American Eagle Outfitters 2001 Annual Report Download - page 32

ae.com AE Management’s Discussion and Analysis of Financial Condition and Results of Operations
The increase in cash and cash equivalents during Fiscal 2001 resulted primarily from an increase of $24.3 million to a total of $174.9 million in cash provided
by operating activities. This was primarily a result of net income for the period of $105.5 million adjusted for depreciation and amortization and changes
in working capital.
Cash outflows for investing activities during Fiscal 2001 were primarily for capital expenditures of $119.3 million and $17.2 million for the net purchase
of short-term investments.
Net cash provided by financing activities of $7.6 million was primarily from proceeds of $15.8 million from stock options exercised during Fiscal 2001
offset by $5.7 million used for principal payments on the note payable and capital lease obligations and $2.5 million used for stock repurchases.
The remainder of the cash flow provided by operating activities is being retained for new store growth, store remodels, system enhancements, and other
capital expenditures. We fund merchandise purchases through operating cash flow.
At February 2, 2002, the Company had an unsecured demand lending arrangement (the “facility”) with a bank to provide a $125.0 million line of credit
at either the lender’s prime lending rate (4.8% at February 2, 2002) 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 required against the line for the current or prior year. At February 2, 2002, letters of credit in the amount
of $43.4 million were outstanding leaving a remaining available balance on the line of $81.6 million. During June 2001, the Company entered into an
agreement with a separate financial institution for an uncommitted letter of credit facility for $50.0 million. At February 2, 2002, letters of credit in the
amount of $10.4 million were outstanding, leaving a remaining available balance on the line of $39.6 million.
During November 2000, the Company entered into a $29.1 million non-revolving term facility (the “term facility”) and a $4.9 million revolving operating
facility (the “operating facility”) in connection with the Canadian acquisition. The term facility matures in December 2007 and bears interest at the one-month
Bankers’ Acceptance Rate (2.1% at February 2, 2002) plus 140 basis points. The operating facility is due in November 2002, has five additional one-year
extensions, and bears interest at either the lender’s prime lending rate (4.0% at February 2, 2002) or the Bankers’ Acceptance Rate (2.1% at February
2, 2002) plus 120 basis points. There were no borrowings under the operating facility for the year ended February 2, 2002.
Capital expenditures, net of construction allowances, totaled $119.3 million for Fiscal 2001, of which $49.2 million related to the addition of 127 new
American Eagle stores in the United States and Canada, $25.6 million related to our second distribution center in the United States and $19.3 million
related to the remodeling of 40 American Eagle stores in the United States. Remaining capital expenditures were primarily related to systems improvements,
fixtures and improvements to existing stores, and office renovations.
We expect capital expenditures for Fiscal 2002 to total approximately $110.0 million, net of construction allowances, which will relate primarily to approx-
imately 90 new American Eagle stores in the United States and Canada, remodeling approximately 40 American Eagle stores in the United States and
systems improvements. Remaining capital expenditures will relate to fixtures and improvements to existing stores, improvements to our corporate head-
quarters and improvements to our distribution facility in Canada. Additionally, in Fiscal 2002, we plan to pay $4.0 million in scheduled principal payments
on the term facility. We plan to fund these capital expenditures and debt repayments primarily through existing cash and cash generated from operations.
These forward-looking statements will be influenced by our financial position, consumer spending, availability of financing, and the number of accept-
able mall leases that may become available.
Our growth strategy includes the possibility of growth through acquisitions. We periodically consider and evaluate acquisitions and opportunities to
support future growth, and may undertake acquisitions in 2002 and beyond. At this time, we have not committed to any material future acquisition. In
the event we do pursue material future acquisitions, such actions could require additional equity or debt financing. There can be no assurance that we
would be successful in closing any potential acquisition transaction, or that any acquisition we undertake would increase our profitability.
Disclosure about Contractual Obligations and Commercial Commitments
The following table summarizes significant contractual obligations and commercial commitments of the Company as of February 2, 2002:
Contractual Obligations and Commercial Commitments Payments Due by Period
Total Less than 1 year 2–3 years 4–5 years After 5 years
in thousands
Note payable $23,405 $4,044 $8,088 $8,088 $3,185
Operating leases 942,850 115,479 222,595 199,209 405,567
Letters of credit 53,773 53,773 — — —
Total contractual obligations and
commercial commitments $1,020,028 $173,296 $230,683 $207,297 $408,752
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