AMERICAN EAGLE OUTFITTERS INC, 10-K filed on 3/12/2020
Annual Report
v3.20.1
Document and Entity Information - USD ($)
12 Months Ended
Feb. 01, 2020
Mar. 09, 2020
Aug. 03, 2019
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Feb. 01, 2020    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Trading Symbol AEO    
Entity Registrant Name AMERICAN EAGLE OUTFITTERS, INC.    
Entity Central Index Key 0000919012    
Current Fiscal Year End Date --02-01    
Entity Well-known Seasoned Issuer Yes    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Filer Category Large Accelerated Filer    
Entity Shell Company false    
Entity Small Business false    
Entity Emerging Growth Company false    
Entity Common Stock, Shares Outstanding   167,203,263  
Entity Public Float     $ 2,507,621,307
Entity Interactive Data Current Yes    
Title of 12(b) Security Common Stock    
Security Exchange Name NYSE    
Entity File Number 1-33338    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 13-2721761    
Entity Address, Address Line One 77 Hot Metal Street    
Entity Address, City or Town Pittsburgh    
Entity Address, State or Province PA    
Entity Address, Postal Zip Code 15203-2329    
City Area Code 412    
Local Phone Number 432-3300    
Document Annual Report true    
Document Transition Report false    
Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders are incorporated into Part III herein.

