<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-0001
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 May 1, 1999
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)
DELAWARE NO. 13-2721761
(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)
(724) 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, $.01 PAR VALUE, 46,518,367 SHARES OUTSTANDING AS OF JUNE 4, 1999
<PAGE> 2
AMERICAN EAGLE OUTFITTERS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
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<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
May 1, 1999 (unaudited) and January 30, 1999 3
Consolidated Statements of Operations (unaudited)
Three months ended May 1, 1999 and May 2, 1998 4
Consolidated Statements of Cash Flows (unaudited)
Three months ended May 1, 1999 and May 2, 1998 5
Notes to Consolidated Financial Statements 6-8
Review By Independent Accountants 9
Independent Accountants' Review Report 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10-13
Item 3. Quantitative and Qualitative Disclosures about Market Risk N/A
PART II. OTHER INFORMATION
Item 1. Legal Proceedings N/A
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 N/A
Item 5. Other Information N/A
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit 15 Acknowledgment of Independent Accountants 15
Exhibit 27 Financial Data Schedule 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) May 1, January 30,
ASSETS 1999 1999
---- ----
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 63,168 $ 71,940
Short-term investments 11,858 13,360
Merchandise inventory 56,587 49,688
Accounts and note receivable, including related party 9,733 8,560
Prepaid expenses and other 13,435 2,757
Deferred income taxes 8,199 8,199
-------- --------
Total current assets 162,980 154,504
-------- --------
Fixed assets:
Fixtures and equipment 38,995 36,307
Leasehold improvements 53,646 46,996
-------- --------
92,641 83,303
Less: Accumulated depreciation and amortization 32,420 29,933
-------- --------
60,221 53,370
-------- --------
Other assets 3,746 3,074
-------- --------
Total assets $226,947 $210,948
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 23,319 $ 18,551
Accrued compensation and payroll taxes 11,789 17,739
Accrued rent 13,193 13,042
Accrued income and other taxes -- 3,208
Other liabilities and accrued expenses 7,517 7,211
-------- --------
Total current liabilities 55,818 59,751
-------- --------
Stockholders' equity:
Common stock, 125,000,000 shares authorized, 46,844,793
shares issued, 46,369,793 and 46,110,984 shares
outstanding, as of May 1, 1999 and January 30, 1999, respectively) 468 461
Contributed capital 71,913 64,561
Retained earnings 102,117 89,874
-------- --------
174,498 154,896
Less: Deferred compensation 2,089 2,419
Treasury stock, 475,000 shares 1,280 1,280
-------- --------
Total stockholders' equity 171,129 151,197
-------- --------
Total liabilities and stockholders' equity $226,947 $210,948
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
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AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------
May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
Net sales $145,404 $ 99,694
Cost of sales, including certain buying, occupancy
and warehousing expenses 86,377 62,477
-------- --------
Gross profit 59,027 37,217
Selling, general and administrative expenses 37,108 26,223
Depreciation and amortization 2,484 1,975
-------- --------
Operating income 19,435 9,019
Interest income, net 734 542
-------- --------
Income before income taxes 20,169 9,561
Provision for income taxes 7,926 3,756
-------- --------
Net income $ 12,243 $ 5,805
======== ========
Basic income per common share $ 0.27 $ 0.13
======== ========
Diluted income per common share $ 0.25 $ 0.12
======== ========
Weighted average common shares outstanding - basic 45,977 44,833
======== ========
Weighted average common shares outstanding - diluted 48,358 47,410
======== ========
Retained earnings, beginning $ 89,874 $ 35,756
Net income 12,243 5,805
-------- --------
Retained earnings, ending $102,117 $ 41,561
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
4
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AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 12,243 $ 5,805
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
(USED FOR ) OPERATING ACTIVITIES:
Depreciation and amortization 2,484 1,975
Loss on impairment and write-off of fixed assets 95 675
Restricted stock compensation 331 1,514
Deferred income taxes (56) (2,427)
CHANGES IN ASSETS AND LIABILITIES:
Merchandise inventory (6,899) (5,088)
Accounts and note receivable (1,173) 1,440
Prepaid expenses and other (8,908) (778)
Accounts payable 4,772 (356)
Accrued liabilities (5,037) (1,964)
-------- --------
Total adjustments (14,391) (5,009)
-------- --------
Net cash provided by (used for) operating activities (2,148) 796
-------- --------
INVESTING ACTIVITIES:
Capital expenditures (9,432) (5,558)
Net sale of short-term investments 1,502 --
-------- --------
Net cash used for investing activities (7,930) (5,558)
-------- --------
FINANCING ACTIVITIES:
Net proceeds from stock options exercised 1,306 677
-------- --------
Net cash provided by financing activities 1,306 677
-------- --------
Net decrease in cash and cash equivalents (8,772) (4,085)
Cash and cash equivalents - beginning of period 71,940 48,359
-------- --------
Cash and cash equivalents - end of period $ 63,168 $ 44,274
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
5
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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 May 1, 1999 and for the three month period ended May 1,
1999 (the "current period") and May 2, 1998 (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 January 30, 1999 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 Fiscal 1998 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.
