American Eagle Outfitters 2009 Annual Report Download - page 50

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Other (Expense) Income, Net
Other (expense) income, net consists primarily of a realized investment loss, interest income/expense and
foreign currency transaction gain/loss.
Gift Cards
The value of a gift card is recorded as a current liability upon purchase and revenue is recognized when the gift
card is redeemed for merchandise. Prior to July 8, 2007, if a gift card remained inactive for greater than 24 months,
the 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
(expense) 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.
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 ASC 450, Contingencies (“ASC 450”), the Company 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 ASC 450. 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 consolidated financial position, results of operations or consolidated cash flows 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 30,
2010
January 31,
2009
February 2,
2008
For the Years Ended
(In thousands)
Cash paid during the periods for:
Income taxes .................................... $61,869 $132,234 $260,615
Interest......................................... $ 1,879 $ 1,947 $ —
Segment Information
In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified four operating
segments (American Eagle Brand US and Canadian stores, aerie by American Eagle retail stores, MARTIN+OSA
retail stores and AEO Direct) that reflect the basis used internally to review performance and allocate resources. All
of the operating segments have been aggregated and are presented as one reportable segment, as permitted by
ASC 280.
49
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)