<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 3, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________to______________
COMMISSION FILE NUMBER: 0-23760
AMERICAN EAGLE OUTFITTERS, INC.
(Exact name of registrant as specified in its charter)
OHIO NO. 25-1724320
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 THORN HILL DRIVE, WARRENDALE, PA 15086-7528
(Address of principal executive offices) (Zipcode)
(412) 776-4857
(Registrant's telephone number, including area code)
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 such
filing requirements for the past 90 days.
Yes X No
---- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
COMMON STOCK, NO PAR VALUE, 9,885,400 SHARES OUTSTANDING AS OF AUGUST 21, 1996
<PAGE> 2
AMERICAN EAGLE OUTFITTERS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
August 3, 1996 (unaudited) and February 3, 1996 3
Consolidated Statements of Operations (unaudited)
Three months ended and six months ended
August 3, 1996 and July 29, 1995 4
Consolidated Statements of Cash Flows (unaudited)
Six months ended August 3, 1996 and July 29, 1995 5
Notes to Consolidated Financial Statements 6-7
Review By Independent Accountants 8
Independent Accountants' Review Report 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities N/A
Item 3. Defaults Upon Senior Securities N/A
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 23 Acknowledgment of Independent Accountants 15
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except common stock share amounts) August 3, February 3,
1996 1996
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $16,327 $19,986
Merchandise inventory 34,329 23,394
Receivables 2,667 5,642
Prepaid expenses and other 4,830 4,429
Deferred income taxes 4,710 2,891
------- -------
Total current assets 62,863 56,342
------- -------
Fixed assets:
Fixtures and equipment 21,786 26,447
Leasehold improvements 31,324 30,326
------- -------
53,110 56,773
Less: Accumulated depreciation and amortization 20,923 23,044
------- -------
32,187 33,729
------- -------
Notes receivable -- 3,568
Other assets 2,310 1,724
------- -------
Total assets $97,360 $95,363
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $22,015 $16,166
Accrued compensation and payroll taxes 4,088 4,255
Accrued rent 5,422 4,550
Accrued income and franchise taxes 1,406 3,536
Other liabilities and accrued expenses 2,834 3,060
------- -------
Total current liabilities 35,765 31,567
------- -------
Stockholders' equity:
Common stock, 30,000,000 shares authorized and
10,005,400 shares issued (10,000,000 shares at February 3, 1996) 52,535 52,507
Contributed capital 4,262 4,262
Retained earnings 8,549 11,194
------- -------
65,346 67,963
Less: Deferred compensation 2,235 2,651
Treasury stock, 125,000 shares 1,516 1,516
------- -------
Total stockholders' equity 61,595 63,796
------- -------
Stockholders' equity
Total liabilities and stockholders' equity $97,360 $95,363
======= =======
</TABLE>
See notes to Consolidated Financial Statements
3
<PAGE> 4
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $70,257 $65,337 $124,653 $113,754
Cost of sales, including certain buying, occupancy
and warehousing expenses 49,018 47,234 89,804 89,319
------- ------- -------- --------
Gross profit 21,239 18,103 34,849 24,435
Selling, general and administrative expenses 19,419 18,573 36,705 35,306
Depreciation and amortization 1,526 1,469 3,093 2,780
------- ------- -------- --------
Operating income (loss) 294 (1,939) (4,949) (13,651)
Interest income (expense), net 275 (460) 589 (553)
------- ------- -------- --------
Income (loss) before income taxes 569 (2,399) (4,360) (14,204)
Provision (benefit) for income taxes 223 (846) (1,715) (5,728)
------- ------- -------- --------
Net income (loss) $ 346 $(1,553) $ (2,645) $ (8,476)
======= ======= ======== ========
Net income (loss) per common share $ 0.04 $ (0.16) $ (0.27) $ (0.85)
======= ======= ======== ========
Weighted average common shares outstanding 9,877 10,000 9,876 10,000
======= ======= ======== ========
Retained earnings, beginning $ 8,203 $ 5,604 $ 11,194 $ 12,527
Net income (loss) 346 (1,553) (2,645) (8,476)
------- ------- -------- --------
Retained earnings, ending $ 8,549 $ 4,051 $ 8,549 $ 4,051
======= ======= ======== ========
</TABLE>
See notes to Consolidated Financial Statements
4
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AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended
----------------
August 3, July 29,
1996 1995
---- ----
<S> <C> <C>
Net loss $ (2,645) $ (8,476)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY
(USED FOR) OPERATING ACTIVITIES:
Depreciation and amortization 3,093 2,780
Loss on disposal 912 175
Restricted stock compensation 416 528
Deferred income taxes (2,094) (308)