STOCK SPLIT
On March 17, 1999, the Company's Board of Directors approved a two-for-one stock
split to be distributed on May 3, 1999, to stockholders of record on April 23,
1999. All share amounts and per share data have been restated to reflect this
stock split.
CASH AND CASH EQUIVALENTS
Cash includes cash equivalents. The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
SHORT-TERM INVESTMENTS
Cash in excess of operating requirements is invested in marketable equity or
government debt obligations. As of May 1, 1999, short-term investments include
investments with an original maturity of greater than three months (averaging
approximately 11 months) and consist primarily of tax-exempt municipal bonds
classified as available for sale. These investments are recorded at cost and
approximate market value.
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EARNINGS PER SHARE
The following table shows the amounts used in computing earnings per share and
the effect on income per share and the weighted average number of shares of
dilutive potential common stock (stock options and restricted stock).
<TABLE>
<CAPTION>
(In thousands) Three Months Ended
-----------------------------------
May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
Net income $12,243 $ 5,805
======= =======
Weighted average number of common shares used in
basic EPS 45,977 44,833
Effect of dilutive stock options and non-vested
restricted stock 2,381 2,577
------- -------
Weighted average number of common shares and dilutive
potential common stock used in diluted EPS 48,358 47,410
======= =======
</TABLE>
RECLASSIFICATION
Certain reclassifications have been made to the Consolidated Financial
Statements for the prior period in order to conform to the May 1, 1999
presentation.
3. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Because there were no borrowings under the terms of the Company's line of
credit, there were no amounts paid for interest during the three months ended
May 1, 1999 or May 2, 1998. Income tax payments were $10.9 million and $8.5
million during the three months ended May 1, 1999 and May 2, 1998, respectively.
Additionally, the Company recognized a $2.4 million tax benefit as an adjustment
to equity resulting from certain stock option exercises.
4. RELATED PARTY TRANSACTIONS
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.
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 and its subsidiaries purchase merchandise from and sell
merchandise to various related parties and use the services of a related
importing company.
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Related party amounts follow:
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------
May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
Merchandise purchases through a
related party importer $11,351 $15,049
Accounts payable $ 1,849 $ 6,837
Accounts and notes receivable $ 4,807 $ 2,742
Rent expense $ 387 $ 387
Merchandise sales $ 2,418 $ 2,643
</TABLE>
The Company provides short-term loans to certain officers to pay the taxes on
the restricted stock that vests each year. As of May 1, 1999 and May 2, 1998,
the outstanding value of these loans approximated $2,620,000 and $1,020,000,
respectively.
5. ACCOUNTS RECEIVABLE
Accounts receivable is comprised of the following:
<TABLE>
<CAPTION>
May 1, January 30,
(In thousands) 1999 1999
---- ----
<S> <C> <C>
Accounts receivable - construction allowances $2,736 $4,008
Related party accounts and note receivable 4,807 2,829
Accounts receivable - other 2,190 1,723
------ ------
Total $9,733 $8,560
====== ======
</TABLE>
6. INCOME TAXES
For the three months ended May 1, 1999 and May 2, 1998, the effective tax rate
used for the provision of income tax approximated 39%.
