American Eagle Outfitters 2009 Annual Report Download - page 30

The following table presents a rollforward of the amount of net impairment loss recognized in earnings related
to credit losses:
For the Year Ended
January 30, 2010
(In thousands)
Beginning balance of credit losses previously recognized in earnings .......... $ —
Year-to-date OTTI credit losses recognized in earnings..................... 940
Ending balance of cumulative credit losses recognized in earnings ............ $940
The reconciliation of our assets measured at fair value on a recurring basis using unobservable inputs
(Level 3) is as follows:
Total
Auction-
Rate
Municipal
Securities
Student
Loan-
Backed
Auction-
Rate
Securities
Auction-Rate
Preferred
Securities
Level 3 (Unobservable Inputs)
(In thousands)
Carrying value at January 31, 2009 ........... $251,007 $ 69,970 $169,254 $11,783
Settlements ............................. (72,600) (29,900) (42,700) —
Gains and (losses):
Reported in earnings .................... (940) — — (940)
Reported in OCI ....................... 24,981 174 22,877 1,930
Balance at January 30, 2010 ................ $202,448 $ 40,244 $149,431 $12,773
Refer to Notes 3 and 4 to the Consolidated Financial Statements for additional information on our investment
securities, including a description of the securities and a discussion of the uncertainties relating to their liquidity.
Non-Financial Assets
Our non-financial assets, which include goodwill and property and equipment, are not required to be measured
at fair value on a recurring basis. However, if certain triggering events occur, or if an annual impairment test is
required and we are required to evaluate the non-financial instrument for impairment, a resulting asset impairment
would require that the non-financial asset be recorded at the estimated fair value. Resulting from our annual
goodwill impairment test performed as of January 30, 2010, we concluded that our goodwill was not impaired.
Additionally, certain long-lived assets were measured at estimated fair value on a nonrecurring basis using
Level 3 inputs as defined in ASC 820. Based on our review of the operating performance and projections of
underperforming stores, we determined that certain underperforming stores would not be able to generate sufficient
cash flow over the life of the related leases to recover our initial investment in them. The estimated fair value of
those stores was determined by estimating the amount and timing of net future cash flows and discounting them
using a risk-adjusted rate of interest. We estimate future cash flows based on our experience and knowledge of the
market in which the store is located. During Fiscal 2009, certain long-lived assets with a carrying value of
$18.0 million, primarily related to 10 M+O stores, were determined to be unable to recover their respective carrying
values and, therefore, were written down to their estimated fair value, resulting in a loss on impairment of assets of
$18.0 million.
Liquidity and Capital Resources
Our uses of cash are generally for working capital, the construction of new stores and remodeling of existing
stores, information technology upgrades, distribution center improvements and expansion, the purchase of both
short and long-term investments, the repurchase of common stock and the payment of dividends. Historically, these
uses of cash have been funded with cash flow from operations and existing cash on hand. Additionally, our uses of
cash include the completion of our new corporate headquarters, the development of aerie by American Eagle and
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