CHANGES IN ASSETS AND LIABILITIES:
Merchandise inventory (10,935) (28,982)
Receivables 2,975 1,142
Prepaid and other (775) (4,419)
Accounts payable 5,849 12,123
Accrued liabilities (1,664) (2,683)
-------- --------
Total adjustments (2,223) (19,644)
-------- --------
Net cash used for operating activities (4,868) (28,120)
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (4,686) (10,501)
Collection on notes from sale of outlet stores 3,568 --
Proceeds from sales of fixed assets 2,299 --
-------- --------
Net cash provided by (used for) investing activities 1,181 (10,501)
-------- --------
FINANCING ACTIVITIES:
Net borrowings on notes payable -- 28,800
Exercise of stock options 28 --
-------- --------
Net cash provided by financing activities 28 28,800
-------- --------
Net increase (decrease) in cash (3,659) (9,821)
Cash - beginning of period 19,986 10,363
-------- --------
Cash - end of period $ 16,327 $ 542
======== ========
</TABLE>
See notes to Consolidated Financial Statements
5
<PAGE> 6
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements of American Eagle
Outfitters, Inc. (the "Company") at August 3, 1996 and for the three and six
month periods ended August 3, 1996 (the "current period") and July 29, 1995
(the "prior period") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. The
Consolidated Balance Sheet at February 3, 1996 was derived from the audited
financial statements. The Company's business is affected by the pattern of
seasonality common to most retail apparel businesses. The results for the
current and prior periods are not necessarily indicative of future financial
results.
Certain notes and other information have been condensed or omitted from the
interim Consolidated Financial Statements presented in this Quarterly Report on
Form 10-Q. Therefore, these Consolidated Financial Statements should be read in
conjunction with the Company's Transition 1996 Annual Report.
2. BASIS OF PRESENTATION
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires 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,
management reviews its estimates based on currently available information.
Changes in facts and circumstances may result in revised estimates.
EARNINGS PER SHARE
Earnings per share have been computed based upon the weighted average number of
common shares outstanding during the periods presented. Common share
equivalents, principally in the form of employee stock option awards, are not
reflected in the common stock outstanding as they either have a nominal effect
on the number of shares outstanding or are anti-dilutive.
RECLASSIFICATION
Certain reclassifications have been made to the Consolidated Financial
Statements for the prior period in order to conform to the August 3, 1996
presentation.
3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Because no borrowings were required under the terms of the Company's line of
credit, there were no amounts paid for interest during the six months ended
August 3, 1996. Interest costs were $0.6 million during the six months ended
July 29, 1995. Income tax payments were $2.6 million and $0.2 million during
the six months ended August 3, 1996 and July 29, 1995, respectively.
4. RELATED PARTY TRANSACTIONS
As described in the information that follows, the Company has various
transactions with related parties. The nature of the relationship is primarily
through common ownership. The Company has an operating lease for its corporate
headquarters and distribution center with an affiliate of the Company. The
lease, which was entered into on January 1, 1996, and expires on December 31,
2010, provides for annual rental payments of approximately $1.2 million through
2001, $1.6 million through 2006, and $1.8 million through the end of the lease.
In addition, the Company purchases merchandise from and sells merchandise to
various related parties and uses the services of a related importing company.
6
<PAGE> 7
Transactions with these related parties and associated balance sheet amounts
were as follows:
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
August 3, July 29, August 3, July 29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Merchandise purchases plus
import administrative charges $11,724 $11,652 $18,800 $22,322
Accounts payable $ 8,527 $16,264 $ 8,527 $16,264
Accounts receivable $ 1,313 $ 1,066 $ 1,313 $ 1,066
Rent expense $ 388 $ 728 $ 783 $ 1,062
Merchandise sales $ 802 $ 809 $ 980 $ 1,332
</TABLE>
The Company has provided loans to certain officers and other individuals to pay
the taxes on the restricted stock that vested in April 1995. As of August 3,
1996, the outstanding value of these loans, including interest at 6.8%,
approximated $356,000 as compared with $345,000 at February 3, 1996.