   
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Feb. 01, 2020
Feb. 02, 2019
Current assets:    
Cash and cash equivalents $ 361,930 $ 333,330
Short-term investments (available for sale) 55,000 92,135
Merchandise inventory 446,278 424,404
Accounts receivable, net 119,064 93,477
Prepaid expenses and other 65,658 102,907
Total current assets 1,047,930 1,046,253
Property and equipment, at cost, net of accumulated depreciation 735,120 742,149
Operating lease right-of-use assets 1,418,916  
Intangible assets, net, including goodwill 53,004 58,167
Non-current deferred income taxes 22,724 14,062
Other assets 50,985 42,747
Total assets 3,328,679 1,903,378
Current liabilities:    
Accounts payable 285,746 240,671
Current portion of operating lease liabilities 299,161  
Accrued income and other taxes 9,514 20,064
Accrued compensation and payroll taxes 43,537 82,173
Unredeemed gift cards and gift certificates 56,974 53,997
Other current liabilities and accrued expenses 56,824 145,740
Total current liabilities 751,756 542,645
Non-current liabilities:    
Non-current operating lease liabilities 1,301,735  
Other non-current liabilities 27,335 73,178
Total non-current liabilities 1,329,070 73,178
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; 166,993 and 172,436 shares outstanding, respectively 2,496 2,496
Contributed capital 577,856 574,929
Accumulated other comprehensive loss, net of tax (33,168) (34,832)
Retained earnings 2,108,292 2,054,654
Treasury stock, 82,573 and 77,130 shares, respectively, at cost (1,407,623) (1,309,692)
Total stockholders' equity 1,247,853 1,287,555
Total liabilities and stockholders’ equity $ 3,328,679 $ 1,903,378
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Jan. 28, 2017
Statement Of Financial Position [Abstract]        
Preferred stock, par value $ 0.01 $ 0.01 $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000 5,000,000 5,000,000
Preferred stock, issued 0 0 0 0
Preferred stock, outstanding 0 0 0 0
Common stock, par value $ 0.01 $ 0.01 $ 0.01 $ 0.01
Common stock, shares authorized 600,000,000 600,000,000 600,000,000 600,000,000
Common stock, shares issued 249,566,000 249,566,000 249,566,000 249,566,000
Common stock, shares outstanding 166,993,000 172,436,000 177,316,000 181,886,000
Treasury stock, shares 82,573,000 77,130,000 72,250,000  
v3.20.1
Consolidated Statements of Operations - USD ($)
shares in Thousands, $ in Thousands
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Income Statement [Abstract]      
Total net revenue $ 4,308,212 $ 4,035,720 $ 3,795,549
Cost of sales, including certain buying, occupancy and warehousing expenses 2,785,911 2,548,082 2,425,044
Gross profit 1,522,301 1,487,638 1,370,505
Selling, general and administrative expenses 1,029,412 980,610 879,685
Impairment and restructuring charges 80,494 1,568 20,611
Depreciation and amortization expense 179,050 168,331 167,421
Operating income 233,345 337,129 302,788
Other income (expense), net 11,933 7,971 (15,615)
Income before income taxes 245,278 345,100 287,173
Provision for income taxes 54,021 83,198 83,010
Net income $ 191,257 $ 261,902 $ 204,163
Basic net income per common share $ 1.13 $ 1.48 $ 1.15
Diluted net income per common share $ 1.12 $ 1.47 $ 1.13
Weighted average common shares outstanding - basic 169,711 176,476 177,938
Weighted average common shares outstanding - diluted 170,867 178,035 180,156
v3.20.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Statement Of Income And Comprehensive Income [Abstract]      
Net income $ 191,257 $ 261,902 $ 204,163
Other comprehensive gain (loss):      
Foreign currency translation gain (loss) 1,664 (4,037) 5,667
Other comprehensive gain (loss) 1,664 (4,037) 5,667
Comprehensive income $ 192,921 $ 257,865 $ 209,830
v3.20.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock
Contributed Capital
Retained Earnings
Treasury Stock
[1]
Accumulated Other Comprehensive Income (Loss)
Beginning Balance at Jan. 28, 2017 $ 1,204,569 $ 2,496 $ 603,890 $ 1,775,775 $ (1,141,130) $ (36,462)
Beginning Balance (in shares) at Jan. 28, 2017 181,886,000 181,886,000 [2]        
Stock awards $ 17,202   17,202      
Repurchase of common stock as part of publicly announced programs (87,672)       (87,672)  
Repurchase of common stock as part of publicly announced programs (in shares) [2]   (6,000,000)        
Repurchase of common stock from employees (12,513)       (12,513)  
Repurchase of common stock from employees (in shares) [2]   (871,000)        
Reissuance of treasury stock $ 3,923   (29,632) (5,488) 39,043  
Reissuance of treasury stock (in shares) 2,301,000 2,301,000 [2]        
Net income $ 204,163     204,163    
Other comprehensive loss 5,667         5,667
Cash dividends and dividend equivalents ($0.50 per share) (88,548)   2,310 (90,858)    
Ending Balance at Feb. 03, 2018 $ 1,246,791 $ 2,496 593,770 1,883,592 (1,202,272) (30,795)
Ending Balance (in shares) at Feb. 03, 2018 177,316,000 177,316,000 [2]        
Stock awards $ 27,057   27,057      
Repurchase of common stock as part of publicly announced programs (144,405)       (144,405)  
Repurchase of common stock as part of publicly announced programs (in shares) [2]   (7,300,000)        
Repurchase of common stock from employees (19,668)       (19,668)  
Repurchase of common stock from employees (in shares) [2]   (943,000)        
Reissuance of treasury stock $ 17,038   (48,022) 8,407 56,653  
Reissuance of treasury stock (in shares) 3,363,000 3,363,000 [2]        
Net income $ 261,902     261,902    
Other comprehensive loss (4,037)         (4,037)
Cash dividends and dividend equivalents ($0.50 per share) (97,123)   2,124 (99,247)    
Ending Balance at Feb. 02, 2019 $ 1,287,555 $ 2,496 574,929 2,054,654 (1,309,692) (34,832)
Ending Balance (in shares) at Feb. 02, 2019 172,436,000 172,436,000 [2]        
Stock awards $ 22,742   22,742      
Repurchase of common stock as part of publicly announced programs (112,381)       (112,381)  
Repurchase of common stock as part of publicly announced programs (in shares) [2]   (6,336,000)        
Repurchase of common stock from employees (8,087)       (8,087)  
Repurchase of common stock from employees (in shares) [2]   (431,000)        
Adoption of ASC 842, net of tax | ASC 842 (44,435)     (44,435)    
Reissuance of treasury stock $ 2,321   (22,175) 1,959 22,537  
Reissuance of treasury stock (in shares) 1,324,000 1,324,000 [2]        
Net income $ 191,257     191,257    
Other comprehensive loss 1,664         1,664
Cash dividends and dividend equivalents ($0.50 per share) (92,783)   2,360 (95,143)    
Ending Balance at Feb. 01, 2020 $ 1,247,853 $ 2,496 $ 577,856 $ 2,108,292 $ (1,407,623) $ (33,168)
Ending Balance (in shares) at Feb. 01, 2020 166,993,000 166,993,000 [2]        
[1] 82,573 shares, 77,130 shares and 72,250 shares at February 1, 2020, February 2, 2019 and February 3, 2018 respectively. During Fiscal 2019, Fiscal 2018, and Fiscal 2017, 1,324 shares, 3,363 shares, and 2,301 shares, respectively, were reissued from treasury stock for the issuance of share-based payments.
[2] 600,000 authorized, 249,566 issued and 166,993 outstanding, $0.01 par value common stock at February 1, 2020; 600,000 authorized, 249,566 issued and 172,436 outstanding, $0.01 par value common stock at February 2, 2019; 600,000 authorized, 249,566 issued and 177,316 outstanding, $0.01 par value common stock at February 3, 2018; 600,000 authorized, 249,566 issued and 181,886 outstanding, $0.01 par value common stock at January 28, 2017. The Company has 5,000 authorized, with none issued or outstanding, $0.01 par value preferred stock for all periods presented.
v3.20.1
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Statement Of Stockholders Equity [Abstract]      
Cash dividends and dividend equivalents, Per share $ 0.55 $ 0.55 $ 0.50
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 166,993,000 172,436,000 177,316,000
Common stock, par value $ 0.01 $ 0.01 $ 0.01
Preferred stock, shares authorized 5,000,000 5,000,000 5,000,000
Preferred stock, shares issued 0 0 0
Preferred stock, shares outstanding 0 0 0
Preferred stock, par value $ 0.01 $ 0.01 $ 0.01
Treasury stock, shares 82,573,000 77,130,000 72,250,000
Reissuance of treasury stock, shares 1,324,000 3,363,000 2,301,000
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Feb. 01, 2020
Feb. 02, 2019
Feb. 03, 2018
Operating activities:      
Net income $ 191,257 $ 261,902 $ 204,163
Adjustments to reconcile net income to net cash provided by operating activities      
Depreciation and amortization 181,379 170,504 169,473
Share-based compensation 23,038 27,506 16,890
Deferred income taxes 6,541 (4,391) 44,312
Loss on impairment of assets 66,252 [1] 546  
Changes in assets and liabilities:      
Merchandise inventory (21,615) (28,496) (35,912)
Operating lease assets 261,303    
Operating lease liabilities (271,519)    
Other assets (32,845) (22,206) 13,755
Accounts payable 44,949 4,329 (16,663)
Accrued compensation and payroll taxes (38,603) 28,043 1,289
Accrued and other liabilities 5,279 18,908 (2,881)
Net cash provided by operating activities 415,416 456,645 394,426
Investing activities:      
Capital expenditures for property and equipment (210,360) (189,021) (169,469)
Purchase of available-for-sale investments (85,000) (202,912)  
Sale of available-for-sale investments 122,135 109,776  
Other investing activities (1,669) (672) (2,681)
Net cash used for investing activities (174,894) (282,829) (172,150)
Financing activities:      
Repurchase of common stock as part of publicly announced programs (112,381) (144,405) (87,682)
Repurchase of common stock from employees (8,087) (19,668) (12,513)
Net proceeds from stock options exercised 2,119 15,495 3,355
Cash dividends paid (92,783) (97,123) (88,548)
Other financing activities (94) (6,802) (3,384)
Net cash used for financing activities (211,226) (252,503) (188,772)
Effect of exchange rates on cash (696) (1,596) 1,496
Net change in cash and cash equivalents 28,600 (80,283) 35,000
Cash and cash equivalents - beginning of period 333,330 413,613 378,613
Cash and cash equivalents - end of period $ 361,930 $ 333,330 $ 413,613
[1] Fiscal 2019 asset impairment charges of $64.5 million on the assets of 20 retail stores. Of the total, $39.5 million related to the impairment of leasehold improvements and store fixtures, and $25.0 million related to the impairment of operating lease ROU assets. The Company also concluded that certain goodwill was impaired resulting in a $1.7 million charge in Fiscal 2019.
v3.20.1
Business Operations
12 Months Ended
Feb. 01, 2020
Accounting Policies [Abstract]  
Business Operations

