AMERICAN EAGLE OUTFITTERS, INC.

AMERICAN EAGLE OUTFITTERS, INC.

March 10, 2005 17:13 ET

American Eagle Outfitters Announces Restatement Due to Lease Accounting


NEWS RELEASE TRANSMITTED BY CCNMatthews

FOR: AMERICAN EAGLE OUTFITTERS, INC.

NASDAQ SYMBOL: AEOS

MARCH 10, 2005 - 17:13 ET

American Eagle Outfitters Announces Restatement Due to
Lease Accounting

WARRENDALE, Pa.--(CCNMatthews - Mar 10, 2005) -

American Eagle Outfitters, Inc. (NASDAQ:AEOS) today announced a
restatement of prior period financial statements due to changes in its
accounting practices related to leasing transactions.

As disclosed in its March 2, 2005 preliminary earnings release, the
Company, like many other retailers, determined that its method of
accounting for rent holidays and tenant allowances was not in accordance
with the views expressed by the Securities and Exchange Commission
regarding generally accepted accounting principles. As the Company
previously stated, it believes that the earnings impact of these changes
is not material to any given period. The primary impact of these changes
on the Company's January 29, 2005 balance sheet is an increase to
property and equipment and accounts receivable of approximately $67
million, as well as a corresponding increase to a deferred lease credit.
The primary impact of these changes on the Company's January 31, 2004
balance sheet is an increase to property and equipment and accounts
receivable of approximately $64 million, as well as a corresponding
increase to a deferred lease credit.

Historically, the Company has recognized straight line rent expense for
leases beginning on the store opening date. This had the effect of
excluding the build-out period of its stores from the calculation of the
period over which it expenses rent and recognizes construction
allowances. The Company is now changing this practice to include the
build-out period in our calculations of rent expense and construction
allowance amortization.

Additionally, the Company is changing its classification of construction
allowances on its consolidated financial statements to record them as
deferred liabilities, which will be amortized as a reduction to rent
expense. Furthermore, construction allowances will be presented within
operating activities on its consolidated statements of cash flows.
Historically, construction allowances have been classified on the
Company's consolidated balance sheets as a reduction of property and
equipment and the related amortization has been classified as a
reduction to depreciation and amortization expense (over the lesser of
the useful life or the life of the lease) on the consolidated statements
of operations. The Company's consolidated statements of cash flows have
historically reflected construction allowances as a reduction of capital
expenditures within investing activities.

The Company, along with its independent auditors, has completed its
review of the respective accounting policies. As a result, Management
determined that a restatement of its consolidated balance sheets,
statements of stockholders' equity, statements of operations and
statements of cash flows is deemed necessary and that those previously
issued financial statements should no longer be relied upon. The Company
will file a Form 8-K reporting these restatements under Item 4.02 and
will file its restated financial statements within its fiscal year 2004
Form 10-K filing as well as its fiscal year 2005 Form 10-Q filings.
Additionally, the Company updated its consolidated financial results for
the fourth quarter and year-to-date periods ended January 29, 2005 and
January 31, 2004 as presented below to reflect these changes.

American Eagle Outfitters (NASDAQ:AEOS) is a leading lifestyle retailer
that designs, markets, and sells its own brand of relaxed, casual
clothing for 15 to 25 year olds, providing high-quality merchandise at
affordable prices. AE's collection includes modern basics like jeans,
cargo pants, and graphic Ts as well as a stylish assortment of cool
accessories, outerwear and footwear. American Eagle Outfitters currently
operates 778 AE stores in 49 states, the District of Columbia and Puerto
Rico, and 69 AE stores in Canada. AE also operates via its Web business,
www.ae.com, which offers additional sizes and styles of favorite AE
merchandise.



