January 28, 2012
Add: Costs incurred, excluding non-cash charges
Less: Cash payments
Accrued liability as of February 2, 2013
$
—
13,676
(13,676)
$
—
The tables below present the significant components of 77kids’ results included in Loss from Discontinued Operations on the Consolidated
Statements of Operations for the years ended February 2, 2013 and January 28, 2012, respectively.
For the Years Ended
February 2,
January 28,
Total net revenue
Loss from discontinued operations, before income taxes(1)
Income tax benefit
Loss from discontinued operations, net of tax
Loss per common share from discontinued operations:
Basic
Diluted
(1)
2013
2012
$ 20,117
$ (51,839)
19,849
$ (31,990)
$ 39,753
$ (38,199)
14,625
$ (23,574)
$
$
$
$
(0.16)
(0.16)
(0.12)
(0.12)
Loss from discontinued operations is presented net of the reversal of non-cash lease credits
There were no assets or liabilities included in the Consolidated Balance Sheets for 77kids as of February 1, 2014 or February 2, 2013.
67
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
16.
Acquisitions and Dispositions
During Fiscal 2013, the Company completed a transaction with Dickson Concepts (International) Limited (“Dickson”) to acquire six
existing American Eagle Outfitters franchised stores in Hong Kong and China, as well as and the related assets operated by Dickson, for total
consideration of $20.8 million USD. Included in the total consideration for the transaction was a $10.0 million USD payment to Dickson
terminate their right to open additional stores in Hong Kong, Macau, China and other designated territories in Asia.
The total purchase price was allocated to the net tangible and intangible assets acquired based on their estimated fair values. Such
estimated fair values require management to make estimates and judgments, especially with respect to intangible assets.
The preliminary allocation of the purchase price to the fair value of assets acquired is as follows:
(In thousands)
Merchandise inventory
Other assets
Property and equipment
Intangible assets and goodwill
Total purchase price
$ 2,456
2,351
6,460
9,484
$20,751
Results of operations of the six acquired stores have been included in our Consolidated Statements of Operations since the May 31, 2013
acquisition date. Pro forma results of the acquired business have not been presented as the results were not material to our Consolidated
Financial Statements for all years presented and would not have been material had the acquisition occurred at the beginning of Fiscal 2013.
17.
Exit and Disposal Activities
On September 5, 2013, the Company announced plans to close its Warrendale, Pennsylvania distribution center and transfer the operations
to its new Hazleton, Pennsylvania facility, as the Warrendale facility is not physically or geographically capable of supporting the Company’s
long-term expansion goals. The Hazleton facility is under construction and is expected to open in the second quarter of Fiscal 2014. It will
initially supplement the Ottawa, Kansas facility in fulfilling internet orders. The transition of store distribution operations from Warrendale to
Hazleton is scheduled to begin in early 2015 and is anticipated to be completed by July 2015.
Including the amounts recognized in Fiscal 2013, the Company continues to expect after-tax charges of $14 million to $15 million related
to the closing of the Warrendale facility. These charges are comprised of the following after-tax amounts:
• $2 million to $3 million of severance and employee related costs
• $12 million of non-cash asset impairment charges
The pre-tax cash outflow for severance and employee related costs are estimated to be $4 million to $5 million to be paid in Fiscal 2015.
Costs associated with exit or disposal activities are recorded when incurred. During Fiscal 2013, $19.3 million of pre-tax non-cash asset
impairments ($11.9 million after-tax) were recorded as a loss on impairment of assets within the Consolidated Statements of Operations.
68
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
There are no liabilities associated with exit and disposal activities recognized in the Consolidated Balance Sheet as of February 1, 2014.
18.
Quarterly Financial Information — Unaudited
The sum of the quarterly EPS amounts may not equal the full year amount as the computations of the weighted average shares outstanding
for each quarter and the full year are calculated independently.
May 4,
2013
(In thousands, except per share amounts)
Total net revenue
Gross profit
Net income
Basic per common share amounts:
Basic net income per common share
Diluted per common share amounts:
Diluted net income per common share
Fiscal 2013
Quarters Ended
November 2,
August 3,
2013
2013
$679,477
$263,609
$ 27,976
$727,313
$245,495
$ 19,594
$ 857,305
$ 298,875
$ 24,903
$1,041,707
$ 306,020
$ 10,510
$
0.14
$
0.10
$
0.13
$
0.05
$
0.14
$
0.10
$
0.13
$
0.05
Fiscal 2012
Quarters Ended
October 27,
July 28,
2012
2012
April 28,
2012
(In thousands, except per share amounts)
Total net revenue
Gross profit
Income from continuing operations
Loss from discontinued operations
Net income
Basic per common share amounts:
Income from continuing operations
Loss from discontinued operations
Basic net income per common share
Diluted per common share amounts:
Income from continuing operations
Loss from discontinued operations
Diluted net income per common share
February 2,
2013
$708,695
$274,913
44,035
(4,338)
$ 39,697
$739,680
$276,564
42,846
(23,819)
$ 19,027
$ 910,374
$ 379,090
82,441
(3,833)
$ 78,608
$1,117,053
$ 459,755
94,776
—
$ 94,776
$
0.22
(0.02)
0.20
$
0.22
(0.12)
0.10
$
0.42
(0.02)
0.40
$
0.22
(0.02)
0.20
$
0.21
(0.12)
0.09
$
0.41
(0.02)
0.39
$
$
$
$
69
February 1,
2014
$
$
$
$
$
$
0.48
—
0.48
0.47
—
0.47
Table of Contents
ITEM 9.
CHANGES IN AND DISAGRE EMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A.
CONTROLS AND P ROCEDURES.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures 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 that such information is accumulated and communicated to the management
of American Eagle Outfitters, Inc. (the “Management”), including our Principal Executive Officer and our Principal Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives.
In connection with the preparation of this Annual Report on Form 10-K as of February 1, 2014, an evaluation was performed under the
supervision and with the participation of our Management, including the Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange
Act). Based upon that evaluation, our Principal Executive Officer and our Principal Financial Officer have concluded that our disclosure controls
and procedures were effective at the reasonable assurance level as of the end of the period covered by this Annual Report on Form 10-K.
Management’s Annual Report on Internal Control Over Financial Reporting
Our Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a15(f) under the Exchange Act). Our internal control over financial reporting is designed to provide a reasonable assurance to our Management
and our Board regarding the preparation and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our Management assessed the effectiveness of our internal control over financial reporting as of February 1, 2014. In making this
assessment, our Management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control — Integrated Framework (1992). Based on this assessment, our Management concluded that we maintained effective internal
control over financial reporting as of February 1, 2014.
The Company’s independent registered public accounting firm that audited the financial statements included in this Annual Report issued
an attestation report on the Company’s internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended February 1, 2014 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
70
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of American Eagle Outfitters, Inc.
We have audited American Eagle Outfitters, Inc.’s internal control over financial reporting as of February 1, 2014 based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(1992 framework) (the COSO criteria). American Eagle Outfitters Inc.’s management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, American Eagle Outfitters, Inc. maintained, in all material respects, effective internal control over financial reporting as of
February 1, 2014, 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. as of February 1, 2014 and February 2, 2013 and the related consolidated
statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended February 1,
2014 of American Eagle Outfitters, Inc. and our reported dated March 13, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
March 13, 2014
71
Table of Contents
ITEM 9B.
OT HER INFORMATION.
Not applicable.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AN D CORPORATE GOVERNANCE.
The information appearing under the captions “Proposal One: Election of Directors,” “Executive Officers,” “Section 16(a) Beneficial
Ownership Reporting Compliance,” “Corporate Governance Information,” and “Board Committees” in our Proxy Statement relating to our 2014
Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 11.
EXECUTIVE COM PENSATION.
The information appearing under the caption “Compensation Discussion and Analysis,” “Executive Officer Compensation,” “Director
Compensation,” and “Compensation Committee Interlocks and Insider Participation” in our Proxy Statement relating to our 2014 Annual
Meeting of Stockholders is incorporated herein by reference.
ITEM 12.
SECURITY O WNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.
The information appearing under the captions “Security Ownership of Principal Stockholders and Management” in our Proxy Statement
relating to our 2014 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 13.
CERTAIN REL ATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The information appearing under the caption “Certain Relationships and Related Transactions” and “Board Committees” in our Proxy
Statement relating to our 2014 Annual Meeting of Stockholders is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUN TING FEES AND SERVICES.
The information appearing under the caption “Independent Registered Public Accounting Firm Fees and Services” in our Proxy Statement
relating to our 2014 Annual Meeting of Stockholders is incorporated herein by reference.
PART IV
ITEM 15.
EXHIBIT S AND FINANCIAL STATEMENT SCHEDULES.
(a)(1) The following consolidated financial statements are included in Item 8:
Consolidated Balance Sheets as of February 1, 2014 and February 2, 2013
Consolidated Statements of Operations for the fiscal years ended February 1, 2014, February 2, 2013 and January 28,
2012
Consolidated Statements of Comprehensive Income for the fiscal years ended February 1, 2014, February 2, 2013 and
January 28, 2012
Consolidated Statements of Stockholders’ Equity for the fiscal years ended February 1, 2014, February 2, 2013 and
January 28, 2012
Consolidated Statements of Cash Flows for the fiscal years ended February 1, 2014, February 2, 2013 and January 28,
2012
Notes to Consolidated Financial Statements
72
Table of Contents
(a)(2) Financial statement schedules have been omitted because either they are not required or are not applicable or because the
information required to be set forth therein is not material.
(a)(3) Exhibits
Exhibit
Number
Description
3.1
Amended and Restated Certificate of Incorporation, as amended(1)
3.2
Amended and Restated Bylaws(2)
4.1
See Amended and Restated Certificate of Incorporation, as amended, in Exhibit 3.1 hereof
4.2
See Amended and Restated Bylaws in Exhibit 3.2 hereof
10.1^
Form of the Registrant’s 1994 Stock Option Plan(3)
10.2^
Form of Indemnification Agreement(4)
10.3^
Employee Stock Purchase Plan(5)
10.4^
Form of the Registrant’s 1999 Stock Incentive Plan, as amended(6)
10.5^
Deferred Compensation Plan, as amended(7)
10.6^
Form of Director Deferred Compensation Agreement(8)
10.7^
Form of 409A Addendum(9)
10.8^
Form of Long Term Incentive Compensation Plan Confidentiality, non-solicitation, non-competition and Intellectual Property
Agreement(10)
10.9^
Employment Agreement between the Registrant and Dennis Parodi, dated February 18, 2003(11)
10.10^
Amendment to the Employment Agreement between the Registrant and Dennis Parodi, dated February 6, 2006(12)
10.11^
2005 Stock Award and Incentive Plan, as amended(13)
10.12^
Form of Change in Control Agreement dated April 21, 2010(14)
10.13^
Form of RSU Confidentiality, Non-Solicitation, Non-Competition and Intellectual Property Agreement(15)
10.14^
Chief Executive Officer Employment Agreement between the Registrant and Robert L. Hanson, dated November 14, 2011(16)
10.15^
Second Amended and Restated Employment Agreement between the Registrant and Roger S. Markfield, dated February 24, 2012
(17)
10.16
Credit Agreement, dated March 2, 2012, 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 lenders, and
certain other parties and agents (18)
10.17^
Separation and Release Agreement between the Registrant and Joan H. Hilson, dated May 18, 2012(19)
10.18^
Employment Agreement between the Registrant and Mary M. Boland, dated May 30, 2012(20)
10.19^
Change in Control Agreement between the Registrant and Mary M. Boland, dated July 25, 2012(21)
10.20^
Employment Agreement between the Registrant and Kitty Yung, dated February 26, 2013(22)
10.21^
General Release and Separation Agreement between the Registrant and Sherry Harris, dated April 12, 2013 (23)
73
Table of Contents
Exhibit
Number
Description
10.22*
Amendment to Credit Agreement, dated February 28, 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 lenders, and certain other parties and agents
10.23^*
Employment Agreement between the Registrant and Chad Kessler, dated December 2, 2013
10.24^*
Employment Agreement between the Registrant and Marie Castellvi, dated January 29, 2014
10.25^*
Equity Agreement between the Registrant and Marie Castellvi, dated January 29, 2014
10.26^*
Employment Agreement between the Registrant and Jennifer Foyle, dated June 25, 2010
10.27^*
Employment Agreement between the Registrant and Simon Nankervis, dated September 7, 2011
21*
Subsidiaries
23*
Consent of Independent Registered Public Accounting Firm
24*
Power of Attorney
31.1*
Certification by Jay L. Schottenstein pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2*
Certification by Mary M. Boland pursuant to Rule 13a-14(a) or Rule 15d-14(a)
32.1**
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2**
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
101*
Interactive Data File
(1)
Previously filed as Exhibit 3.1 to the Form 10-Q dated August 4, 2007, filed September 6, 2007 and incorporated herein by reference.
(2)
Previously filed as Exhibit 3.1 to the Form 8-K dated November 20, 2007, filed November 26, 2007 and incorporated herein by reference.
(3)
Previously filed as Exhibit 4(a) to Registration Statement on Form S-8 (file no. 33-79358), filed May 25, 1994, as amended on Form S-8
(file no. 333-12643), filed September 25, 1996 and Form S-8 (file no. 333-44759), filed January 22, 1998 and incorporated herein by
reference.
(4)
Previously filed as Exhibit 10.7 to Registration Statement on Form S-1 (file no. 33-75294), filed February 14, 1994, as amended, and
incorporated herein by reference.
(5)
Previously filed as Exhibit 4(a) to Registration Statement on Form S-8 (file no. 33-33278), filed April 5, 1996 and incorporated herein by
reference.
(6)
Previously files as Exhibit 10.5 to the Form 10-K dated February 3, 2007, filed April 4, 2007 and incorporated herein by reference.
(7)
Previously filed as Exhibit 10.2 to the Form 8-K dated December 17, 2008, filed December 23, 2008 and incorporated herein by reference.
(8)
Previously filed as Exhibit 10.1 to the Form 8-K dated December 30, 2005, filed January 5, 2006 and incorporated herein by reference.
(9)
Previously filed as Exhibit 10.3 to the Form 8-K dated December 17, 2008, filed December 23, 2008 and incorporated herein by reference.
(10) Previously filed as Exhibit 10.1 to the Form 8-K dated May 20, 2008, filed May 23, 2008 and incorporated herein by reference.
74
Table of Contents
(11) Previously filed as Exhibit 10.1 to the Form 8-K dated February 28, 2006, filed March 7, 2006 and incorporated herein by reference.
(12) Previously filed as Exhibit 10.2 to the Form 8-K dated February 28, 2006, filed March 7, 2006 and incorporated herein by reference.
(13) Previously filed as Appendix A to the Definitive Proxy Statement for the 2009 Annual Meeting of Stockholders held on June 16, 2009 held
on June 16, 2009, filed May 4, 2009 and incorporated herein by reference.
(14) Previously filed as Exhibit 10.1 to the Form 8-K dated April 21, 2010, filed April 26, 2010 and incorporated herein by reference.
(15) Previously filed as Exhibit 10.25 to the Form 10-K dated January 29, 2011, filed on March 11, 2011 and incorporated herein by reference.
(16) Previously filed as Exhibit 10.1 to the Form 8-K dated November 14, 2011, filed November 18, 2011 and incorporated herein by reference.
(17) Previously filed as Exhibit 10.1 to the Form 8-K dated February 24, 2012, filed February 24, 2012 and incorporated herein by reference.
(18) Previously filed as Exhibit 10.1 to the Form 8-K dated March 2, 2012, filed March 8, 2012 and incorporated herein by reference.
(19) Previously filed as Exhibit 10.1 to the Form 8-K dated May 18, 2012, filed May 24, 2012 and incorporated herein by reference.
(20) Previously filed as Exhibit 10.1 to the Form 8-K dated May 24, 2012, filed June 1, 2012 and incorporated herein by reference.
(21) Previously filed as Exhibit 10.1 to the Form 8-K dated July 25, 2012, filed July 27, 2012 and incorporated herein by reference.
(22) Previously filed as Exhibit 10.1 to the Form 10-Q for the period ended May 4, 2013, filed May 30, 2013 and incorporated herein by
reference.
(23) Previously filed as Exhibit 10.2 to the Form 10-Q for the period ended May 4, 2013, filed May 30, 2013 and incorporated herein by
reference.
^
Management contract or compensatory plan or arrangement.
*
Filed herewith.
**
Furnished herewith.
(b) Exhibits
The exhibits to this report have been filed herewith.
(c) Financial Statement Schedules
None.
75
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN EAGLE OUTFITTERS, INC.
By: /s/ Jay L. Schottenstein
Jay L. Schottenstein
Interim Chief Executive Officer
Dated March 13, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities
indicated on March 13, 2014.
Signature
Title
/s/ Jay L. Schottenstein
Jay L. Schottenstein
Interim Chief Executive Officer, Chairman of the Board of Directors
and Director
(Principal Executive Officer)
/s/ Mary M. Boland
Mary M. Boland
Chief Financial Officer and
Chief Administrative Officer
(Principal Financial Officer)
*
Director
*
Director
*
Director
*
Director
*
Director
*
Director
*
Director
Michael G. Jesselson
Thomas R. Ketteler
Roger S. Markfield
Cary D. McMillan
Janice E. Page
David M. Sable
Noel J. Spiegel
*By:
/s/ Mary M. Boland
Mary M. Boland,
Attorney-in-Fact
76
Exhibit 10.22
AMENDMENT NO. 2 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 2 (this “ Amendment ”) TO CREDIT AGREEMENT is dated as of February 28, 2014, by and among
AMERICAN EAGLE OUTFITTERS, INC. (the “ Company ”), AEO MANAGEMENT CO. (“ AMC ”), AEO INTERNATIONAL CORP. (“
AIC ”, and together with the Company and AMC, each a “ U.S. Borrower ” and collectively, the “ U.S. Borrowers ”), AE NORTH HOLDINGS
CO. (“ AE North ”) and AMERICAN EAGLE OUTFITTERS CANADA CORPORATION (“ AEO Canada ”, and together with AE North, each
a “ Canadian Borrower ” and collectively, the “ Canadian Borrowers ”), certain Subsidiaries of the Company party hereto pursuant to
Section 2.14 (each a “ Designated Borrower ”, and together with the U.S. Borrowers and the Canadian Borrowers, each a “ Borrower ”, and
collectively, the “ Borrowers ”), the lenders party hereto, and HSBC BANK USA, N.A. (“ HSBC ”), as Administrative Agent (the “
Administrative Agent ”). Capitalized terms used but not otherwise defined herein shall have the meanings provided in the Credit Agreement
referred below.