1.  Business Operations

American Eagle Outfitters, Inc. (the “Company,” “we” and “our”), a Delaware corporation, operates under the American Eagle® (“AE”) and Aerie® brands. We also operate Tailgate, a vintage, sports-inspired apparel brand with a college town store concept, and Todd Snyder New York, a premium menswear brand.  

Founded in 1977, the Company is a leading multi-brand specialty retailer that operates more than 1,000 retail stores in the U.S. and internationally, online at www.ae.com and www.aerie.com, www.toddsnyder.com and more than 200 international store locations managed by third-party operators. Through its portfolio of brands, the Company offers high quality, on-trend clothing, accessories, and personal care products at affordable prices. The Company’s online business, AEO Direct, ships to 81 countries worldwide. 

Merchandise Mix

The following table sets forth the approximate consolidated percentage of total net revenue from operations attributable to each merchandise group for each of the periods indicated:

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

 

 

2020

 

 

2019

 

 

2018

 

Men’s apparel and accessories

 

 

29

%

 

 

32

%

 

 

34

%

Women’s apparel and accessories (excluding Aerie)

 

 

52

%

 

 

52

%

 

 

53

%

Aerie

 

 

19

%

 

 

16

%

 

 

13

%

Total

 

 

100

%

 

 

100

%

 

 

100

%

v3.20.1
Summary of Significant Accounting Policies
12 Months Ended
Feb. 01, 2020
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
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 February 1, 2020, the Company operated in one reportable segment.

Fiscal Year

Our fiscal year is a 52- or 53-week year that ends on the Saturday nearest to January 31. As used herein, “Fiscal 2020” refers to the 52-week period that will end on January 30, 2021. “Fiscal 2019” refers to the 52-week period ended February 1, 2020. “Fiscal 2018” refers to the 52-week period ended February 2, 2019. “Fiscal 2017” refers to the 53-week period ended February 3, 2018.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of 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 its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) established Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”), by issuing Accounting Standards Update (“ASU”) No. 2016-02 (“ASU 2016-02”). ASU 2016-02 was subsequently amended by ASU No. 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU No. 2018-10, Codification Improvements to Topic 842, Leases; and ASU No. 2018-11, Targeted Improvements.

The standard establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.

The Company adopted ASU 2016-02 and its subsequent amendments effective February 3, 2019. Financial information has not been updated and the disclosures required under the new standard have not been provided for dates and periods before February 3, 2019. The Company elected the new standard’s package of practical expedients, which permits the Company to maintain prior conclusions about lease identification, lease classification, and initial direct costs. The Company elected to use the go-forward practical expedient to not separate lease and non-lease components for all of our leases. The Company also elected to use the short-term lease recognition exemption for all leases that qualify.

Upon adoption, the Company:

 

Recognized operating lease liabilities and operating lease ROU assets of $1.6 billion, for the present value of the remaining minimum rental payments on existing operating leases (including consideration related to non-lease components due to the related practical expedient).

 

Recognized a transition adjustment of $44.4 million (net of tax effects of $15.0 million) to beginning retained earnings related to the impairment of newly recognized operating lease ROU assets related to store assets that were impaired prior to the date of adoption.