AMERICAN EAGLE OUTFITTERS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

January 29, January 31,
2005 2004
-------------- -----------
(Unaudited)(1) (1)
ASSETS
Cash, cash equivalents and short-term
investments $ 589,607 $ 337,812
Merchandise inventory 137,991 120,586
Other current assets 100,042 72,302
--------------- -----------
Total current assets 827,640 530,700
--------------- -----------
Property and equipment, net 353,213 340,955
Goodwill, net 10,136 10,136
Other assets, net 103,913 50,623
--------------- -----------
Total Assets $ 1,294,902 $ 932,414
=============== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 76,344 $ 71,330
Accrued compensation and payroll
taxes 36,008 14,409
Accrued rent 45,089 40,668
Accrued income and other taxes 33,926 28,669
Unredeemed stored value cards and
gift certificates 32,724 25,785
Current portion of note payable - 4,832
Current portion of deferred lease
credits 9,798 10,261
Other current liabilities 19,376 13,025
--------------- -----------
Total current liabilities 253,265 208,979
--------------- -----------
Note payable - 13,874
Deferred lease credits 57,758 53,936
Other non-current liabilities 20,393 18,248
--------------- -----------
Total non-current liabilities 78,151 86,058
--------------- -----------
Total stockholders' equity 963,486 637,377
--------------- -----------
Total Liabilities and
Stockholders' Equity $ 1,294,902 $ 932,414
=============== ===========

Current Ratio 3.27 2.54

(1) Amounts as of January 29, 2005 and January 31, 2004 have been
updated from those disclosed in the Company's preliminary earnings
release dated March 2, 2005 to reflect the impact of certain lease
accounting adjustments.


AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts)

Three Months Ended Twelve Months Ended
-------------------------- --------------------------
January 29, January 31, January 29, January 31,
2005 2004 2005 2004
-------------- ----------- -------------- -----------
(Unaudited)(1) (1) (Unaudited)(1) (1)

Net sales $ 674,024 $ 490,580 $ 1,881,241 $ 1,435,436
Cost of sales,
including
certain buying,
occupancy and
warehousing
expenses 341,647 299,800 1,003,433 885,939
-------------- ----------- -------------- -----------
Gross profit 332,377 190,780 877,808 549,497
Selling, general
and
administrative
expenses 142,386 105,782 446,829 356,261
Depreciation and
amortization 18,304 15,704 68,273 59,965
-------------- ----------- -------------- -----------
Operating income 171,687 69,294 362,706 133,271
Other income,
net 3,343 469 4,129 2,016
-------------- ----------- -------------- -----------
Income before
income taxes 175,030 69,763 366,835 135,287
Provision for
income taxes 68,086 26,953 142,603 52,179
-------------- ----------- -------------- -----------
Income from
continuing
operations,
net of tax 106,944 42,810 224,232 83,108
Loss from
discontinued
operations,
net of income
tax benefit (6,027) (7,816) (10,889) (23,486)
-------------- ----------- -------------- -----------
Net income $ 100,917 $ 34,994 $ 213,343 $ 59,622
============== =========== ============== ===========

Basic per share
amounts (post-
split):
Income from
continuing
operations $ 0.73 $ 0.30 $ 1.55 $ 0.59
Loss from
discontinued
operations (0.04) (0.05) (0.08) (0.17)
-------------- ----------- -------------- -----------
Net income per
basic share $ 0.69 $ 0.25 $ 1.47 $ 0.42
============== =========== ============== ===========

Diluted per
share amounts
(post-split):
Income from
continuing
operations $ 0.70 $ 0.29 $ 1.49 $ 0.57
Loss from
discontinued
operations (0.04) (0.05) (0.07) (0.16)
-------------- ----------- -------------- -----------
Net income per
diluted share $ 0.66 $ 0.24 $ 1.42 $ 0.41
============== =========== ============== ===========

Weighted average
common shares
outstanding -
basic
(post-split) 147,094 142,358 145,150 142,226
Weighted average
common shares
outstanding -
diluted
(post-split) 153,402 144,502 150,244 144,414

----------------------------------------------------------------------

Total gross
square footage
at end of
period: 4,540,095 4,239,497

Store count at
end of period: 846 805

----------------------------------------------------------------------

(1) Amounts for the three and twelve months ended January 29, 2005 and
January 31, 2004 have been updated from those disclosed in the
Company's preliminary earnings release dated March 2, 2005 to reflect
the impact of certain lease accounting adjustments.



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Contact Information

  • FOR FURTHER INFORMATION PLEASE CONTACT:
    American Eagle Outfitters, Inc.
    Laura Weil or Judy Meehan, 724-776-4857