5. INCOME TAXES
The provisions of FASB No. 109, "Accounting for Income Taxes", have been
reflected in the accompanying Consolidated Financial Statements. For the three
months and six months ended August 3, 1996 and July 29, 1995, the effective tax
rate used to provide income tax amounts was 39.3%.
6. LEGAL PROCEEDINGS
On November 30, 1995, a complaint was filed in the United States District Court
for the Western District of Pennsylvania under the caption Thomas G. DiCicco v.
American Eagle Outfitters, Inc., et al., No. 95-1937, as a class action on
behalf of purchasers of the Company's common stock during the period August 4,
1994 through October 26, 1995. It alleged violations of the federal securities
laws arising out of purported misrepresentations and non-disclosures concerning
the Company and its financial condition. The matter has been settled on a basis
satisfactory to the Company. A settlement agreement has been entered into,
subject to court approval, which approval is anticipated by the end of the
calendar year. Earnings as reported reflect full settlement of the lawsuit.
7
<PAGE> 8
REVIEW BY INDEPENDENT ACCOUNTANTS
Ernst & Young LLP, our independent accountants, have performed a limited review
of the Consolidated Financial Statements for the quarters ended August 3, 1996
and July 29, 1995, as indicated in their report on the limited review included
below. Since they did not perform an audit, they express no opinion on the
Consolidated Financial Statements referred to above. Management has given
effect to any significant adjustments and disclosures proposed in the course of
the limited review.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders
American Eagle Outfitters, Inc.
We have reviewed the accompanying consolidated balance sheet of American Eagle
Outfitters, Inc. as of August 3, 1996, and the consolidated statements of
operations for the three-month and six-month periods ended August 3, 1996, and
July 29, 1995 and the statement of cash flows for the six-month periods ended
August 3, 1996 and July 29, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any modifications that should be made
to the accompanying financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of American Eagle Outfitters, Inc. as
of February 3, 1996, and the related consolidated statements of operations and
cash flows for the year then ended (not presented herein) and in our report
dated March 29, 1996 we expressed an unqualified opinion on those financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of February 3, 1996, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
Pittsburgh, Pennsylvania
August 23, 1996
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to net sales of the listed items included in the Company's
Consolidated Statements of Operations.
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
Aug. 3, July 29, Aug.3, July 29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including certain buying,
occupancy and warehousing expenses 69.8 72.3 72.0 78.5
----- ----- ----- -----
Gross profit 30.2 27.7 28.0 21.5
Selling, general and administrative
expenses 27.6 28.4 29.4 31.0
Depreciation and amortization 2.2 2.3 2.5 2.4
----- ----- ----- -----
Operating income (loss) 0.4 (3.0) (3.9) (11.9)
Interest income (expense), net 0.4 (0.7) 0.5 (0.5)
----- ----- ----- -----
Income (loss) before income taxes 0.8 (3.7) (3.4) (12.4)
Provision (benefit) for income taxes 0.3 (1.3) (1.4) (5.0)
----- ----- ----- -----
Net income (loss) 0.5% (2.4)% (2.0)% (7.4)%
===== ===== ===== =====
</TABLE>
COMPARISON OF THREE MONTHS ENDED AUGUST 3, 1996 TO THREE MONTHS ENDED JULY 29,
1995
Net sales for the three months ended August 3, 1996 (the "current period")
increased 20.5% to $70.3 million from $58.3 million for the three months ended
July 29, 1995 (the "prior period"). When including $7.0 million from outlet
stores which were sold in October 1995 in last year's sales, sales would have
increased 7.5%. Comparable store sales increased 10.0% compared to the prior
period. The Company operated 282 stores, excluding 3 temporary locations, at
the end of the current period, compared to 297 stores, including 32 outlet
stores and excluding 17 temporary locations, operated at the end of the prior
period. The total increase in net sales resulted primarily from an increase in
the average unit selling price rather than from an increase in units sold. The
increase in average unit selling price in the current period as compared to the
prior period resulted from the inclusion of outlet store unit sales in last
year's results. The unit sales at the outlet stores (which were sold in October
1995) were typically at lower price points and therefore lowered the average
unit selling price in the prior period. The average unit selling price for the
ongoing American Eagle Outfitters chain stores has increased nominally for the
current period as compared to the prior period.
