CP14-3 Comparing Companies within an Industry

| June 14, 2016

Question
CP14-3 Comparing Companies within an Industry
Required:
1. Refer to the financial statements of American Eagle (Appendix B) and Urban Outfitters (Appendix C) and the Industry
Ratio Report (Appendix D) at the end of this book. Compute the following ratios for the most recent reporting year for
which you have available information: return on equity, earnings per share, net profit margin, current ratio, inventory
turnover, debt/equity ratio, price earnings ratio, and dividend yield. Assume the stock price is $28 for Urban Outfitters
and $15 for American Eagle. Compare the ratios for each company to the industry average ratios.

This workbook is organized as follows:
Sheet Name
Contents
CP14-3 (this worksheet)
CP14-3 Problem Requirements and Workbook Layout
Industry Ratio Report
Industry Ratio Report
AEO Balance Sheets
American Eagle Outfitters, Inc. Consolidated Balance Sheets
AEO Income Statements
American Eagle Outfitters, Inc. Consolidated Statements of Operations
AEO Stmts of Stockholders’ Eq
American Eagle Outfitters, Inc. Consolidated Statements of Stockholders’ Equity
American Eagle Outfitters, Inc. Consolidated Statements of Cash Flows
AEO Statements of Cash Flow
Urban Balance Sheets
Urban Outfitters, Inc. Consolidated Balance Sheets
Urban Income Statements
Urban Outfitters, Inc. Consolidated Statements of Income
Urban Stmts of Stockholders’ Eq Urban Outfitters, Inc. Consolidated Statements of Stockholders’ Equity
Urban Stmts of Cash Flow
Urban Outfitters, Inc. Consolidated Statements of Cash Flows

INDUSTRY RATIO REPORT
Retail Family Clothing Stores
Liquidity
Current Ratio
Quick Ratio
Activity
Inventory
Turnover
Days to Sell
Inventory
Receivables
Turnover
Average
Collection
Fixed Asset
Period
Turnover
Total Asset
Turnover
Accounts
Payable
Turnover
Profitability
Gross Profit
Margin
Operating
Profit Margin
Net Profit
Margin on
Return
Equity on
Return
Assets of
Quality
Income
Leverage
Times Interest
Earned
Interest
Coverage
Total
Ratio
Debt/Total
Total
Equity
Assets/Total
Equity
Dividends
Dividend
Payout Yield
Dividend
Other
Advertising-toSales Growth
Sales
Capital
Acquisitions
Price/Earnings
Ratio

2.55
1.38

5.92
70.897 days
54.24
15.07 days
5.76
1.90
6.43

38.99%
6.24%
3.77%
13.11%
7.17%
0.07
0.72
16.33
16.39
1.08
1.92

19.61%
2.22%

2.39%
2.39%
1.93
6.81

COMPANIES USED IN INDUSTRY ANALYSIS
Company
Ticker
Name
Symbol
Abercrombie & Fitch
ANF
Aeropostale Inc
ARO
American Eagle Outfitters
AEO
Ann Taylor Stores
ANN
bebe stores Inc
BEBE
Chico’s FAS Inc
CHS
Collective Brands Inc
PSS
Dress Barn Inc.
DBRN
Foot Locker, Inc
FL
Gap Inc
GPS
Guess? Inc
GES
J. Crew Group Inc
JCG
Limited Brands Inc
LTD
Nordstrom, Inc.
JWN
Pacific Sunwear of California Inc
PSUN
Ross Stores Inc
ROST
The Buckle Inc
BKE
The Men’s Warehouse Inc
MW
Urban Outfitters Inc
URBN
Wet Seal Inc.
WTSLA

AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED BALANCE SHEETS
January 31,
2009

(in thousands, except per share amounts)

February 2,
2008

ASSETS
Current assets:
Cash and cash equivalents
Short-term investments
Merchandise inventory
Accounts and note receivable
Prepaid expenses and other
Deferred income taxes
Total current assets

$473,342
10,511
294,928
41,471
59,660
45,447
925,359

Property and equipment, at cost, net of accumulated depreciation and amortization
Goodwill
Long-term investments
Non-current deferred income taxes
Other assets, net
Total assets