7. LEASE COMMITMENTS
The Company is contingently liable for the rental payments totaling
approximately $2.7 million for certain outlet stores which were sold in October
1995.
8. LEGAL PROCEEDINGS
The Company is a party to ordinary routine litigation incidental to its
business. The Company does not expect any of such litigation to have a material
adverse effect on the Company's results of operations or financial condition.
8
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REVIEW BY INDEPENDENT ACCOUNTANTS
Ernst & Young LLP, our independent accountants, have performed a limited review
of the Consolidated Financial Statements for the three month period ended May 1,
1999 and May 2, 1998, 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 May 1, 1999, and the related consolidated statements of
operations and cash flows for the three-month periods ended May 1, 1999 and May
2, 1998. These financial statements are the responsibility of the Company's
management.
We conducted our reviews 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 reviews, we are not aware of any material modifications that should
be made to the accompanying consolidated 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 January 30, 1999, and the related consolidated statements of operations and
cash flows for the year then ended (not presented herein) and in our report
dated February 26, 1999 (except for Note 12, as to which the date is April 7,
1999) we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of January 30, 1999, is fairly stated, in all
material respects, in relation to the consolidated financial statements from
which it has been derived.
Pittsburgh, Pennsylvania
May 18, 1999
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
This table shows the percentage relationship to net sales of the listed items
included in the Company's Consolidated Statements of Operations.
<TABLE>
<CAPTION>
Three months ended
-----------------------------------
May 1, May 2,
1999 1998
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales, including certain buying,
occupancy and warehousing expenses 59.4 62.7
----- -----
Gross profit 40.6 37.3
Selling, general and administrative expenses 25.5 26.3
Depreciation and amortization 1.7 2.0
----- -----
Operating income 13.4 9.0
Interest income, net 0.5 0.5
----- -----
Income before income taxes 13.9 9.5
Provision for income taxes 5.5 3.7
----- -----
Net income 8.4% 5.8%
===== =====
</TABLE>
COMPARISON OF THREE MONTHS ENDED MAY 1, 1999 TO THE THREE MONTHS ENDED MAY 2,
1998
Net sales increased 45.9% to $145.4 million from $99.7 million. The increase
includes:
- - $27.2 million from comparable store sales, representing a 27.5%
increase over the prior year, and
- - $18.5 million from new and non-comparable store sales, and non-store sales.
The increase resulted from an increase of 50.1% in units sold, offset by a 4.1%
decrease in prices. We operated 401 stores at the end of the current period,
compared to 336 stores at the end of the prior period.
Gross profit increased to $59.0 million from $37.2 million. Gross profit as a
percent of net sales increased to 40.6% from 37.3% . The increase in gross
profit as a percent of net sales, was attributable to a 0.5% increase in
merchandise margins as well as a 2.8% improvement in buying, occupancy, and
warehousing costs. The increase in merchandise margins resulted primarily from
improved mark-ons, offset by increased markdowns as a percent of sales. This
improvement in buying, occupancy, and warehousing costs reflect improved
leveraging achieved through comparable store sales growth.
Selling, general and administrative expenses increased to $37.1 million from
$26.2 million. As a percent of net sales, these expenses decreased to 25.5% from
26.3%. The $10.9 million increase includes:
- -$4.1 million in store operating expenses to support new store growth,
- -$2.0 million for increased promotional advertising, direct mail, and non-store
advertising costs,
- -$2.2 million in compensation costs to support increased sales, and
- -$2.6 million for general services purchased, supplies, and other expenses.
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Depreciation and amortization expense increased to $2.5 million from $2.0
million. As a percent of net sales, these expenses decreased to 1.7% from 2.0%.
Interest income increased to $0.7 million because of higher cash reserves
available for investment. No borrowings were required under the terms of our
line of credit during the current or prior periods.
Income before income taxes increased to $20.2 million from $9.6 million. As a
percent of net sales, income before income taxes increased to 13.9% from 9.5%.
The increase in income before income taxes as a percent of sales was
attributable to the factors noted above.
