AMERICAN EAGLE OUTFITTERS INC, 10-Q filed on 8/24/2016
Quarterly Report
Document and Entity Information
6 Months Ended
Jul. 30, 2016
Aug. 19, 2016
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jul. 30, 2016 
 
Document Fiscal Year Focus
2016 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
AEO 
 
Entity Registrant Name
AMERICAN EAGLE OUTFITTERS INC 
 
Entity Central Index Key
0000919012 
 
Current Fiscal Year End Date
--01-28 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
181,763,310 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 30, 2016
Aug. 1, 2015
Current assets:
 
 
 
Cash and cash equivalents
$ 247,934 
$ 260,067 
$ 327,290 
Merchandise inventory
422,151 
305,178 
408,541 
Accounts receivable
65,282 
80,912 
50,693 
Prepaid expenses and other
90,852 
77,218 
72,106 
Total current assets
826,219 
723,375 
858,630 
Property and equipment, at cost, net of accumulated depreciation
700,270 
703,586 
715,650 
Intangible assets, at cost, net of accumulated amortization
50,761 
51,832 
47,154 
Goodwill
17,399 
17,186 
13,006 
Non-current deferred income taxes
44,370 
64,927 
74,140 
Other assets
54,169 
51,340 
51,629 
Total assets
1,693,188 
1,612,246 
1,760,209 
Current liabilities:
 
 
 
Accounts payable
286,691 
182,789 
263,145 
Accrued compensation and payroll taxes
35,908 
79,302 
37,851 
Accrued rent
78,621 
77,482 
77,127 
Accrued income and other taxes
10,250 
22,223 
14,654 
Unredeemed gift cards and gift certificates
31,532 
48,274 
30,502 
Current portion of deferred lease credits
12,810 
12,711 
13,240 
Other liabilities and accrued expenses
42,719 
40,901 
55,625 
Total current liabilities
498,531 
463,682 
492,144 
Non-current liabilities:
 
 
 
Deferred lease credits
51,100 
50,104 
56,421 
Non-current accrued income taxes
4,795 
4,566 
5,441 
Other non-current liabilities
38,365 
42,518 
40,525 
Total non-current liabilities
94,260 
97,188 
102,387 
Commitments and contingencies
   
   
   
Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
   
   
   
Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 180,907, 180,135 and 195,429 shares outstanding, respectively
2,496 
2,496 
2,496 
Contributed capital
591,532 
590,820 
577,146 
Accumulated other comprehensive loss
(29,356)
(29,868)
(18,378)
Retained earnings
1,693,371 
1,659,267 
1,553,380 
Treasury stock, 68,659, 69,431 and 54,137 shares, respectively
(1,157,646)
(1,171,339)
(948,966)
Total stockholders’ equity
1,100,397 
1,051,376 
1,165,678 
Total liabilities and stockholders’ equity
$ 1,693,188 
$ 1,612,246 
$ 1,760,209 
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Jul. 30, 2016
Jan. 30, 2016
Aug. 1, 2015
Statement Of Financial Position [Abstract]
 
 
 
Preferred stock, par value
$ 0.01 
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
5,000,000 
5,000,000 
5,000,000 
Preferred stock, issued
Preferred stock, outstanding
Common stock, par value
$ 0.01 
$ 0.01 
$ 0.01 
Common stock, shares authorized
600,000,000 
600,000,000 
600,000,000 
Common stock, shares issued
249,566,000 
249,566,000 
249,566,000 
Common stock, shares outstanding
180,907,000 
180,135,000 
195,429,000 
Treasury stock, shares
68,659,000 
69,431,000 
54,137,000 
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Income Statement [Abstract]
 
 
 
 
Total net revenue
$ 822,594 
$ 797,428 
$ 1,572,010 
$ 1,496,948 
Cost of sales, including certain buying, occupancy and warehousing expenses
515,499 
512,389 
971,463 
949,697 
Gross profit
307,095 
285,039 
600,547 
547,251 
Selling, general and administrative expenses
199,536 
195,791 
395,529 
380,882 
Depreciation and amortization expense
38,900 
36,109 
77,683 
71,237 
Operating income
68,659 
53,139 
127,335 
95,132 
Other (expense) income, net
(3,134)
(2,237)
1,801 
3,733 
Income before income taxes
65,525 
50,902 
129,136 
98,865 
Provision for income taxes
23,933 
17,637 
47,068 
36,547 
Net income
41,592 
33,265 
82,068 
62,318 
Net income per basic share
$ 0.23 
$ 0.17 
$ 0.45 
$ 0.32 
Net income per diluted share
$ 0.23 
$ 0.17 
$ 0.45 
$ 0.32 
Cash dividends per common share
$ 0.125 
$ 0.125 
$ 0.250 
$ 0.250 
Weighted average common shares outstanding - basic
181,048 
195,508 
180,872 
195,241 
Weighted average common shares outstanding - diluted
183,413 
196,885 
182,922 
196,532 
Retained earnings, beginning
1,675,031 
1,545,674 
1,659,267 
1,543,085 
Net income
41,592 
33,265 
82,068 
62,318 
Cash dividends and dividend equivalents
(23,246)
(24,428)
(46,405)
(49,417)
Reissuance of treasury stock
(6)
(1,131)
(1,559)
(2,606)
Retained earnings, ending
$ 1,693,371 
$ 1,553,380 
$ 1,693,371 
$ 1,553,380 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Statement Of Income And Comprehensive Income [Abstract]
 
 
 
 
Net income
$ 41,592 
$ 33,265 
$ 82,068 
$ 62,318 
Other comprehensive (loss) income:
 
 
 
 
Foreign currency translation (loss) income
(4,873)
(7,334)
511 
(8,434)
Other comprehensive (loss) income:
(4,873)
(7,334)
511 
(8,434)
Comprehensive income
$ 36,719 
$ 25,931 
$ 82,579 
$ 53,884 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Operating activities:
 
 
Net income
$ 82,068 
$ 62,318 
Adjustments to reconcile net income to net cash from operating activities:
 
 
Depreciation and amortization
78,142 
71,582 
Share-based compensation
16,748 
22,091 
Deferred income taxes
20,262 
(1,272)
Foreign currency transaction gain
(2,268)
(1,062)
Changes in assets and liabilities:
 
 
Merchandise inventory
(115,371)
(131,345)
Accounts receivable
14,081 
16,189 
Prepaid expenses and other
(13,360)
(1,800)
Other assets
(3,482)
(16,074)
Accounts payable
92,027 
67,869 
Unredeemed gift cards and gift certificates
(16,953)
(17,285)
Deferred lease credits
718 
2,349 
Accrued compensation and payroll taxes
(42,796)
(6,407)
Accrued income and other taxes
(12,020)
(22,926)
Accrued liabilities
3,570 
3,289 
Total adjustments
19,298 
(14,802)
Net cash provided by operating activities
101,366 
47,516 
Investing activities:
 
