American Eagle Outfitters 2004 Annual Report Download - page 33

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Part II
Disclosure about Commercial Commitments
The following table summarizes significant commercial commitments of the Company as of January 29, 2005:
Amount of Commitment Expiration Per Period (In thousands) Total
Amount
Committed
Less than
1 year
2-3
years
4-5
years
After
5 years
Letters of Credit $72,576 $72,576 - - -
Total Commercial Commitments $72,576 $72,576 - - -
Guarantees
In connection with the disposition of Bluenotes, the Company has provided guarantees related to two store leases
that were assigned to 6295215 Canada Inc. (the “Purchaser”). These guarantees were provided to the applicable
landlords and will remain in effect until the leases expire in 2007 and 2015, respectively. The lease guarantees
require the Company to make all required payments under the lease agreements in the event of default by the
Purchaser. The maximum potential amount of future payments (undiscounted) that the Company could be required to
make under the guarantees is approximately $1.6 million as of January 29, 2005. In the event that the Company
would be required to make any such payments, it would pursue full reimbursement from YM, Inc., a related party of
the Purchaser, in accordance with the Bluenotes Asset Purchase Agreement.
In accordance with FASB Interpretation 45, Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others—an interpretation of FASB Statements No. 5, 57, and 107
and rescission of FASB Interpretation No. 34 (“FIN 45”), as the Company issued the guarantees at the time it
became secondarily liable under a new lease, no amounts have been accrued in the Company’s Consolidated
Financial Statements related to these guarantees. Additionally, Management believes that the likelihood of having to
perform under the guarantees is remote.
New Accounting Pronouncements
FIN No. 46, Consolidation of Variable Interest Entities
The FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51, Consolidated Financial Instruments, in January 2003 and subsequently issued a revision
of the Interpretation in December 2003 ("FIN 46R"). FIN 46R requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional financial support from other parties. All provisions of FIN 46R were effective for the
first reporting period ended after March 15, 2004. The Company fully adopted the provisions of FIN 46R during the
three months ended May 1, 2004, which did not have an impact on the Company's consolidated financial position,
results of operations or liquidity because the Company has no interest in any variable interest entities.
FSP No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within
the American Jobs Creation Act of 2004
In December 2004, the FASB issued Staff Position No. FAS 109-2, Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (“FSP No. 109-2”). FSP
No. 109-2 allows additional time for companies to determine how the American Jobs Creation Act of 2004 (the
“Act”) affects a company’s accounting for the deferred tax liabilities on un-remitted foreign earnings. The Act
provides for a special one-time deduction of 85% of certain foreign earnings that are repatriated and which meet
certain requirements. The Company is currently evaluating whether any of the earnings of our non-U.S. operations