 

Reclassified $82.9 million of straight-line deferred rent, $55.0 million of deferred lease credits, and $40.4 million of prepaid rent to the operating lease ROU asset. Combined with the impairment discussed above, these reclassifications reduced the net operating lease ROU asset to $1.4 billion. Corresponding amounts were not reclassified in prior periods as those prior periods are presented under ASC 840, Leases.

Refer to Note 10 to the Consolidated Financial Statements for information regarding leases.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU 2018-02”). The new guidance permits companies to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) on items within accumulated other comprehensive income to retained earnings. The Company adopted ASU 2018-02 on February 3, 2019. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). This ASU simplifies the accounting for goodwill impairments by eliminating the requirement to perform procedures to determine the fair value of the assets and liabilities of the reporting unit for the determination of the fair value of the goodwill and any impairment charge to be recognized. The Company adopted ASU 2017-04 on February 3, 2019. The adoption did not have a material impact on the Company’s Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. The Company will adopt this ASU in Fiscal 2020 and does not expect a material impact from the adoption of this guidance to its Consolidated Financial Statements.

Foreign Currency Translation

In accordance with ASC 830, Foreign Currency Matters, the Company translates assets and liabilities denominated in foreign currencies into United States dollars (“USD”) (the reporting currency) at the exchange rates prevailing at the balance sheet date. The Company translates revenues and expenses denominated in foreign currencies into USD at the monthly average exchange rates for the period. Gains or losses resulting from foreign currency transactions are included in the consolidated results of operations, whereas, related translation adjustments are reported as an element of other comprehensive income in accordance with ASC 220, Comprehensive Income (refer to Note 11 to the Consolidated Financial Statements).

Cash, Cash Equivalents, and Short-term Investments

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

Short-term investments classified as available-for-sale included certificates of deposit as of February 1, 2020, and they included certificates of deposit and commercial paper with a maturity of greater than three months, but less than one year as of February 2, 2019.   

Refer to Note 3 to the Consolidated Financial Statements for information regarding cash, cash equivalents, and short-term investments.

Merchandise Inventory

Merchandise inventory is valued at the lower of average cost or net realizable value, utilizing the retail method. Average cost includes merchandise design and sourcing costs and related expenses. The Company records merchandise receipts when control of the merchandise has 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.

Property and Equipment

Property and equipment is recorded on the basis of cost 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 and equipment

Five years

Information technology

Three - five years

 

As of February 1, 2020, the weighted average remaining useful life of our assets was approximately 7.5 years.

In accordance with ASC 360, Property, Plant, and Equipment (“ASC 360”), the Company’s management evaluates the value of leasehold improvements, store fixtures, and operating lease ROU assets associated with retail stores, which have been open for a period sufficient to reach maturity. 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. Impairment losses are recorded on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the projected undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts. When events such as these occur, the impaired assets are adjusted to their estimated fair value and an impairment loss is recorded separately as a component of operating income under impairment and restructuring charges.

During Fiscal 2019, the Company recorded asset impairment charges of $64.5 million on the assets of 20 retail stores. Of the total, $39.5 million related to the impairment of leasehold improvements and store fixtures, and $25.0 million related to the impairment of operating lease ROU assets. The impairments were recorded as a result of store performance up to and including the holiday selling season and a significant portfolio review in the fourth quarter of Fiscal 2019 that considered current and future performance projections and strategic real estate initiatives. The Company determined that these stores would not be able to generate sufficient cash flows over the expected remaining lease term to recover the carrying value of the respective stores’ assets.

During Fiscal 2018, the Company recorded no significant asset impairment charges.  

When the Company closes, remodels, or relocates a store prior to the end of its lease term, the remaining net book value of the assets related to the store is recorded as a write-off of assets within depreciation and amortization expense.

Refer to Note 7 to the Consolidated Financial Statements for additional information regarding property and equipment, and refer to Note 15 for additional information regarding impairment charges. 

Intangible Assets, including Goodwill

The Company’s goodwill is primarily related to the acquisition of its importing operations, Canada business, and Tailgate and Todd Snyder brands. 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 February 1, 2020. As a result, the Company concluded that certain goodwill was impaired resulting in a $1.7 million charge included within impairment and restructuring charges in the Consolidated Statements of Operations. There were no goodwill impairment charges recorded during Fiscal 2018.

Definite-lived 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 definite-lived intangible assets, which consist primarily of trademark assets, are generally amortized over 15 to 25 years.

The Company evaluates definite-lived intangible assets for impairment in accordance with ASC 360 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 is less than the carrying amounts of the assets, then the assets are impaired and are adjusted to their estimated fair value. No definite-lived intangible asset impairment charges were recorded for all periods presented.

Refer to Note 8 to the Consolidated Financial Statements for additional information regarding intangible assets, including goodwill.

Gift Cards

Revenue is not recorded on the issuance of 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 $9.5 million, $8.9 million, and $10.1 million during Fiscal 2019, Fiscal 2018, and Fiscal 2017, respectively, of revenue related to gift card breakage.

Construction allowances

As part of certain lease agreements for retail stores, the Company receives construction allowances from lessors, which are generally comprised of cash amounts. The Company records a receivable and an adjustment to the operating lease ROU asset at the lease commencement date (date of initial possession of the store). The deferred lease credit is amortized as part of the single lease cost over the term of the original lease (including the pre-opening build-out period). The receivable is reduced as amounts are received from the lessor.