 
Capital expenditures for property and equipment
(60,539)
(78,927)
Acquisition of intangible assets
(1,034)
(1,680)
Net cash used for investing activities
(61,573)
(80,607)
Financing activities:
 
 
Payments on capital leases
(3,902)
(3,084)
Repurchase of common stock from employees
(6,868)
(5,149)
Net proceeds from stock options exercised
1,905 
6,362 
Excess tax benefit from share-based payments
486 
653 
Cash dividends paid
(45,213)
(48,809)
Net cash used for financing activities
(53,592)
(50,027)
Effect of exchange rates changes on cash
1,666 
(289)
Net decrease in cash and cash equivalents
(12,133)
(83,407)
Cash and cash equivalents - beginning of period
260,067 
410,697 
Cash and cash equivalents - end of period
247,934 
327,290 
Supplemental disclosure of cash flow information:
 
 
Cash paid during the period for income taxes
63,631 
60,936 
Cash paid during the period for interest
$ 610 
$ 611 
Interim Financial Statements
Interim Financial Statements

1.  Interim Financial Statements

The accompanying Consolidated Financial Statements of American Eagle Outfitters, Inc. (the “Company”) at July 30, 2016 and August 1, 2015 and for the 13 week and 26 week periods ended July 30, 2016 and August 1, 2015 have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Certain notes and other information have been condensed or omitted from the interim Consolidated Financial Statements presented in this Quarterly Report on Form 10-Q. Therefore, these Consolidated Financial Statements should be read in conjunction with the Company’s Fiscal 2015 Annual Report. In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and those described in the footnotes that follow) considered necessary for a fair presentation have been included. The existence of subsequent events has been evaluated through the filing date of this Quarterly Report on Form 10-Q.

As used in this report, all references to “we,” “our” and the “Company” refer to American Eagle Outfitters, Inc. and its wholly owned subsidiaries. “American Eagle Outfitters,” “American Eagle,” “AEO” and the “AE Brand” refer to our American Eagle Outfitters stores. “Aerie” refers to our Aerie® by American Eagle® stores. “AEO Direct” refers to our e-commerce operations, ae.com and aerie.com.

The Company’s business is affected by the pattern of seasonality common to most retail apparel businesses. The results for the current and prior periods are not necessarily indicative of future financial results.

 

Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

2.  Summary of Significant Accounting Policies

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.  At July 30, 2016, the Company operated in one reportable segment.

Fiscal Year

The Company’s financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2016” refers to the 52 week period ending January 28, 2017. “Fiscal 2015” refers to the 52 week period ended January 30, 2016.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of our contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews the Company’s estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”).  ASU 2014-09 is a comprehensive new revenue recognition model that expands disclosure requirements and requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Originally, ASU 2014-09 was effective for annual reporting periods beginning after December 15, 2016. In July 2015, the FASB voted to approve amendments deferring the effective date by one year to be effective for annual reporting periods beginning after December 15, 2017. Accordingly, the Company will adopt ASU 2014-09 on February 4, 2018. The Company does not expect a material impact of the adoption of this guidance on its Consolidated Financial Statements, results of operations or cash flows.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU may be applied prospectively or retrospectively. The Company adopted the ASU on January 30, 2016, applied retrospectively.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016–02”) which replaces the existing guidance in ASC 840, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.   The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application. The Company will adopt in Fiscal 2019 and is currently evaluating the impact of ASU 2016-02 to its Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU 2016-09”).  ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016. The Company will adopt in Fiscal 2017 and is currently evaluating the impact to its Consolidated Financial Statements.

Foreign Currency Translation

In accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters, assets and liabilities denominated in foreign currencies were translated into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. Revenues and expenses denominated in foreign currencies were translated into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the results of operations, whereas, related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income.

Revenue Recognition

Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.

Revenue is not recorded on the issuance of gift cards. A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company’s gift card program, refer to the Gift Cards caption below.

The Company recognizes royalty revenue generated from its licensee or franchise agreements based on a percentage of merchandise sales by the licensee/franchisee.  This revenue is recorded as a component of total net revenue when earned.

Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses

Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively “merchandise costs”) and buying, occupancy and warehousing costs.

Design costs are related to the Company's Design Center operations and include compensation, travel, supplies and samples for our design teams, as well as rent and depreciation for our Design Center. These costs are included in cost of sales as the respective inventory is sold.

Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased. Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales.

Other (Expense) Income, Net

Other (expense) income, net consists primarily of foreign currency transaction gain/loss, interest income/expense and investment gain/loss.

Cash and Cash Equivalents and Investments

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

As of July 30, 2016 and August 1, 2015, the Company held no short or long term investments.

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when both title and risk of loss for the merchandise have transferred to the Company.

The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected. The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.

Income Taxes

The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits may materially impact the Company’s effective income tax rate.

The Company evaluates its income tax positions in accordance with ASC 740, which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits.

The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions. The Company believes that its assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income.

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding income taxes.

Property and Equipment

Property and equipment is recorded on the basis of cost, including costs to prepare the asset for use, with depreciation computed utilizing the straight-line method over the assets’ estimated useful lives. The useful lives of our major classes of assets are as follows:

 

Buildings

 

25 years

Leasehold improvements

 

Lesser of 10 years or the term of the lease

Fixtures, equipment and technology

 

5 years

 

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), the Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified, for stores that have been open for a period of time sufficient to reach maturity.  Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded. No long-lived asset impairment charges were recorded during the 13 weeks or 26 weeks ended July 30, 2016 or August 1, 2015.

Refer to Note 6 to the Consolidated Financial Statements for additional information regarding property and equipment.

Goodwill

The Company’s goodwill is related to the acquisition of its importing operations, Canada, Hong Kong and China businesses and the recent acquisition of Tailgate Clothing Co. in Fiscal 2015. In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment on at least an annual basis and last performed an annual impairment test as of January 30, 2016.  As a result of the Company’s annual goodwill impairment test, the Company concluded that its goodwill was not impaired.

Intangible Assets

Intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated useful lives.  The Company’s intangible assets, which primarily include trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows are less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. No intangible asset impairment charges were recorded during the 13 or 26 weeks ended July 30, 2016 or August 1, 2015.

Refer to Note 7 to the Consolidated Financial Statements for additional information regarding intangible assets.

Gift Cards

The value of a gift card is recorded as a current liability upon issuance, and revenue is recognized when the gift card is redeemed for merchandise.  The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of total net revenue. 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. The Company recorded $1.7 million and $1.5 million of revenue related to gift card breakage during the 13 weeks ended July 30, 2016 and August 1, 2015, respectively.  During the 26 weeks ended July 30, 2016 and August 1, 2015, the Company recorded $3.8 million and $3.2 million, respectively, of revenue related to gift card breakage.

