EXHIBIT 99.2
UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS OF AMERICAN EAGLE OUTFITTERS, INC.
The following unaudited pro forma condensed consolidated financial information of American Eagle Outfitters, Inc. (the "Company") gives effect to the disposition of the Bluenotes business by the Company to a private company controlled by Mr. Michael Gold, owner of YM Inc., (Sales), a prominent Canadian retailer (the "Purchaser"). The accompanying unaudited pro forma condensed consolidated statements of operations for the nine month period ended October 30, 2004 and for the year ended January 31, 2004 give effect to the disposition as if it had occurred on February 2, 2003. The unaudited pro forma condensed consolidated balance sheet as of October 30, 2004 reflects the disposition as if it had occurred on that date. All pro forma adjustments are described in the notes to the unaudited condensed consolidated financial statements and are based upon available information and certain assumptions that the Company believes are reasonable under the circumstances.
This pro forma information is based on and should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 31, 2004 and the Company's Quarterly Report on Form 10-Q for the period ended October 30, 2004. The unaudited pro forma financial information is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have occurred if the transaction has taken place on the dates indicated and is not necessarily indicative of future financial position or results of operations.
AMERICAN EAGLE OUTFITTERS, INC. |
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET |
AS OF OCTOBER 30, 2004 |
(In thousands)
Assets | As Reported | | Pro Forma Adjustments | | Pro Forma |
Current assets: | | | | | |
Cash and cash equivalents | $273,755 | | $11,979 | (A) | $285,734 |
Short-term investments | 110,885 | | - | | 110,885 |
Merchandise inventory | 204,972 | | (12,419) | (B) | 192,553 |
Other current assets | 87,455 | | 9,342 | (C) | 96,797 |
Total current assets | 677,067 | | 8,902 | | 685,969 |
Property and equipment, at cost, net of accumulated depreciation and amortization | 310,512 | | (13,297) | (B) | 297,215 |
Other assets, net of accumulated amortization | 69,646 | | 2,021 | (D) | 71,667 |
Total assets | $1,057,225 | | $(2,374) | | $1,054,851 |
| | | | | |
Liabilities and Stockholders' Equity | | | | | |
Current liabilities: | | | | | |
Accounts payable | $84,303 | | $ - | | $84,303 |
Other liabilities and accrued expenses | 130,546 | | 3,763 | (E) | 134,309 |
Total current liabilities | 214,849 | | 3,763 | | 218,612 |
Non-current liabilities: | | | | | |
Other non-current liabilities | 21,933 | | - | | 21,933 |
Total non-current liabilities | 21,933 | | - | | 21,933 |
Stockholders' equity: | | | | | |
Common stock | 755 | | - | | 755 |
Contributed capital | 215,537 | | - | | 215,537 |
Accumulated other comprehensive income | 14,065 | | 2,339 | (F) | 16,404 |
Retained earnings | 636,886 | | (8,476) | (G) | 628,410 |
Deferred compensation | (1,782) | | - | | (1,782) |
Treasury stock | (45,018) | | - | | (45,018) |
Total stockholders' equity | 820,443 | | (6,137) | | 814,306 |
Total liabilities and stockholders' equity | $1,057,225 | | $(2,374) | | $1,054,851 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements |
AMERICAN EAGLE OUTFITTERS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Nine Months Ended October 30, 2004 |
(In thousands, except per share amounts) | As Reported | Pro Forma
Adjustments (H) | Pro Forma |
Net sales | $1,267,233 | $(58,772) | $1,208,461 |
Cost of sales, including certain buying, occupancy and warehousing expenses | 715,682 | (46,686) | 668,996 |
Gross profit | 551,551 | (12,086) | 539,465 |
Selling, general and administrative expenses | 321,330 | (16,328) | 305,002 |
Depreciation and amortization expense | 46,482 | (3,529) | 42,953 |
Operating income | 183,739 | 7,771 | 191,510 |
Other income, net | 901 | (115) | 786 |
Income before income taxes | 184,640 | 7,656 | 192,296 |
Provision for income taxes | 71,860 | 2,848 | 74,708 |
Net income | $112,780 | $4,808 | $117,588 |
| | | |
Basic income per common share | $1.56 | | $1.63 |
Diluted income per common share | $1.51 | | $1.58 |
| | | |
Weighted average common shares outstanding - basic | 72,253 | | 72,253 |
Weighted average common shares outstanding - diluted | 74,468 | | 74,468 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
AMERICAN EAGLE OUTFITTERS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Year Ended January 31, 2004 |
|---|
(In thousands, except per share amounts) | As Reported | Pro Forma
Adjustments (H) | Pro Forma |
Net sales | $1,519,968 | $(82,948) | $1,437,020 |
Cost of sales, including certain buying, occupancy and warehousing expenses | 965,716 | (69,468) | 896,248 |
Gross profit | 554,252 | (13,480) | 540,772 |
Selling, general and administrative expenses | 379,289 | (23,635) | 355,654 |
Depreciation and amortization expense | 56,281 | (4,926) | 51,355 |
| Goodwill impairment loss | 14,118 | (14,118) | - |
Operating income | 104,564 | 29,199 | 133,763 |
Other income, net | 2,021 | (5) | 2,016 |
Income before income taxes | 106,585 | 29,194 | 135,779 |
Provision for income taxes | 46,585 | 5,810 | 52,395 |
Net income | $60,000 | $23,384 | $83,384 |
| | | |
Basic income per common share | $0.84 | | $1.17 |
Diluted income per common share | $0.83 | | $1.15 |
| | | |
Weighted average common shares outstanding - basic | 71,113 | | 71,113 |
Weighted average common shares outstanding - diluted | 72,207 | | 72,207 |
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Adjustments
(A) Adjustment to reflect cash proceeds from the sale of $12.3 million, partially offset by $0.3 million of working capital adjustments.
(B) Adjustment to reflect assets sold to the Purchaser.
(C) Adjustment primarily to record $9.4 million in accounts receivable which represents proceeds from the sale. This amount is estimated based upon expected future inventory sales by the purchaser through April 2, 2005, in accordance with the purchase agreement.
(D) Adjustment to reflect an increase in the income tax benefit attributed to the net operating loss caused by the pro forma loss on the transaction. No valuation allowance has been recorded against this amount as the Company anticipates that future taxable income in Canada will be sufficient to utilize the full amount of the deferred tax asset.
(E) Adjustment to reflect accruals of $3.8 million in estimated direct expenses, including various personnel expenses, real estate/legal fees and appropriate reserves and taxes for the transaction. Note that the accruals of estimated direct expenses and appropriate reserves were not considered in preparation of the pro forma income statements as these amounts were deemed nonrecurring in nature.
(F) Adjustment to reflect the reversal of accumulated other comprehensive income related to foreign currency translation.
(G) Adjustment to reflect the pro forma loss resulting from the sale, net of tax benefit.
(H) Adjustment to reflect the elimination of revenue, expenses and related taxes attributed to Bluenotes.
