American Eagle Outfitters 2014 Annual Report Download - page 27

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Table of Contents
Loss on Impairment of Assets
Loss on impairment of assets this year was the result of a store fleet and corporate location review and challenging performance this year,
and consisted of $25.1 million for the impairment of 48 AE and 31 aerie stores and $8.4 million for corporate items. In Fiscal 2013, the loss on
impairment of assets was $44.5 million relating to 69 retail stores and our Warrendale, Pennsylvania Distribution Center.
Depreciation and Amortization Expense
Depreciation and amortization expense increased to $141.2 million from $132.0 million last year, driven by omni-channel and IT
investments, new factory and international stores, and the new fulfillment center. As a rate to total net revenue, depreciation and amortization
increased to 4.3% from 4.0% last year as a result of the lower total net revenue and an increase in depreciation and amortization expense this
year. Depreciation and amortization includes $11.7 million of asset write
-offs in Fiscal 2013.
Other Income, Net
Other income was $3.7 million this year, compared to income of $1.0 million last year, primarily as a result of foreign currency
fluctuations.
Provision for Income Taxes
The effective income tax rate from continuing operations increased to approximately 44% in Fiscal 2014 from 42% in Fiscal 2013. The
higher effective income tax rate in Fiscal 2014 was primarily due to valuation allowances on foreign losses, offset by an overall increase in
income levels.
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 2014 was $88.8 million, or $0.46 per diluted share. This includes $51.2 million, or ($0.17)
per diluted share, diluted share impact from impairment charges and restructuring charges. Income from continuing operations for Fiscal 2013
was $83.0 million, or $0.43 per diluted share. This includes $60.9 million, or ($0.31) per diluted share, of after-tax impairment charges, asset
write-offs, corporate charges and tax related items.
Loss from Discontinued Operations
We completed the sale of the 77kids stores and related e-commerce operations during Fiscal 2012. Accordingly, the after-tax operating
results appear in Loss from Discontinued Operations on the Consolidated Statements of Operations for all periods presented.
In Fiscal 2014, we became primarily liable for 21 store leases as the third party purchaser did not fulfill its obligations. We incurred $13.7
million in pre-tax expense to terminate store leases. Loss from Discontinued Operations, net of tax, was $8.5 million for Fiscal 2014.
Refer to Note 15 to the Consolidated Financial Statements for additional information regarding the discontinued operations of 77kids.
Net Income
Net income decreased to $80.3 million in Fiscal 2014 from $83.0 million in Fiscal 2013. As a percent to total net revenue, net income
was 2.4% and 2.5% for both Fiscal 2014 and Fiscal 2013, respectively. Net income per diluted share was $0.42, compared to $0.43 last year.
The change in net income was attributable to the factors noted above.
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