Deferred Lease Credits

Deferred lease credits represent the unamortized portion of construction allowances received from landlords related to the Company’s retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its landlords as part of the negotiated lease terms. The Company records a receivable and a deferred lease credit liability at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized on a straight-line basis as a reduction of rent expense over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the landlord.

Co-branded Credit Card and Customer Loyalty Program

The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”) under the AEO and Aerie brands. These credit cards are issued by a third-party bank (the “Bank”) in accordance with a credit card agreement (“the Agreement”). The Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. We receive additional funding from the Bank based on the Agreement and card activity. We recognize revenue for the additional funding when the amounts are fixed or determinable and collectability is reasonably assured.  This revenue is recorded as a component of total net revenue.

Once a customer is approved to receive the AEO Visa Card or the AEO Credit Card and the card is activated, the customer is eligible to participate in the credit card rewards program. Customers who make purchases at AEO and Aerie earn discounts in the form of savings certificates when certain purchase levels are reached. Also, AEO Visa Card customers who make purchases at other retailers where the card is accepted earn additional discounts. Savings certificates are valid for 90 days from issuance.

Points earned under the credit card rewards program on purchases at AEO and Aerie are accounted for by analogy to ASC 605-25, Revenue Recognition, Multiple Element Arrangements  (“ASC 605-25”).  The Company believes that points earned under its point and loyalty programs represent deliverables in a multiple element arrangement rather than a rebate or refund of cash.  Accordingly, the portion of the sales revenue attributed to the award points is deferred and recognized when the award is redeemed or when the points expire. Additionally, credit card reward points earned on non-AEO or Aerie purchases are accounted for in accordance with ASC 605-25.  As the points are earned, a current liability is recorded for the estimated cost of the award, and the impact of adjustments is recorded in cost of sales.

The Company offers its customers the AEREWARDS® loyalty program (the “Program”).  Under the Program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds during three-month earning periods. Rewards earned during these periods are valid through the stated expiration date, which is approximately one month from the mailing date of the reward. These rewards can be redeemed for a discount on a purchase of merchandise. Rewards not redeemed during the one-month redemption period are forfeited.  The Company determined that rewards earned using the Program should be accounted for in accordance with ASC 605-25.  Accordingly, the portion of the sales revenue attributed to the award credits is deferred and recognized when the awards are redeemed or expire. 

Segment Information

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified three operating segments (American Eagle Brand retail stores, Aerie 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.  

 

Cash and Cash Equivalents and Investments
Cash and Cash Equivalents and Investments

3.  Cash and Cash Equivalents and Investments

The following table summarizes the fair market values for the Company’s cash and marketable securities, which are recorded on the Consolidated Balance Sheets:

 

(In thousands)

 

July 30,

2016

 

 

January 30,

2016

 

 

August 1,

2015

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

173,921

 

 

$

205,359

 

 

$

248,824

 

Interest Bearing Deposits and Money Market Funds

 

 

74,013

 

 

 

54,708

 

 

 

78,466

 

Total cash and cash equivalents

 

$

247,934

 

 

$

260,067

 

 

$

327,290

 

 

Fair Value Measurements
Fair Value Measurements

4.  Fair Value Measurements

ASC 820, Fair Value Measurement Disclosures (“ASC 820”), defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements.  Fair value is defined under ASC 820 as the exit price associated with the sale of an asset or transfer of a liability in an orderly transaction between market participants at the measurement date.

Financial Instruments

Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.  In addition, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.  These tiers include:

·

Level 1 — Quoted prices in active markets for identical assets or liabilities.

·

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

·

Level 3 — Unobservable inputs (i.e., projections, estimates, interpretations, etc.) that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

As of July 30, 2016 and August 1, 2015, the Company held certain assets that are required to be measured at fair value on a recurring basis.  These include cash and cash equivalents.

In accordance with ASC 820, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents) measured at fair value on a recurring basis at July 30, 2016 and August 1, 2015:

 

 

 

Fair Value Measurements at July 30, 2016

 

(In thousands)

 

Carrying Amount

 

 

Quoted Market

Prices in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

173,921

 

 

$

173,921

 

 

 

 

 

 

 

Interest Bearing Deposits

 

 

74,013

 

 

 

74,013

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$

247,934

 

 

$

247,934

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at August 1, 2015

 

(In thousands)

 

Carrying Amount

 

 

Quoted Market

Prices in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

248,824

 

 

$

248,824

 

 

 

 

 

 

 

Interest Bearing Deposits and Money Market Funds

 

 

78,466

 

 

 

78,466

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$

327,290

 

 

$

327,290

 

 

 

 

 

 

 

 

In the event the Company holds Level 3 investments, a discounted cash flow model is used to value those investments. There were no Level 3 investments at July 30, 2016 or August 1, 2015.

Non-Financial Assets

The Company’s non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be measured at fair value on a recurring basis.  However, if certain triggering events occur, or if an annual impairment test is required, and the Company is required to evaluate the non-financial instrument for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the estimated fair value.

 

Earnings per Share
Earnings per Share

5.  Earnings per Share

The following is a reconciliation between basic and diluted weighted average shares outstanding:

 

 

 

13 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 30,

 

 

August 1,

 

 

July 30,

 

 

August 1,

 

(In thousands)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic number of common shares outstanding

 

 

181,048

 

 

 

195,508

 

 

 

180,872

 

 

 

195,241

 

Dilutive effect of stock options and non-vested

   restricted stock

 

 

2,365

 

 

 

1,377

 

 

 

2,050

 

 

 

1,291

 

Diluted number of common shares outstanding

 

 

183,413

 

 

 

196,885

 

 

 

182,922

 

 

 

196,532

 

 

Equity awards to purchase 2.8 million shares of common stock during both the 13 and 26 weeks ended July 30, 2016, respectively, and approximately 40,000 shares of common stock during both the 13 and 26 weeks ended August 1, 2015 were outstanding, but were not included in the computation of weighted average diluted common share amounts as the effect of doing so would be anti-dilutive.

Additionally, approximately 0.1 million shares of restricted stock units for the 13 and 26 weeks ended July 30, 2016, respectively, were not included in the computation of weighted average diluted common share amounts because the number of shares ultimately issued is contingent on the Company’s performance compared to pre-established annual performance goals.

Refer to Note 9 to the Consolidated Financial Statements for additional information regarding share-based compensation.