LIQUIDITY AND CAPITAL RESOURCES
Our primary source of cash in the current period was from net income. Our
primary uses of cash included $9.4 million in capital expenditures and an
increase in prepaid expenses of $11.3 million which relates to prepaid income
taxes and the timing of rent payments. Additionally, $6.9 million was used to
support inventory increases for anticipated sales growth and new stores. Working
capital at May 1, 1999 was $107.2 million compared to $53.5 million at May 2,
1998. The increase in working capital resulted primarily from the increase in
cash provided by operating activities.
Capital expenditures, net of construction allowances, totaled $9.4 million for
the current period. These expenditures included:
- -the addition of 15 new stores totaling $3.4 million,
- -the remodeling of 15 locations totaling $2.9 million,
- -costs related to future new stores and remodeled locations totaling $1.4
million,
- -improvements to our distribution center of $0.8 million, and
- -other capital expenditures of $0.9 million.
At May 1, 1999, the Company had an unsecured demand lending arrangement with a
bank to provide a $100 million line of credit at either the lender's prime
lending rate (7.75% at May 1, 1999) or a negotiated rate such as LIBOR. This
reflects a $25 million increase in line availability for letters of credit which
occurred in June 1999. The facility has a limit of $40.0 million that can be
used for direct borrowing. No borrowings were required against the line for the
current or prior period. At May 1, 1999, letters of credit in the amount of
$61.2 million were outstanding leaving a remaining available balance on the line
of $13.8 million.
We are currently planning to open approximately 65 stores during the remainder
of the fiscal year. This forward-looking statement will be influenced by factors
including our financial position, consumer spending, and the number of
acceptable mall store leases that may become available. We believe that cash
flow from operations and our bank line of credit will be sufficient to meet our
anticipated cash requirements through Fiscal 1999.
IMPACT OF INFLATION
We do not believe that the relatively modest levels of inflation occurring in
the United States in recent years have significantly effected our net sales or
our profitability. Substantial increases in cost, however, could have a
significant impact on us and the industry in the future.
IMPACT OF YEAR 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000.
State of Readiness: Our plan to resolve the internal Year 2000 issue involves
two major phases: detection and correction. The detection phase includes
planning, inventory, triage, and detailed assessment. We took an inventory of
all our information technology and non-information technology systems to
determine which of our systems were not Year 2000 compliant. We also implemented
procedures to review the Year 2000 readiness in all recently acquired equipment.
Next, the Company prioritized actions related to the Year 2000 problems based
upon their potential impact on the Company. This detailed assessment of the
problems and a correction plan were completed in October 1998.
The correction phase includes repair and resolution and testing and
implementation. We have four mission critical systems: distribution center
systems, point of sale systems, merchandising software, and financial software.
A portion of the packing systems
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<PAGE> 12
in our distribution center are not Year 2000 compliant. We are implementing a
software upgrade to make the packing system Year 2000 compliant. The point of
sale register systems need to have a BIOS upgrade and a minor software upgrade.
We are working with our outside vendors to complete these repairs in each store
location. Additionally, our point of sale store polling system is not Year 2000
compliant and is being replaced with a Year 2000 compliant system. We recently
completed a version upgrade of our merchandise software in order to make it Year
2000 compliant. Our financial software is Year 2000 compliant. We are internally
reviewing and testing all mission critical systems and major systems components
for Year 2000 compliance and plan to complete such tests by June 1999. We
believe that all mission critical systems will be Year 2000 compliant.
With respect to suppliers and business partners, we have sent letters to
approximately 1,800 parties in an attempt to determine the possible impact of
failure of third parties to be Year 2000 compliant. Approximately 75% of the
parties contacted have returned our questionnaire. We have had discussions with
our major suppliers and continue to follow up with third parties to ensure that
they remain on schedule with their Year 2000 compliance. We are in the process
of visiting our major suppliers to review their Year 2000 readiness. We have
determined that approximately 10% of our vendors will not be Year 2000
compliant. However, none of these third parties are critical to our continuing
operations. We believe that all of our major suppliers and business partners
will be Year 2000 compliant.
