American Eagle Outfitters 2009 Annual Report Download - page 59

8. Note Payable and Other Credit Arrangements
The Company has borrowing agreements with four separate financial institutions under which it may borrow
an aggregate of $325.0 million United States dollars (“USD”) and $25.0 million Canadian dollars (“CAD”). Of this
amount, $200.0 million USD can be used for demand letter of credit facilities, $100.0 million USD and
$25.0 million CAD can be used for demand line borrowings and the remaining $25.0 million USD can be used
for either letters of credit or demand line borrowings at the Company’s discretion. The $100.0 million USD of
demand line credit is comprised of two facilities each with $50.0 million USD of borrowing capacity. The
expiration dates of the two demand line facilities are April 21, 2010 and May 22, 2010. The $25.0 million CAD of
demand line credit was established during Fiscal 2009, and is provided at the discretion of the lender.
During Fiscal 2009, the Company reduced the amount of credit available that could be used for either letters of
credit or as a demand line from $100.0 million USD to $25.0 million USD. This request was made by the lender due
to the Company’s low utilization of this credit facility. The reduction was effective July 3, 2009 and had no material
impact on the Company’s Consolidated Financial Statements or on the Company’s ability to fund its operations.
Additionally, during Fiscal 2009, the Company increased its borrowing capacity for demand letters of credit from
$150.0 million USD to $200.0 million USD.
As of January 30, 2010, the Company had outstanding trade and standby letters of credit of $51.5 million USD
and demand line borrowings of $30.0 million USD, which reflects a $45.0 million USD reduction from January 31,
2009, as a result of a voluntary partial repayment made during Fiscal 2009. The outstanding amounts on the demand
line borrowings can be called for repayment by the financial institutions at any time. Additionally, the availability of
any remaining borrowings is subject to acceptance by the respective financial institutions. The average borrowing
rate on the demand lines for Fiscal 2009 was 2.5% and the Company has incorporated the outstanding demand line
borrowings into working capital.
9. Leases
The Company leases all store premises, some of its office space and certain information technology and office
equipment. The store leases generally have initial terms of 10 years. Most of these store leases provide for base
rentals and the payment of a percentage of sales as additional contingent rent when sales exceed specified levels.
Additionally, most leases contain construction allowances and/or rent holidays. In recognizing landlord incentives
and minimum rent expense, the Company amortizes the charges on a straight-line basis over the lease term
(including the pre-opening build-out period). These leases are classified as operating leases.
A summary of fixed minimum and contingent rent expense for all operating leases follows:
January 30,
2010
January 31,
2009
February 2,
2008
For the Years Ended
(In thousands)
Store rent:
Fixed minimum ................................ $229,428 $197,820 $167,051
Contingent .................................... 7,873 11,767 17,626
Total store rent, excluding common area maintenance
charges, real estate taxes and certain other expenses...... $237,301 $209,587 $184,677
Offices, distribution facilities, equipment and other ........ 18,664 18,260 17,250
Total rent expense ................................ $255,965 $227,847 $201,927
In addition, the Company is typically responsible under its store, office and distribution center leases for tenant
occupancy costs, including maintenance costs, common area charges, real estate taxes and certain other expenses.
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AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)