Property and Equipment
Property and Equipment

6.  Property and Equipment

Property and equipment consists of the following:

 

 

 

July 30,

 

 

January 30,

 

 

August 1,

 

(In thousands)

 

2016

 

 

2016

 

 

2015

 

Property and equipment, at cost

 

$

1,824,869

 

 

$

1,792,382

 

 

$

1,757,957

 

Less:  Accumulated depreciation

 

 

(1,124,599

)

 

 

(1,088,796

)

 

 

(1,042,307

)

Property and equipment, net

 

$

700,270

 

 

$

703,586

 

 

$

715,650

 

 

Intangible Assets
Intangible Assets

7.  Intangible Assets

Intangible assets consist of the following:

 

 

 

July 30,

 

 

January 30,

 

 

August 1,

 

(In thousands)

 

2016

 

 

2016

 

 

2015

 

Trademarks and other intangibles, at cost

 

$

68,430

 

 

$

67,398

 

 

$

61,065

 

Less:  Accumulated amortization

 

 

(17,669

)

 

 

(15,566

)

 

 

(13,911

)

Intangible assets, net

 

$

50,761

 

 

$

51,832

 

 

$

47,154

 

 

Other Credit Arrangements
Other Credit Arrangements

8.  Other Credit Arrangements

The Company currently participates in a Credit Agreement (“Credit Agreement”) consisting of a five-year, syndicated, asset-based revolving credit facilities (the “Credit Facilities”). The Credit Agreement provides senior secured revolving credit for loans and letters of credit up to $400 million, subject to customary borrowing base limitations. The Credit Facilities provide increased financial flexibility and take advantage of a favorable credit environment.

All obligations under the Credit Facilities are unconditionally guaranteed by certain subsidiaries. The obligations under the Credit Agreement are secured by a first-priority security interest in certain working capital assets of the borrowers and guarantors, consisting primarily of cash, receivables, inventory and certain other assets and have been further secured by first-priority mortgages on certain real property.

As of July 30, 2016, the Company was in compliance with the terms of the Credit Agreement and had $8.1 million outstanding in stand-by letters of credit. No loans were outstanding under the Credit Agreement as of July 30, 2016.

Additionally, the Company has a borrowing agreement with one financial institution under which it may borrow an aggregate of $5.0 million USD for the purposes of trade letter of credit issuances. The availability of any future borrowings under the trade letter of credit facilities is subject to acceptance by the financial institution.

As of July 30, 2016, the Company had no outstanding trade letters of credit.

Share-Based Compensation
Share-Based Compensation

9.  Share-Based Compensation

The Company accounts for share-based compensation under the provisions of ASC 718, Compensation - Stock Compensation (“ASC 718”), which requires companies to measure and recognize compensation expense for all share-based payments at fair value. Total share-based compensation expense included in the Consolidated Statements of Operations for the 13 weeks and 26 weeks ended July 30, 2016 was $7.9 million ($5.0 million, net of tax) and $16.7 million ($10.6 million, net of tax), respectively, and for the 13 and 26 weeks ended August 1, 2015 was $14.0 million ($8.6 million, net of tax) and $22.1 million ($13.5 million, net of tax) respectively.

Stock Option Grants

The Company grants both time-based and performance-based stock options. A summary of the Company’s stock option activity for the 26 weeks ended July 30, 2016 follows:

 

 

 

 

 

 

 

Weighted-

Average

 

 

Weighted-

Average

Remaining

Contractual

 

 

Aggregate

 

 

 

Options

 

 

Exercise Price

 

 

Term

 

 

Intrinsic Value

 

 

 

(In thousands)

 

 

 

 

 

 

(In years)

 

 

(In thousands)

 

Outstanding - January 30, 2016

 

 

1,213

 

 

$

14.83

 

 

 

 

 

 

 

 

 

Granted

 

 

2,211

 

 

$

15.35

 

 

 

 

 

 

 

 

 

Exercised (1)

 

 

121

 

 

$

13.74

 

 

 

 

 

 

 

 

 

Cancelled

 

 

42

 

 

$

14.50

 

 

 

 

 

 

 

 

 

Outstanding - July 30, 2016

 

 

3,261

 

 

$

15.23

 

 

 

4.8

 

 

 

8,802

 

Vested and expected to vest - July 30, 2016

 

 

3,079

 

 

$

15.22

 

 

 

4.7

 

 

 

8,336

 

Exercisable - July 30, 2016 (2)

 

 

1,036

 

 

$

14.90

 

 

 

0.6

 

 

 

3,125

 

 

(1)

Options exercised during the 26 weeks ended July 30, 2016 had exercise prices ranging from $11.50 to $14.50.

(2)

Options exercisable represent “in-the-money” vested options based upon the weighted-average exercise price of vested options compared to the Company’s stock price at July 30, 2016.

Cash received from the exercise of stock options was $1.9 million for the 26 weeks ended July 30, 2016 and $6.4 million for the 26 weeks ended August 1, 2015.  The actual tax benefit realized from stock option exercises totaled $0.1 million for the 26 weeks ended July 30, 2016 and $0.6 million for the 26 weeks ended August 1, 2015.

The fair value of stock options was estimated based on the closing market price of the Company’s common stock on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:    .

 

 

 

26 Weeks Ended

 

 

 

July 30,

 

Black-Scholes Option Valuation Assumptions

 

2016

 

Risk-free interest rate (1)

 

 

1.3

%

Dividend yield

 

 

3.0

%

Volatility factor (2)

 

 

35.4

%

Weighted-average expected term (3)

 

4.4 years

 

Expected forfeiture rate (4)

 

 

8.0

%

 

(1)

Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options.

 

(2)

Based on a combination of historical volatility of the Company’s common stock and implied volatility.

 

(3)

Represents the period of time options are expected to be outstanding, based on historical experience.

 

(4)

Based upon historical experience.

As of July 30, 2016, there was $7.2 million of unrecognized compensation expense related to non-vested time-based stock option awards that is expected to be recognized over a weighted average period of 3.1 years.

Restricted Stock Grants

Time-based restricted stock awards are comprised of time-based restricted stock units.  These awards vest over three years.  Time-based restricted stock units receive dividend equivalents in the form of additional time-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

Performance-based restricted stock awards include performance-based restricted stock units.  These awards cliff vest at the end of a three year period based upon the Company’s achievement of pre-established goals throughout the term of the award.  Performance-based restricted stock units receive dividend equivalents in the form of additional performance-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

The grant date fair value of all restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant.

