American Eagle Outfitters 2011 Annual Report Download - page 28

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Table of Contents
Share-based payment expense included in selling, general and administrative expense decreased to $17.1 million compared to $23.0 million in Fiscal
2009.
Depreciation and Amortization Expense
Depreciation and amortization expense increased 2% to $140.5 million from $137.8 million in Fiscal 2009. This increase is primarily due to a greater
property and equipment base driven by our level of capital expenditures. As a percent to net sales, depreciation and amortization expense increased to 4.8%
from 4.7% due to the increased expense as well as the impact of the comparable store sales decline.
Realized Loss on Sale of Investment Securities
The realized loss on sale of investment securities was $24.4 million, or approximately $0.12 per diluted share, for Fiscal 2010. This compares to a loss
of $2.7 million, or $0.01 per diluted share, in Fiscal 2009.
The loss in Fiscal 2010 was primarily due to the liquidation of 95% of our ARS investment portfolio. Our ARS investment portfolio was originally
purchased as highly liquid short-term instruments. Due to the deterioration of the ARS market and ARS investments experiencing failed auctions or long-term
auction resets, our ARS investment portfolio was subsequently classified as long-term, with a weighted average contractual maturity of approximately 26
years. This liquidation allowed us to convert substantially our entire ARS investment portfolio to short-term liquid assets, with total cash proceeds of $149.6
million plus accrued interest and a net realized loss of $24.2 million for the liquidation.
Additionally, in the first half of Fiscal 2010, we liquidated $28.1 million of ARS investments for proceeds of $27.9 million and a total realized loss of
$0.2 million.
Other Income (Expense), Net
Other income (expense), net increased to $2.2 million from $(3.3) million in Fiscal 2009, due primarily to a non-cash, non-operating foreign currency
loss related to holding U.S. dollars in our Canadian subsidiary in anticipation of repatriation recorded in Fiscal 2009.
Provision for Income Taxes
The effective income tax rate from continuing operations increased to approximately 38.3% in Fiscal 2010 from 29.9% in Fiscal 2009. The lower
effective income tax rate in Fiscal 2009 was primarily the result of the tax benefit associated with the repatriation of foreign earnings from Canada as well as
federal and state income tax settlements and other changes in income tax reserves. Additionally, the Fiscal 2010 effective income tax rate was higher due to
losses on the sale of certain ARS investments in which no income tax benefit was recognized. The repatriation of foreign earnings from Canada in Fiscal 2009
was a discrete event and has not changed the Company's intention to indefinitely reinvest the earnings of our Canadian subsidiaries to the extent not
repatriated.
Refer to Note 14 to the Consolidated Financial Statements for additional information regarding our accounting for income taxes.
Income From Continuing Operations
Income from continuing operations for Fiscal 2010 was $181.9 million, or $0.90 per diluted share, and includes a $0.12 per diluted share loss from the
sale of investment securities related to our ARS liquidation as discussed above. Income from continuing operations for Fiscal 2009 was $213.4 million, or
$1.02 per diluted share, and includes $0.11 per diluted share of tax benefits and a $0.01 per diluted share realized loss on the sale of investment securities.
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