Saks Fifth Avenue 2008 Annual Report Download - page 26

INTEREST EXPENSE
Interest expense decreased to $39.3 million in 2008 from $42.3 million in 2007 and, as a percentage of net
sales, was 1.3% in 2008 and 2007. The decrease of $3.0 million was primarily due to lower interest rates due in
part to utilizing the revolving credit facility to retire approximately $84.1 million in principal amount of senior
notes which matured in November 2008.
GAIN/(LOSS) ON EXTINGUISHMENT OF DEBT
During the year ended February 2, 2008, the Company repurchased a total of approximately $106.3 million
of senior notes. The repurchase of these notes resulted in a loss on extinguishment of debt of $5.6 million. There
were no such losses recorded during the year ended January 31, 2009.
OTHER INCOME, NET
Other income decreased to $5.6 million in 2008 from $24.9 million in 2007. Other income in 2008 included
a $3.4 million gain on the sale of three unutilized properties. Other income in 2007 included approximately $13.5
million of business interruption insurance settlement proceeds received for the SFA New Orleans store, which
was destroyed in the aftermath of Hurricane Katrina, $6.2 million of interest income and $2.7 million related to
an OFF 5th store closing and the sale of an unused support facility.
INCOME TAXES
For 2008 and 2007, the effective income tax rate for continuing operations differs from the federal statutory
tax rate due to state income taxes and other items such as executive compensation, tax-exempt interest, change in
state tax law, the change in the valuation allowance against state net operating loss carryforwards, the effect of
concluding tax examinations and other tax reserve adjustments, and the write-off of an expired Federal NOL.
Including the effect of these items, the Company’s effective income tax rate for continuing operations was 27.4%
and 36.5% in 2008 and 2007, respectively.
2007 COMPARED TO FISCAL YEAR ENDED FEBRUARY 3, 2007 (“2006”)
DISCUSSION OF OPERATING INCOME (LOSS) — CONTINUING OPERATIONS
The following table shows the changes in operating income (loss) from 2006 to 2007:
(In Millions)
Total
Company
2006 Operating Loss — Continuing Operations .......................................... $(15.3)
Store sales and margin ................................................................ 143.5
Operating expenses .................................................................. (32.8)
Impairments and dispositions .......................................................... 7.5
Change ........................................................................ 118.2
2007 Operating Income — Continuing Operations ....................................... $102.9
For the year ended February 2, 2008, the Company’s operating income totaled $102.9 million, a 370 basis
point improvement from an operating loss of $15.3 million for the year ended February 3, 2007. Operating
income was driven by a 11.9% increase in comparable store sales and expense management which resulted in a
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