A summary of the Company’s restricted stock activity is presented in the following tables:

 

 

 

Time-Based Restricted

Stock Units

 

 

Performance-Based Restricted

Stock Units

 

 

 

26 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 30, 2016

 

 

July 30, 2016

 

(Shares in thousands)

 

Shares

 

 

Weighted

-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted

-Average

Grant Date

Fair Value

 

Nonvested - January 30, 2016

 

 

1,935

 

 

$

15.17

 

 

 

2,609

 

 

$

16.02

 

Granted

 

 

946

 

 

$

16.02

 

 

 

1,077

 

 

$

15.70

 

Vested

 

 

(885

)

 

$

16.11

 

 

 

(195

)

 

$

14.82

 

Cancelled

 

 

(44

)

 

$

10.50

 

 

 

(700

)

 

$

19.72

 

Nonvested - July 30, 2016

 

 

1,952

 

 

$

15.26

 

 

 

2,791

 

 

$

15.05

 

 

As of July 30, 2016, there was $26.6 million of unrecognized compensation expense related to non-vested, time-based restricted stock unit awards that is expected to be recognized over a weighted-average period of 2.3 years. Based on current probable performance, there is $13.6 million of unrecognized compensation expense related to performance-based restricted stock unit awards which will be recognized as achievement of performance goals is probable over a one to three year period.

As of July 30, 2016, the Company had 3.5 million shares available for all equity grants.

 

Income Taxes
Income Taxes

10.  Income Taxes

The provision for income taxes is based on the current estimate of the annual effective income tax rate and is adjusted as necessary for discrete quarterly events. The effective income tax rate for the 13 weeks ended July 30, 2016 was 36.5% compared to 34.7% for the 13 weeks ended August 1, 2015.  The effective income tax rate for the 26 weeks ended July 30, 2016 was 36.4% compared to 37.0% for the 26 weeks ended August 1, 2015. The increase in the effective income tax rate for the 13 weeks ended July 30, 2016, and the decrease in the effective income tax rate for the 26 weeks ended July 30, 2016 was primarily due to prior year income tax settlements, offset by changes to foreign deferred tax assets.

The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company recognizes income tax liabilities related to unrecognized tax benefits in accordance with ASC 740 and adjusts these liabilities when its judgment changes as the result of the evaluation of new information not previously available. Unrecognized tax benefits did not change significantly during the 13 weeks ended July 30, 2016.  Over the next twelve months, the Company believes that it is reasonably possible that unrecognized tax benefits may decrease by approximately $3.3 million due to settlements, expiration of statute of limitations or other changes in unrecognized tax benefits.

 

Legal Proceedings
Legal Proceedings

11.  Legal Proceedings

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”), management 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 or results of the operations of the Company.

 

Summary of Significant Accounting Policies (Policies)

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.  At July 30, 2016, the Company operated in one reportable segment.

Fiscal Year

The Company’s financial year is a 52/53 week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2016” refers to the 52 week period ending January 28, 2017. “Fiscal 2015” refers to the 52 week period ended January 30, 2016.

Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of our contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, our management reviews the Company’s estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”).  ASU 2014-09 is a comprehensive new revenue recognition model that expands disclosure requirements and requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Originally, ASU 2014-09 was effective for annual reporting periods beginning after December 15, 2016. In July 2015, the FASB voted to approve amendments deferring the effective date by one year to be effective for annual reporting periods beginning after December 15, 2017. Accordingly, the Company will adopt ASU 2014-09 on February 4, 2018. The Company does not expect a material impact of the adoption of this guidance on its Consolidated Financial Statements, results of operations or cash flows.

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU may be applied prospectively or retrospectively. The Company adopted the ASU on January 30, 2016, applied retrospectively.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016–02”) which replaces the existing guidance in ASC 840, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.   The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and requires retrospective application. The Company will adopt in Fiscal 2019 and is currently evaluating the impact of ASU 2016-02 to its Consolidated Financial Statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation—Stock Compensation (Topic 718) (“ASU 2016-09”).  ASU 2016-09 makes several modifications to Topic 718 related to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. ASU 2016-09 also clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016. The Company will adopt in Fiscal 2017 and is currently evaluating the impact to its Consolidated Financial Statements.

Foreign Currency Translation

In accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters, assets and liabilities denominated in foreign currencies were translated into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. Revenues and expenses denominated in foreign currencies were translated into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the results of operations, whereas, related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income.

Revenue Recognition

Revenue is recorded for store sales upon the purchase of merchandise by customers. The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise. Shipping and handling revenues are included in total net revenue. Sales tax collected from customers is excluded from revenue and is included as part of accrued income and other taxes on the Company’s Consolidated Balance Sheets.

Revenue is recorded net of estimated and actual sales returns and deductions for coupon redemptions and other promotions. The Company records the impact of adjustments to its sales return reserve quarterly within total net revenue and cost of sales. The sales return reserve reflects an estimate of sales returns based on projected merchandise returns determined through the use of historical average return percentages.

Revenue is not recorded on the issuance of gift cards. A current liability is recorded upon issuance, and revenue is recognized when the gift card is redeemed for merchandise. Additionally, the Company recognizes revenue on unredeemed gift cards based on an estimate of the amounts that will not be redeemed (“gift card breakage”), determined through historical redemption trends. Gift card breakage revenue is recognized in proportion to actual gift card redemptions as a component of total net revenue. For further information on the Company’s gift card program, refer to the Gift Cards caption below.

The Company recognizes royalty revenue generated from its licensee or franchise agreements based on a percentage of merchandise sales by the licensee/franchisee.  This revenue is recorded as a component of total net revenue when earned.

Cost of Sales, Including Certain Buying, Occupancy and Warehousing Expenses

Cost of sales consists of merchandise costs, including design, sourcing, importing and inbound freight costs, as well as markdowns, shrinkage and certain promotional costs (collectively “merchandise costs”) and buying, occupancy and warehousing costs.

Design costs are related to the Company's Design Center operations and include compensation, travel, supplies and samples for our design teams, as well as rent and depreciation for our Design Center. These costs are included in cost of sales as the respective inventory is sold.

Buying, occupancy and warehousing costs consist of compensation, employee benefit expenses and travel for our buyers and certain senior merchandising executives; rent and utilities related to our stores, corporate headquarters, distribution centers and other office space; freight from our distribution centers to the stores; compensation and supplies for our distribution centers, including purchasing, receiving and inspection costs; and shipping and handling costs related to our e-commerce operation. Gross profit is the difference between total net revenue and cost of sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist of compensation and employee benefit expenses, including salaries, incentives and related benefits associated with our stores and corporate headquarters. Selling, general and administrative expenses also include advertising costs, supplies for our stores and home office, communication costs, travel and entertainment, leasing costs and services purchased. Selling, general and administrative expenses do not include compensation, employee benefit expenses and travel for our design, sourcing and importing teams, our buyers and our distribution centers as these amounts are recorded in cost of sales.

Other (Expense) Income, Net

Other (expense) income, net consists primarily of foreign currency transaction gain/loss, interest income/expense and investment gain/loss.

Cash and Cash Equivalents and Investments

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

As of July 30, 2016 and August 1, 2015, the Company held no short or long term investments.

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash and cash equivalents.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or market, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when both title and risk of loss for the merchandise have transferred to the Company.