Gross profit for the current period increased to $21.2 million from $18.1
million for the prior period. Gross profit as a percent of net sales for the
current period increased to 30.2% from 27.7% for the prior period. The increase
in gross profit was attributable to higher initial mark-ups, lower markdowns
and a decrease in inventory shrinkage costs compared to the prior period.
Selling, general and administrative expenses for the current period increased
to $19.4 million from $18.6 million for the prior period. As a percent of net
sales, these expenses decreased to 27.6% from 28.4% for the prior period. The
increase of $0.8 million resulted primarily from an increase in write-offs
related to fixture upgrades at the stores and increases in impairment reserves
on fixed assets in the amount of $0.6 million. The prior period included
approximately $0.1 million in fixture write-offs. Additionally, expenses in
connection with the tentative settlement of the class action suit in the amount
of $0.3 were incurred in the current period (See Note 6 to the Consolidated
Financial Statements). The 0.8% improvement as a percent to sales was due to
greater sales leverage and better expense controls in areas such as payroll.
9
<PAGE> 10
Depreciation and amortization expense for the current period remained at $1.5
million and represented 2.2% of sales in the current period as compared to 2.3%
of sales in the prior period.
Interest income for the current period was $0.3 million compared to interest
expense of $0.5 million for the prior period. Interest income was generated
because no borrowings were required under the terms of the Company's line of
credit during the quarter ended August 3, 1996.
Income before income taxes for the current period increased to $0.6 million
from a $2.4 million net loss for the prior period. As a percent of net sales,
income before income taxes for the current period increased to 0.8% from (3.7%)
for the prior period. The increase in income before income taxes of $3.0
million was primarily a result of the favorable sales performance, higher
margins attributable to higher initial mark-ups, lower markdowns, lower
inventory shrinkage, and reduced interest costs.
COMPARISON OF SIX MONTHS ENDED AUGUST 3, 1996 TO SIX MONTHS ENDED JULY 29, 1995
Net sales for the six months ended August 3, 1996 (the "current period")
increased 23.5% to $124.7 million from $101.0 million for the six months ended
July 29, 1995 (the "prior period"). When including the $12.8 million in last
year's sales for the sold outlet stores, sales increased 9.6%. Comparable store
sales were up 9.9% versus the prior period. The Company operated 282 stores,
excluding 3 temporary locations, at the end of the current period, compared to
297 stores, including 32 outlet stores and excluding 17 temporary locations,
operated at the end of the prior period. The total increase in net sales
resulted primarily from an increase in the average unit selling price rather
than from an increase in units sold. The increase in average unit selling price
in the current period as compared to the prior period resulted from the
inclusion of outlet store unit sales in last year's results. The unit sales at
the outlet stores (which were sold in October 1995) were typically at lower
price points and therefore lowered the average unit selling price in the prior
period. The average unit selling price for the ongoing American Eagle
Outfitters chain stores has increased nominally for the current period as
compared to the prior period.
Gross profit for the current period increased to $34.8 million from $24.4
million for the prior period. Gross profit as a percent of net sales for the
current period increased to 28.0% from 21.5% for the prior period. The increase
in gross profit was attributable to both higher initial mark-ups and a decrease
in markdowns.
Selling, general and administrative expenses for the current period increased
to $36.7 million from $35.3 million for the prior period. As a percent of net
sales, these expenses decreased to 29.4% from 31.0% for the prior period. The
increase of $1.4 million resulted primarily from an increase in write-offs
related to fixture upgrades at the stores and increases in impairment reserves
on fixed assets in the amount of $0.7 million in the current period versus $0.1
million in fixture write-offs in the prior period. Additionally, expenses in
connection with the tentative settlement of the class action suit in the amount
of $0.5 were incurred in the current period (See Note 6 to the Consolidated
Financial Statements). The 1.6% improvement as a percent to sales was due to
greater sales leverage and better expense controls in areas such as payroll.