$116,061
503,878
286,485
31,920
35,486
47,004
1,020,834

740,240
10,706
251,007
15,001
21,363
$1,963,676

625,568
11,479
165,810
24,238
19,751
$1,867,680

$152,068
$75,000
29,417
64,695
6,259
42,299
13,726
18,299
401,763

$157,928
$49,494
62,161
22,803
54,554
12,953
16,285
376,178

88,314
39,898
24,670
152,882

70,355
44,837
35,846
151,038

2,485
513,574
(14,389)
1,694,161
(786,800)
1,409,031
$1,963,676

2,481
493,395
35,485
1,601,784
(792,681)
1,340,464
$1,867,680

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Notes payable
Accrued compensation and payroll taxes
Accrued rent
Accrued income and other taxes
Unredeemed stored value cards and gift certificates
Current portion of deferred lease credits
Other liabilities and accrued expenses
Total current liabilities
Non-current liabilities:
Deferred lease credits
Non-current accrued income taxes
Other non-current liabilities
Total non-current liabilities
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 shared authorized; 249,328 and 248,763 shares
share issued; 205,281 and 204,480 shares outstanding , respectively
Contributed capital
Accumulated other comprehensive (loss) income
Retained earnings
Treasury stock, 43,248 and 43,596 shares, repectively, at cost
Total stockholders’ equity
Total liabilities and stockholders equity

AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)
Net sales
Cost of sales, including certain buying, occupancy and
warehousin
g expenses
Gross profit
Selling, general and administrative expenses
Depreciation
and
Operating
amortization
income
Other
expense
income, net
Other-thantemporary
Income
impairment
before
Provision for
charge taxes
income taxes
income
Net income
Basic income
per common
Diluted
share per
income
Weighted average common shares outstanding – basic
common
Weighted average common shares outstanding – diluted
share

For the Years Ended
January 1,
February 2,
February 3,
2009
2008
2007
$2,988,866
$3,055,419
$2,794,409
1,814,765
1,174,101
740,742
131,219
302,140
17,790
22,889
297,041
117,980
$179,061

1,632,281
1,423,138
715,180
109,203
598,755
37,626
636,381
236,362
$400,019

1,453,980
1,340,429
665,606
88,033
586,790
42,277
629,067
241,708
$387,359

$0.87
$0.86
205,169
207,582

$1.85
$1.82
216,119
220,280

$1.74
$1.70
222,662
228,384

AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

Shares
Outstanding
(1)

Common
Stock

Contributed
Capital

Retained
Earnings

Balance at January 31, 2006
Stock awards
Repurchase of common stock as part of publicly
announced programs
Repurchase of common stock from employees
Cash paid for fractional shares in three-for-two
stock split
Reissuance of treasury stock
Net income
Other comprehensive loss, net of tax

221,897
4,556

$2,416
45

$369,807
83,615

$978,855

(5,250)
(443)

(4)
528

(113)
109

(2,348)
387,359

Cash dividends ($0.28 per share)
Balance at February 3, 2007
Adoption of FIN 48
Balance at February 4, 2007
Stock awards
Repurchase of common stock as part
of publicly announced programs
Repurchase of common stock from employees
Reissuance of treasury stock
Net income

221,284
221,284
1,092

2,461
2,461
20

453,418
453,418
39,977

(18,750)
(415)
1,269

Other comprehensive income, net of tax
Cash dividends ($0.98 per share)
Balance at February 2, 2008
Stock awards
Repurchase of common stock from employees
Reissuance of treasury stock
Net income
Other comprehensive loss, net of tax

204,480
453
(164)
512
$205,281

2,481
4
$2,485

Cash dividends ($0.40 per share)
Balance at January 31, 2009

Treasury
Stock (2)

Accumulated
Deferred
Other
Compensation Comprehensive
Expense
Income (loss)

Stockholders
Equity

$(216,513)

$(1,041)
1,041

$22,028

$1,155,552
84,701

(146,485)
(7,635)

(146,485)
(7,635)

8,007

(314)

(113)
5,768
387,359
(314)

(61,521)
1,302,345
(13,304)
1,289,041

(362,626)

21,714

(362,626)

(61,521)
1,417,312
(13,304)
1,404,008
39,997

(6,480)
400,019

(438,291)
(12,310)
20,546

(438,291)
(12,310)
14,066
400,019

493,395
20,179
$513,574

(80,796)
1,601,784
420
(4,710)
179,061
(82,394)
$1,694,161

(792,681)
(3,432)
9,313
$(786,800)

$-

13,771
35,485
(49,874)
$(14,389)

13,771
(80,796)
1,340,464
20,603
(3,432)
4,603
179,061
(49,874)
(82,394)
$1,409,031

21,714

Note 1

600,000 authorized, 249,328 issued and 205,281 outstanding (excluding 799 shares of non-vested restricted stock), $0.01 par value common stock at January 31,
2009; 600,000 authorized, 248,763 issued and 204,480 outstanding (excluding 687 shares of non-ves