WHEREAS, the Borrowers, the lenders from time to time party thereto, and the Administrative Agent, among others, are parties to a
certain Credit Agreement, dated as of March 2, 2012 (as amended by Amendment No. 1 to Credit Agreement dated as of December 11, 2012,
and as further amended, restated, supplemented or otherwise modified and in effect from time to time, the “ Credit Agreement ”), pursuant to
which the Lenders party thereto have made loans to the Borrowers subject to the terms and conditions set forth therein;
WHEREAS, the Loan Parties have requested that the Administrative Agent and the Required Lenders amend certain of the terms and
provisions of the Credit Agreement; and
WHEREAS, the Administrative Agent and the Required Lenders have agreed, subject to the terms and conditions set forth herein, to so
amend those certain terms and provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
AMENDMENTS TO CREDIT AGREEMENT
1.01 Section 1.01 of the Credit Agreement is hereby amended by amending and restating the definition of “Consolidated Fixed Charge
Coverage Ratio” in its entirety as follows:
“ Consolidated Fixed Charge Coverage Ratio ” means, as of any date of determination, the ratio of (a) Consolidated EBITDAR for
the period of the four fiscal quarters most recently ended to (b) scheduled principal payments in respect of Indebtedness for such period
plus Consolidated Rental Expense for such period plus Consolidated Interest Charges for such period.”,
1.02 Section 7.03(e) of the Credit Agreement is hereby amended by replacing the reference to “$12,500,000” with “$30,000,000”, and
1.03 Section 7.14(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:
“(b) Consolidated Fixed Charge Coverage Ratio . Permit the Consolidated Fixed Charge Coverage Ratio as of the end of (i) any fiscal
quarter ending prior to February 1, 2014 to be less than 1.50:1.00, (ii) the fiscal quarters ending February 1, 2014, May 3, 2014, August 2,
2014, and November 1, 2014 to be less than 1.75:1.00, (iii) the fiscal quarter ending January 31, 2015 to be less than 1.90:1.00 and (iv) any
other fiscal quarter to be less than 2.00:1.00.”
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
2.01 Representations and Warranties . Each Loan Party represents and warrants to the Administrative Agent and the Lenders as
follows:
(a) Representation and Warranties in the Credit Agreement . The representations and warranties of the Loan Parties contained in the
Credit Agreement or any other Loan Document, or which are contained in any document previously furnished under or in connection with
therewith, shall be true and correct on and as of the date hereof, except to the extent that such representations and warranties specifically refer to
an earlier date, in which case they shall be true and correct as of such earlier date.
(b) Authority, Etc . The execution and delivery by each of the Loan Parties of this Amendment and the performance by each of the
Loan Parties of its respective agreements and obligations under the Credit Agreement, as amended hereby, are within such Loan Party’s
corporate authority and have been duly authorized by all necessary corporate and, if required, stockholder.
(c) Enforceability . This Amendment has been duly executed and delivered by each Loan Party. This Amendment and the Credit
Agreement, as amended hereby, constitute legal, valid and binding obligations of each Loan Party, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and
subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
(d) No Default . No Default or Event of Default has occurred and is continuing as of the date hereof.
(e) Ratification, Etc . Except as expressly amended hereby, the Credit Agreement and each of the Loan Documents is hereby ratified
and confirmed in all respects and shall continue in full force and effect. The Credit Agreement shall, together with this Amendment, be read and
construed as a single agreement. All references in the Credit Agreement, the other Loan Documents or any related agreement or instrument shall
hereafter refer to the Credit Agreement as amended hereby.
2
ARTICLE 3
CONDITIONS PRECEDENT
3.01 Conditions Precedent . This Amendment shall be effective as of February 1, 2014 upon receipt by the Administrative Agent of all of
the following, each in form and substance satisfactory to the Administrative Agent:
(a) counterparts of this Amendment duly executed by the Loan Parties, the Administrative Agent and the Required Lenders;
(b) such other documents as the Administrative Agent may reasonably request; and
(c) a payment, for the account of each Lender signatory hereto, of a non-refundable amendment fee equal to 0.05% of the aggregate
principal amount of the Commitment held by such Lender.
ARTICLE 4
MISCELLANEOUS
4.01 No Other Amendments; No Novation . Except as expressly provided in this Amendment, all terms, conditions and provisions of the
Credit Agreement and the other Loan Documents shall remain the same. Nothing herein contained shall be construed as a substitution or
novation of the obligations outstanding under the Credit Agreement or instruments securing the same, which shall remain in full force and effect,
except as modified hereby.
4.02 Execution in Counterparts . This Amendment may be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an
executed counterpart of a signature page of this Amendment by telecopy or other electronic method of transmission shall be effective as delivery
of a manually executed counterpart of this Amendment.
4.03 Headings . Article and Section headings used herein are for convenience of reference only, are not part of this Amendment and shall
not affect the construction of, or be taken into consideration in interpreting, this Amendment.
4.04 Governing Law . This Amendment shall be governed by and construed in accordance with, the law of the State of New York.
4.05 Expenses . The Borrowers shall pay all reasonable out-of-pocket expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of counsel for the Administrative Agent, in connection with this Amendment.
[Remainder of page intentionally left blank]
3
IN WITNESS WHEREOF , the parties hereto have caused this Amendment to be duly executed as of the date first above written.
AMERICAN EAGLE OUTFITTERS, INC.
By:
/s/ Kenneth T. Barfuss
Name: Kenneth T. Barfuss
Title: Sr. Director of Treasury
AEO MANAGEMENT CO.
By:
/s/ Kenneth T. Barfuss
Name: Kenneth T. Barfuss
Title: Treasurer
AEO INTERNATIONAL CORP.
By:
/s/ Kenneth T. Barfuss
Name: Kenneth T. Barfuss
Title: Treasurer
AMERICAN EAGLE OUTFITTERS CANADA
CORPORATION
/s/ Kenneth T. Barfuss
By:
Name: Kenneth T. Barfuss
Title: Treasurer
AE NORTH HOLDINGS CO.
By:
/s/ Kenneth T. Barfuss
Name: Kenneth T. Barfuss
Title: Treasurer
Signature Page to Amendment No. 2 to Credit Agreement
ACKNOWLEDGED BY GUARANTORS:
AE HOLDINGS CO.
AEH HOLDING COMPANY
AE DISTRIBUTION CO.
BLUE STAR IMPORTS, LTD.
AE CORPORATE SERVICES CO.
AMERICAN EAGLE CDN HOLD CO
AEO ISRAELI SERVICES CO.
AE OUTFITTERS RETAIL CO.
BSI IMPORTS COMPANY, LLC
AE RETAIL WEST LLC
RETAIL DISTRIBUTION WEST, LLC
LINMAR REALTY COMPANY II LLC
AEO REALTY CO LLC
BLUE HEART ENTERPRISES LLC
AE DIRECT CO. LLC
M+O MANAGEMENT CO LLC
M+O RETAIL LLC
AE ADMIN SERVICES CO LLC
BLUE STAR IMPORTS, L.P.
RETAIL DISTRIBUTION EAST LLC
By:
/s/ Kenneth T. Barfuss
Name: Kenneth T Barfuss
Title: Treasurer of each of the Guarantors listed above
RETAIL ROYALTY COMPANY
RETAIL LICENSING COMPANY
VIOLET SUN ENTERPRISES LLC
By:
/s/ Michael Rempell
Name: Michael Rempell
Title: President of each of the Guarantors listed above
Signature Page to Amendment No. 2 to Credit Agreement
HSBC BANK USA, N.A ., as Administrative Agent,
Joint Lead Arranger and Joint Bookrunner
By:
/s/ Andrew Hallman
Name: Andrew Hallman
Title: Vice President
Signature Page to Amendment No. 2 to Credit Agreement
HSBC BANK USA, N.A., as a Lender and L/C Issuer
By:
/s/ Andrew Hallman
Name: Andrew Hallman
Title: Vice President
Signature Page to Amendment No. 2 to Credit Agreement
PNC BANK, NATIONAL ASSOCIATION, as
Syndication Agent, a Lender and L/C Issuer
By:
/s/ Scott Colombe
Name: Scott Colombe
Title: Senior Vice President
Signature Page to Amendment No. 2 to Credit Agreement
JPMORGAN CHASE BANK, N.A., as
Co-Documentation Agent and as a Lender
By:
/s/ Devin Roccisano
Name: Devin Roccisano
Title: Vice President
Signature Page to Amendment No. 2 to Credit Agreement
WELLS FARGO BANK, N.A., as
Co-Documentation Agent and as a Lender
By:
/s/ Bradley Aris
Name: Bradley Aris
Title: Senior Vice President
Signature Page to Amendment No. 2 to Credit Agreement
BANK OF AMERICA, N.A., as a Lender
By:
/s/ Darren Bielawski
Name: Darren Bielawski
Title: Vice President
Signature Page to Amendment No. 2 to Credit Agreement
ROYAL BANK OF CANADA, as a Lender
By:
/s/ Michael G. Wang
Name: Michael G. Wang
Title: Authorized Signatory
Signature Page to Amendment No. 2 to Credit Agreement
Exhibit 10.23
December 2, 2013
Chad Kessler
212 Gaskill Street
Philadelphia, PA 19147
Dear Chad:
We are pleased to offer you a position with American Eagle Outfitters, Inc. or one of its subsidiaries or affiliates (collectively, the “Company”)
in New York, New York. This letter confirms the terms of the Company’s offer with respect to your planned employment. You will join the
Company as EVP, Merchandising and Design Officer – AE Brand, reporting to, Robert Hanson, Chief Executive Officer. The details of the offer
are outlined below.
Given the position offered within the Company, this offer is contingent upon approval by the Compensation Committee, which we anticipate
receiving shortly. This offer letter and the terms of our offer are strictly confidential. To the fullest extent permitted by law, you agree to keep
this offer and its terms confidential and you will not disclose the offer or its terms to any third party (excluding your spouse, lawyer, tax advisor
or pursuant to court order). You understand that if you breach this provision the offer will be automatically revoked and the Company will have
no obligation to you.
Anticipated Start Date: (“Start Date”): The Company anticipates that your first month of employment will be January 2014.
Salary : You will receive an annualized base salary of $700,000, payable every 2 weeks in accordance with the Company’s normal payroll
practices.
Sign-on Bonus: You will receive a one time lump sum cash bonus of $500,000 (gross) that will be paid within your first month of your Start
Date. In the event that you leave your employment with the Company before the sign-on bonus repayment period has lapsed, your
responsibilities are set forth in the attached repayment agreement.
Annual Incentive Compensation Bonus : You will be eligible to earn an incentive compensation bonus of 80% (Target) of your salary equal to
$560,000 with a maximum up to 160% of your salary equal to $1,120,000. You will first be eligible to receive this bonus for the Company’s
FY2014 (to be paid in Spring, 2015). The Spring, 2015 bonus will be based on a percentage of your actual wages earned during our 2014 fiscal
year. For each performance year, the value of the Bonus will be determined in the sole discretion of management, based upon: [i] the
achievement of the Company and Brand (where applicable) financial performance-based goals to be established by the Compensation
Committee of the Board of Directors (the “Committee”); and [ii] your overall level of performance. In order to be eligible to receive an Annual
Incentive Compensation Bonus, you must remain continuously employed by the Company or any of its subsidiaries or affiliates through the date
the Bonus actually is paid.
Restricted Stock Units: You will be eligible for consideration for a Restricted Stock Unit award (RSU) in Spring, 2014. The grant will have an
expected value of $340,000. The grant price will be the closing price of AEO common stock on the grant date. The number of units can fluctuate
based on the stock price at the grant date, but the overall grant value will remain constant. The units will be a part of the grant made by the
Compensation Committee pursuant to and subject to all terms and conditions set forth in the Company’s 2005A Plan.
C. Kessler Offer Letter
December 2, 2013
Page | 2
Additionally, upon your hire, you will be eligible for consideration for an RSU grant with an expected value of $400,000.The grant price will be
the closing price of AEO common stock on the grant date.
The RSU grants will vest proportionally over three years from the grant date based solely on your continued service to the Company over that
period. It is the parties’ intention that the 2005A Plan be adopted and administered in a manner that enables the Company to deduct for federal
income tax purposes the full value of all RSU grants. Any award is subject to the terms and conditions of the applicable plan document and
individual RSU agreement, including but not limited to vesting and forfeiture provisions.
Performance Share Plan : You will be eligible for consideration for a Performance Share Plan (PS) award under the Company Long-Term
Restricted Stock Unit Incentive Plan in Spring, 2014. The grant will have an expected target value of $510,000. The grant price will be the
closing price of AEO common stock on the grant date. The number of units can fluctuate based on the stock price at the grant date, but the
overall grant value will remain constant.
Additionally, upon your hire, you will be eligible for consideration for a PS grant with an expected target value of $600,000.The grant price will
be the closing price of AEO common stock on the grant date.
Vesting of the PS will be contingent upon the achievement of Company performance goals for a given 3-year period. Based upon Company
performance, the units will vest at the end of the 3-year period. The actual number of units vested will be based upon a sliding performance
scale, varying between 0-150% of the target award. Shares not vested will be forfeited.
The units will be part of the grant made by the Committee pursuant to and subject to all terms and conditions set forth in the Company’s 2005A
Plan. It is the parties’ intention that the 2005A Plan be adopted and administered in a manner that enables the Company to deduct for federal
income tax purposes the full value of all PS grants. Any award is subject to the terms and conditions of the applicable plan document and
individual award agreement, if any, including but not limited to any vesting and forfeiture provisions.
The Company reserves the right in its sole discretion to change or modify the manner or mode of delivering compensation and benefits for a
performance year that the Company, in its sole discretion, deems equivalent.
Performance Review : Performance appraisals generally take place in March. You will be eligible to receive your first evaluation for merit
consideration in Spring 2015 with a retro-active effective date to the beginning of the 2015 fiscal year.
Benefits Plans and Other Programs : You will be eligible to participate in the Company’s benefit plans and programs that the Company offers
to its associates, subject to the provisions of those plans. 1 These benefits include a 401(k) plan, dental, vision, life insurance, and short and long
term disability insurance. For an additional overview of other provided benefits please refer to the enclosed booklet for benefits. Some additional
benefits are outlined below:
1
Receipt of this letter does not automatically entitle you to benefits offered by the Company. Rather, the letter provides an overview of
select health and insurance benefits. If there is any discrepancy between this letter and the official benefits plan documents, the plan
documents always will govern. The Company reserves the right to amend or terminate any benefit plan in its sole discretion at any time
and for any reason. The Company also retains the discretion to interpret any terms or language used in this letter.
C. Kessler Offer Letter
December 2, 2013
Page | 3
•
Deferred Compensation Plan : Upon eligibility, you may elect to contribute a percent amount of your before-tax salary and, in
future years, your bonus to the Deferred Compensation Plan. This plan provides you with an additional savings vehicle and allows
scheduled withdrawals without early withdrawal penalties in accordance with its terms.
•
Health Insurance : Medical, dental and vision coverage (if you elect to participate) will begin the pay period following the 60 th day
of your start date. You can choose between our Aetna US Healthcare Open Choice PPO plan, Highmark Blue Cross Blue Shield
PPO, or Aetna High Deductible Health Plan. Each medical plan option provides prescription drug coverage through Express Scripts.
Dental coverage is available through Delta Dental and Vision coverage available through Ameritas Group.
•
Cobra: If purchased, the Company will reimburse you for 70% of the cost of COBRA insurance you purchased until you are eligible
to begin medical coverage under AEO’s plan. You must provide documentation of premiums (a copy of the endorsed check used for
payment or an electronic payment confirmation statement) to our Benefits Department within 30 days of payment.
•
Relocation : The Company is providing relocation assistance to help defray moving costs and other expenses you may incur as you
relocate to our office in New York, NY as outlined in the Company’s relocation guide. Details regarding these benefits will be
provided to you in a separate document under separate cover. You will be contacted by the Relocation Services Department with
additional details once you have accepted this offer.
•
Paid Time Off (PTO) : You will accrue paid time off each pay period (every two weeks) to earn a maximum of 28 PTO days in
your first year of employment. You may generally begin to use your PTO days after 60 days of your start date. PTO is inclusive of all
personal, sick and vacation days. AE also observes 9 holidays throughout the year (holiday pay will apply).
Payments Subject to Withholdings & Deductions: The amount of any payment made to you by the Company under the terms of this letter will
be reduced by any required taxes, withholdings, and other authorized employee deductions as may be required by law or as you have elected
under the applicable benefit plans.
Associate Discount : You will receive 40% off regular price merchandise and 25% off sale merchandise.
At Will Employment : The terms of this letter do not imply employment for any specific period of time. The Company is an “at will” employer.
This means that you can terminate your employment at anytime and for any reason and the Company can also terminate your employment at any
time and for any reason.
New York Employment : If you primarily will work in the state of New York, enclosed are two copies of a notice that the Company is required
to provide you under New York law. You must sign and return one copy to the Company with your signed offer letter. If your primary language
is Spanish, Chinese, Korean, Russian, Polish, or Haitian-Creole, please inform us of that fact. In such event, the Company will provide you the
notice in both English and your primary language.
Notice Period Obligations : By signing this letter, you represent to the Company that your acceptance of this offer and agreement to accept
employment with the Company under these terms will not conflict with, violate or constitute a breach of any employment or other agreement to
which you are a party and that you are not required to obtain the consent of any person, firm, corporation or other entity in order to accept this
offer of employment.
