Question

Retrieve the Form 10-K for American Eagle Outfitters for the fiscal year ending February 3, 2018. American Eagle’s Form 10-K can be accessed through the SEC EDGAR database athttps://www.sec.gov/Archives/edgar/data/919012/000156459018006045/aeo-10k_20180203.htm

Hints: You will need to search the financial statement footnotes to find some of the information. Also, the financial statements are in thousands, except for per share amounts. If a number is in thousands, please indicate this by writing out the full number or writing ‘(in thousands)’. Furthermore, you will not need the information before page 35 in American Eagle’s Form 10-K.

1. What were American Eagle’s impairment and restructuring charges for the fiscal year ending February 3, 2018?

2. Did American Eagle’s gross profit margin increase or decrease for the fiscal year ending February 3, 2018 compared to the fiscal year ending January 28, 2017? Show supporting computations.

3. If the gross profit profit margin decreases, what does this tell a financial statement user?

4. At what point does American Eagle’s e-commerce operation recognize revenue for a sale?

5. How much was American Eagle’s Advertising Expense for the fiscal year ending February 3, 2018 (also called Fiscal 2017)?

6. For American Eagle, list the items that are included in Other (Expense) Income, Net.

7. What was American Eagle’s Diluted Income per Common Share for the fiscal year ending February 3, 2018?

8. What is American Eagle’s gift card ‘breakage’ for the fiscal year ending February 3, 2018 (also called Fiscal 2017)?

9. The difference between American Eagle’s net income and its comprehensive income has been caused by which item?

10. What was the total amount of Cash Dividends and Dividend Equivalents for American Eagle for the year fiscal year ending February 3, 2018?

Answer 1

1.)  American Eagle’s impairment and restructuring charges for the fiscal year ending February 3, 2018 is $20,611 thousands.

2.) American Eagle’s gross profit margin

2018	2017	Net change
1,370,505/3,795,549 = 36.11%	1,366,927/3,609,865 = 37.87%	decreases by 1.76%

3.) Decreased gross margin tells the user the following reason :-

- One of the simplest factors that can lead to declining margin is higher costs of goods sold.

- Lowering your prices to generate sales can also reduce gross profit margin.

- New competitors or increased rivalry from competitors also impact your gross profit margin.

4.) The Company’s e-commerce operation records revenue upon the estimated customer receipt date of the merchandise.

5.) American Eagle’s Advertising Expense for the fiscal year ending February 3, 2018 is  $129.8 million.

6.) Other (expense) income, net consists primarily of allowances for uncollectible receivables, foreign currency transaction gain/loss, interest income/expense and realized investment gains/losses.

7.) American Eagle’s Diluted Income per Common Share is $1.13.

8.)  American Eagle’s gift card ‘breakage’ for the fiscal year ending February 3, 2018 is $10.1 million.

9.) The difference between American Eagle’s net income and its comprehensive income has been caused by Foreign currency translation gain.

10.) The total amount of Cash Dividends and Dividend Equivalents for American Eagle for the year fiscal year ending February 3, 2018 is $88,548 thousands.