Note2

43,248 shares 43,596 shares and 25,699 shares at January 31, 2009, February 2, 2008, and February 3, 2007, respectively. During Fiscal 2008 and Fiscal 2007,
512 shares and 1,269 shares, respectively, were reissued from treasury stock for the issuance of

AMERICAN EAGLE OUTFITTERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)
Operating activities:
Net income
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization
Stock-based compensation
Provision for deferred income taxes
Tax benefit from share-based payments
Excess tax benefit from share-based payments
Foreign currency transaction (gain) loss
Loss on impairment of assets
Other-than-temporary impairment charge
Proceeds from sale of trading securities
Changes in assets and liabilities:
Merchandise inventory
Accounts and note receivable
Prepaid expenses and other
Other assets, net
Accounts payable
Unredeemed gift cards and gift certificates
Deferred lease credits
Accrued income and other taxes
Accrued liabilities
Total adjustments
Net cash provided by operating activities
Investing activities:
Capital expenditures
Proceeds from sale of assets
Purchase of available-for-sale securities
Sale of available-for-sale securities
Other investing activities
Net cash provided by (used for) investing activities
Financing activities:
Payments on note payable and capital leases
Proceeds from issuance of note payable
Repurchase of common stock as part of publicly announced programs
Repurchase of common stock from employees
Cash paid for fractional shares in connection with three-for-two stock split
Net proceeds from stock options exercised
Excess tax benefit from share-based payments
Cash dividends paid
Net cash used for financing activities
Effect of exchange rates on cash
Net (increase) decrease in cash and cash equivalents
Cash and cash equivalents – beginning of period
Cash and cash equivalents – end of period

For the Years Ended
January 31,
February 2,
February 3,
2009
2008
2007
$179,061

$400,019

$387,359

133,141
20,296
24,469
1,121
(693)
(1,141)
6,713
22,889

110,753
33,670
(8,147)
7,260
(6,156)
1,221
592

89,698
36,556
(27,572)
25,465
(19,541)
687
183,968

(13,735)
(10,094)
(24,781)
390
(3,053)
(11,392)
18,887
(20,697)
(19,188)
123,132
302,193

(19,074)
(5,660)
(1,334)
(3,242)
(15,559)
(699)
4,640
(31,416)
(2,598)
64,251
464,270

(53,527)
7,448
(4,204)
(5,357)
32,345
11,623
7,791
43,482
33,047
361,909
749,268

(265,335)
(48,655)
393,559
(1,180)
78,389

(250,407)
(1,772,653)
2,126,891
(1,170)
102,661

(225,939)
12,345
(1,353,339)
915,952
(140)
(651,121)

(2,177)
75,000
(3,432)
3,799
693
(82,394)
(8,511)
(14,790)
357,281
116,061
$473,342

(1,912)
(438,291)
(12,310)
13,183
6,156
(80,796)
(513,970)
3,363
56,324
59,737
$116,061

(3,020)
2,025
(146,485)
(7,635)
(113)
28,447
19,541
(61,521)
(168,761)
(178)
(70,792)
130,529
$59,737

URBAN OUTFITTERS, INC.
Consolidated Balance Sheets
(in thousands, except share and per share data)
January 31,
2009

2008

ASSETS
Current Assets:
Cash and cash equivalents

$316,035

Marketable securities
Accounts receivable, net of allowance for doubtful accounts of $1,229
and $966, respectively
Inventories
Prepaid expenses and other current assets
Deferred taxes
Total current assets
Property and equipment, net
Marketable securities
Deferred income taxes and other assets
Total Assets

$49,912

49,948

141,883

36,390
169,698
46,412
5,919
624,402
505,407
155,226
43,974
$1,329,009

14,324
140,377
33,993
4,694
385,183
299,291
64,748
19,983
$769,205

62,955
11,975
66,220
141,150
134,084
275,234

41,291
12,673
79,544
133,508
74,817
208,325

17
170,166
901,339
(17,747)
1,053,775
$1,329,009

16
134,146
426,190
528
560,880
$769,205

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable
Accrued compensation
Accrued expenses and other current liabilities
Total current liabilities
Deferred rent and other liabilities
Total Liabilities
Commitments and contingencies (see Note 11)
Shareholders’ equity:
Preferred shares; $.0001 par value, 10,000,000 shares authorized,
none issued
Common shares; $.0001 par value, 200,000,000 shares authorized,
167,712,088 and 166,104,615 issued and outstanding respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive (loss) income
Total Shareholders Equity
Total Liabilities and Shareholders’ Equity