C. Kessler Offer Letter
December 2, 2013
Page | 4
Non-Disclosure of Confidential, Business and Proprietary or Trade Secret Information : You further represent and agree that you will not
knowingly use or otherwise disclose any confidential, business and proprietary or trade secret information obtained as a result of any prior
employment, unless specifically authorized to do so by your former employer(s). You should clearly understand that this provision of this letter
should be regarded as this Company’s explicit instruction for you not to use or disclose this information in breach and / or violation of your
representations and agreement.
Confidentiality, Non-competition and Intellectual Property Agreement : Your employment is conditioned upon your execution of the form
of Confidentiality, Non-Competition and Intellectual Property Agreement attached to this letter.
Background Checks/I-9 Documentation: Any offer with the Company is contingent upon the satisfactory completion of various background
investigations that may include reference checks, employment and education verification, and a federal / national and county level criminal
conviction investigation. At or around the time you receive this offer letter, you will be required to sign and return the Pre-Hire Authorization
form and Fair Credit Reporting Act forms. Your hiring and employment with the Company is contingent upon successful completion of your
references and your ability to provide documentation sufficient to complete form I-9 as required by law. If you begin work with AEO before
your references are checked and/or if your reference check results are unacceptable, your contingent employment will be terminated.
This letter and its attached documents which are incorporated herein by reference as if fully set forth, constitute the complete understanding
between you and the Company concerning the subject matters(s) addressed, and they supersede any prior or written understanding regarding the
terms and conditions of your employment with the Company. No representations have been made to you other than those contained herein. No
oral modifications to the commitments made herein shall be valid. Any changes to these terms must be in writing and signed by you and an
authorized representative of the Company.
We really look forward to you becoming a member of our team at American Eagle Outfitters. Please review this letter and return the signed
copy. By signing below, you acknowledge and agree that you have received and reviewed both this letter and the attached and will abide by the
terms stated therein. Upon approval by the Compensation Committee, we will send you a fully executed copy of this letter for your records.
Please let me know if you have any questions.
Sincerely,
Robert Hanson
Chief Executive Officer
AEO Inc.
I have read and understand, and by my signature below agree to the terms and conditions of this offer letter:
/s/ Chad Kessler
Chad Kessler
12/2/13
Date
C. Kessler Offer Letter
December 2, 2013
Page | 5
AMERICAN EAGLE OUTFITTERS, INC.
RELOCATION EXPENSE PAYBACK AGREEMENT
For: Chad Kessler
In exchange for American Eagle Outfitters, Inc.’s (“American Eagle Outfitters” or the “Company”) agreement to provide monetary assistance to
me in connection with my relocation to New York, New York , I agree as follows:
(1) I acknowledge that I have read this American Eagle Outfitters Relocation Expense Payback Agreement and that I understand its provisions.
(2) I acknowledge that the Company has agreed to pay directly to me, or to third parties on my behalf, the following benefits in connection with
my relocation to New York, New York :
•
Cost of moving household goods
•
Home finding trip expenses
•
Relocation allowance
•
Travel to the new location
•
Tax gross-up
•
Miscellaneous expenses related to my relocation
•
Temporary living and return trips home
For purposes of this Agreement, the total amount of the relocation benefits paid directly to me or on my behalf shall be referred to as the “Total
Relocation Amount”.
(3) I agree that if I voluntarily terminate my employment with the Company, or any of its affiliated entities or subsidiaries, for any reason
whatsoever, or if I am dismissed by the Company, or any of its affiliated entities or subsidiaries based on gross misconduct or proven dishonesty,
before the second anniversary of the date of my signature to this Agreement, I will pay all of the Total Relocation Amount in accordance with
this Section 3.
(4) If I leave the Company’s, or any of its affiliated entities or subsidiaries, employment as stated above, I authorize the Company to deduct from
monies otherwise due to me, any amounts I am obligated hereunder to pay. I understand that if such monies are not sufficient to repay the full
amount that I owe, I will immediately pay the remainder owing to the Company under this Agreement. In the event that I fail to repay the
amounts due within 30 days following the date that I terminate my employment, I will also pay the Company interest at an annual rate of one
(1%) percent over prime on all amounts that remain unpaid after the end of such 30-day period.
(5) In the event I breach this Agreement, or default on my obligation to repay all of the Total Relocation Amount, I agree to pay the Company’s
cost (including reasonable attorneys’ fees and court costs) of collecting any amounts payable under this Agreement. Any dispute arising under or
in connection with the agreement shall be subject to the exclusive jurisdiction of the state courts located in Pennsylvania.
(6) I understand that the Company’s agreement to provide me with the Total Relocation Amount as outlined herein is made in the Company’s
sole discretion. This does not guarantee my employment with American Eagle Outfitters as the Company is an “at-will” employer.
(7) This Agreement is in addition to, and does not replace or supersede, any other repayment Agreement I have entered into with the Company
and/or its affiliated entities or subsidiaries.
/s/ Chad Kessler
Chad Kessler
12/2/13
Date
/s/ Rebecca Seidenstein
Rebecca Seidenstein
12/2/13
Date
THIS RELOCATION EXPENSE PAYBACK AGREEMENT MUST BE SIGNED AND RETURNED TO AMERICAN EAGLE
OUTFITTERS, INC. BEFORE ANY AMOUNTS WILL BE PAID IN CONNECTION WITH YOUR RELOCATION.
C. Kessler Offer Letter
December 2, 2013
Page | 6
AIReS
6 Penn Center West; Suite 200
Pittsburgh, PA 15276
AMERICAN EAGLE OUTFITTERS, INC.
SIGN-ON BONUS PAYBACK AGREEMENT
American Eagle Outfitters
For: Chad Kessler
In exchange for American Eagle Outfitters, Inc.’s (“American Eagle Outfitters” or the “Company”) agreement to provide a one-time, sign-on
bonus in the amount of $500,000 (GROSS) to me in connection with my employment, I agree as follows:
(1) I acknowledge that I have read this American Eagle Outfitters Sign-On Bonus Payback Agreement and that I understand its provisions.
(2) I agree that if I voluntarily terminate my employment with American Eagle Outfitters or I am dismissed by the Company based on gross
misconduct or proven dishonesty during the first 24 months of employment following my start date, I will payback to American Eagle
Outfitters 100% of the monies.
(3) If I leave American Eagle Outfitters employment as stated above, I authorize them to deduct from monies otherwise due me, any amounts I
am obligated hereunder to pay. I understand that if such monies are not sufficient to repay the full amount I owe, I will immediately pay the
remainder owed to American Eagle Outfitters under this Agreement. In the event that I fail to pay the remaining amounts due within 30 days
following the date that I terminate my employment, I will also pay the Company interest at an annual rate of one (1%) percent over prime on all
amounts that remain unpaid after the end of such 30-day period.
(4) I understand that the Company’s agreement to provide me with this Sign-On Bonus is made in the Company’s sole discretion. This does not
guarantee my employment with American Eagle Outfitters as the Company is an “at-will” employer.
(5) In the event that I fail to adhere to the repayment obligations as outlined herein, I also agree to pay American Eagle Outfitters cost (including
reasonable attorney’s fees and court costs) of collecting any amounts payable under this Agreement. Any dispute arising under or in connection
with the agreement shall be subject to the exclusive jurisdiction of the state courts located in Pennsylvania.
(6) This Agreement is in addition to, and does not replace or supersede, any other repayment Agreement I have entered into with the Company
and/or its affiliated entities or subsidiaries.
Signature:
/s/ Charles F. Kessler
Print Name: Charles F. Kessler
Date:
12/2/2013
ONE COPY OF THIS AMERICAN EAGLE OUTFITTERS, INC. SIGN-ON BONUS PAYBACK AGREEMENT MUST BE SIGNED AND
RETURNED TO HUMAN RESOURCES PRIOR TO PAYMENT OF ANY AMOUNT. PLEASE RETAIN THE OTHER FOR YOUR
RECORDS
Exhibit 10.24
CONTRATO DE TRABAJO ORDINARIO
En Barcelona, Spain, a 3 de enero, 2013.
ORDINARY EMPLOYMENT AGREEMENT
In Barcelona, Spain, on January 3, 2013.
REUNIDOS
THE UNDERSIGNED
DE UNA PARTE , Jay Schottenstein, en nombre y representación de la
sociedad American Eagle NL Services Co B.V. (en adelante, la
“Compañía”), con NIF. 8526.29.370, y domicilio a efectos de
notificaciones Prins Bernhardplein 200, 1097 JB Amsterdam, the
Netherlands
ON THE ONE HAND , Jay Schottenstein in the name and on
behalf of American Eagle NL Services Co B.V. (hereinafter, the
“Company”), with Tax Identification Number 8526.29.370,
domiciled for notification purposes at Prins Bernhardplein 200,
1097 JB Amsterdam, the Netherlands
Y DE OTRA PARTE, Marie Castellvi Depee, mayor de edad, con NIE
nº X1678697L, y domicilio en Carrer del Bosc 6, Els Cards. 08812 San
Perdro de Ribes. (Barcelona). España, actuando en su propio nombre y
derecho (en adelante la “Empleada”).
ON THE OTHER HAND , Marie Castellvi Depee of legal age,
bearer of Spanish N.I.E: X1678697L domiciled at Carrer del Bosc
6, Els Cards. 08812 San Perdro de Ribes. (Barcelona). Spain in the
Employee’s own name and right (hereinafter, the “Employee”).
Ambos con capacidad suficiente al efecto, que recíprocamente se
reconocen y otorgan el presente Contrato de Trabajo (en adelante, el
“Contrato”).
Each acknowledging the other’s capacity to execute this
Employment Agreement (hereinafter, the “Agreement”).
EXPONEN
Que es de interés de ambas partes establecer una relación laboral que se
regulará de acuerdo con las siguientes:
WITNESSETH
Both parties wish to establish a labor relationship that is subject to
the following
ESTIPULACIONES
1.
OBJETO/RESPONSABILIDADES FUNCIONES
CLAUSES
1. PURPOSES / DUTIES
1.1
El objeto del presente Contrato será la realización, por parte de la
Empleada, de las funciones propias del puesto de trabajo de “ EVP
Europe ”.
1.1
The specific purpose of this Agreement shall be the rendering
of duties for the job position of EVP—Europe.
1.2
La ejecución del trabajo convenido se llevará a cabo bajo la
dirección de la Compañía, o de las personas que ésta pueda designar.
La Empleada reportará a Jay Schottenstein, (“Chief Executive
Officer”).
1.2
The work shall be carried out under the direction of the
Company or any person who the Company may designate. The
Employee will report to Jay Schottenstein, Chief Executive
Officer.
2.
2.1
DURACIÓN, EMPLEADOR, Y “SIGN-ON” BONUS
2.
El presente Contrato de trabajo surtirá sus efectos tan pronto como
la Empleada pueda dimitir voluntariamente del puesto de trabajo que
actualmente desarrolla para Claire’s.
2.1
A priori, el presente Contrato producirá sus efectos a partir del día 1
de mayo de 2014 (la “Fecha de Efectos”), salvo lo previsto en la
siguiente estipulación, se pacta con carácter indefinido.
DURATION, EMPLOYER, AND SIGN-ON BONUS
This Agreement shall be effective as soon as the Employee is
able to voluntary resign from the position she currently holds
in Claire’s.
Tentatively, this Agreement shall be effective as from May 1,
2014 (hereinafter, the “Effective Date”) and, except as
provided in the following provision, shall have an indefinite
duration.
a.
Los primeros cuatro (4) meses de trabajo se considerarán como
período de prueba, durante el cual, cualquiera de las partes podrá dar
por concluida la relación laboral, sin preaviso y sin derecho a ningún
tipo de indemnización por despido.
a.
The first four (4) months of work shall be considered a trial
period, during which either party may terminate the
relationship without prior notice and without giving rise to any
type of severance compensation.
b.
Ambas partes acuerdan que las situaciones de incapacidad temporal,
maternidad, paternidad y adopción o acogimiento, que afecten a la
Empleada durante el período de prueba, interrumpirán el cómputo
del mismo.
b.
Both parties agree that the probationary period shall be
suspended during the Employee’s absence due to sick leave,
maternity leave, paternity leave and adoption or guardianship
leave.
2.3
La Empleada ha sido informada de que las actividades que
originariamente han sido desarrolladas por la Compañía serán
transferidas a otra compañía dentro del Grupo de Empresas
American Eagle que esta siendo constituida. Así, las partes acuerdan
que cuando tal compañía sea constituida, la Empleada será
efectivamente transferida a tal nueva compañía. Esta nueva entidad
legal, se subrogará plenamente en los términos y condiciones aquí
acordados por las partes.
2.3
The Employee has been informed that the activities originally
developed by the Company will be transferred to another
company belonging to the American Eagle Group of
Companies that is being incorporated. Thus, the parties agree
that when this company is incorporated, the Employee will be
effectively transferred to this new company. This new legal
entity will be fully subrogated in the terms and conditions
hereby agreed by the parties.
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2.4
La Empleada reconoce que la Compañía podría necesitar trasladarle
a otras dependencias de la Compañía en los Países Bajos o el Reino
Unido en el futuro y, en tal caso, su centro de trabajo, sería
transferido a tal lugar de mutuo acuerdo.
2.4
En el caso de que la Compañía deba trasladar a la Empleada a los
Países Bajos la Compañía acuerda abonar, directamente a la misma,
o a una tercera parte, en nombre de la Empleada, los beneficios en
relación con el traslado de la Empleada de conformidad con la
Política de la Compañía sobre Traslado Internacional de Executivos.
Should the Company relocate the Employee to the
Netherlands, the Company has agreed to pay directly to the
Employee or to third parties on the Employee’s behalf,
benefits in connection with the Employee’s relocation in
accordance with the Company’s International Executive
Relocation Policy.
En el caso de que la Compañía deba trasladar a la Empleada al
Reino Unido, ella se beneficiará de los beneficios existentes para
expatriados conforme a las políticas de la Compañía vigentes en
cada momento.
2.5
Should the Company relocate the Employee to the United
Kingdom, the Employee would benefit from the expatriate
benefits as per the Company’s policy in force from time to
time.
Bono de contratación excepcional :
2.5
a.
La Empleada recibirá un bono excepcional bruto de 200.000) DOS
CIENTOS MIL EUROS BRUTOS que será abonado durante el
primer mes, a contar desde, la fecha de inicio del contrato.
b.
c.
The Employee acknowledges that the Company may need to
relocate the Employee to other premises in the Netherlands or
the United Kingdom in the future and in that event, the
Employee’s place of work shall move to these premises upon
mutual consent
Exceptional Sign-On Bonus :
a.
A efectos aclaratorios, la Empleada no tendrá derecho a recibir el
bono correspondiente de La Compañía si el presente contrato se
extingue con anterioridad a las fecha de pago por cualquier causa.
The Employee will receive an exceptional Sign-On Bonus
payment of TWO HUNDRED THOUSAND GROSS EUROS
200,000) that will be paid within the first month of the
Employee’s start date.
b.
Adicionalmente, si el contrato se extingue durante el plazo de los 12
meses siguientes al inicio del Contrato de Trabajo, como
consecuencia de la baja voluntaria de la Empleada o a su despido
disciplinario procedente, la Empleada deberá devolver el 100% del
bonus de contratación recibido.
For clarification purposes, the Employee will be ineligible to
receive this Exceptional Sign-On Bonus from the Company if
this Agreement is terminated prior to the payment date,
irrespective of the cause of such termination.
c.
In addition, if the Employee voluntarily resigns or if the
Company terminates the Employee’s Agreement with
sufficient disciplinary cause (“ despido procedente ”) during
the first 12 months of employment following the Employee’s
start date, the Employee will be obligated to return the SignOn Bonus to the Company at 100%.
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d.
Si la Empleada abandona la Compañía tal y como se establece en el
párrafo anterior, la Empleada autoriza a la Compañía a deducir, de
las cantidades adeudadas a la misma, cualquier importe que la
Empleada este obligada a restituir a la Compañía. La Empleada
comprende que, si tales cantidades no son suficientes para
reembolsar a la Compañía por la cantidad total que adeuda a la
misma, la Empleada deberá proceder a abonar a la Compañía la
cantidad restante. En el caso de que la Empleada no abone a la
Compañía la cantidad restante en el plazo de los 30 días siguientes a
la extinción del contrato de trabajo, la Empleada deberá abonar,
igualmente, a la Compañía un interés del 1% anual sobre la cantidad
total adeudada, a la finalización de tal plazo de 30 días.
d.
If the Employee leaves the Company as stated above, the
Employee authorizes the Company to deduct from monies
otherwise due to the Employee, any amounts the Employee is
obligated to pay. The Employee understands that if such
monies are not sufficient to repay the full amount the
Employee owes, the Employee will immediately pay the
remainder owed to the Company. In the event that the
Employee fails to pay the remaining amounts due within 30
days following the date employment is terminated, the
Employee will also pay the Company interest at an annual rate
of 1% over prime on all amounts that remain unpaid after the
end of such 30 day period.
e.
En el caso de que la Empleada incumpla sus obligaciones de
reembolso establecidas en el párrafo precedente, igualmente,
acuerda abonar a la Compañía los costes derivados de la reclamación
de tales cantidades (incluyendo costes razonables de abogados y
tasas judiciales).
e.
In the event that the Employee fails to adhere to the repayment
obligations as outlined herein, the Employee also agrees to pay
the Company cost (including reasonable attorney’s fees and
court costs) of collecting any amounts payable.
f.
f.
En todo caso, el bono de contratación excepcional no será
considerado salario a efectos indemnizatorios ni a los efectos de
cálculo de ningún beneficio o remuneración variable o en especie.
In any case, the exceptional Sign-On Bonus will not be
considered salary for severance compensation purposes nor for
the purposes of calculating any benefits or variable or in kind
remuneration.
3.
JORNADA/ HORARIO/ VACACIONES
3.
WORK SCHEDULE / HOLIDAYS
3.1
La jornada laboral y horarios serán los que establezca la Compañía
de acuerdo con la legislación vigente.