Self-Insurance Liability

The Company uses a combination of insurance and self-insurance mechanisms for certain losses related to employee medical benefits and worker’s compensation. Costs for self-insurance claims filed and claims incurred but not reported are accrued based on known claims and historical experience. Management believes that it has adequately reserved for its self-insurance liability, which is capped by stop loss contracts with insurance companies. However, any significant variation of future claims from historical trends could cause actual results to differ from the accrued liability.

Co-branded Credit Card

The Company offers a co-branded credit card (the “AEO Visa Card”) and a private label credit card (the “AEO Credit Card”) under the AE 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 funding from the Bank based on the Agreement and card activity, which includes payments for new account activations and usage of the credit cards. We recognize revenue for this funding as we fulfill our performance obligations under the Agreement. This revenue is recorded in other revenue, which is a component of total net revenue in our Consolidated Statements of Operations. The adoption of ASC 606, Revenue from Contracts with Customers (“ASC 606”) did not have an impact of the Company’s accounting for the co-branded credit card.

For further information on the Company’s loyalty program, refer to the Customer Loyalty Program caption below.

Customer Loyalty Program

In 2017, the Company launched a highly digitized loyalty program called AEO Connected™ (the “Program”). This Program integrates the credit card rewards program and the AEREWARDS® loyalty program into one combined customer offering. Under the Program, customers accumulate points based on purchase activity and earn rewards by reaching certain point thresholds. Customers earn rewards in the form of discount savings certificates. Rewards earned are valid through the stated expiration date, which is 45 days from the issuance date of the reward. Rewards not redeemed during the 45-day redemption period are forfeited. Additional rewards are also given for key items such as jeans and bras.  

Points earned under the Program on purchases at American Eagle and Aerie are accounted for in accordance with ASC 606. 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, using the relative stand-alone selling price method. Additionally, reward points earned using the co-branded credit card on non-AE or Aerie purchases are accounted for in accordance with ASC 606. As the points are earned, a current liability is recorded for the estimated cost of the award, and the impact of the adjustments are recorded in revenue.

Sales Return Reserve

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 using historical average return percentages.

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

Beginning balance

 

$

4,620

 

 

$

4,717

 

 

$

3,639

 

Returns

 

 

(121,513

)

 

 

(113,805

)

 

 

(103,393

)

Provisions

 

 

122,718

 

 

 

113,708

 

 

 

104,471

 

Ending balance

 

$

5,825

 

 

$

4,620

 

 

$

4,717

 

 

The presentation on a gross basis consists of a separate right of return asset and liability. These amounts are recorded within (i) prepaid expenses and other and (ii) other current liabilities and accrued expenses, respectively, on the Consolidated Balance Sheets.

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 affect 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 14 to the Consolidated Financial Statements for additional information.

Revenue Recognition

In May 2014, the FASB issued ASC 606, a comprehensive 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. The Company adopted ASC 606 on February 4, 2018. Results for reporting periods beginning on or after February 4, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting. The Company recorded a net increase to opening retained earnings of $0.2 million as of February 4, 2018 due to the cumulative impact of adoption. The impact was the result of accounting for customer loyalty programs using a relative stand-alone selling price method vs. incremental cost method. The Company defers a portion of the sales revenue attributed to the loyalty points and recognizes revenue when the points are redeemed or expire, consistent with the requirements of ASC 606. Refer to the Customer Loyalty Program caption above for additional information.

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 on the Company’s Consolidated Statements of Operations. 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 promotional price reductions. 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 using 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 above.

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

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 and entertainment, 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 and entertainment 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. Additionally, selling, general, and administrative expenses do not include rent and utilities related to our stores, operating costs of our distribution centers, and shipping and handling costs related to our e-commerce operations.

Advertising Costs

Certain advertising costs, including direct mail, in-store photographs, and other promotional costs are expensed when the marketing campaign commences. As of February 1, 2020 and February 2, 2019, the Company had prepaid advertising expense of $14.5 million and $12.6 million, respectively. All other advertising costs are expensed as incurred. The Company recognized $151.5 million, $143.2 million, and $129.8 million in advertising expense during Fiscal 2019, Fiscal 2018, and Fiscal 2017, respectively.

Store Pre-Opening Costs

Store pre-opening costs consist primarily of rent, advertising, supplies, and payroll expenses. These costs are expensed as incurred.

Other Income (Expense), Net

Other income (expense), net consists primarily of foreign currency transaction gains (losses), interest income (expense), and realized investment gains (losses).

Legal Proceedings and Claims

The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In accordance with ASC 450, Contingencies (“ASC 450”), the Company records a reserve for estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records the accrual at the low end of the range, in accordance with ASC 450. As the Company believes that it has provided adequate reserves, it anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect the consolidated financial position, results of operations or cash flows of the Company. However, our assessment of any litigation or other legal claims could potentially change in light of the discovery of facts not presently known or determinations by judges, juries, or other finders of fact that are not in accord with management’s evaluation of the possible liability or outcome of such litigation or claims.