The Company reviews its inventory levels to identify slow-moving merchandise and generally uses markdowns to clear merchandise. Additionally, the Company estimates a markdown reserve for future planned permanent markdowns related to current inventory. Markdowns may occur when inventory exceeds customer demand for reasons of style, seasonal adaptation, changes in customer preference, lack of consumer acceptance of fashion items, competition, or if it is determined that the inventory in stock will not sell at its currently ticketed price. Such markdowns may have a material adverse impact on earnings, depending on the extent and amount of inventory affected. The Company also estimates a shrinkage reserve for the period between the last physical count and the balance sheet date. The estimate for the shrinkage reserve, based on historical results, can be affected by changes in merchandise mix and changes in actual shrinkage trends.

Income Taxes

The Company calculates income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the difference between the Consolidated Financial Statement carrying amounts of existing assets and liabilities and their respective tax bases as computed pursuant to ASC 740. Deferred tax assets and liabilities are measured using the tax rates, based on certain judgments regarding enacted tax laws and published guidance, in effect in the years when those temporary differences are expected to reverse. A valuation allowance is established against the deferred tax assets when it is more likely than not that some portion or all of the deferred taxes may not be realized. Changes in the Company’s level and composition of earnings, tax laws or the deferred tax valuation allowance, as well as the results of tax audits may materially impact the Company’s effective income tax rate.

The Company evaluates its income tax positions in accordance with ASC 740, which prescribes a comprehensive model for recognizing, measuring, presenting and disclosing in the financial statements tax positions taken or expected to be taken on a tax return, including a decision whether to file or not to file in a particular jurisdiction. Under ASC 740, a tax benefit from an uncertain position may be recognized only if it is “more likely than not” that the position is sustainable based on its technical merits.

The calculation of the deferred tax assets and liabilities, as well as the decision to recognize a tax benefit from an uncertain position and to establish a valuation allowance require management to make estimates and assumptions. The Company believes that its assumptions and estimates are reasonable, although actual results may have a positive or negative material impact on the balances of deferred tax assets and liabilities, valuation allowances or net income.

Refer to Note 10 to the Consolidated Financial Statements for additional information regarding income taxes.

Property and Equipment

Property and equipment is recorded on the basis of cost, including costs to prepare the asset for use, with depreciation computed utilizing the straight-line method over the assets’ estimated useful lives. The useful lives of our major classes of assets are as follows:

 

Buildings

 

25 years

Leasehold improvements

 

Lesser of 10 years or the term of the lease

Fixtures, equipment and technology

 

5 years

 

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), the Company evaluates long-lived assets for impairment at the individual store level, which is the lowest level at which individual cash flows can be identified, for stores that have been open for a period of time sufficient to reach maturity.  Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets are impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded. No long-lived asset impairment charges were recorded during the 13 weeks or 26 weeks ended July 30, 2016 or August 1, 2015.

Refer to Note 6 to the Consolidated Financial Statements for additional information regarding property and equipment.

Goodwill

The Company’s goodwill is related to the acquisition of its importing operations, Canada, Hong Kong and China businesses and the recent acquisition of Tailgate Clothing Co. in Fiscal 2015. In accordance with ASC 350, Intangibles – Goodwill and Other (“ASC 350”), the Company evaluates goodwill for possible impairment on at least an annual basis and last performed an annual impairment test as of January 30, 2016.  As a result of the Company’s annual goodwill impairment test, the Company concluded that its goodwill was not impaired.

Intangible Assets

Intangible assets are recorded on the basis of cost with amortization computed utilizing the straight-line method over the assets’ estimated useful lives.  The Company’s intangible assets, which primarily include trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates intangible assets for impairment in accordance with ASC 350 when events or circumstances indicate that the carrying value of the asset may not be recoverable. Such an evaluation includes the estimation of undiscounted future cash flows to be generated by those assets. If the sum of the estimated future undiscounted cash flows are less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. No intangible asset impairment charges were recorded during the 13 or 26 weeks ended July 30, 2016 or August 1, 2015.

Refer to Note 7 to the Consolidated Financial Statements for additional information regarding intangible assets.

Gift Cards

The value of a gift card is recorded as a current liability upon issuance, and revenue is recognized when the gift card is redeemed for merchandise.  The Company estimates gift card breakage and recognizes revenue in proportion to actual gift card redemptions as a component of total net revenue. 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. The Company recorded $1.7 million and $1.5 million of revenue related to gift card breakage during the 13 weeks ended July 30, 2016 and August 1, 2015, respectively.  During the 26 weeks ended July 30, 2016 and August 1, 2015, the Company recorded $3.8 million and $3.2 million, respectively, of revenue related to gift card breakage.

Deferred Lease Credits

Deferred lease credits represent the unamortized portion of construction allowances received from landlords related to the Company’s retail stores. Construction allowances are generally comprised of cash amounts received by the Company from its landlords as part of the negotiated lease terms. The Company records a receivable and a deferred lease credit liability at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized on a straight-line basis as a reduction of rent expense over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the landlord.

Co-branded Credit Card and Customer Loyalty Program

The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”) under the AEO and Aerie brands. These credit cards are issued by a third-party bank (the “Bank”) in accordance with a credit card agreement (“the Agreement”). The Company has no liability to the Bank for bad debt expense, provided that purchases are made in accordance with the Bank’s procedures. We receive additional funding from the Bank based on the Agreement and card activity. We recognize revenue for the additional funding when the amounts are fixed or determinable and collectability is reasonably assured.  This revenue is recorded as a component of total net revenue.

Once a customer is approved to receive the AEO Visa Card or the AEO Credit Card and the card is activated, the customer is eligible to participate in the credit card rewards program. Customers who make purchases at AEO and Aerie earn discounts in the form of savings certificates when certain purchase levels are reached. Also, AEO Visa Card customers who make purchases at other retailers where the card is accepted earn additional discounts. Savings certificates are valid for 90 days from issuance.

Points earned under the credit card rewards program on purchases at AEO and Aerie are accounted for by analogy to ASC 605-25, Revenue Recognition, Multiple Element Arrangements  (“ASC 605-25”).  The Company believes that points earned under its point and loyalty programs represent deliverables in a multiple element arrangement rather than a rebate or refund of cash.  Accordingly, the portion of the sales revenue attributed to the award points is deferred and recognized when the award is redeemed or when the points expire. Additionally, credit card reward points earned on non-AEO or Aerie purchases are accounted for in accordance with ASC 605-25.  As the points are earned, a current liability is recorded for the estimated cost of the award, and the impact of adjustments is recorded in cost of sales.