3.1
The working hours and schedule will be those set by the
Company in accordance with applicable law.
3.2
La Empleada tendrá derecho a un período anual de vacaciones de
treinta (30) días laborables. Adicionalmente, en relación con el
ejercicio fiscal 2014/2015, la Empleada tendrá derecho a 30 días
laborables de vacaciones adicionales. El
3.2
The Employee shall be entitled to an annual holiday period of
thirty (30) working days of vacation. Additionally, the
Employee shall be entitled to (30) incremental working days of
vacation to be used in 2014/2015 calendar years. How the
holiday
4
régimen a seguir en supuesto de fraccionamiento y disfrute del
periodo vacacional se determinará mediante acuerdo de las partes de
conformidad con las disposiciones del Convenio Colectivo y la
legislación que resulten de aplicación.
3.3
4.
Durante el primer año de vigencia del Contrato de trabajo con
American Eagle NL Services Co B.V., y en el supuesto de que éste
se extinga con anterioridad al 31 de diciembre, el número de días de
vacaciones será prorrateado sobre la base del período de los
servicios prestados en el año natural.
RETRIBUCIÓN
period may be divided and enjoyed will be determined by the
parties’ agreement in accordance with applicable legislation
and any applicable Collective Bargaining Agreement.
3.3
4.
During the first year of employment with American Eagle NL
Services Co B.V., and in the event this Agreement is
terminated prior to December 31 st , the number of days of
holidays shall be prorated on the basis of the actual period of
services rendered in the calendar year.
REMUNERATION
4.1
La Empleada percibirá un salario fijo anual bruto (en adelante el
“Salario Fijo”) de trescientos setenta y cinco mil euros (375.000€),
cantidad que se entiende referida al período del año natural, por lo
que, si la Empleada causase alta o baja en la Compañía en fecha
distinta al comienzo o terminación del año natural, percibirá las
cantidades efectivamente devengadas, proporcional-mente al tiempo
trabajado en el mencionado año.
4.1
The Employee shall receive an annual gross fixed salary
(hereinafter, the “Fixed Salary”) of three-hundred seventy-five
thousand Euros (€375,000), referring to the calendar year, such
that, should the Employee’s relationship commence or
terminate on a date other than the beginning or end of the
calendar year, the Employee shall receive any salary amounts
actually earned and accrued, proportional to the time worked
in that year.
4.2
El Salario Fijo antes mencionado se distribuirá en doce
(12) mensualidades.
4.2
The aforementioned Fixed Salary shall be distributed in
twelve (12) monthly instalments.
4.3
El Salario Fijo se acuerda como una cantidad total que incluye todos
los conceptos exigidos por el Convenio Colectivo de aplicación, con
independencia de la naturaleza de dichos conceptos. Por tanto, el
Salario Fijo antes mencionado se distribuirá de conformidad con la
regulación contenida en el Convenio Colectivo aplicable.
4.3
The Fixed Salary is agreed as a total amount of compensation
that includes any and all amounts required by the applicable
Collective Bargaining Agreement, regardless of the nature of
those amounts. Therefore, the Fixed Salary shall be distributed
according to the regulations set forth in the applicable
Collective Bargaining Agreement.
5
4.4
5.
Dicha retribución absorberá y compensará cualesquiera otras
mejoras que se pudieran establecer en el futuro por el Convenio
Colectivo que resulte de aplicación o cualquier otra disposición
legal, en el caso de que aquellas mejoras no excedan en términos
anuales, la remuneración establecida en el presente Contrato, de
acuerdo con la legislación vigente.
4.4
SALARIO VARIABLE
5.
Said remuneration shall absorb and compensate any salary
increases established in the future by the applicable Collective
Bargaining Agreement or another legal provision, provided
that said increases do not exceed, in annual terms, the
remuneration agreed on in this Agreement, in accordance with
the legislation in force.
ANNUAL INCENTIVE COMPENSATION BONUS
5.1
La Empleada tendrá derecho a participar en un plan de retribución
variable. Para el ejercicio fiscal 2014, la Empleada tendrá derecho a
participar en un plan de bonus que le podría dar derecho a percibir
un bonus equivalente al 65% (objetivo) del salario fijo de la
Empleada mencionado en la clausula 4.1 (igual a 243.750 Euros)
hasta un máximo del 130% del salario fijo de la Empleada
mencionado en la clausula 4.1 (equivalente a 487.500 Euros). La
Empleada podrá tener derecho a recibir el primer bonus
correspondiente al ejercicio fiscal de la Compañía 2014 (Febrero
2014- Enero 2015) (a pagarse en la primavera de 2015).
5.1
The Employee will be entitled to participate in the Company’s
variable salary scheme. For Fiscal year 2014, the Employee
will be eligible to earn an incentive compensation bonus of
65% (Target) of the Employee’s fixed salary mentioned in
clause 4.1 equal to 243,750 Euro with a maximum up to 130%
of the Employee’s fixed salary mentioned in clause 4.1 equal
to 487,500 Euro. The Employee will first be eligible to receive
this bonus for the Company’s FY2014 (February 2014January 2015) (to be paid in Spring, 2015).
5.2
En primavera de 2015, el bonus estará basado en el porcentaje del
salario fijo percibido por la Empleada durante el ejercicio fiscal
2014. Para valorar el desempeño en cada año, la cuantía del Bonus
será determinada a la sola discreción del equipo de dirección, basado
en: [i] el Cumplimiento de objetivos de desempeño financiero y de
imagen de marca de la Compañía, establecidos por el Comité de
Compensación del Consejo de Administración (el “Comité”); and
[ii] el nivel global de desempeño de la Empleada. Para recibir el
Bonus Anual, la Empleada debe permanecer contratada por la
Compañía o por cualquier filial o afiliada, hasta la fecha de abono
del mismo.
5.2
The Spring, 2015 bonus will be based on a percentage of the
Employee’s fixed actual wages earned during our 2014 fiscal
year. For each performance year, the value of the Bonus will
be determined in the sole discretion of management, based
upon: [i] the achievement of the Company and Brand (where
applicable) financial performance-based goals to be
established by the Compensation Committee of the Board of
Directors (the “Committee”); and [ii] the Employee’s overall
level of performance. In order to be eligible to receive an
Annual Incentive Compensation Bonus, the Employee must
remain continuously employed by the Company or any of its
subsidiaries or affiliates through the date the Bonus actually is
paid.
6
6.
6.1
BENEFICIOS
La Empleada tendrá derecho a participar de los siguientes
beneficios:
6.
BENEFITS
6.1
The Employee will be entitled to the following benefits:
A car allowance of 25,000 Euro gross annually plus expenses
for gas for professional use, insurance, and maintenance
according to the Car Policy applicable to the Company with
periodic review.
Un ayuda vehículo de Empresa por importe de 25.000 Euros anuales
además del abono de la gasolina derivada del uso profesional, gastos
de seguro y mantenimiento, de conformidad con la Política de
Empresa aplicable en cada momento.
In addition, the Employee may be eligible to participate in the
Company’s Change in Control Agreement, which will be
provided to the Employee separately.
Adicionalmente, la Empleada podría tener derecho a participar en el
Acuerdo de la Compañía sobre Cambio de Control (Company’s
Change in Control Agreement) , que será facilitado a la Empleada en
documento aparte.
•
•
7.
La Compañía pondrá a disposición de la Empleada y su
familia un seguro médico y de vida con cobertura
suplementaria hasta que el plan específico de la Compañía este
disponible.
Adicionalmente, La Empleada tendrá derecho a percibir los
beneficios que le correspondan en aplicación del programa de
beneficios vigente en cada momento en la Compañía.
GASTOS
7.
•
The Company will reimburse family plan health care
supplemental coverage and life insurance coverage until a
Company sponsored plan is available.
•
Additionally, the Employee will be entitled to any
benefits which may correspond to the Employee
according to the Company’s benefits program applicable
with periodic review.
REPRESENTATION EXPENSES
7.1
La Compañía reembolsará a la Empleada cualesquiera gastos
razonables en los que ésta incurra en el ejercicio de sus tareas al
amparo del presente Contrato. Para ello, la Empleada deberá
presentar los recibos correspondientes a dichos gastos, así como
cumplir con las reglas y políticas de Compañía relativas a gastos.
7.1
The Company will reimburse the Employee the reasonable
expenses properly incurred by the Employee in the
performance of the Employee’s duties under this Agreement
subject to the Employee producing receipts in respect of such
expenses, and to the Employee’s compliance with the
Company’s rules and policies relating to expenses.
7.2
Los gastos así reembolsados por la Compañía no tendrán en ningún
caso la consideración de salario.
7.2
Expenses reimbursed by the Company under this Clause
should in no case be considered salary.
7
8.
8.1
9.
DEDUCCIONES LEGALES
8.
De la remuneración pactada con la Empleada, se deducirán las
cantidades que por contribuciones a la Seguridad Social, impuestos o
cualquier otro tipo, establezcan las normas vigentes. La Empleada
podría estar sometido a deducciones en varias jurisdicciones. El
coste de tales deducciones será responsabilidad exclusiva de la
Empleada.
LUGAR DE PRESTACIÓN DE LOS SERVICIOS
8.1
9.
LEGAL WITHHOLDINGS
The Company shall withhold from the Employee’s earnings
any amounts established under the laws and regulations in
force as payable by the Employee, including Social Security
contributions, taxes, and any other deductions. Employee may
be subjected to withholdings from multiple jurisdictions. Costs
for all such withholdings are the sole responsibility of the
employee.
WORK PLACE
9.1
La Compañía, con anterioridad al inicio de la relación laboral
ordinaria, identificará una oficina donde la Empleada pueda prestar
sus servicios para la Compañía.
9.1
The Company, prior to the commencement of the ordinary
employment relationship will identify a suitable office space in
Barcelona where the Employee would be able to provide her
services for the Company.
9.2
Como consecuencia del trabajo a desarrollar, la Compañía podrá
exigir de la Empleada la realización de viajes, tanto dentro de
España como en el extranjero, condición que la Empleada acepta
expresamente cumplir.
9.2
As a result of the work to be carried out, the Company may
request the Employee to travel, whether in Spain or abroad,
and the Employee shall comply with these terms.
9.3
9.3
Los viajes de negocios tendrán una duración media de 3 días por
semana, dentro y fuera de España. Cuando sea acordado
mutuamente, habrá situaciones donde se requiera que la Empleada
realice viajes de mayor duración.
Travel will normally average 3 days per week in Spain and
abroad. When mutually agreed, there may be situations where
longer travel will be required.
10.
DERECHOS DE PROPIEDAD INDUSTRIAL E
INTELECTUAL
10.
INDUSTRIAL AND INTELLECTUAL PROPERTY
RIGHTS
10.1 Si en el desempeño de las funciones relacionadas con su puesto de
trabajo o utilizando los medios y/o conocimientos adquiridos en la
Compañía, la Empleada desarrollase invenciones, diseños
industriales, obras de propiedad intelectual o cualquier otro tipo de
creaciones originales susceptibles de protección como obras de
propiedad intelectual o industrial (en adelante las
10.1 If through the performance of functions relating to the
Employee’s position or the Employee’s use of the resources
and/or knowledge acquired in the Company, the Employee
develops inventions, industrial designs, copyright works or any
other type of original creation capable of being protected as a
work of intellectual property (hereafter the “Works”), the
Employee must immediately inform the Company in
8
Obras), deberá informar de ello inmediatamente a la Compañía por
escrito, facilitando todos los datos que estén a su disposición. La
Empleada reconoce que las Obras han sido desarrolladas en el marco
de una relación laboral, por lo que pertenecen en exclusiva a la
Compañía que podrá explotar las Obras mediante cualquier medio y
formato en todo el mundo y por todo el plazo por el que los derechos
permanezcan vigentes, sin que ello genere derecho económico
alguno a su favor, por considerarse que ha sido satisfecho en virtud
de la remuneración pactada en este Contrato.
writing, supplying all the information the Employee has at the
Employee’s disposal. The Employee acknowledges that the
Works have been developed in the context of an employment
relationship, and that the Company has the exclusive right to
exploit the Works through whatever means and format
throughout the world and the period for which the rights
remain in force, without the Employee being entitled to any
kind of economic reward, as such reward is considered to have
been satisfied by virtue of the remuneration agreed to in this
Agreement.
10.2 La Empleada se compromete a colaborar con la Compañía, o con
quien ésta designe, en la forma en que la Compañía estime
pertinente, para proteger los derechos de la Compañía sobre las
Obras, en todos los países del mundo. Los gastos en que se incurra
para la protección de los derechos de propiedad industrial e
intelectual serán de cuenta de la Compañía. La colaboración con la
Compañía incluirá la divulgación de toda la información y datos
relacionados con las Obras, así como la formalización de solicitudes,
declaraciones y cualquier otro documento o acto que la Compañía
considere necesario para poder solicitar, obtener y mantener dichos
derechos sobre las Obras, así como para su defensa frente a
cualquier infracción por parte de terceros y para formalizar su cesión
en exclusiva y en su totalidad a favor de la Compañía, sus herederos,
cesionarios o las personas que la Compañía designe. La obligación
de la Empleada de formalizar y firmar cualquier tipo de documento
o acto necesario para la protección de los derechos sobre las Obras,
perdurará aún después de extinguido el presente Contrato y hasta la
fecha de expiración de la vigencia de todos los derechos sobre las
Obras.
10.2 The Employee agrees to collaborate with the Company, or
with whoever may be appointed, in the manner that the
Company considers appropriate, in order to protect the
Company’s rights in the Works in all the countries of the
world. The expenses incurred by the protection of the
intellectual and industrial property rights will be met by the
Company. Collaboration with the Company will include the
disclosure of all the information and data related to the Works,
as well as the formalisation of applications, declarations and
any other kind of documents or acts that the Company
considers necessary in order to apply for, obtain and maintain
these rights in the Works, as well as their defence in relation to
infringement by a third-party and the formalisation of the
exclusive and universal transfer of the rights in favour of the
Company, their successors, assignees or other such persons as
the Company may so designate. The obligation of the
Employee to formalise and sign any kind of document or act
necessary for the protection of the rights in the Works will
remain in force until the date of the expiration of all the rights
in the Works despite termination of this Agreement.
9
10.3 Igualmente, la Empleada se compromete a no revelar el contenido de
las Obras a ninguna persona ajena a la Compañía, sin la autorización
expresa de la Compañía.
10.3 The Employee also undertakes not to disclose the content of
the Works to any person outside the Company, without the
express authorisation of the Company.
10.4 Por su parte, la Compañía se compromete a respetar, en todo
momento, los derechos morales e irrenunciables de la Empleada
sobre las Obras, según lo dispuesto en la legislación vigente.
10.4 The Company undertakes to respect, at all times, the moral
rights and any other rights of the Employee in the Works that
cannot be waived, as provided by the current legislation.
10.5 En Anexo A adjunto al presente Contrato, la Empleada enumera
todas aquellas Obras existentes, que (a) fueron desarrolladas con
anterioridad al momento de formalización del presente Contrato;
(b) la Empleada afirma le pertenecen, y está interesado en conservar;
y (c) están relacionados con el actual o futuro objeto social,
productos o servicios de la Compañía. La Empleada afirma que
dicha enumeración está completa. En caso de que dicha enumeración
no se adjunte al presente Contrato o dicho Anexo A esté en blanco,
la Empleada confirma que no existen dichas Obras en el momento
de formalización del Contrato.
10.5 On Exhibit A attached hereto, Employee has listed all existing
Works, by title, date, and description, that (a) was made prior
to the Execution Date of this Agreement; (b) Employee asserts
belongs to Employee, or in which Employee asserts and
desires to retain an interest; and (c) relates to the Company’s
actual or proposed business, products and/or services.
Employee acknowledges and agrees that such list is complete.
If no such list is attached to this Agreement or if Exhibit A is
left blank, Employee represents that there are no such Works
as of the Execution Date.
11.
11.
DEBERES ÉTICOS FUNDAMENTALES
FUNDAMENTAL ETHICAL DUTIES
11.1 La Empleada se ajustará, en el cumplimiento de sus cometidos y
obligaciones, a los usos y costumbres habituales de la Compañía,
cualquier compañía del grupo y del sector, respetando las políticas,
procedimientos y normas de conducta de la Compañía y cualquier
compañía del grupo, de aplicación en cada momento, cuyas
previsiones se consideran integradas en sus obligaciones
contractuales.
11.1 In performing the Employee’s tasks and obligations, the
Employee shall adapt to the common uses and customs of the
Company, the company group and the sector, complying with
the policies, procedures and rules of conduct of the Company
and the company group, as applicable from time to time, which
are considered to form part of the Employee’s contractual
obligations.
11.2 La Empleada no podrá, ni durante la vigencia de su relación laboral
con la Compañía (salvo que así sea requerido por el ejercicio regular
de sus funciones) , ni en ningún momento (sin limitación)
11.2 The Employee must not either during the Employee’s
employment (except in the proper performance of the
Employee’s duties) or at any time (without limit) after the
termination of the Employee’s
10
tras la extinción de su relación laboral, directa o indirectamente (a)
utilizar para fines personales o relacionados con cualquier otra
persona, compañía, entidad u organización de cualquier tipo, o (b)
revelar a cualquier persona, compañía, entidad u organización de
ningún tipo, cualesquiera secretos comerciales o información
confidencial relativa o perteneciente a la Compañía o cualquier
compañía del grupo.
employment, directly or indirectly (a) use for the Employee’s
own purposes or those of any other person, company, business
entity or other organization whatsoever, or (b) disclose to any
person, company, business entity or other organization
whatsoever, any trade secrets or confidential information
relating or belonging to the Company or any group company.