Depreciation and amortization expense for the current period increased to $3.1
million and 2.5% of sales as compared to $2.8 million and 2.4% of sales in the
prior period. The increase in expense related primarily to additions for new
stores that were opened.
Interest income for the current period was $0.6 million compared to interest
expense of $0.6 million for the prior period. Interest income was generated
because no borrowings were required under the terms of the Company's line of
credit during the six months ended August 3, 1996.
The loss before income taxes for the current period decreased to $4.4 million
from a $14.2 million net loss for the prior period. As a percent of net sales,
loss before income taxes for the current period decreased to 3.4% from 12.4%
for the prior period. The decrease in the loss before income taxes of $9.8
million was primarily a result of the favorable sales performance, higher
margins attributable to higher mark-ups and lower markdowns, and reduced
interest costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of working capital are cash and cash equivalents
provided by operating activities and borrowings under its revolving credit
facility. The primary uses of working capital are for the acquisition of
inventory and fixed assets. The Company had working capital of $27.1 and $24.8
million at August 3, 1996 and February 3, 1996, respectively. The current
period increase resulted from higher inventory levels planned for the
back-to-school selling season, net of increases in accounts payable.
For the six months ended August 3, 1996, the cash used for operating activities
of $4.9 million was primarily the result of inventory increases net of accounts
payable increases and the net loss for the six month period.
10
<PAGE> 11
At August 3, 1996, the Company had an unsecured demand lending arrangement with
a bank to provide a $60.0 million line of credit at either the lender's prime
lending rate ( 8.25% at August 3, 1996) or a negotiated rate such as LIBOR. The
facility has a limit of $40.0 million that can be used for direct borrowing. No
borrowings were outstanding and letters of credit in the amount of $33.1
million were outstanding at August 3, 1996. The remaining available balance on
the line was $26.9 million at August 3, 1996. Additionally, the Company had
$16.3 million of cash and short-term investments on hand as of August 3, 1996.
Capital expenditures, net of construction allowances, totaled $4.7 million for
the six months ended August 3, 1996. These expenditures included the addition
of thirteen new store locations, six store remodels and replacement of fixtures
in existing stores. The number of new store openings currently planned for the
remaining of the fiscal year is approximately 22, although the number may be
increased or decreased depending on the availability of suitable retail space
for expansion. The Company believes that the cash flow from operations and its
bank line of credit together with available cash on hand will be sufficient to
meet its presently anticipated cash flow requirements through fiscal 1996.
SEASONALITY AND GENERAL ECONOMIC CONDITIONS
The Company desires to take advantage of the new "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. The statements contained
in this report which are not historical facts are "forward looking statements"
that involve various important risks, uncertainties and other factors which
could cause the Company's actual results for fiscal 1996 and beyond to differ
materially from those expressed in such forward looking statements. These
important factors include, without limitation, the risks and factors set forth
below, as well as other risks previously disclosed in the Company's securities
filings.
Historically, the Company's operations have been seasonal, with highest sales
and net income occurring in the fourth fiscal quarter, reflecting increased
demand during the year-end holiday selling season and, to a lesser extent, the
third quarter, reflecting increased demand during the back-to-school selling
season.
The Company's results of operations will also fluctuate from quarter to quarter
in the future as a result of numerous other factors. These include factors the
Company cannot control that impact mall-based apparel retailers generally, such
as factors affecting the amount of traffic in enclosed shopping malls and
regional and national economic conditions affecting disposable consumer
incomes. They also include factors over which the Company has some control,
such as distinguishing itself from its competitors based on the quality and
design of its private label brand names, identifying and responding to fashion
trends in a timely manner, the ability to direct source merchandise closer to
need and in appropriate quantities, the ability to retain qualified personnel
and the number and timing of the opening of new stores. Any one or a
combination of these factors could have a material adverse affect on the
Company's results of operations and financial condition.