Costs to Address Our Year 2000 Issues: The total cost of the Year 2000 project
is estimated at $2.1 million and is being funded through cash flows from
operations. To date, we have incurred approximately $1.6 million of which $0.4
million relates to hardware and software which was capitalized. The remaining
costs were expensed as incurred and include salaries, incentive compensation and
third party consulting services. Of the total remaining project costs,
approximately $0.1 million is attributable to the purchase of new software and
hardware, which will be capitalized. We cannot guarantee that these estimates
will be achieved and actual results could differ materially from these plans.
Risks of Our Year 2000 Issues: We are dependent on our suppliers and business
partners. If efforts on our part, our customers' part, our suppliers' and
business partners' part, or the part of public utilities or the government fail
to adequately address the relevant Year 2000 issues, the most likely worst case
scenario would be possible delays in the delivery of merchandise to our stores.
We do not currently believe that any such delay will have a materially adverse
effect on us.
Our Contingency Plans: While we anticipate that all of our major suppliers and
business partners will be Year 2000 compliant, we are developing a contingency
plan which will allow the continuation of business operations in the event that
we or any of our significant suppliers or business partners do not properly
address Year 2000 issues. We will obtain early delivery of some merchandise from
suppliers in an attempt to mitigate any Year 2000 issues that may arise. We are
also looking for alternative vendors to supply products and services in the
event that some of our current non-mission critical vendors are unable to
perform because of Year 2000 problems. Further, we are searching for ways that
we can support our current vendors who may have Year 2000 problems. We cannot
assure you that our efforts will prevent all consequences and there may be
undetermined future costs due to business disruption that may be caused by
suppliers, transportation disruptions, or unforeseen circumstances.
SAFE HARBOR STATEMENT, SEASONALITY, AND BUSINESS RISKS
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 65 stores during the remainder of Fiscal
1999,
- -the sufficiency of cash flows and line of credit facilities to meet Fiscal 1999
requirements, and
- -the completion of modifications to computer systems to enable the processing
of transactions in the year 2000 and beyond.
We caution that these statements are further qualified by factors that could
cause actual results to differ materially from those in the forward-looking
statements, including without limitation, the following:
- -decline in demand for our merchandise,
- -the ability to obtain suitable sites for new stores at acceptable costs,
- -the hiring and training of qualified personnel,
- -the integration of new stores into existing operations,
- -the expansion of buying and inventory capabilities,
- -the availability of capital,
- -our ability to anticipate and respond to changing consumer preferences and
fashion trends in a timely manner,
- -any disaster or casualty resulting in the interruption of service for our
distribution center,
- -the effect of economic conditions, and
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<PAGE> 13
- -the effect of competitive pressures from other retailers.
Results actually achieved may differ materially from expected results in these
statements.
Historically, our operations have been seasonal, with a disproportionate amount
of net sales and a majority of 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. During Fiscal 1998, these periods accounted
for approximately 62% of our sales. 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 amount of net sales contributed by new and
existing stores, the timing and level of markdowns, store closings,
refurbishments and relocations, competitive factors, weather and general
economic conditions.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 15 Acknowledgement of Ernst & Young LLP
Exhibit 27 Financial Data Schedule
(b) Current report on Form 8-K filed April 8, 1999, Items 5 and 7.
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 June 10, 1999
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
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Exhibit 15
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) pertaining to the American Eagle Outfitters, Inc. Employee Stock
Purchase Plan (Registration No. 333-3278), the American Eagle Outfitters, Inc.
1994 Restricted Stock Plan (Registration No. 33-79350), the American Eagle
Outfitters, Inc. 1994 Stock Option Plan (Registration Nos. 333-44759, 33-79358,
and 333-12661), and the American Eagle Outfitters, Inc. Stock Fund of American
Eagle Outfitters, Inc. Profit Sharing and 401(k) Plan (Registration No.
33-84796), and the American Eagle Outfitters, Inc. Registration Statement (Form
S-3) (Registration No. 333-68875) of our report dated May 18, 1999 relating to
the unaudited consolidated interim financial statements of American Eagle
Outfitters, Inc. which is included in its Form 10-Q for the quarter ended May 1,
1999.
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
June 5, 1999
15
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