11.3 Este tipo de información incluye a efectos ilustrativos pero no
limitativos, información relativa a clientes, listados o requerimientos
de clientes, métodos relativos a la prestación de servicios al cliente,
listados o estructuras de precios, actividades, estrategias y planes de
negocio, listados de empleados, directivos, administradores o
contratistas y detalle de los sistemas de remuneración y condiciones
de contratación/ vinculación, información y planes financieros,
detalles de propuestas relativas a adquisiciones o actos de
disposición realizados por la Compañía o cualquier compañía del
grupo, diseños, fórmulas, líneas de producto, actividades de
investigación, prototipos, servicios, códigos fuente y sistemas
informáticos, software, cualquier documento marcado como
“Confidencial” (o con una expresión similar), o cualquier
información de cuyo carácter confidencial se haya informado a la
Empleada o respecto de la cual la Empleada pueda razonablemente
esperar que la Compañía considera confidencial, o cualquier
información que se haya proporcionado a la Compañía o a cualquier
compañía del grupo de forma confidencial por parte de clientes
actuales y potenciales, proveedores u otras personas.
11.3 This type of information includes but is not limited to any such
information relating to customers, customer lists or
requirements, methodologies relating to the delivery of client
services, price lists or pricing structures, business development
activities, strategies and plans, lists of employees, officers or
contractors and details of remuneration packages and terms of
employment / engagement, financial information and plans,
details of proposals relating to acquisitions or disposals by the
Company or any group company, designs, formulae, product
lines, research activities, prototypes, services, source codes
and computer systems, software, any document marked
“Confidential” (or with a similar expression), or any
information that the Employee has been told is confidential or
that the Employee might reasonably expect the Company
would regard as confidential, or any information that has been
given to the Company or any group company in confidence by
customers, prospective customers, suppliers or other persons.
11.4 Los secretos comerciales e información confidencial deberán
preservar tal condición hasta que pasen a ser de dominio público por
cualquier medio distinto de la revelación no autorizada de la misma
por cualquier persona.
11.4 The trade secrets and confidential information shall remain
confidential unless and until they enter the public domain,
other than by way of unauthorized disclosure by any person.
11
12.
LEY DE PRACTICAS CORRUPTAS EN EL EXTRANJERO/
12.
ANTI-BRIBERY COMPLIANCE
12.1 La Empleada se compromete a cumplir con la normativa de
cualquier rango, vigente en cada momento, que resulte aplicable a la
relación laboral que mantiene con la Compañía, incluyendo sin
carácter limitativo, cualquier legislación local relativa a cohecho o
corrupción en el sector público o privado (por ejemplo, los artículos
419 a 427, Capítulo V, Título XIX, Libro II, de la Ley Orgánica
10/1995; los artículos 31 bis y 286 bis del Código Penal español), la
Ley Anti-corrupción del Reino Unido del año 2010 (“UK Bribery
Act 2010”) y la Ley estadounidense de Prácticas Corruptas en el
Extranjero (“United States Foreign Corrupt Practices Act”).
12.1 The Employee agrees to comply with all applicable laws,
regulations, and governmental orders, now or hereafter in
effect, relating to the Employee’s employment with the
Company, including but not limited to local public and private
sector bribery laws (such as Sections 419 to 427, Chapter V,
Title XIX, Book II, of Organic Law 10/1995; Sections 31 bis
and 286 bis of the Spanish Criminal Code), the UK Bribery
Act 2010, and the United States Foreign Corrupt Practices Act.
12.2 La Empleada confirma que ha leído y comprendido las provisiones
dispuestas en el Código de Conducta y políticas de Compañía
(“Code of Ethics), en sus políticas internas, en la Ley estadounidense
de Prácticas Corruptas en el Extranjero “United States Foreign
Corrupt Practices Act” (“FCPA”), y acepta cumplir con las
provisiones allí contenidas.
12.2 The Employee confirms that the Employee has read,
understood, and agrees to fully comply with the Company’s
Code of Ethics, and all applicable Company policies and the
United States Foreign Corrupt Practices Act (“FCPA”).
12.3 Sin ánimo de limitar el alcance de las anteriores manifestaciones, la
Empleada garantiza expresamente que, ni durante su relación laboral
con la Compañía ni con anterioridad al mismo, ha realizado o
realizará ningún pago, entrega u oferta, ni ninguna promesa de pago
o entrega de cualquier suma dineraria o cualesquiera otros objetos de
valor, directa o indirectamente a favor o en beneficio de: (i)
cualquier autoridad, funcionario público nacional o internacional,
partido político o candidato a un cargo político; o (ii) cualquier otra
persona, compañía,
12.3 Without limiting the generality of the foregoing, the Employee
represents and warrants that the Employee has not, and shall
not at any time during the Employee’s employment with the
Company, pay, give, or offer or promise to pay or give, any
money or any other thing of value, directly or indirectly, to, or
for the benefit of: (i) any authority government official,
political party, candidate for political office; or public
international organization or (ii) any other person, firm,
corporation or other entity, with knowledge that some or all of
that money or other thing of value will be
12
corporación o entidad que tenga conocimiento de que parte o la
totalidad de la suma dineraria u objeto de valor se pagará, entregara,
ofrecerá o prometerá a autoridad, funcionario público nacional o
internacional, partido político o candidato a un cargo político, con la
finalidad de obtener o retener cualquier negocio, o para obtener
cualquier otra ventaja ilícita en relación con el negocio de a
Compañía. Asimismo, la Empleada garantiza expresamente que
durante su relación laboral con la Compañía, no ha realizado o
realizará ningún pago, entrega u oferta, o promesa de pago o entrega,
de cualquier suma dineraria o cualesquiera otros objetos de valor,
directa o indirectamente a favor o en beneficio de cualquier persona
o entidad, de carácter público o privado, situada en cualquier lugar
del mundo, con la finalidad de obtener o retener cualquier negocio, o
para obtener cualquier otra ventaja ilícita en relación con el negocio
de la Compañía.
13.
DILIGEN CIA
paid, given, offered or promised to an authority, government
official, political party, candidate for political office, or public
international organization, for the purpose of obtaining or
retaining any business, or to obtain any other unfair advantage,
in connection with the Company’s business. The Employee
further represents and warrants that the Employee has not, and
shall not at any time during the Employee’s employment with
the Company, pay, give, offer or promise to pay or give,
accept, or promise to accept any money or any other thing of
value, directly or indirectly, to or from any person or entity,
public or private, located anywhere in the world, for the
purpose of obtaining or retaining any business, or to obtain any
other unfair advantage, in connection with the Company’s
business.
13.
DILIGENCE
13.1 La Empleada realizará las funciones propias de su cometido en la
forma establecida por la Compañía, de acuerdo siempre con sus
instrucciones y comprometiéndose a prestar el máximo interés y
entrega en el desempeño de las mismas.
13.1 The Employee shall render the services proper to the
Employee’s position in the manner established by the
Company, always in accordance with its instructions, and
committing himself to offer the Employee’s utmost interest
and dedication in carrying out the same.
14.
14.
PROTECCIÓN DE DATOS
14.1 De conformidad con lo dispuesto en la Ley Orgánica 15/1999 de
Protección de Datos de Carácter Personal, la Empleada por la
presente declara que conoce y acepta que la Compañía u otras
Compañías del Grupo conservarán y procesarán datos relativos a él
(los “Datos Personales”) (que la Compañía podrá recoger por
escrito, electrónicamente o de cualquier otro modo) incluyendo, a
meros efectos enunciativos, el nombre, dirección particular, número
de tarjeta de la seguridad social, permisos de trabajo, salario y
beneficios.
13
DATA PROTECTION
14.1 For the purposes of the Spanish Data Protection Act 15/1999,
the Employee hereby agrees and gives the Employee’s consent
to the processing of personal data by the Company or other
Group Companies relating to the Employee (which the
Company may obtain or hold in any form, whether in writing,
electronically or otherwise), including but not limited to, the
name, address, number of the social security card, residence
and work permits, expertise, salary and benefits (“Personal
Data”).
14.2 Los Datos Personales se conservarán y procesarán para fines
relacionados con la relación empleador / empleado, incluyendo sin
carácter limitativo: salario y revisiones salariales, y otros beneficios
(tales como planes de pensiones, seguro de vida, médico y de
viajes), así como con el objeto de mejorar los sistemas de seguridad
y cumplimiento de obligaciones contractuales y legales (tales como
retenciones de Impuesto sobre la Renta de Personas Físicas y
contribuciones a la Seguridad Social) y mantenimiento de registros
de baja por enfermedad y maternidad a los meros efectos del
cumplimiento de obligaciones laborales y de Seguridad Social.
14.2 Personal Data is processed for purposes connected with the
employer/employee relationship, including, but not limited to:
the payment and review of salaries and other benefits (such as
pension plans and medical, life and travel insurance),
facilitating appraisals, maintaining sickness and maternity
leaves records exclusively to comply with labor and Social
Security obligations, and also more generally to maintain and
improve security systems and ensure compliance with its legal
and contractual obligations such (as income tax withholdings
and Social Security contributions).
14.3 La Compañía podrá periódicamente solicitar a la Empleada la
revisión y actualización de los Datos Personales que sobre él se
mantengan en el fichero de empleados de la Compañía. No obstante
lo anterior, la Empleada tendrá el derecho a revisar, actualizar y
cancelar sus datos personales en cualquier momento, mediante
solicitud dirigida al Departamento de Recursos Humanos de la
Compañía. Asimismo, la Empleada podrá oponerse a alguna de las
finalidades del tratamiento de sus datos, mediante solicitud dirigida
al Departamento indicado más arriba.
14.3 The Company may ask the Employee to review and update the
Personal Data held in the Employee’s database from time to
time. Notwithstanding the foregoing, the Employee will have
the right to review, update and cancel the Employee’s Personal
Data at any time, upon request to the Human Resources
Department of the Company. Additionally, the Employee can
oppose any of the purposes with which the Employee’s data is
processed, upon request to the Department indicated above.
14.4 La Empleada conoce y acepta expresamente que la Compañía puede
en cualquier momento poner los Datos Personales a disposición de
otras compañías del grupo en otros países, ya sean compañías
localizadas en la Unión Europea o en otros países, algunos de los
cuales pueden no ofrecer un nivel de protección equivalente al que
existe en la Unión Europea, para fines de gestión de recursos
humanos.
14.4 The Employee expressly acknowledges and agrees that the
Company may periodically make the Personal Data available
to other group companies, which may be located in the
European Union and elsewhere, including countries that may
not offer an equivalent level of protection to that applicable in
the European Union, for purposes of human resources
management.
14
14.5 La Empleada asimismo declara conocer y aceptar que la Compañía
puede requerir poner los Datos Personales o parte de ellos a
disposición de las autoridades competentes (incluyendo autoridades
fiscales), contables, auditores, abogados y otros asesores externos.
14.5 Moreover, the Employee acknowledges and agrees that the
Company may, from time to time, make available some or part
of the Personal Data to legal and regulatory authorities
(including the tax authorities), to its accountants, auditors,
lawyers and other outside professional advisers and to third
parties supplying products or services to the Company.
14.6 Sin perjuicio de lo dispuesto anteriormente, los Datos Personales de
salud de la Empleada necesarios para el cumplimiento de
obligaciones laborales y de Seguridad Social, no serán objeto de
cesiones ni transferencias internacionales.
14.6 Without prejudice to the foregoing, the health related Personal
Data of the Employee necessary for the compliance with
labour and Social Security obligations may not be assigned or
transferred abroad.
14.7 Igualmente la Compañía podría procesar los Datos Personales de los
familiares, dependientes y conocidos de la Empleada, para los
siguientes fines: (i) aviso en situaciones de emergencia y;
(ii) contratación de pólizas de seguros de vida, médicos y de viaje y
otros planes otorgados por la Compañía. Los Datos Personales de las
personas designadas por la Empleada como beneficiarios de los
seguros de vida y otros planes concedidos por la Compañía podrán
ser puestos a disposición de compañías para contactarles en el
supuesto de fallecimiento de la Empleada. Con la firma del presente
documento la Empleada confirma que ha notificado a estas personas
que ha comunicado sus Datos Personales a la Compañía y que ellos
otorgan su consentimiento para el tratamiento y transferencia
(cuando sea precisa) de sus Datos Personales para los citados
propósitos.
14.7 In addition, the Company will process personal data about the
Employee’s dependants, relatives and friends for the following
purposes: (i) for emergency contact; and (ii) medical, life and
travel insurance contracts and other plans granted by the
Company. The personal data of such persons designated by the
Employee as the Employee’s beneficiaries of the life insurance
and other plans granted by the Company may be made
available to companies for contact purposes in case of death of
the Employee. By signing this Agreement, the Employee
confirms that those persons are aware that the Employee has
provided the Employee’s data to the Company and furthermore
that the Employee consents to the Company storing,
transferring (where necessary) and using the Employee’s data
for the purposes for which the Employee provided such data.
15.
15.
EXTINCIÓN DEL CONTRATO
15.1 La extinción del Contrato por cualquier causa se regulará de acuerdo
con los términos y las condiciones establecidos por la legislación
española aplicable.
15
TERMINATION
15.1 Termination of the Agreement for any cause will be governed
by the terms and conditions set forth by applicable Spanish
law.
15.2 La dimisión voluntaria de la Empleada requerirá un periodo de
preaviso de seis (6) meses. En el supuesto de que la Empleada
incumpla el periodo de preaviso estipulado, la Empleada se
compromete a abonar a la Compañía una compensación equivalente
a un día de salario por cada día de preaviso omitido. La Empleada
autoriza expresamente a la Compañía para que deduzca dicha
compensación del importe de su liquidación final de haberes.
15.2 The Employee’s voluntary resignation shall require a notice
period of six (6) months In the event the Employee fails to
provide the stipulated notice, the Employee agrees to pay the
Company compensation in an amount equal to one day of
salary per each day of notice period omitted. The Employee
expressly agrees and accepts that the Company may deduct
said compensation from the Employee’s final liquidation
payment.
15.3 En el momento de la extinción del Contrato de trabajo, la Empleada
deberá devolver inmediatamente a la Compañía todos los objetos
pertenecientes a la misma y/o a su matriz u otras Compañías
relacionadas con la Compañía, que todavía mantenga en su poder,
así como toda la documentación correspondiente a asuntos de las
mencionadas compañías, incluyendo, sin limitación: hardware,
software, discos magnéticos, llaves, tarjetas de crédito, bocetos,
muestras, notas, impresos, borradores (independiente-mente de
cómo hayan sido almacenados), así como todas las copias y otros
documentos incluidas copias a carbón. La Empleada no tendrá
derecho a retener estos objetos y documentos.
15.3 Upon termination of this Agreement, the Employee shall
immediately return to the Company in their entirety, all objects
belonging to the Company and/or a Group Company that are
still in the Employee’s possession, as well as all documents
concerning matters of the aforementioned companies,
including without limitation, hardware, software, magnetic
discs, keys, credit cards, sketches, samples, printed matter,
notes, drafts, and other documents (whatever the medium of
storing such information), as well as all copies including
carbon copies. The Employee has no right to withhold such
objects and documents.
15.4 Asimismo, en el momento de la extinción del Contrato de trabajo, la
Empleada deberá borrar de forma inmediata e irreversible, cualquier
información relativa a la actividad de la Compañía que tuviese
almacenada en cualquier disco o memoria magnética u óptica, así
como todo tipo de materiales que se encuentren bajo su posesión,
custodia, cuidado o control, fuera de las dependencias de la
Compañía y que, por no estar contenidos en un soporte físico, no
pueda devolver o almacenar en los equipos de la Compañía, y
acreditará el cumplimiento de la referida obligación en caso de ser
requerido para ello por la Compañía.
15.4 Additionally, upon termination of this Agreement, the
Employee shall immediately and irretrievably delete any
information relating to the business of the Company stored on
any magnetic or optical disc or memory and all matter derived
therefrom that is in the Employee’s possession, custody, care
or control outside the premises of the Company and that is not
in a physical form capable of being returned to the Company
or stored on Company equipment such as a laptop computer,
and shall produce such evidence of compliance with this
obligation as the Company may require.
16
15.5 El incumplimiento de estas obligaciones asumidas por la Empleada a
la fecha de extinción del Contrato dará lugar a las responsabilidades
legales pertinentes.
15.5 Breach of these obligations upon termination of this
Agreement shall give rise to the corresponding legal
responsibilities.
16.
16.
OTROS ACUERDOS
OTHER AGREEMENTS
16.1 La Empleada manifiesta expresamente que no existe contrato ni
acuerdo alguno que pudiera impedir o dificultar su prestación de
servicios a la Compañía a tiempo completo. La validez del presente
Contrato se encuentra condicionada a la capacidad de la Empleada
para trabajar sin infringir ningún pacto de no competencia o
cualesquiera pactos o contratos similares.
16.1 The Employee hereby declares that no contract or agreement
currently exists that would prevent the Employee from or
interfere with the Employee’s rendering of services to the
Company on a full time basis. This Agreement is conditional
upon the Employee’s ability to perform the Employee’s
services without infringing any no compete covenant or similar
covenants and/or agreements.
16.2 La Empleada reconoce y acepta que no usará o revelará
conscientemente información confidencial, concerniente al negocio
o secretos industriales, o secretos comerciales obtenidos como
consecuencia de su previa prestación de servicios para el anterior
empleador, salvo que fuera expresamente autorizado para ello, por
su(s) previos empleador(es). La Empleada debe entender que esta
provisión de este Contrato debe ser considerada como una
instrucción expresa de la Compañía para que no use o revele esta
información, en infracción o violación, de las garantías y acuerdos
de la Empleada.
16.2 The Employee further represents and agrees that the Employee
will not knowingly use or otherwise disclose any confidential,
business and proprietary or trade secret information obtained
as a result of any prior employment, unless specifically
authorized to do so by the Employee’s former employer(s).
The Employee should clearly understand that this provision
should be regarded as this Company’s explicit instruction for
the Employee not to use or disclose this information in breach
and / or violation of the Employee’s representations and
agreement.
17.
17.
NULIDAD PARCIAL
17.1 En el supuesto de que, por cualquier razón, alguna o algunas de las
cláusulas del presente Contrato resultasen inaplicables en el futuro,
la invalidez repercutirá exclusivamente sobre la cláusula en cuestión,
siendo plenamente válido el resto del Contrato.
