American Eagle Outfitters 2008 Annual Report Download - page 51

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Company assessed the recipient a one-dollar per month service fee, where allowed by law, which was automatically
deducted from the remaining value of the card. For those jurisdictions where assessing a service fee was not allowable
by law, the estimated breakage was recorded in a manner consistent with that described above, starting after 24 months
of inactivity. Both gift card service fees and breakage estimates were recorded within other income, net.
On July 8, 2007, the Company discontinued assessing a service fee on active gift cards. As a result, the
Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a
component of net sales. The Company determines an estimated gift card breakage rate by continuously evaluating
historical redemption data and the time when there is a remote likelihood that a gift card will be redeemed. The
Company recorded $12.2 million of revenue related to gift card breakage during Fiscal 2008. The Company
recorded $13.1 million of revenue related to gift card breakage during Fiscal 2007, which included cumulative
breakage revenue related to gift cards issued since the Company introduced its gift card program. Prior to July 8,
2007, the Company recorded gift card service fee income in other income, net. The Company recorded gift card
service fee income of $0.8 million and $2.3 million in Fiscal 2007 and Fiscal 2006, respectively.
Legal Proceedings and Claims
The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In
accordance with SFAS No. 5, Accounting for Contingencies, management records a reserve for estimated losses
when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no
anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at
the low end of the range, in accordance with FASB Interpretation No. 14, Reasonable Estimation of the Amount of a
Loss — an interpretation of FASB Statement No. 5. As the Company believes that it has provided adequate reserves,
it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially
affect the financial position or results of operations of the Company.
Supplemental Disclosures of Cash Flow Information
The table below shows supplemental cash flow information for cash amounts paid during the respective periods:
January 31,
2009
February 2,
2008
February 3,
2007
For the Years Ended
(In thousands)
Cash paid during the periods for:
Income taxes .................................... $132,234 $260,615 $204,179
Interest......................................... $ 1,947 $ — $ 19
Supplemental disclosure of non-cash transactions:
Transfer of investment securities from available-for-sale to
trading classification ............................. $ — $ — $180,787
49
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)