American Eagle Outfitters 2004 Annual Report Download - page 61

47
Part II
Depreciation expense is summarized as follows:
For the Years Ended
(In thousands) January 29,
2005
January 31,
2004
(Restated)
February 1,
2003
(Restated)
Depreciation expense $66,326 $59,083 $52,128
6. Note Payable and Other Credit Arrangements
Unsecured Demand Lending Arrangement
The Company has an unsecured demand lending arrangement (the "facility") with a bank to provide a $118.6 million
line of credit at either the lender's prime lending rate (5.25% at January 29, 2005) or at LIBOR plus a negotiated
margin rate. The facility has a limit of $40.0 million to be used for direct borrowing. Because there were no
borrowings during any of the past three years, there were no amounts paid for interest on this facility. At January 29,
2005, letters of credit in the amount of $55.0 million were outstanding on this facility, leaving a remaining available
balance on the line of $63.6 million.
Uncommitted Letter of Credit Facility
The Company also has an uncommitted letter of credit facility for $50.0 million with a separate financial institution.
At January 29, 2005, letters of credit in the amount of $17.6 million were outstanding on this facility, leaving a
remaining available balance on the line of $32.4 million.
Non-revolving Term Facility and Revolving Operating Facility
During Fiscal 2004, the Company retired its $29.1 million non-revolving term facility (the "term facility") for $16.2
million. The term facility required annual payments of $4.8 million, with interest at the one-month Bankers'
Acceptance Rate plus 140 basis points, and was originally scheduled to mature in December 2007. Interest paid
under the term facility was $1.2 million, $1.5 million and $1.6 million for the years ended January 29, 2005, January
31, 2004 and February 1, 2003, respectively.
The Company also had an $11.2 million revolving operating facility (the "operating facility") that was used to
support the working capital and capital expenditures of the acquired Canadian businesses. The operating facility was
due in November 2003 and had four additional one-year extensions. During Fiscal 2003, the Company chose not to
extend the operating facility for another year.
7. Accounting for Derivative Instruments and Hedging Activities
On November 30, 2000, the Company entered into an interest rate swap agreement totaling $29.2 million in
connection with the term facility. The swap amount decreased on a monthly basis beginning January 1, 2001 until the
early termination of the agreement during Fiscal 2004. In accordance with SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, the Company recognized its derivative on the balance sheet at fair value at the
end of each period. Changes in the fair value of the derivative, which was designated and met all the required criteria
for a cash flow hedge, were recorded in accumulated other comprehensive income (loss). Unrealized net gains
(losses) on derivative instruments of approximately $(0.1) million and $0.3 million for the years ended January 31,
2004 and February 1, 2003, respectively, net of related tax effects, were recorded in other comprehensive income
(loss). During Fiscal 2004, the interest rate swap was terminated at its fair value, which represented a net loss of $0.7