17
SEVERABILITY
17.1 In the event that, for any reason, any one or more provisions of
this Agreement are found to be unenforceable in the future, the
remainder of this Agreement shall remain fully valid and
enforceable.
18.
ÚNICO CONTRATO
18.
ENTIRE AGREEMENT
18.1 El presente Contrato sustituye a cualesquiera cartas de oferta,
acuerdos o comunicaciones anteriores, ya sean verbales o escritos en
relación con todas y cada una de las relaciones contractuales
existentes o que hubiesen existido entre las partes (incluyendo con
otras compañías del grupo American Eagle Outfitters), y constituye
el único contrato válido existente entre las partes. Para la validez de
cualquier modificación del presente Contrato, ésta deberá constar
por escrito en el mismo, junto con las firmas tanto de la Empleada
como de la Compañía.
18.1 This Agreement supersedes any prior offer letters, agreements,
communications, whether oral or written with respect to any
and all prior or existing contractual relationships between the
parties (including with other companies of the American Eagle
Outfitters company group), and constitutes the only valid
agreement existing between the parties. In order for any
modification to this Agreement to be valid, it must be made in
writing in the same and must be signed by both the Employee
and the Company.
19.
19.
NORMAS LABORALES
LABOUR RULES
19.1 En todo lo no pactado en el presente Contrato, se estará a lo
establecido en el Estatuto de los Trabajadores y el Comercio Textil.
19.1 Any and all aspects not addressed in this Agreement shall be
governed by the Spanish Labour Act and the Textile Industry
Commerce CBA.
20.
20.
IDIOMA
LANGUAGE
20.1 Este Contrato se ha firmado en inglés y en español. En el supuesto
de que surja alguna discrepancia entre ambas versiones, prevalecerá
la versión en español.
20.1 This Agreement has been signed in both English and Spanish.
In the event any discrepancies should arise between the two
versions, the Spanish version shall prevail.
21.
21.
SEGURIDAD Y SALUD
HEALTH AND SAFETY REGULATIONS
21.1 La Compañía, en cumplimiento de la normativa existente sobre
seguridad y salud laboral, realizará la evaluación genérica de los
riesgos potenciales de la prestación de los servicios de la Empleada.
Esta evaluación, o cualquiera que pudiera ser preceptiva por Ley,
será realizada por la compañía que tiene contratada la Compañía a
estos fines.
21.1 In compliance with current regulations governing health and
safety in the workplace, the Company shall make a general
assessment of the potential risks involved in the performance
of the Employee’s duties. This assessment, or any other
required by law, shall be carried out through a company
contracted by the Company to evaluate health and safety risks
in the workplace.
21.2 La Empleada deberá prestar su absoluta colaboración en todo
aspecto que fuere necesario, en relación con la prevención de los
riesgos laborales, debiendo recibir la formación necesaria, en su
caso, y seguir las instrucciones que en materia de seguridad laboral
dictase la Compañía de acuerdo con la normativa vigente,
obligándose ésta al pago de cualquier gasto en que deba incurrir la
Empleada para su cumplimiento.
21.2 The Employee must fully cooperate whenever necessary in all
matters related to occupational hazard prevention and shall
receive the necessary training, as applicable, and observe the
instructions on health and safety in the workplace given by the
Company, in accordance with the applicable legislation. The
Company shall be responsible for all expenses incurred by the
Employee as a result of the Employee’s compliance with the
above.
18
22.
HERRAMIENTAS DE TRABAJO
22.
WORKING EQUIPMENT
22.1 Para la prestación de los servicios, la Compañía entregará a la
Empleada herramientas y equipos tales como un ordenador portátil y
un teléfono móvil propiedad de la Compañía, suficientes para la
correcta realización de los cometidos que tiene asignados la
Empleada, comprometiéndose la Empleada a mantener dicho
equipamiento en perfecto estado, según su uso y vida útil.
22.1 For the Employee to render services, the Company shall
provide the Employee with equipment and tools such as a
laptop and mobile phone which shall be the property of the
Company, so that the Employee may adequately provide the
Employee’s assigned duties. The Employee shall ensure that
such equipment is kept in a good condition taking into account
ordinary wear and tear.
22.2 Las partes acuerdan que, en caso de extinción del Contrato de
trabajo, suspensión del mismo, o causa de excedencia o enfermedad
de una duración superior a cuarenta y cinco (45) días, la Empleada
deberá devolver a la Compañía las herramientas de trabajo descritas
anteriormente en un plazo no superior a veinticuatro (24) horas
desde la fecha de la mencionada extinción o suspensión, o desde que
la excedencia o enfermedad supere los cuarenta y cinco (45) días, en
su caso.
22.2 The parties agree that in the event of the termination or
suspension of the Employee’s employment contract or a period
of leave of absence or illness exceeding forty-five (45) days,
the Employee shall return the aforementioned equipment to the
Company, within a maximum term of twenty-four (24) hours
as of the date of such termination or suspension, or as of the
date upon which the leave of absence or illness exceeds fortyfive (45) days, as the case may be.
22.3 Las reparaciones que pudieran necesitar los equipamientos que la
Compañía cede a la Empleada, serán por cuenta y cargo de la
Compañía, siempre que las mismas no se deriven de usos no
permitidos a la Empleada, debiendo la Empleada notificar a ésta
cualquier incidencia o desperfecto que sufrieran las citadas
herramientas en el momento de su detección.
22.3 The cost of any necessary repairs to the equipment provided by
the Company to the Employee shall be paid by the Company,
provided such repairs are not due to the Employee’s misuse of
said equipment, and the Employee shall immediately notify the
Company of all incidents or damage thereto.
22.4 En el supuesto que la Empleada necesitase algún equipamiento
adicional, deberá realizar una petición a la Compañía, que será
analizada según la política interna de la misma.
22.4 In the event that the Employee needs any additional
equipment, the Employee shall make a request to the
Company, which shall be reviewed in accordance with the
Company’s internal policy..
19
22.5 La Empleada usará el sistema informático únicamente para fines
relacionados con la actividad de la Compañía y su trabajo en la
misma. Sin perjuicio de lo establecido en el siguiente apartado, se
permite un uso personal moderado de las herramientas para fines
distintos de los mencionados.
22.5 The Employee shall use the referred computer equipment
solely for purposes related to the Company’s business and the
Employee’s work. Without prejudice of the next paragraph, the
Employee is authorized to moderately use the equipment for
personal purposes.
22.6 La Empleada, con la firma del presente Contrato, reconoce que todos
los archivos, informes, correspondencia vía e-mail, software y, en
general, cualesquiera otros datos o información de cualquier tipo que
hayan sido generados o se encuentren en el sistema informático son
propiedad de la Compañía y podrán ser usados por la misma para
cualquier propósito dentro de los límites legalmente permitidos, y
autoriza expresamente a la Compañía para acceder a la información
referida.
22.6 By signing this agreement, the Employee acknowledges that
the files, reports, e-mail correspondence, software, and in
general, any other data or information of any nature
whatsoever created or filed on the Employee’s computer
system belong to the Company and may be used by the
Company for any legal purpose, and expressly authorizes the
Company to access such information.
22.7 La Compañía tendrá el derecho de requerir a la Empleada, la puesta
a disposición inmediata del equipamiento de su propiedad, siempre y
cuando no perjudique el cumplimiento efectivo de sus obligaciones
contractuales.
22.7 The Company shall be entitled to request that the Employee
immediately return said Company equipment, provided it does
not hinder the effective fulfillment by the Employee of the
Employee’s contractual obligations.
24.
24.
OBLIGACIONES ADICIONALES DE LAS PARTES
Las partes establecen, como obligaciones adicionales a las generales
establecidas en la normativa laboral, las siguientes:
ADDITIONAL OBLIGATIONS
In addition to those obligations of a general nature set forth by
employment law, the parties establish the following
obligations:
24.1 Para la Empleada:
24.1 For the Employee:
a.
a
Para preservar la garantía y conservación de la información
propiedad de la Compañía, la Empleada, deberá realizar copias de
seguridad (back-up) de la información contenida en los archivos de
los equipos propiedad de la Compañía con la periodicidad y con el
procedimiento, que sea establecido en su momento. De este mismo
modo, la Compañía podrá acceder a los archivos existentes en su red
informática interna, aún cuando éstos se encuentren físicamente en
el terminal de la Empleada.
20
In order to ensure the security of the information belonging to
the Company, the Employee must keep back-up copies of
information held on the files stored on the Company’s
equipment, at the intervals and according to the procedure
established at any given time. Similarly, the Company may
access the files existing on its internal network, even though
they are physically recorded on the Employee’s terminal.
b.
La Empleada deberá observar todas las normas internas de
procedimiento y actuación que sean dictadas por la Compañía en su
debido momento, de las que deberá ser previamente informado con
claridad, precisión y antelación suficiente.
b.
The Employee shall comply with all internal rules on
procedure and conduct duly issued by the Company, and
which must be notified to the Employee in advance, with
sufficient clarity and accuracy.
c.
Las evaluaciones del desempeño tendrán generalmente lugar en
Marzo. La Empleada podrá tener derecho a recibir la primera
evaluación para un incremento salarial por mérito en la primavera de
2015.
c.
Performance appraisals generally take place in March. The
Employee will be eligible to receive the Employee’s first
evaluation for merit consideration in Spring, 2015.
24.2 Para la Compañía:
24.2 For the Company:
a.
La Compañía deberá asistir a la Empleada con todos los medios
necesarios para llevar a cabo la efectiva prestación de los servicios
objeto del presente Contrato.
a.
The Company shall make every effort to assist the Employee
so that the Employee may effectively provide the services
covered under this agreement.
b.
Todos los gastos de mantenimiento, así como los productos
consumibles del equipamiento telemático-informático (papel de
impresión, tóner de impresora....) serán reembolsados por la
Compañía, siempre previa aportación de la factura justificativa a
nombre de la Compañía de conformidad con lo previsto en la
Política de Gastos de la Compañía.
b.
Any maintenance expenses, and/or materials necessary for the
functioning of the computer equipment (paper for the printer,
toner ….) shall be reimbursed by the Company, provided the
Employee provides the relevant invoice issued in the name of
the Company in adherence with the Company Expense Policy.
25.
NO INDUCCIÓN Y NO COMPETENCIA POST
CONTRACTUAL
25.
NON SOLICITATION AND POST CONTRACTUAL
NON COMPETITION
25.1 En base a la naturaleza de las funciones que debe realizar la
Empleada y que son objeto del presente Contrato, y debido a las
circunstancias especiales del sector en el que opera la Compañía,
ambas partes acuerdan que la Empleada no podrá, durante la
vigencia de este Contrato y
25.1 Due to the nature of the duties to be performed under this
Agreement, and due to the special circumstances of the
Company within the sector in which it operates, both parties
agree that the Employee shall not, during the term of this
Agreement and for the duration of the post
21
durante el plazo de vigencia de las restricciones post contractuales
establecidas en la presente Cláusula, prestar servicios directa o
indirectamente como empleado, contratista independiente, directivo,
administrador, accionista, prestamista, representante de ventas u
otros a cualquier empresa o negocio que compita directamente con la
Compañía en España.
De conformidad con lo anterior, producida la extinción del Contrato
de Trabajo, la Empleada no prestará sus servicios directa o
indirectamente para las siguientes compañías (incluyendo a título
enunciativo, no limitativo):
Gap, Old Navy, Abercrombie & Ftich, Hollister, Aeropostale,
Forever 21, Rue 21, Express, Buckle, Limited, Victorias Secret, VS
Pink, Pacific Sunwear, J.Crew, Banana Republic, Inditex, S.A., Fast
Retailing Co., Ltd, and H&M Hennes & Mauritz AB.
25.2 Asimismo, la Empleada acepta que durante el transcurso de la
relación laboral regulada en el presente Contrato y durante el plazo
de vigencia de las restricciones post contractuales establecidas en la
presente Cláusula, no podrá, ni por cuenta propia ni en
representación de otra persona, entidad, compañía o organización, ya
sea directa o indirectamente, desvincular o tratar de desvincular de la
Compañía a ninguna persona, entidad o compañía que, en la fecha
de extinción del presente Contrato, sea un cliente actual o potencial
de la Compañía, o un empleado de ésta. Adicionalmente, la
Empleada no podrá interferir en la actividad de suministro de
productos o de prestación de servicios a la Compañía que desarrolle
cualquiera de sus proveedores, ni inducir a éstos para que cesen o
pongan fin a dicha actividad en el futuro.
22
contractual non-compete restrictions agreed under this Clause,
render services directly or indirectly as an employee,
independent contractor, officer, director, shareholder, lender,
sales representative or otherwise, to any company or business
competing directly with the Company in Spain.
In light with the above, upon termination of the Employment
Contract, the Employee would not provide directly or
indirectly her services for the following companies (including
by not limited to):
Gap, Old Navy, Abercrombie & Ftich, Hollister, Aeropostale,
Forever 21, Rue 21, Express, Buckle, Limited, Victorias
Secret, VS Pink, Pacific Sunwear, J.Crew, Banana Republic,
Inditex, S.A., Fast Retailing Co., Ltd, and H&M Hennes &
Mauritz AB.
25.2 Likewise, the Employee hereby agrees that during the
Employee’s employment term hereunder and for the duration
of the post contractual no compete restrictions agreed under
this Clause, for whatever reason, the Employee shall not, either
on the Employee’s own account or on behalf of any other
person, firm, company or organization, directly or indirectly,
solicit or endeavor to entice away from the Company any
person, firm or company who is at the date of termination of
this Agreement, an existing or prospective client of the
Company, or an employee of the Company. In addition, the
Employee shall not interfere with the supply of goods or
services to the Company from any supplier, or induce any
supplier to the Company to cease or decline to supply such
goods or services in the future.
25.3 Las obligaciones previstas en la presente Cláusula permanecerán
vigentes durante el plazo de 12 meses en relación con la obligación
de no competencia postcontractual y 18 meses la de no solicitación
años a contar desde la extinción del presente Contrato, cualquiera
que sea la causa de extinción del mismo.
25.3 The post-contractual duties provided in this Clause shall be
applicable for a period of up to a maximum of 12 months for
non-competition and 18 months for non-solicitation as from
the date this Agreement is terminated, regardless of the reason
for the termination.
25.4 La Empleada, por cada mes de vigencia que dicha obligación de no
competencia post contractual sea efectiva (12 meses tras la extinción
del contrato de trabajo), percibirá una cantidad equivalente al 100%
del salario fijo mensual bruto que viniera percibiendo al momento de
la extinción del Contrato.
25.4 The Employee shall, for each month that the non-competition
obligation is in force (i.e. 12 as from the termination of the
employment contract), receive an amount equal to 100% of the
monthly gross fixed salary that the Employee was receiving at
the time the Agreement is terminated.
25.5 Si la Empleada incumpliera las obligaciones establecidas en la
presente Cláusula, éste deberá devolver a la Compañía la
compensación abonada, además de las cantidades que se pudieran
derivar de los daños y perjuicios ocasionados, y que serán
establecidos por la jurisdicción competente. Adicionalmente, la
Compañía dejará de abonar inmediatamente a la Empleada la
compensación pactada en esta Cláusula.
25.5 If the Employee fails to comply with these obligations, the
Employee shall return any compensation paid by the
Company, as well as any amounts which could result from the
damages caused, which shall be established by the courts of
law. In addition, the Company will immediately cease paying
the Employee the compensation agreed under this Clause.
LA EMPLEADA DECLARA HABER LEÍDO EL PRESENTE
ACUERDO, COMPRENDER SU CONTENIDO Y ACEPTARLO
EN SU INTEGRIDAD, NO TENIENDO RESERVA ALGUNA AL
RESPECTO.
THE EMPLOYEE EXPRESSLY DECLARES THAT THE
EMPLOYEE HAS READ THIS AGREEMENT,
ACKNOWLEDGES ITS CONTENT AND ACCEPTS IT
COMPLETELY WITH NO RESERVATIONS ABOUT IT.
IN WITNESS WHEREOF, the parties sign this Agreement in
triplicate and to one effect in the place and the date here-above
mentioned.
En cuyos términos ambas partes contratantes firman el presente
Contrato por triplicado a un solo efecto en la ciudad y fecha arriba
indicados.
23
LA COMPAÑÍA
Fdo. Jay Schottenstein, Chief Executive Officer
/s/ Jay L. Schottenstein
THE COMPANY
By: Jay Schottenstein, Chief Executive Officer
1/29/14
Date
LA EMPLEADA
Fdo. Dª. Marie Castellvi Depee
/s/ Marie Castellvi Depee
THE EMPLOYEE
Marie Castellvi Depee
1/29/14
Date
24
Exhibit 10.25
January 24, 2014
Marie Castellvi
Carrer del Bosc 6
Els Cards
08812 San Perdro de Ribes
Barcelona Spain
Re:
Stock-Based Awards of American Eagle Outfitters, Inc. (the “Company”)
Dear Marie:
We are pleased to inform you that, should you join the Company group, you will be eligible to receive certain equity awards from the
Company, as described below. The awards will be granted under, and subject to the terms and conditions of, the American Eagle Outfitters, Inc.
2005 Stock Award and Incentive Plan, as amended on June 16, 2009 (the “Plan”), as well as the terms and conditions of the applicable award
agreement, which will be provided to you as soon as practicable after the grant date and which you will be required to sign or otherwise accept in
accordance with the Company’s acceptance procedures.
Restricted Stock Units : In the Spring of fiscal year 2014, you will be eligible for consideration for a Restricted Stock Unit (RSU) award.
The RSU award will have an expected value of US $135,000 as of the grant date (but will be pro-rated if you join the Company group after the
Company’s annual grant date). This means that the number of shares subject to the RSU award will be calculated by dividing the award value of
US $135,000 (or the pro-rated amount, if applicable) by the closing price of a share of the Company’s common stock on the actual grant date.