Supplemental Disclosures of Cash Flow Information

The table below shows supplemental cash flow information for cash amounts paid during the respective periods:

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

Cash paid during the periods for:

 

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

$

69,689

 

 

$

81,248

 

 

$

47,094

 

Interest

 

$

828

 

 

$

1,207

 

 

$

1,098

 

 

Segment Information

In accordance with ASC 280, Segment Reporting (“ASC 280”), the Company has identified two operating segments (American Eagle Brand and Aerie Brand) that reflect the Company’s operational structure as well as the business’s internal view of analyzing results and allocating resources. All of the operating segments have met the aggregation criteria and have been aggregated and are presented as one reportable segment, as permitted by ASC 280.

The following tables present summarized geographical information:

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

Total net revenue:

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

3,710,270

 

 

$

3,511,265

 

 

$

3,295,066

 

Foreign (1)

 

 

597,942

 

 

 

524,455

 

 

 

500,483

 

Total net revenue

 

$

4,308,212

 

 

$

4,035,720

 

 

$

3,795,549

 

 

(1)

Amounts represent sales from American Eagle and Aerie international retail stores, and e-commerce sales that are billed to and/or shipped to foreign countries and international franchise royalty revenue.

 

 

 

February 1,

 

 

February 2,

 

(In thousands)

 

2020

 

 

2019

 

Long-lived assets, net:

 

 

 

 

 

 

 

 

United States

 

$

2,032,280

 

 

$

728,196

 

Foreign

 

 

174,760

 

 

 

72,120

 

Total long-lived assets, net

 

$

2,207,040

 

 

$

800,316

 

 

As of February 1, 2020, the United States and foreign balances contain $1.3 billion and $0.1 billion of operating lease ROU assets, respectively, related to the adoption of ASC 842. Please refer to the Recent Accounting Pronouncements section of this footnote for information regarding the adoption of ASC 842.

v3.20.1
Cash, Cash Equivalents and Short-term Investments
12 Months Ended
Feb. 01, 2020
Cash And Cash Equivalents [Abstract]  
Cash, Cash Equivalents and Short-term Investments

3.  Cash, Cash Equivalents, and Short-term Investments

The following table summarizes the fair market value of our cash and short-term investments, which are recorded on the Consolidated Balance Sheets:

 

(In thousands)

 

February 1,

2020

 

 

February 2,

2019

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

Cash

 

$

126,087

 

 

$

108,216

 

Interest bearing deposits

 

 

235,843

 

 

 

165,274

 

Commercial paper

 

 

 

 

 

59,840

 

Total cash and cash equivalents

 

$

361,930

 

 

$

333,330

 

Short-term investments:

 

 

 

 

 

 

 

 

Certificates of deposits

 

 

55,000

 

 

 

70,000

 

Commercial paper

 

 

 

 

 

22,135

 

Total short-term investments

 

 

55,000

 

 

 

92,135

 

Total cash and short-term investments

 

$

416,930

 

 

$

425,465

 

 

v3.20.1
Fair Value Measurements
12 Months Ended
Feb. 01, 2020
Fair Value Disclosures [Abstract]  
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.

Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash equivalents and short-term investments are Level 1 financial assets and are measured at fair value on a recurring basis, for all periods presented. Refer to Note 3 to the Consolidated Financial Statements for additional information regarding cash equivalents and short-term investments.

The Company had no other financial instruments that required fair value measurement for any of the periods presented.

Non-Financial Assets

The Company’s non-financial assets, which include 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 and the Company is required to evaluate the non-financial asset for impairment, a resulting impairment would require that the non-financial asset be recorded at the estimated fair value. During Fiscal 2019, the Company concluded that certain goodwill was impaired resulting in a $1.7 million charge included within impairment and restructuring charges in the Consolidated Statements of Operations. The measurement of the goodwill impairment included Level 3 measurements.

Certain long-lived assets were measured at fair value on a nonrecurring basis using Level 3 inputs as defined in ASC 820. During Fiscal 2019, the Company recorded asset impairment charges of $64.5 million on the assets of 20 retail stores. Of the total, $39.5 million related to the impairment of leasehold improvements and store fixtures and $25.0 million related to the impairment of operating lease ROU assets. The assets were adjusted to their fair value and the loss on impairment was recorded within impairment and restructuring charges in the Consolidated Statements of Operations. The fair value of the impaired assets on these stores, after the recorded loss, is approximately $145.2 million including $3.9 million of leasehold improvements and store fixtures and $141.3 million of operating lease ROU assets.

The fair value of the Company’s stores was determined by estimating the amount and timing of net future cash flows and discounting them using a risk-adjusted rate of interest. The Company estimates future cash flows based on its experience and knowledge of the market in which the store is located.

v3.20.1
Earnings per Share
12 Months Ended
Feb. 01, 2020
Earnings Per Share [Abstract]  
Earnings per Share

5.  Earnings per Share

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

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

(In thousands, except per share amounts)

 

2020

 

 

2019

 

 

2018

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic number of common shares outstanding

 

 

169,711

 

 

 

176,476

 

 

 

177,938

 

Dilutive effect of stock options and non-vested

   restricted stock

 

 

1,156

 

 

 

1,559

 

 

 

2,218

 

Diluted number of common shares outstanding

 

 

170,867

 

 

 

178,035

 

 

 

180,156

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potentially issuable common shares excluded due to

   anti-dilutive effect

 

 

700

 

 

 

393

 

 

 

3,082

 

 

Dilutive and anti-dilutive shares relate to share-based compensation.