The Company offers its customers the AEREWARDS® loyalty program (the “Program”).  Under the Program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds during three-month earning periods. Rewards earned during these periods are valid through the stated expiration date, which is approximately one month from the mailing date of the reward. These rewards can be redeemed for a discount on a purchase of merchandise. Rewards not redeemed during the one-month redemption period are forfeited.  The Company determined that rewards earned using the Program should be accounted for in accordance with ASC 605-25.  Accordingly, the portion of the sales revenue attributed to the award credits is deferred and recognized when the awards are redeemed or expire. 

Segment Information

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified three operating segments (American Eagle Brand retail stores, Aerie 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.  

Summary of Significant Accounting Policies (Tables)
Useful Lives of Major Classes of Assets

The useful lives of our major classes of assets are as follows:

 

Buildings

 

25 years

Leasehold improvements

 

Lesser of 10 years or the term of the lease

Fixtures, equipment and technology

 

5 years

 

Cash and Cash Equivalents and Investments (Tables)
Fair Market Values for Cash and Marketable Securities

The following table summarizes the fair market values for the Company’s cash and marketable securities, which are recorded on the Consolidated Balance Sheets:

 

(In thousands)

 

July 30,

2016

 

 

January 30,

2016

 

 

August 1,

2015

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

173,921

 

 

$

205,359

 

 

$

248,824

 

Interest Bearing Deposits and Money Market Funds

 

 

74,013

 

 

 

54,708

 

 

 

78,466

 

Total cash and cash equivalents

 

$

247,934

 

 

$

260,067

 

 

$

327,290

 

 

Fair Value Measurements (Tables)
Fair Value Hierarchy for Financial Assets (Cash Equivalents) Measured at Fair Value on Recurring Basis

In accordance with ASC 820, the following table represents the Company’s fair value hierarchy for its financial assets (cash equivalents) measured at fair value on a recurring basis at July 30, 2016 and August 1, 2015:

 

 

 

Fair Value Measurements at July 30, 2016

 

(In thousands)

 

Carrying Amount

 

 

Quoted Market

Prices in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

173,921

 

 

$

173,921

 

 

 

 

 

 

 

Interest Bearing Deposits

 

 

74,013

 

 

 

74,013

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$

247,934

 

 

$

247,934

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at August 1, 2015

 

(In thousands)

 

Carrying Amount

 

 

Quoted Market

Prices in Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

248,824

 

 

$

248,824

 

 

 

 

 

 

 

Interest Bearing Deposits and Money Market Funds

 

 

78,466

 

 

 

78,466

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$

327,290

 

 

$

327,290

 

 

 

 

 

 

 

 

Earnings per Share (Tables)
Reconciliation Between Basic and Diluted Weighted Average Shares Outstanding

The following is a reconciliation between basic and diluted weighted average shares outstanding:

 

 

 

13 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 30,

 

 

August 1,

 

 

July 30,

 

 

August 1,

 

(In thousands)

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic number of common shares outstanding

 

 

181,048

 

 

 

195,508

 

 

 

180,872

 

 

 

195,241

 

Dilutive effect of stock options and non-vested

   restricted stock

 

 

2,365

 

 

 

1,377

 

 

 

2,050

 

 

 

1,291

 

Diluted number of common shares outstanding

 

 

183,413

 

 

 

196,885

 

 

 

182,922

 

 

 

196,532

 

 

Property and Equipment (Tables)
Property and Equipment

Property and equipment consists of the following:

 

 

 

July 30,

 

 

January 30,

 

 

August 1,

 

(In thousands)

 

2016

 

 

2016

 

 

2015

 

Property and equipment, at cost

 

$

1,824,869

 

 

$

1,792,382

 

 

$

1,757,957

 

Less:  Accumulated depreciation

 

 

(1,124,599

)

 

 

(1,088,796

)

 

 

(1,042,307

)

Property and equipment, net

 

$

700,270

 

 

$

703,586

 

 

$

715,650

 

 

Intangible Assets (Tables)
Intangible Assets

Intangible assets consist of the following:

 

 

 

July 30,

 

 

January 30,

 

 

August 1,

 

(In thousands)

 

2016

 

 

2016

 

 

2015

 

Trademarks and other intangibles, at cost

 

$

68,430

 

 

$

67,398

 

 

$

61,065

 

Less:  Accumulated amortization

 

 

(17,669

)

 

 

(15,566

)

 

 

(13,911

)

Intangible assets, net

 

$

50,761

 

 

$

51,832

 

 

$

47,154

 

 

Share-Based Compensation (Tables)

A summary of the Company’s stock option activity for the 26 weeks ended July 30, 2016 follows:

 

 

 

 

 

 

 

Weighted-

Average

 

 

Weighted-

Average

Remaining

Contractual

 

 

Aggregate

 

 

 

Options

 

 

Exercise Price

 

 

Term

 

 

Intrinsic Value

 

 

 

(In thousands)

 

 

 

 

 

 

(In years)

 

 

(In thousands)

 

Outstanding - January 30, 2016

 

 

1,213

 

 

$

14.83

 

 

 

 

 

 

 

 

 

Granted

 

 

2,211

 

 

$

15.35

 

 

 

 

 

 

 

 

 

Exercised (1)

 

 

121

 

 

$

13.74

 

 

 

 

 

 

 

 

 

Cancelled

 

 

42

 

 

$

14.50

 

 

 

 

 

 

 

 

 

Outstanding - July 30, 2016

 

 

3,261

 

 

$

15.23

 

 

 

4.8

 

 

 

8,802

 

Vested and expected to vest - July 30, 2016

 

 

3,079

 

 

$

15.22

 

 

 

4.7

 

 

 

8,336

 

Exercisable - July 30, 2016 (2)

 

 

1,036

 

 

$

14.90

 

 

 

0.6

 

 

 

3,125

 

 

(1)

Options exercised during the 26 weeks ended July 30, 2016 had exercise prices ranging from $11.50 to $14.50.

(2)

Options exercisable represent “in-the-money” vested options based upon the weighted-average exercise price of vested options compared to the Company’s stock price at July 30, 2016.

The fair value of stock options was estimated based on the closing market price of the Company’s common stock on the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:    .

 

 

 

26 Weeks Ended

 

 

 

July 30,

 

Black-Scholes Option Valuation Assumptions

 

2016

 

Risk-free interest rate (1)

 

 

1.3

%

Dividend yield

 

 

3.0

%

Volatility factor (2)

 

 

35.4

%

Weighted-average expected term (3)

 

4.4 years

 

Expected forfeiture rate (4)

 

 

8.0

%

 

(1)

Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options.

 

(2)

Based on a combination of historical volatility of the Company’s common stock and implied volatility.

 

(3)

Represents the period of time options are expected to be outstanding, based on historical experience.

 

(4)

Based upon historical experience.