Accordingly, the number of shares subject to the RSU award will not be determined until the actual grant date. In addition, because the price of
the Company’s common stock fluctuates, we cannot predict the value of the RSU award after the grant date. The RSU award will vest
proportionally over three years from the grant date subject solely to your continued service with the Company group over that period.
Performance Share Plan : In the Spring of fiscal year 2014, you will be eligible for consideration for a Performance Share Plan (PS)
award under the Company Long-Term Restricted Stock Unit Incentive Plan. The grant will have an expected target value of US $315,000 (but
will be pro-rated if you join the Company group after the Company’s annual grant date). This means that the target number of shares subject to
the PS award will be calculated by dividing the award value of US $315,000 (or the pro-rated amount, if applicable) by the closing price of a
share of the Company’s common stock on the actual grant date. Accordingly, the target number of shares subject to the PS award will not be
determined until the actual grant date. In addition, because the price of the Company’s common stock fluctuates, we cannot predict the value of
the PS award after the grant date.
In addition, you will be eligible for consideration for a PS award upon your start date. The grant will have an expected value of -the US$
equivalent of 400,000 Euro as of the grant date. This means that the target number of shares subject to the PS award will be calculated by
dividing the award value of the US$ equivalent of 400,000 Euro by the closing price of a share of
the Company’s common stock on the grant date. Accordingly, the target number of shares subject to the PS award will not be determined until
the grant date. In addition, because the price of the Company’s common stock fluctuates, we cannot predict the value of the PS award after the
grant date.
Vesting of the PS awards will be contingent upon the achievement of Company performance goals for a given 3-year period. Based upon
Company performance, the units will vest at the end of the 3-year period. The actual number of units vested will be based upon a sliding
performance scale, varying between 0-150% of the target award. Shares not vested will be forfeited.
Furthermore, in its discretion, the Company may impose a different vesting schedule for the RSU and/or PS awards if it determines that a
different vesting schedule may be required or recommended to comply with local law or be advisable to take advantage of any favorable tax
regime available in your country or in any country to which you may relocate after grant of the RSU or PS awards.
Upon a Change in Control event (as such term will be defined in the award agreement but which generally refers to an event where control
over the Company is assumed by another company), the treatment of any unvested RSU and PS awards will be as set forth in the applicable
award agreement.
Please note that the Company can make the RSU and PS awards to you only if and as long as it is permitted and feasible under the laws of
the country in which you reside and/or work or to which laws you may be subject during the life of the award. If local laws make the RSU or PS
awards illegal or impractical, the Company will let you know as soon as possible.
Furthermore, you should know that the RSU and PS awards and any shares acquired pursuant to the awards are an additional benefit that
may be given to you by the Company and not by your employer or any other subsidiary or affiliate of the Company. Therefore, the RSU and PS
awards and any shares acquired pursuant to the awards are not part of your employment relationship with your employer and are completely
separate from your salary or any other remuneration or benefits provided to you by your employer. This means that any gain you realize from the
RSU or PS awards will not be included if or when any benefits that you may receive from your employer are calculated, including but not
limited to bonuses, severance payments or similar termination compensation or indemnity, payments during a notice period or payments in lieu
of notice.
If RSU or PS awards are granted to you, you will be responsible for complying with any applicable legal requirements in connection with
your participation in the Plan and for any tax or social insurance contribution obligations arising from the awards and the shares received
pursuant to the awards, including any employer obligations that the Company has determined may legally be transferred to you and regardless of
any tax and social insurance contribution withholding and/or reporting obligation of the Company, your employer or any other subsidiary of the
Company. You agree that if the RSU or PS awards are granted to you, your employer may report or withhold taxes as may be required under the
laws of the jurisdiction in which you reside and/or work or to which laws you may be subject during the life of the award . You agree to seek
advice from your personal accountant or tax advisor at your own expense regarding the tax implications of any awards granted to you.
2
The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic
means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic
system established and maintained by the Company or a third party designated by the Company.
You understand that, in order for the Company to administer the awards, the Company and your employer must collect, process and
transfer certain of your personal data. By signing this letter, you agree to the collection, processing and transfer of your personal data, as
described in the attached appendix.
Finally, all disputes arising under or relating to the RSU or PS awards and/or the provisions of this letter shall be governed by and
construed in accordance with the laws of the state of Delaware, U.S.A. (without giving effect to principles of conflicts of law). For purposes of
litigating any dispute that arises directly or indirectly from the RSU or PS awards and/or the provisions of this letter, you and the Company
hereby submit to and consent to the exclusive jurisdiction of the state of Pennsylvania, U.S.A. and agree that such litigation shall be conducted
only in the courts of Allegheny County, Pennsylvania, or the federal courts for the United States for the District of Columbia, and no other
courts.
Sincerely,
American Eagle Outfitters, Inc.
By
Jay Schottenstein
Chief Executive Officer
ACKNOWLEDGED AND AGREED:
/s/ Marie Castellvi
Marie Castellvi
1/29/14
Date
3
APPENDIX
By signing the letter to which this appendix is attached, you agree to the additional terms and conditions set forth in this appendix. Capitalized
terms used in this appendix shall have the meaning ascribed to such terms in the letter.
You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data
by and among, as applicable, the Company your employer and the Company’s other subsidiaries and affiliates for the exclusive purpose of
implementing, administering and managing your participation in the Plan.
You understand that the Company, your employer and the Company’s other subsidiaries and affiliates may hold certain personal
information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number
or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSU or
PS awards or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in your favor (“Data”),
for the exclusive purpose of implementing, administering and managing the Plan.
You understand that Data may be transferred to a broker or other stock plan service provider, which may be assisting the Company
(presently or in the future) with the implementation, administration and management of the Plan. You understand that the recipients of the
Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data
privacy laws and protections than your country. You understand that if you reside outside the United States, you may request a list with the
names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize the
Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and
managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing,
administering and managing your participation in the Plan. You understand that Data will be held only as long as is necessary to implement,
administer and manage your participation in the Plan. You understand that if you reside outside the United States, you may, at any time,
view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or
withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. Further, you
understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your
consent, your employment status or service and career with your employer will not be adversely affected; the only adverse consequence of
refusing or withdrawing your consent is that the Company may not be able to grant awards to you or administer or maintain such awards.
Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more
information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local
human resources representative.
4
Exhibit 10.26
June 25, 2010
Jennifer Foyle
1 Hudson Street, Apt 6
New York, NY 10013
Dear Jennifer,
I am pleased to offer you the position with American Eagle Outfitters, Inc. or one of its subsidiaries or affiliates (collectively, the “Company”) of
Senior Vice President / Chief Merchandising Officer—aerie, reporting to me, Roger Markfield, Vice Chairman / Executive Creative Director,
initially responsible for planning, merchandising and design for the aerie brand. The following summarizes your total compensation package,
including our Benefits Program, which proudly reflects the value we place on our Associate family.
Title : Senior Vice President / Chief Merchandising Officer—aerie
Salary : $500,000
Sign-on Bonus: A one time cash bonus of $125,000 will be paid within your first month of employment and is subject to our repayment
agreement. This bonus will be paid in lieu of any incentive bonus payment for Fiscal 2010.
Annual Incentive Compensation Bonus : You will be eligible to earn an incentive compensation bonus of 50% (Target) of your salary equal to
$250,000 with a maximum up to 100% equal to $500,000. You will first be eligible to receive this bonus in Spring, 2012 based upon the
achievement of Company and Brand (where applicable) financial performance based goals to be established by the Compensation Committee of
the Board of Directors. Spring, 2012 bonus will be based on a percentage of your actual wages earned during our 2011 fiscal year. For Fiscal
2010, your sign-on bonus will replace your Target level incentive compensation bonus, however, if Company and brand performance for Fiscal
2010 exceed Target level, then you shall receive the amount of your incentive compensation bonus above the Target level, pro-rated based on
your actual salary earned during Fiscal 2010.
Stock Options : You will be eligible for consideration for a Stock Option award on the first business day of the fiscal quarter following your
first day of active employment. The grant will have a value of $99,167. The grant price will be the closing price of AEO common stock on the
grant date. For example, at a stock price of $14.00 and the current accounting value for stock options (30.45%), you would receive options for
23,262 shares at that price. The exercise price and number of shares will fluctuate based on the stock price at the grant date and the accounting
value used will change from time to time, but the overall grant value will remain constant. The shares will be part of the grant made by the
Compensation Committee pursuant to and subject to all the terms and conditions set forth in the Company’s 2005 Amended Stock Award and
Incentive Plan (“the 2005A Plan”). The stock options will vest proportionally over three years, subject to your continued employment with the
company.
Restricted Stock Units: You will be eligible for consideration for a Restricted Stock Unit award (RSU) on your first day of active employment.
The grant will have a value of $65,333. The grant price will be the closing price of AEO common stock on the grant date. This number of units
can fluctuate based on the stock price at the grant date, but the overall grant value will remain constant. The units will be a part of the grant made
by the Compensation Committee pursuant to and subject to all terms and conditions set forth in the Company’s 2005A Plan.
If Company performance meets or exceeds certain targets for FY2010; the entire RSU grant may vest upon certification of 2010 performance.
The Committee must verify that the performance goals and other material terms are met prior to vesting. However, if the performance goals are
not met, then the RSU grant will vest proportionally over three years from the grant date. It is the parties’ intention that the 2005A Plan be
adopted and administered in a manner that enables the Company to deduct for federal income tax purposes the full value of all RSU grants.
Performance Share Plan : You will be eligible for consideration for a Performance Share Plan award under the Company Long-Term
Restricted Stock Unit Incentive Plan on your first day of active employment. The grant will have a target value of $61,250. For example, at a
stock price of $14.00, you would receive 4,375 units. The number of units can fluctuate based on the stock price at the grant date, but the overall
value will remain constant. Vesting of the RSU will be contingent upon the achievement of Company performance goals for a given 3-year
period. Based upon Company performance, the units will vest at the end of the 3-year period. The actual number of units vested will be based
upon a sliding performance scale, varying between 0-150% of the target award. Shares not vested will be forfeited. The units will be part of the
grant made by the Compensation Committee pursuant to and subject to all terms and conditions set forth in the Company’s 2005A Plan. It is the
parties’ intention that the 2005A Plan be adopted and administered in a manner that enables the Company to deduct for federal income tax
purposes the full value of all RSU grants.
Deferred Compensation Plan : You will be eligible to start contributing for calendar year 2010. You may select a percent amount of your
before-tax salary and, in future years, your bonus to contribute. This plan provides you with an additional savings vehicle and allows scheduled
withdrawals without early withdrawal penalties in accordance with its terms.
Performance Review : Annual performance appraisals take place in March. You will receive your first evaluation for merit consideration in
March, 2011 with a retro-active effective date to the beginning of the 2011 fiscal year.
Employee Stock Purchase Plan : You will be eligible to start contributing on the first of the month following your 60 th day of employment.
You may contribute any dollar amount. AE will match up to $100 per pay period at 15% of your contribution (up to $15 per pay period). This
stock vests immediately!
401(k) Plan : You will be eligible to begin contributing on the first of the month following your 60th day of employment. AE Associates are
automatically enrolled at a 3% contribution rate. If you wish to decline enrollment or contribute at a different rate, you must contact The
Principal by the 20th of the month prior to your eligibility. Automatic increases will occur January 1st of every year after you are automatically
enrolled and will stop when you reach an elective deferral rate of six percent. AE will match on the first 6% of associate contributions after one
year of service with the following scale: 1-3% Associate contribution = 100% AE match; 4-6% Associate contribution = 50% AE match (i.e.,
you can contribute up to 6% and receive an AE match of 4.5%). In addition, AE Associates may contribute up to 30% of their annual earnings
up to the IRS annual allowable maximum. Associates are 100% vested in their employee contribution from day one and are 100% vested in the
employer match after two years.
Health Insurance : Medical, dental and vision coverage (if you elect to participate) will begin the pay period following your 60 th day of
employment. You can choose between our Aetna US Healthcare Open Choice PPO plan, Highmark Blue Cross Blue Shield PPO, or Highmark
High Deductible PPO Blue 3000. Dental coverage is provided by United Concordia and Vision coverage is provided by Ameritas Group. AEO
will reimburse you for 70% of the cost of COBRA insurance until AEO coverage begins.
Disability Insurance : You will be provided with Short-term and Long-term Disability after your 180 th day of employment at no cost to you in
accordance with the terms of our plans. Additional supplemental insurance is also available.
Life Insurance : You will be provided with Life Insurance at one times your annual salary after your 60 th day of employment at no cost to you.
Accidental Death & Dismemberment Insurance will also be provided after your 60 th day of employment at no cost to you. Also, you may
purchase supplemental dependent and spousal life insurance.
Paid Time Off (PTO) : You will accrue paid time off each pay period (every two weeks) to earn a maximum of 28 PTO days in your first year
of employment. You may begin to use your PTO days after 60 days of employment. Paid Time Off is inclusive of all personal, sick and vacation
days.
Associate Discount : You will receive 40% off regular price merchandise and 25% off sale merchandise.
At Will Employment : The Company is an “at will” employer. This means that you can terminate your employment at anytime and for any
reason and the Company can also terminate your employment at any time and for any reason. You will not receive any bonus or restricted stock
award if you are not employed on the payment or vesting date, and all unvested options will terminate.
Confidentiality, Non-competition and Intellectual Property Agreement : Your employment is conditioned upon your execution of the form
of Confidentiality, Non-Competition and Intellectual Property Agreement attached to this letter.
Third Party Confidential Information: The terms and conditions of your employment with the Company prohibit you from using or disclosing
any confidential or proprietary information of third parties, including your prior employers. In your employment with the Company, you are
expected to comply with any current contractual restrictions that prohibit either the misappropriation or disclosure of confidential and proprietary
information or the solicitation of employees.
References/Drug Screen : Your hiring and employment with American Eagle Outfitters are contingent upon successful completion of your
references and your submission to and passing of a pre-hire drug screen. If you begin work with American Eagle before your references are
checked and/or before your drug screen occurs or American Eagle has received its results, and if either your reference check results are
unacceptable or you refuse to submit to or fail to pass your pre-hire drug screen requirement, your contingent employment will be terminated.
Future Compensation : The compensation package outlined here is based on current American Eagle benefits and compensation policies and
practices. Your compensation and benefits levels are subject to change by the Company in the future.
We very much look forward to you becoming a member of our team at American Eagle Outfitters. Please sign and date one copy of this and
return it to us to verify your verbal acceptance. Because of your level within the Company, this offer is subject to approval by the Compensation
Committee, which we anticipate receiving shortly. Upon approval, we will send you a fully executed copy of this letter for your records. Please
let me know if you have any questions.
Sincerely,
/s/ Roger Markfield
Roger Markfield
Vice Chairman / Executive Creative Director
I have read and understand, and by my signature below agree to the terms and conditions of this offer letter:
/s/ Jennifer Foyle
Jennifer Foyle
June 28, 2010
Date
Exhibit 10.27
September 7, 2011
Simon Nankervis
13 Kitchener Street
Balwyn, Victoria, Australia 3103
Dear Simon,
I am pleased to offer you the position with American Eagle Outfitters, Inc., or one of its subsidiaries or affiliates (collectively, the “Company”)
of Vice President / Franchise Management & New Business Development, reporting to me, James O’Donnell, Chief Exeutive Officer. Your
employment with the Company will commence on October 1, 2011 (the “Start Date”). The following summarizes your total compensation
package, including our Benefits Program, which proudly reflects the value we place in our Associate family.
Title : Vice President / Franchise Management & New Business Development
Salary : Annual base salary = $375,000.
Visas : The proposed effective date of your Employment is October 1, 2011, or as soon thereafter as the Company receives the visas and/or work
permits required for you to lawfully reside and work in the United States. The Company will pay all costs associated with obtaining your visas
and/or work permits. For the avoidance of doubt, this employment offer is conditioned upon the Company’s receipt of visas and/or work
permits. In the event you are unable to obtain them, this employment offer will be automatically rescinded. You are also required to maintain the
relevant visas and/or work permits in good standing at all times during your employment with the Company.
Sign-on Bonus : You are eligible to receive a $50,000 sign-on bonus. You will be required to adhere to the attached Bonus Repayment
Agreement.
Annual Incentive Compensation Bonus : You will be eligible to earn an incentive compensation bonus of 40% (Target) of your salary equal to
$150,000 with a maximum up to 80% of your salary equal to $300,000. You will first be eligible to receive this bonus for the Company’s FY
2011 (to be paid in Spring, 2012) based upon the achievement of Company and Brand (where applicable) financial performance-based goals
established by the Compensation Committee of the Board of Directors (the “Compensation Committee”).
Restricted Stock Units : You will be eligible for consideration for a Restricted Stock Unit award (“RSU”) in Spring, 2012. The grant will have
a value of $150,000. The number of units subject to that award will be calculated by dividing $150,000 by the closing price of AEO common
stock on the grant date. This number of units can fluctuate based on the stock price at the grant date, but the overall grant value will remain
constant. The units will be a part of the grant made by the Compensation Committee pursuant to and subject to all terms and conditions set forth
in the Company’s 2005A Plan.
If Company performance meets or exceeds certain targets for FY 2012, the entire RSU grant will vest upon certification of FY 2012
performance. The Compensation Committee must verify that the performance goals and other material terms are met prior to vesting. However,
if the performance goals for FY 2012 are not met, then the RSU grant will vest proportionally over three years from the grant date based solely
on your continued service to the Company over that period.
S.Nankervis Offer Letter
September 7, 2011
Page 2 | P a g e
Performance Share Plan : You will be eligible for consideration for a Performance Share Plan award under the Company’s Long-Term
Restricted Stock Unit Incentive Plan (the “RSU Plan”) in Spring, 2012. The grant will have a target value of $66,000. The number of Restricted
Stock Units subject to this award will be calculated by dividing $66,000 by the closing price of AEO common stock on the grant date. This
number of units can fluctuate based on the stock price at the grant date, but the overall value will remain constant. Vesting of this RSU award
will be contingent upon the achievement of Company performance goals for a given 3-year period. Based upon Company performance, the units
will vest at the end of the 3-year period. The actual number of units vested will be based upon a sliding performance scale, varying between 0150% of the target award. Shares not vested at the end of the applicable 3-year period will be forfeited. The units will be part of the grant made
by the Compensation Committee pursuant to and subject to all terms and conditions set forth in the Company’s 2005A Plan.