Refer to Note 12 to the Consolidated Financial Statements for additional information regarding share-based compensation.

v3.20.1
Accounts Receivable, net
12 Months Ended
Feb. 01, 2020
Receivables [Abstract]  
Accounts Receivable, net

6.  Accounts Receivable, net

Accounts receivable, net is comprised of the following:

 

 

 

February 1,

 

 

February 2,

 

(In thousands)

 

2020

 

 

2019

 

Franchise and license receivable

 

$

36,060

 

 

$

31,474

 

Merchandise sell-offs and vendor receivables

 

 

24,474

 

 

 

12,943

 

Credit card program receivable

 

 

30,578

 

 

 

21,129

 

Tax refunds

 

 

4,868

 

 

 

7,483

 

Landlord construction allowances

 

 

12,038

 

 

 

9,001

 

Gift card receivable

 

 

1,794

 

 

 

3,514

 

Other items

 

 

9,252

 

 

 

7,933

 

Total

 

$

119,064

 

 

$

93,477

 

 

v3.20.1
Property and Equipment, net
12 Months Ended
Feb. 01, 2020
Property Plant And Equipment [Abstract]  
Property and Equipment, net

7.  Property and Equipment, net

Property and equipment, net consists of the following:

 

 

 

February 1,

 

 

February 2,

 

(In thousands)

 

2020

 

 

2019

 

Land

 

$

17,910

 

 

$

17,910

 

Buildings

 

 

211,814

 

 

 

209,487

 

Leasehold improvements

 

 

721,514

 

 

 

698,029

 

Fixtures and equipment

 

 

1,316,198

 

 

 

1,221,203

 

Construction in progress

 

 

46,992

 

 

 

34,221

 

Property and equipment, at cost

 

$

2,314,428

 

 

$

2,180,850

 

Less:  Accumulated depreciation

 

 

(1,579,308

)

 

 

(1,438,701

)

Property and equipment, net

 

$

735,120

 

 

$

742,149

 

 

Depreciation expense is as follows:

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

Depreciation expense

 

$

178,038

 

 

$

164,265

 

 

$

158,969

 

 

Additionally, during Fiscal 2019, Fiscal 2018, and Fiscal 2017, the Company recorded $4.3 million, $2.0 million and $6.0 million, respectively, related to asset write-offs within depreciation and amortization expense.

v3.20.1
Intangible Assets, net, including Goodwill
12 Months Ended
Feb. 01, 2020
Goodwill And Intangible Assets Disclosure [Abstract]  
Intangible Assets, net, including Goodwill

8.  Intangible Assets, net, including Goodwill

Intangible assets, net, including goodwill, consists of the following:

 

 

 

February 1,

 

 

February 2,

 

(In thousands)

 

2020

 

 

2019

 

Goodwill, gross

 

$

17,353

 

 

$

17,383

 

Accumulated impairment (1)

 

 

(4,196

)

 

 

(2,484

)

Goodwill, net

 

$

13,157

 

 

$

14,899

 

 

 

 

 

 

 

 

 

 

Trademarks, at cost

 

 

71,685

 

 

 

70,994

 

Accumulated amortization

 

 

(31,838

)

 

 

(27,726

)

Trademarks, net

 

$

39,847

 

 

$

43,268

 

 

 

 

 

 

 

 

 

 

Intangibles, net, including goodwill

 

$

53,004

 

 

$

58,167

 

 

(1)

Accumulated impairment includes $2.5 million recorded in Fiscal 2016 and $1.7 million recorded in Fiscal 2019

Amortization expense is as follows:

 

 

 

For the Years Ended

 

 

 

February 1,

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2020

 

 

2019

 

 

2018

 

Amortization expense

 

$

4,184

 

 

$

4,225

 

 

$

4,551

 

 

The table below summarizes the estimated future amortization expense for intangible assets existing as of February 1, 2020 for the next five Fiscal Years:

 

 

 

Future

 

(In thousands)

 

Amortization

 

2020

 

$

3,493

 

2021

 

$

3,166

 

2022

 

$

3,164

 

2023

 

$

3,110

 

2024

 

$

2,902

 

 

 

v3.20.1
Other Credit Arrangements
12 Months Ended
Feb. 01, 2020
Debt Disclosure [Abstract]  
Other Credit Arrangements

9.  Other Credit Arrangements

In January 2019, the Company entered into an amended and restated Credit Agreement (“Credit Agreement”) for 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 will be further secured by first-priority mortgages on certain real property.

As of February 1, 2020, the Company was in compliance with the terms of the Credit Agreement and had $7.9 million outstanding in stand-by letters of credit. No loans were outstanding under the Credit Agreement as of February 1, 2020 or at any time throughout Fiscal 2019.

v3.20.1
Leases
12 Months Ended
Feb. 01, 2020
Leases [Abstract]  
Leases

10.  Leases

The Company leases all store premises, some of its office space and certain information technology and office equipment. These leases are generally classified as operating leases.

Store leases generally provide for a combination of base rentals and contingent rent based on store sales. Additionally, most leases include lessor incentives such as construction allowances and rent holidays. The Company is typically responsible for tenant occupancy costs including maintenance costs, common area charges, real estate taxes, and certain other expenses.