 

A summary of the Company’s restricted stock activity is presented in the following tables:

 

 

 

Time-Based Restricted

Stock Units

 

 

Performance-Based Restricted

Stock Units

 

 

 

26 Weeks Ended

 

 

26 Weeks Ended

 

 

 

July 30, 2016

 

 

July 30, 2016

 

(Shares in thousands)

 

Shares

 

 

Weighted

-Average

Grant Date

Fair Value

 

 

Shares

 

 

Weighted

-Average

Grant Date

Fair Value

 

Nonvested - January 30, 2016

 

 

1,935

 

 

$

15.17

 

 

 

2,609

 

 

$

16.02

 

Granted

 

 

946

 

 

$

16.02

 

 

 

1,077

 

 

$

15.70

 

Vested

 

 

(885

)

 

$

16.11

 

 

 

(195

)

 

$

14.82

 

Cancelled

 

 

(44

)

 

$

10.50

 

 

 

(700

)

 

$

19.72

 

Nonvested - July 30, 2016

 

 

1,952

 

 

$

15.26

 

 

 

2,791

 

 

$

15.05

 

 

Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Segment
Aug. 1, 2015
Significant Accounting Policies [Line Items]
 
 
 
 
Number of reportable segments
 
 
 
Investments
$ 0 
$ 0 
$ 0 
$ 0 
Long-lived asset impairment charges
Finite-lived impairment charges
Revenue related to gift card breakage
$ 1,700,000 
$ 1,500,000 
$ 3,800,000 
$ 3,200,000 
Number of operating segments
 
 
 
Minimum
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
Finite lived intangibles, useful life
 
 
15 years 
 
Maximum
 
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
 
Finite lived intangibles, useful life
 
 
25 years 
 
Useful Lives of Major Classes of Assets (Detail)
6 Months Ended
Jul. 30, 2016
Buildings
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
25 years 
Leasehold Improvements
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
Lesser of 10 years or the term of the lease 
Fixtures, Equipment and Technology
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
5 years 
Useful Lives of Major Classes of Assets (Parenthetical) (Detail) (Maximum, Leasehold Improvements)
6 Months Ended
Jul. 30, 2016
Maximum |
Leasehold Improvements
 
Property, Plant and Equipment, Estimated Useful Lives, Lease Terms [Line Items]
 
Useful lives in asset class
10 years 
Fair Market Values for Cash and Marketable Securities (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 30, 2016
Aug. 1, 2015
Cash and cash equivalents:
 
 
 
Cash and cash equivalents
$ 247,934 
$ 260,067 
$ 327,290 
Cash
 
 
 
Cash and cash equivalents:
 
 
 
Cash and cash equivalents
173,921 
205,359 
248,824 
Interest Bearing Deposits and Money Market Funds
 
 
 
Cash and cash equivalents:
 
 
 
Cash and cash equivalents
$ 74,013 
$ 54,708 
$ 78,466 
Fair Value Hierarchy for Financial Assets (Cash Equivalents) Measured at Fair Value on Recurring Basis (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 30, 2016
Aug. 1, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
$ 247,934 
$ 260,067 
$ 327,290 
Cash
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
173,921 
205,359 
248,824 
Interest Bearing Deposits and Money Market Funds
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
74,013 
54,708 
78,466 
Fair Value, Measurements, Recurring |
Carrying Amount
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
247,934 
 
327,290 
Fair Value, Measurements, Recurring |
Carrying Amount |
Cash
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
173,921 
 
248,824 
Fair Value, Measurements, Recurring |
Carrying Amount |
Interest Bearing Deposits
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
74,013 
 
 
Fair Value, Measurements, Recurring |
Carrying Amount |
Interest Bearing Deposits and Money Market Funds
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
 
 
78,466 
Fair Value, Measurements, Recurring |
Fair Value |
Quoted Market Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
247,934 
 
327,290 
Fair Value, Measurements, Recurring |
Fair Value |
Cash |
Quoted Market Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
173,921 
 
248,824 
Fair Value, Measurements, Recurring |
Fair Value |
Interest Bearing Deposits |
Quoted Market Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
74,013 
 
 
Fair Value, Measurements, Recurring |
Fair Value |
Interest Bearing Deposits and Money Market Funds |
Quoted Market Prices in Active Markets for Identical Assets (Level 1)
 
 
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
 
 
Cash and cash equivalents
 
 
$ 78,466 
Reconciliation Between Basic and Diluted Weighted Average Shares Outstanding (Detail)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Weighted average common shares outstanding:
 
 
 
 
Basic number of common shares outstanding
181,048 
195,508 
180,872 
195,241 
Dilutive effect of stock options and non-vested restricted stock
2,365 
1,377 
2,050 
1,291 
Diluted number of common shares outstanding
183,413 
196,885 
182,922 
196,532 
Earnings per Share - Additional Information (Detail)
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Common stock
 
 
 
 
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
 
 
Shares that were not included in the computation of weighted average diluted common share amounts as the effect of doing so would have been anti-dilutive
2,800,000 
40,000 
2,800,000 
40,000 
Restricted Stock Units (RSUs) |
Performance shares
 
 
 
 
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
 
 
 
 
Shares that were not included in the computation of weighted average diluted common share amounts as the effect of doing so would have been anti-dilutive
100,000 
 
100,000 
 
Property and Equipment (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 30, 2016
Aug. 1, 2015
Property Plant And Equipment [Abstract]
 
 
 
Property and equipment, at cost
$ 1,824,869 
$ 1,792,382 
$ 1,757,957 
Less: Accumulated depreciation
(1,124,599)
(1,088,796)
(1,042,307)
Property and equipment, net
$ 700,270 
$ 703,586 
$ 715,650 
Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 30, 2016
Aug. 1, 2015
Finite Lived Intangible Assets Net [Abstract]
 
 
 
Trademarks and other intangibles, at cost
$ 68,430 
$ 67,398 
$ 61,065 
Less: Accumulated amortization
(17,669)
(15,566)
(13,911)
Intangible assets, net
$ 50,761 
$ 51,832 
$ 47,154 
Other Credit Arrangements - Additional Information (Detail) (USD $)
6 Months Ended
Jul. 30, 2016
Line Of Credit Facility [Line Items]
 
Borrowing agreement, number of financial institution
Credit Facilities |
Credit Agreement
 
Line Of Credit Facility [Line Items]
 
Line of credit facility, expiration period
5 years 
Borrowing agreements with financial institutions
$ 400,000,000 
Stand-by Letters of Credit |
Credit Agreement
 
Line Of Credit Facility [Line Items]
 
Letters of credit outstanding amount
8,100,000 
Credit Agreement Loans |
Credit Agreement
 
Line Of Credit Facility [Line Items]
 
Outstanding borrowings
Demand letter of credit facilities |
Borrowing Agreements
 
Line Of Credit Facility [Line Items]
 
Borrowing agreements with financial institutions