Housing Allowance : For the first 12 months of employment, AEO will provide you with a monthly housing allowance. The housing allowance
will be $6,000/month net.
Taxes: You are responsible for all United States and Australian income and other tax liabilities (including, but not limited to, federal, state, local,
municipal and social taxes, as applicable) that arise during your employment. Since the tax regime in the United States may differ greatly from
Australian taxation, the Company will provide (at no cost to you) one arrival consultation with AEO’s designated tax assistance provider, to
discuss United States taxation applicable to your specific facts and circumstances and anticipated general aspects of Australian taxation of
Australian-source income received during the period of your United States employment. AEO’s designated tax assistance provider has offices in
Australia as well as the United States. It is suggested that the consultation occur prior to your relocation to the United States in case any potential
tax planning is desired before leaving Australia.
In addition, since the initial United States tax return may be complicated by multiple allowable filing positions in the year of US arrival, AEO’s
designed tax assistance provider is authorized to prepare the initial year (calendar year ended 2011) United States income tax returns (including
state and local, if applicable), at no cost to you. AEO’s designated tax assistance provided is also authorized to prepare your fiscal year
2011/2012 Australian income tax return, at no cost to you, due to Australian tax complexities that may arise due to your relocation to the United
States for employment. All information related to your income tax returns is kept confidential between you and AEO’s designated tax assistance
provider.
Similar to other US employees, you, and not AEO, will be required to prepare and file all global income tax returns not identified as authorized
to be prepared by AEO’s designated tax assistance provider, as may be required.
Deferred Compensation Plan : Upon eligibility, you may select a percent amount of your before-tax salary and, in future years, your bonus to
contribute a deferred compensation plan. This plan provides you with an additional savings vehicle and allows scheduled withdrawals without
early withdrawal penalties in accordance with its terms.
Performance Review : Annual performance appraisals take place in March. You will receive your first evaluation for merit consideration in
March, 2012, with a retro-active effective date to the beginning of the 2012 fiscal year.
S.Nankervis Offer Letter
September 7, 2011
Page 3 | P a g e
401(k) Plan : You will be eligible to begin contributing on the first of the month following your 60th day of employment. The Company’s
Associates are automatically enrolled at a 3% contribution rate. If you wish to decline enrollment or contribute at a different rate, you must
contact The Principal by the 20th of the month prior to your eligibility. Automatic increases will occur January 1st of every year after you are
automatically enrolled and will stop when you reach an elective deferral rate of six percent. The Company will match on the first 6% of associate
contributions after one year of service with the following scale: 1-3% Associate contribution = 100% Company match; 4-6% Associate
contribution = 50% Company match (i.e., you can contribute up to 6% and receive a Company match of 4.5%). In addition, Company Associates
may contribute up to 30% of their annual earnings up to the IRS annual allowable maximum. Associates are 100% vested in their employee
contribution from day one and are 100% vested in the employer match after two years.
Health Insurance : Medical, dental and vision coverage (if you elect to participate) will begin the pay period following your 60 th day of
employment. You can choose between our Aetna US Healthcare Open Choice PPO plan, Highmark Blue Cross Blue Shield PPO, or Highmark
High Deductible PPO Blue 3000. Dental coverage is provided by United Concordia and Vision coverage is provided by Ameritas Group.
Disability Insurance : You will be provided with Short-term and Long-term Disability after your 180 th day of employment at no cost to you in
accordance with the terms of our plans. Additional supplemental insurance is also available.
Life Insurance : You will be provided with Life Insurance at one times your annual salary after your 60 th day of employment at no cost to you.
Accidental Death & Dismemberment Insurance will also be provided after your 60 th day of employment at no cost to you. Also, you may
purchase supplemental dependent and spousal life insurance.
Paid Time Off (PTO) : You will accrue paid time off each pay period (every two weeks) to earn a maximum of 28 PTO days in your first year
of employment; provided, however, that your paid time off will not be less than the amount of paid time off provided to the Company’s other
Senior Executives. You may begin to use your PTO days after 60 days of employment. Paid Time Off is inclusive of all personal, sick and
vacation days.
Associate Discount : You will receive 40% off regular price merchandise and 25% off sale merchandise.
Relocation : You will be eligible for a relocation package as outlined in the Company’s Relocation guide. You will be required to adhere to the
attached Relocation Payback Agreement. Please contact Michele Lindemann at 412-432-4553 once you accept this offer. (Specific details
enclosed).
At Will Employment : The Company is an “at will” employer. This means that you can terminate your employment at anytime and for any
reason and the Company can also terminate your employment at any time and for any reason. You will not receive any cash bonus or restricted
stock awards if you are not employed on the payment date (in the case of the cash bonus) or vesting date (in the case of a restricted stock unit
award), and all unvested options will terminate.
Confidentiality, Non-competition and Intellectual Property Agreement : Your employment and eligibility for a payout of a pro-rated award
under the Performance Share Plan (“RSU Plan”) after termination is conditioned upon your execution of the form of Confidentiality, NonCompetition and Intellectual Property Agreement included with this Offer Letter.
S.Nankervis Offer Letter
September 7, 2011
Page 4 | P a g e
Third Party Confidential Information : The terms and conditions of your employment with the Company prohibit you from using or
disclosing any confidential or proprietary information of third parties, including your prior employers. In your employment with the Company,
you are expected to comply with any current contractual restrictions that prohibit either the misappropriation or disclosure of confidential and
proprietary information or the solicitation of employees.
Background Screen : Your hiring and employment with the Company are contingent upon your submission to, and successful completion of, a
background screen. If you begin work with the Company before your background screen is completed, before the Company has received the
results, or if your results are unacceptable, your contingent employment may be terminated.
Future Compensation : The compensation package outlined herein is based on current Company benefits and compensation policies and
practices. Your compensation and benefits levels are subject to change by the Company in the future; provided, however, that such a change may
give rise to a separation for Good Reason.
Sincerely,
/s/ James O’Donnell
James O’Donnell
Chief Executive Officer
I have read and understand, and by my signature below agree to the terms and conditions of this offer letter:
/s/ Simon Nankervis
Simon Nankervis
September 9, 2011
Date
S.Nankervis Offer Letter
September 7, 2011
Page 5 | P a g e
AMERICAN EAGLE OUTFITTERS, INC.
Confidentiality, Non-Solicitation, Non-Competition And
Intellectual Property Agreement
As a new officer and/or employee of American Eagle Outfitters, Inc., or one of its subsidiaries or affiliates (collectively, the Company), the
undersigned will be placed or retained by the Company in a position of special trust and confidence, will be granted access to or may develop
trade secrets, intellectual property, and other confidential or proprietary information (“Confidential Information”) of the Company, and will be
authorized to communicate with customers, vendors, employees and others to develop good will for the Company.
NOW, THEREFORE, in recognition of the highly competitive nature of the business conducted by the Company and in exchange for and
in consideration of:
•
my employment with the Company;
•
the compensation and benefits provided pursuant the Offer Letter dated September 7, 2011, and
•
to be eligible to receive a pro-rated award under the Performance Share Plan (“RSU Plan”) after termination of my employment, based on
actual days worked and performance goals being met for the full period, but not an amount above the “target” award level,
I, Simon Nankervis, agree as follows:
1. I will at all times during and after my employment with the Company faithfully hold the Company’s Confidential Information in the
strictest confidence, and I will use my best efforts and diligence to guard against its disclosure to anyone other than as required in the
performance of my duties to the Company. I will not use Confidential Information for my own personal benefit or for the benefit of any
competitor or other person. I understand that Confidential Information includes all information and materials relating to Intellectual Property, as
defined below, the Company’s trade secrets and all information relating to the Company that the Company does not make available to the public.
By way of example, Confidential Information includes information about the Company’s products, designs, processes, systems, marketing,
promotional plans, technical procedures, strategies, costs, financial information, and many other types of information and materials. Upon
termination of my employment with the Company, regardless of the reason for such termination, I will return to the Company all computers,
data storage devices, documents and other materials of any kind that contain Confidential Information. I will not use any confidential
information of any third party, including any prior employer, in breach of a legal obligation to that third party in the course of my work for the
Company.
2. If I decide to resign my employment with the Company, I will provide the Company with thirty (30) days prior written notice.
3. If I leave the Company for any reason whatsoever, then for a period of eighteen (18) months after my separation from the Company, I
will not directly or indirectly solicit, induce or attempt to influence any associate to leave the employment of the Company, nor will I in any way
assist anyone else in doing so.
4. I agree that all inventions, designs and ideas conceived, produced, created, or reduced to practice, either solely or jointly with others,
during my employment with the Company, including those developed on my own time, which relate to or are useful in the Company’s business
(“Intellectual
S.Nankervis Offer Letter
September 7, 2011
Page 6 | P a g e
Property”) shall be owned solely by the Company. I understand that whether in preliminary or final form, such Intellectual Property includes, for
example, all ideas, inventions, discoveries, designs, innovations, improvements, trade secrets, and other intellectual property. All Intellectual
Property is either work made for hire for the Company within the meaning of the U. S. Copyright Act, or, if such Intellectual Property is
determined not to be work made for hire, then I irrevocably assign all right, title and interest in and to the Intellectual Property to the Company,
including all copyrights, patents, and/or trademarks. I will, without any additional consideration, execute all documents and take all other actions
needed to convey my complete ownership of the Intellectual Property to the Company so that the Company may own and protect such
Intellectual Property and obtain patent, copyright and trademark registrations for it. I agree that the Company may alter or modify the Intellectual
Property at the Company’s sole discretion, and I waive all right to claim or disclaim authorship. I represent and warrant that any Intellectual
Property that I assign to the Company, except as otherwise disclosed in writing at the time of assignment, will be my sole, exclusive, original
work. I have not previously invented any Intellectual Property or I have advised the Company in writing of any prior inventions or ideas.
5. If I leave the Company for any reason whatsoever, then for a period of twelve (12) months after my separation from the Company, I will
not, directly or indirectly, work for or contribute to the efforts of any business organization or entity that competes, or plans to compete, with the
Company or its products and services. I understand that the Company at its discretion may waive this provision or shorten the twelve month
period by giving me a written waiver. I also understand that the Company shall continue to pay me my base salary during the period I am
required not to work for a competitor, except that in no case will the Company pay me my base salary for any portion of the period that I am
employed or work for someone other than a competitor.
6. I understand and agree that if I breach any provision of this Agreement as determined in the sole discretion of the Company, then the
Company may refrain from paying to me my account balance under the RSU Plan, all of which I will forfeit in that event.
7. I understand and agree that the Company has the right to suspend or terminate the RSU Plan at any time in the future, provided that such
suspension or termination does not decrease the value of my then-current account balance.
8. I understand and agree that the Company is entitled, in addition to other remedies under this or any other Agreement related to my
employment, to obtain an injunction against any potential or actual violation of this Agreement. This Agreement is in addition to and does not
replace any other agreement between me and the Company relating to the subject matter hereof, and I acknowledge that the Company is entitled
to enforce any such other agreement in addition to the provisions of this Agreement.
9. This Agreement cannot be changed in any way unless the Company agrees in writing. This Agreement will be governed by and
interpreted in accordance with Pennsylvania law.
S.Nankervis Offer Letter
September 7, 2011
Page 7 | P a g e
American Eagle Outfitters, Inc.
Date:
September 9, 2011
Date:
September 9, 2011
By:
/s/ James O’Donnell
(American Eagle Outfitters, Inc. Representative)
Title: Chief Executive Officer
/s/ Simon Nankervis
Simon Nankervis
Exhibit 21
Subsidiaries
American Eagle Outfitters, Inc., a Delaware Corporation, has the following wholly owned subsidiaries:
AE Admin Services Co LLC, a Ohio Limited Liability Company
AE Corporate Services Co., a Delaware Corporation
AE Direct Co. LLC, a Delaware Limited Liability Company
AE Distribution Co., a Delaware Corporation
AE Holdings Co., a Delaware Corporation
AE North Holdings Co, a Canadian (Nova Scotia) Unlimited Liability Company
AE Outfitters Retail Co., a Delaware Corporation
AE Retail West LLC, a Delaware Limited Liability Company
AEH Holding Company, a Delaware Corporation
AEO Foreign Hold Co LLC, a Delaware Limited Liability Company
AEO International Corp., a Delaware Corporation
AEO Israeli Services Co, a Delaware Corporation
AEO Management Co., a Delaware Corporation
AEO Realty Co LLC, a Delaware Limited Liability Company
American Eagle Cdn Hold Co., a Delaware Corporation
American Eagle International Hold Co B.V., a Netherlands Limited Liability Company
American Eagle Mexico, S. de R.L. de C.V., a Mexican Limited Liability Company
American Eagle Mexico Imports, S. de R.L. de C.V., a Mexican Limited Liability Company
American Eagle Mexico Retail, S. de R.L. de C.V., a Mexican Limited Liability Company
American Eagle Mexico Services, S. de R.L. de C.V., a Mexican Limited Liability Company
American Eagle NL Hold Co B.V., a Netherlands Limited Liability Company
American Eagle NL Services Co B.V., a Netherlands Limited Liability Company
American Eagle Outfitters Asia Limited, a Hong Kong Limited Liability Company
American Eagle Outfitters Canada Corporation, a Canadian (Nova Scotia) Unlimited Liability Company
American Eagle Outfitters (China) Commercial Enterprise Co., Ltd., a Peoples Republic of China Foreign Investment Commercial Enterprise
American Eagle Outfitters Hong Kong Limited, a Hong Kong 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 Limited Partnership
BSI Imports Company, LLC, a Delaware Limited Liability Company
Linmar Realty Company II LLC, a Delaware Limited Liability Company
Retail Distribution East LLC, a Delaware Limited Liability Company
Retail Distribution West LLC, a Delaware Limited Liability Company
Retail Licensing Company, a Nevada Corporation
Retail Royalty Company, a Nevada Corporation
South Side Realty Co, a Delaware Corporation
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement and in the related prospectus (Form S-3, Registration No. 33368875) of American Eagle Outfitters, Inc. and in the Registration Statements (Forms S-8) of American Eagle Outfitters, Inc. as follows:
• 1999 Stock Incentive Plan (Registration Nos. 333-34748 and 333-75188),
• Employee Stock Purchase Plan (Registration No. 333-03278),
• 1994 Restricted Stock Plan (Registration No. 33-79358),
• 1994 Stock Option Plan (Registration Nos. 333-44759, 33-79358, and 333-12661),
• Stock Fund of American Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan (Registration No. 33-84796), and
• 2005 Stock Award and Incentive Plan (Registration No. 333-126278 and 333-161661)
of our reports dated March 13, 2014, with respect to the 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 February 1, 2014.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
March 13, 2014
Exhibit 24
Power of Attorney
Each director and/or officer of American Eagle Outfitters, Inc. (the “Corporation”) whose signature appears below hereby appoints Charles
P. Sandel or Mary M. Boland as his or her attorneys or either of them individually as his or her attorney, to sign, in his or her name and behalf
and in any and all capacities stated below, and to cause to be filed with the Securities and Exchange Commission (the “Commission”), the
Corporation’s Annual Report on Form 10-K (the “Form 10-K”) for the year ended February 1, 2014, and likewise to sign and file with the
Commission any and all amendments to the Form 10-K, and the Corporation hereby appoints such persons as its attorneys-in-fact and each of
them as its attorney-in-fact with like authority to sign and file the Form 10-K and any amendments thereto granting to each such attorney-in-fact
full power of substitution and revocation, and hereby ratifying all that any such attorney-in-fact or his substitute may do by virtue hereof.
IN WITNESS WHEREOF, we have hereunto set our hands as of March 13, 2014.
Signature
/s/ Jay L. Schottenstein
Jay L. Schottenstein
/s/ Mary M. Boland
Mary M. Boland
Title
Interim Chief Executive Officer, Chairman of the Board of
Directors and Director
(Principal Executive Officer)
Chief Financial Officer and
Chief Administrative Officer
(Principal Financial Officer)
/s/ Michael G. Jesselson
Michael G. Jesselson
Director
/s/ Thomas R. Ketteler
Thomas R. Ketteler
Director
/s/ Roger S. Markfield
Roger S. Markfield
Director
/s/ Cary D. McMillan
Cary D. McMillan
Director
/s/ Janice E. Page
Janice E. Page
Director
/s/ David M. Sable
David M. Sable
Director
/s/ Noel J. Spiegel
Noel J. Spiegel
Director
Exhibit 31.1
CERTIFICATIONS
I, Jay L. Schottenstein, certify that:
1. I have reviewed this Annual Report on Form 10-K of American Eagle Outfitters, Inc.;
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 statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15
(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
/s/ Jay L. Schottenstein
Jay L. Schottenstein
Interim Chief Executive Officer
(Principal Executive Officer)
March 13, 2014
Exhibit 31.2
CERTIFICATIONS
I, Mary M. Boland, certify that:
1. I have reviewed this Annual Report on Form 10-K of American Eagle Outfitters, Inc.;
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 statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15
(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
/s/ Mary M. Boland
Mary M. Boland
Chief Financial Officer and
Chief Administrative Officer
(Principal Financial Officer)
March 13, 2014
Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of American Eagle Outfitters, Inc. (the “Company”) on Form 10-K for the period ended February 1,
2014 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 the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/s/ Jay L. Schottenstein
Jay L. Schottenstein
Interim Chief Executive Officer
(Principal Executive Officer)
March 13, 2014
Exhibit 32.2
Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of American Eagle Outfitters, Inc. (the “Company”) on Form 10-K for the period ended February 1,
2014 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 the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the SarbanesOxley Act of 2002, that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of
the Company.
/s/ Mary M. Boland
Mary M. Boland
Chief Financial Officer and
Chief Administrative Officer
(Principal Financial Officer)
March 13, 2014