Earnings per Share

9 Months Ended

Oct. 31, 2020

5. Earnings per Share

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

	13 Weeks Ended				39 Weeks Ended
	October 31,		November 2,		October 31,		November 2,
(In thousands)	2020		2019		2020		2019
Weighted average common shares outstanding:
Basic number of common shares outstanding		166,185		167,912		166,385		170,463
Dilutive effect of convertible notes		16,382		—		—		—
Dilutive effect of stock options and non-vested restricted stock		1,830		781		—		1,234
Diluted number of common shares outstanding		184,397		168,693		166,385		171,697
Anti-Dilutive Shares*		1,423		1,057		9,250		595

*For the 39 weeks ended October 31, 2020, there were 1.4 million potentially dilutive equity awards and 7.8 million potentially dilutive shares from the Company’s convertible notes that were excluded from the diluted earnings per share calculation because the Company incurred a net loss for this period and their inclusion would be anti-dilutive. For all other periods, anti-dilutive shares relate to stock options and unvested restricted stock.

The Company has the right to settle its convertible notes in any combination of cash and shares of common stock. However, the Company intends to settle the original principal portion of the notes in cash and any conversion value above the principal in stock. Because of this repayment policy election, only the conversion spread portion of the amount owed is reflected as dilutive in our weighted average diluted shares outstanding. The Company uses the average of the closing prices of its common stock (NYSE: AEO) as reported on the New York Stock Exchange to calculate the conversion spread. These convertible notes could have a potential dilutive effect in future periods.

Refer to Note 8 and 9 to the Consolidated Financial Statements for additional information regarding our convertible notes and share-based compensation, respectively.