American Eagle Outfitters 2006 Annual Report Download - page 38

The following tables present summarized geographical information:
For the Years Ended
(In thousands)
February 3,
2007
January 28,
2006
January 29,
2005
Net sales (1):
UnitedStates $2,562,831 $2,144,429 $1,760,111
Foreign (2) 231,578 177,533 129,536
Total net sales $2,794,409 $2,321,962 $1,889,647
(1) Bluenotes’ net sales amounts have been excluded from all periods as they are being presented in
discontinued operations. See Note 9 of the Consolidated Financial Statements for additional information
regarding Bluenotes.
(2) Amounts represent sales from American Eagle’s Canadian retail stores,as well as ae.com sales, that are
billed to and/or shipped to foreign countries.
(In thousands)
February 3,
2007
January 28,
2006
Long-lived assets, net:
UnitedStates $470,494 $329,050
Foreign (1) 21,101 26,418
Total long-lived assets, net (1)$491,595 $355,468
(1) Long-lived assets as of January 28, 2006 do not include the assets of NLS subject to the sales agreement
entered into during the fourth quarter of Fiscal 2005, as they have been classified as held-for-sale. As of
February 3, 2007, there were no remaining assets related to NLS. See Note 9 of the Consolidated Financial
Statements for additional information regarding NLS.
Reclassification
Certain reclassificationshave been made to the Consolidated Financial Statements for prior periods in order to
conform to the Fiscal 2006 presentation, including unaudited quarterly financial information. See Note 14 of the
Consolidated Financial Statements.
3. Share-Based Payments
At February 3, 2007, the Company had three share-based compensation plans, which are described below. Prior
to January 29, 2006, the Company accounted forthese plans under the recognition and measurement provisions
of APBNo. 25, and related interpretations, as permitted by SFAS No. 123. No share-based employee
compensation cost related to stock options was recognized in the Consolidated Statements of Operations prior to
January 29, 2006, as alloptions granted under those plans had an exercise price equal to the marketvalue of the
underlying common stock on the date of grant.
Effective January 29, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R),
using the modified prospective transition method. Underthis transition method, share-based compensation cost
recognized in Fiscal 2006 includes: (a) compensation cost for allshare-based payments granted prior to, but not
yet vested as of January 29, 2006, based on the grant date fair value estimated in accordance with the original
provisions of SFAS No. 123 and (b) compensation cost for allshare-based payments granted subsequent to
January 29, 2006, based on the grant datefair value estimated using the Black-Scholesoption pricingmodel. The
Company recognizes compensation expense for stockoption awardsand time-based restricted stockawards on a
straight-line basis over therequisite service period of the award (or to an employee’s eligible retirement date, if
earlier). Performance-based restricted stockawards are recognized as compensation expense based on the fair
PAGE 46 ANNUAL REPORT 2006
value of the Company’s common stock on the date of grant, the number of shares ultimately expected to vest and
the vesting period. Total share-based compensation expense included in the Consolidated Statements of
Operations for Fiscal 2006, Fiscal 2005 and Fiscal 2004 was $36.6 million ($22.6 million, net of tax), $19.6
million ($12.1 million, net of tax) and $25.2 million ($15.4 million, net of tax), respectively. In accordance with
the modifiedprospective transition method of SFAS No. 123(R), financial results for prior periods have not been
restated.
Historically, for pro forma reporting purposes, the Company had followed the nominal vesting period approach
for stock-based compensation awards with retirement eligibility provisions. Under this approach, the Company
recognized compensation expense over thevesting period of the award. If an employee retired before the end of
the vesting period, any remaining unrecognized compensation cost was recognized at the date of retirement.
SFAS No. 123(R) requires recognition of compensation cost under anon-substantive vesting period
approach. This approach requires recognition of compensation expense over theperiod from the grant date to the
date retirement eligibility is achieved, if that is expected to occur during the nominal vesting period.
Additionally, for awards granted to retirement eligible employees, the full compensation cost of an award must
be recognized immediately upon grant. Had the Company applied the non-substantive vesting period approach
for retirement eligible employees, there would not have been an impact toour reported pro forma income per
common share for Fiscal 2005 or Fiscal 2004. In accordance with SFAS No. 123(R), beginning in Fiscal 2006,
the Company applies the non-substantive vesting period approach to new stock award grants that have retirement
eligibility provisions.
As aresult of adopting SFAS No. 123(R) on January 29, 2006, the Company’s income before income taxesand
net income werelower by $3.9 million and $2.4 million, respectively, for Fiscal 2006, than if the Company had
continuedtoaccount for share-based compensation under APB No. 25. Net income perbasic anddiluted
common share are each lower by $0.01 for Fiscal 2006 than if the Company had not adopted SFAS No. 123(R).
Prior to the adoption of SFAS No. 123(R), the Company presented alltax benefits from share-based payments as
operating cash flows in the ConsolidatedStatements of Cash Flows. SFAS No. 123(R) requires that cash flows
resulting from the benefits of tax deductions in excess of recognized compensation cost be classified as financing
cash flows. Accordingly, for Fiscal 2006, the $19.5 million excess tax benefit from share-based payments
classified as afinancing cash flow would have been classified as an operating cash flow if the company had not
adopted SFAS No. 123(R).
The following table illustratestheeffect on net income and income per common share as if the Company had
applied the fair value recognition provisions of SFAS No. 123 to employee stock options granted in allperiods
presented. For purposes of this pro forma disclosure, the fair value for these options was estimated at the date of
grant using aBlack-Scholes option pricing model and amortized to expense over theoptions’ vesting period.
For the Years Ended
(In thousands, except per shareamounts)
January 28,
2006
January 29,
2005
Net Income, as reported $294,153 $213,343
Add:stock option compensation expense includedinreported net income, net of tax 304 1,301
Less: total stock option compensation expense determined under fair value method, net
of tax (9,283) (10,948)
Proforma net income $285,174 $203,696
Basic income percommon share:
As reported$1.29 $ 0.98
Proforma $1.25 $ 0.94
Diluted income
As reported$1.26 $ 0.95
Proforma $1.22 $0.90
AMERICAN EAGLE OUTFITTERS PAGE 47