Most leases include one or more options to renew. The exercise of lease renewal options is at the Company’s discretion and is not reasonably certain at lease commencement. When measuring operating lease ROU assets and operating lease liabilities after the date of adoption of ASC 842 (February 3, 2019), the Company only includes cash flows related to options to extend or terminate leases once those options are executed.

Some leases have variable payments. However, because they are not based on an index or rate, they are not included in the measurement of operating lease ROU assets and operating lease liabilities.

When determining the present value of future payments for an operating lease that does not have a readily determinable implicit rate, the Company uses its incremental borrowing rate as of the date of initial possession of the leased asset.

For leases that qualify for the short-term lease exemption, the Company does not record an operating lease liability or operating lease ROU asset. Short-term lease payments are recognized on a straight-line basis over the lease term of 12 months or less.

The following table summarizes expense categories and cash payments for operating leases during the period. It also includes the total non-cash transaction activity for new operating lease ROU assets and related operating lease liabilities entered into during the period.

 

 

 

For the Year Ended

 

 

 

February 1, 2020

 

(In thousands)

 

 

 

 

Lease costs

 

 

 

 

Operating lease costs

 

$

349,429

 

Variable lease costs

 

 

102,797

 

Short-term leases and other lease costs

 

 

37,293

 

Total lease costs

 

$

489,519

 

 

 

 

 

 

Other information

 

 

 

 

Cash paid for operating lease liability

 

$

(328,925

)

New operating lease ROU asset  entered into during the period

 

$

277,562

 

 

The following table contains the average remaining lease term and discount rate, weighted by outstanding operating lease liability as of the end of the period:

 

Lease term and discount rate

 

February 1, 2020

 

Weighted-average remaining lease term - operating leases

 

6.2 years

 

Weighted-average discount rate - operating leases

 

5.1%

 

 

The table below is a maturity analysis of the operating leases in effect as of the end of the period. Undiscounted cash flows for finance leases and short-term leases are not material for the periods reported and are excluded from the table below:

 

 

 

Undiscounted

cash flows

 

 

 

February 1, 2020

 

(In thousands)

 

 

 

 

Fiscal years:

 

 

 

 

2020

 

$

374,819

 

2021

 

 

331,578

 

2022

 

 

277,954

 

2023

 

 

255,695

 

2024

 

 

184,591

 

Thereafter

 

 

471,160

 

Total undiscounted cash flows

 

$

1,895,797

 

Less: discount on lease liability

 

 

(294,901

)

Total lease liability

 

$

1,600,896

 

 

The Company adopted ASC 842 as of February 3, 2019 through the modified retrospective method. Prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting treatment. In accordance with the transition guidance within ASC 842, the following table provides the disclosures related to Fiscal Years 2018 and 2017 as required under ASC 840, Leases. Refer to Note 2 for further information about the Company’s adoption of ASC 842.

 

 

 

For the Years Ended

 

 

 

February 2,

 

 

February 3,

 

(In thousands)

 

2019

 

 

2018

 

Store rent:

 

 

 

 

 

 

 

 

Fixed minimum

 

$

303,123

 

 

$

298,458

 

Contingent

 

 

13,883

 

 

 

9,566

 

Total store rent, excluding common area maintenance

   charges, real estate taxes and certain other expenses

 

$

317,006

 

 

$

308,025

 

Offices, distribution facilities, equipment and other

 

 

18,636

 

 

 

26,960

 

Total rent expense

 

$

335,642

 

 

$

334,985

 

 

v3.20.1
Other Comprehensive Income
12 Months Ended
Feb. 01, 2020
Equity [Abstract]  
Other Comprehensive Income

11.  Other Comprehensive Income

The accumulated balances of other comprehensive income included as part of the Consolidated Statements of Stockholders’ Equity follow:

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

Before

 

 

Tax

 

 

Other

 

 

 

Tax

 

 

Benefit

 

 

Comprehensive

 

(In thousands)

 

Amount

 

 

(Expense)

 

 

Income

 

Balance at January 28, 2017

 

$

(38,745

)

 

 

2,283

 

 

$

(36,462

)

Foreign currency translation gain (1)

 

 

3,564

 

 

 

 

 

 

3,564

 

Gain on long-term intra-entity foreign currency transactions

 

 

3,436

 

 

 

(1,333

)

 

 

2,103

 

Balance at February 3, 2018

 

$

(31,745

)

 

 

950

 

 

$

(30,795

)

Foreign currency translation loss (1)

 

 

(834

)

 

 

 

 

 

(834

)

Loss on long-term intra-entity foreign currency transactions

 

 

(3,225

)

 

 

22

 

 

 

(3,203

)

Balance at February 2, 2019

 

$

(35,804

)

 

 

972

 

 

$

(34,832

)

Foreign currency translation gain (1)

 

 

2,094

 

 

 

 

 

 

2,094

 

Loss on long-term intra-entity foreign currency transactions

 

 

(577

)

 

 

147

 

 

 

(430

)

Balance at February 1, 2020

 

$

(34,287

)

 

$

1,119

 

 

$

(33,168

)

 

(1)

Foreign currency translation adjustments are not adjusted for income taxes as they relate to a permanent investment in a subsidiary.

v3.20.1
Share-Based Payments
12 Months Ended
Feb. 01, 2020