American Eagle Outfitters 2009 Annual Report Download - page 31

the development of 77kids by american eagle. We expect to be able to fund our future cash requirements through
current cash holdings as well as cash generated from operations. In the future, we expect that our uses of cash will
also include further development of aerie by American Eagle and 77kids by american eagle.
Our growth strategy includes internally developing new brands and the possibility of further franchising
arrangements or acquisitions. We periodically consider and evaluate these options to support future growth. In the
event we do pursue such options, we could require additional equity or debt financing. There can be no assurance
that we would be successful in closing any potential transaction, or that any endeavor we undertake would increase
our profitability.
The following sets forth certain measures of our liquidity:
January 30,
2010
January 31,
2009
Working Capital (in 000’s) .................................... $758,075 $523,596
Current Ratio .............................................. 2.85 2.30
The increase of our working capital and current ratio as of January 30, 2010 compared to January 31, 2009, is
primarily related to an increase in cash and cash equivalents as a result of cash from operations as well as the
liquidation of long-term investments.
Cash Flows from Operating Activities
Net cash provided by operating activities totaled $386.5 million during Fiscal 2009 compared to $303.3 million
during Fiscal 2008 and $464.7 million during Fiscal 2007. Our major source of cash from operations was
merchandise sales. Our primary outflows of cash from operations were for the purchase of inventory and
operational costs.
The increase in net cash provided by operating activities of $83.2 million from the prior year was driven
primarily by an increase in accrued compensation due to incentive compensation accruals during Fiscal 2009 as
well as an increase in prepaid taxes due to the timing of payments.
Cash Flows from Investing Activities
Investing activities for Fiscal 2009 included $127.4 million for capital expenditures partially offset by
$80.4 million from the sale of investments classified as available-for-sale. Investing activities for Fiscal 2008
included $344.9 million from the net sale of investments classified as available-for-sale, partially offset by
$265.3 million for capital expenditures. Investing activities for Fiscal 2007 primarily included $354.2 million for
the net sale of investments classified as available-for-sale as well as $250.4 million for capital expenditures.
We invest our cash primarily in liquid money market funds. We also have investments, made under our prior
investment policy, in auction rate and auction rate preferred securities, with an original contractual maturity of up to
39 years and an expected rate of return of approximately a 0.8% taxable equivalent yield. All investments made
under our new investment policy must have a highly liquid secondary market at the time of purchase and an effective
maturity not exceeding two years.
Cash Flows from Financing Activities
During Fiscal 2009, cash used for financing activities resulted primarily from $83.0 million used for the
payment of dividends and the partial repayment of $45.0 million in borrowings against our demand line of credit.
During Fiscal 2008, cash used for financing activities resulted primarily from $82.4 million used for the payment of
dividends partially offset by $75.0 million in borrowings against our demand line of credit. During Fiscal 2007, cash
used for financing activities resulted primarily from $438.3 million used for the repurchase of our common stock as
part of our publicly announced repurchase program and $80.8 million used for the payment of dividends.
ASC 718 requires that cash flows resulting from the benefits of tax deductions in excess of recognized
compensation cost for share-based payments be classified as financing cash flows. Accordingly, for Fiscal 2009,
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