IMPACT OF INFLATION
The Company does not believe that the relatively modest levels of inflation
which have been experienced in the United States in recent years have had a
significant effect on its net sales or its profitability. Substantial increases
in cost, however, could have a significant impact on the Company and the
industry in the future.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On November 30, 1995, a complaint was filed in the United States District Court
for the Western District of Pennsylvania under the caption Thomas G. DiCicco v.
American Eagle Outfitters, Inc., et al., No. 95-1937, as a class action on
behalf of purchasers of the Company's common stock during the period August 4,
1994 through October 26, 1995. It alleged violations of the federal securities
laws arising out of purported misrepresentations and non-disclosures concerning
the Company and its financial condition. The matter has been settled on a
basis satisfactory to the Company. A settlement agreement has been entered
into, subject to court approval, which approval is anticipated by the end of
the calendar year. Earnings as reported reflect full settlement of the
lawsuit.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its 1996 Annual Meeting of Shareholders on June 3,
1996. Holders of 8,280,539 Common Shares of the Company were present
representing approximately 84% of the Company's 9,875,000 Common
Shares issued and outstanding.
(b) The following persons were elected as members of the Company's Board of
and Directors to serve until the annual meeting following their election or
(c) until their successors are duly elected and qualified. Each person
received the number of votes for or the number of votes with
authority withheld indicated below.
Name Votes For Votes Withheld
---- --------- --------------
Martin P. Doolan 8,229,583 50,956
Edward S. Finkelstein 8,232,258 48,281
Thomas R. Ketteler 8,233,158 47,381
George Kolber 8,232,858 47,681
John L. Marakas 8,232,658 47,881
Jay L. Schottenstein 8,231,308 49,231
Saul Schottenstein 8,219,608 60,931
David W. Thompson 8,230,883 49,656
On August 30, 1996, Edward S. Finkelstein resigned from the Board of
Directors.
(d) Not applicable.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
23. Acknowledgment of Independent Accountants
</TABLE>
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements 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.
Dated September 13, 1996
American Eagle Outfitters, Inc.
(Registrant)
/s/ LAURA A. WEIL
------------------------------------
Laura A. Weil
Executive Vice President and Chief
Financial Officer
/s/ DALE E. CLIFTON
------------------------------------
Dale E. Clifton
Vice President, Controller and Chief
Accounting Officer
14
<PAGE> 1
Exhibit 23
Acknowledgment of Ernst & Young LLP
The Board of Directors and Stockholders
American Eagle Outfitters, Inc.
We are aware of the incorporation by reference in the Registration Statements
(Forms S-8) of American Eagle Outfitters, Inc. pertaining to the American Eagle
Outfitters, Inc. 1994 Stock Option Plan, the Stock Fund of the American Eagle
Outfitters, Inc. Profit Sharing and 401(k) Plan, the American Eagle Outfitters,
Inc. Employee Stock Purchase Plan, and the American Eagle Outfitters, Inc. 1994
Restricted Stock Plan of our report dated August 23, 1996 relating to the
unaudited consolidated interim financial statements of American Eagle
Outfitters, Inc. which are included in its Form 10-Q for the quarter ended
August 3, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933, our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
Pittsburgh, Pennsylvania
August 23, 1996
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED AUGUST 3, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000919012
<NAME> AMERICAN EAGLE OUTFITTERS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> MAY-05-1996
<PERIOD-END> AUG-03-1996
<CASH> 16,327
<SECURITIES> 0
<RECEIVABLES> 2,667
<ALLOWANCES> 0
<INVENTORY> 34,329
<CURRENT-ASSETS> 62,863
<PP&E> 53,110
<DEPRECIATION> 20,923
<TOTAL-ASSETS> 97,360
<CURRENT-LIABILITIES> 35,765
<BONDS> 0
<COMMON> 52,535
0
0
<OTHER-SE> 9,060
<TOTAL-LIABILITY-AND-EQUITY> 97,360
<SALES> 70,257
<TOTAL-REVENUES> 70,257
<CGS> 49,018
<TOTAL-COSTS> 49,018
<OTHER-EXPENSES> 20,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (275)
<INCOME-PRETAX> 569
<INCOME-TAX> 223
<INCOME-CONTINUING> 346
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 346
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