URBAN OUTFITTERS, INC.
Consolidated Statements of Income
(in thousands, except share and per share data)

Net sales
Cost of sales, including certain buying, distribution
and occupancy costs
Gross profit
Selling, general and administrative expenses
Income from operations
Interest income
Other income
Other expenses
Income before income tax expense
Income tax expense
Net income
Net income per common share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted

Fiscal Year Ended January 31,
2009
2008
2007
$1,834,618
$1,507,724
$1,224,717
1,121,140
713,478
414,043
299,435
11,504
694
(2,143)
309,490
110,126
$199,364

930,952
576,772
351,827
224,945
9,390
575
(515)
234,395
74,164
$160,231

772,796
451,921
287,932
163,989
6,531
353
(715)
170,158
53,952
$116,206

$1.20
$1.17

$0.97
$0.94

$0.71
$0.69

166,793,062
170,860,605

165,305,207
169,640,585

164,679,786
168,652,005

URBAN OUTFITTERS, INC.
Consolidated Statements of Shareholders’ Equity
(in thousands, except share data)
Accumulated
Comprehensive
Income
Balances as of February 1, 2006
Net Income
Foreign currency translation
Unrealized losses on marketable securities,
net of tax
Comprehensive income
Share-based compensation
Unearned compensation reclass
Exercise of stock options
Tax effect of share exercises
Share Repurchase
Balances as of January 31, 2007
Net income
Foreign currency translation
FIN48 adjustment
Unrealized gains on marketable securities,
net of tax
Comprehensive income
Share-based compensation
Exercise of stock options
Tax effect of share exercises
Balances as of January 31, 2008
Net income
Foreign currency translation
Unrealized losses on marketable securities,
net of tax
Comprehensive income
Share-based compensation
Exercise of stock options
Tax effect of share exercises
Balances as of January 31, 2009

$116,206
3,614
142
$119,962

Common Shares
Number of
Par
Shares
Value
164,831,477
$16

Additional
Paid-in
Unearned
Capital
Compensation
$138,050
$(3,905)

Other
Retained
Comprehensive
Earnings
Income (loss)
$426,190
$528
116,206
3,614

Total
$560,880
116,206
3,614

142

142

3,497
(3,905)

3,905

3,497

1,375,986
(1,220,000)
164,987,463

1

17

6,350
5,394
(20,801)
128,586

542,396
160,231
(652)

4,284
703

6,351
5,394
(20,801)
675,283
160,231
703
(652)

2,248

2,248

1,117,152
166,104,615

17

3,277
5,000
7,341
144,204

701,975

7,235

3,277
5,000
7,341
853,431

199,364
(19,866)

199,364

(19,866)

199,364
(19,866)

(5,116)
$174,382

(5,116)

(5,116)

1,607,473

3,637
8,891
13,434

3,637
8,891
13,434

167,712,088

$17

$170,166

$-

$901,339

$(17,747)

$1,053,775

160,231
703
2,248
$163,182

URBAN OUTFITTERS, INC.
Consolidated Statements of Cash Flows
(in thousands)
Fiscal Year Ended January 31,
2009
2008
2007
Cash flows from operating activities:
Net income

$199,364

$160,231

$116,206

81,949
(9,351)
(13,434)
3,637
61

70,017
(2,782)
(7,341)
3,277
317

55,713
(4,959)
(5,394)
3,497
1,393

(10,726)
(272)
9,210
(8,868)
251,570

(5,462)
(17,430)
(22,441)
75,967
254,353

(6,371)
(13,416)
6,848
33,600
187,117

(112,553)
(809,039)
864,685

(115,370)
(293,633)
220,101

(212,029)
(182,653)
193,274

(56,907)

(188,902)

(201,408)

8,891
13,434
22,325
(6,224)
210,764
105,271
$316,035

5,000
7,341
12,341
212
78,004
27,267
$105,271

6,351
5,394
(20,801)
(9,056)
702
(22,645)
49,912
$27,267

$115,040
$6,561

$70,765
$6,645

$52,535
$14,618

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Provision for deferred income taxes
Tax benefit of stock option exercises
Share-based compensation expense
Loss on disposition of property and equipment, net
Changes in assets and liabilities:
Receivables
Inventories
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Cash paid for property and equipment
Cash paid for marketable securities
Sales and maturities of marketable securities
Net cash used in investing activities
Cash flows from financing activities:
Exercise of stock options
Excess tax benefit of stock options exercises
Share repurchases
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Cash paid during the year for:
Income taxes
Non-cash investing activities – Accrued capital expenditures

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