Saks Fifth Avenue 2008 Annual Report Download - page 30

During the year ended January 31, 2009, the Company repurchased approximately 2.9 million shares of its
common stock at an average price of $11.83 per share and a total cost of approximately $34.9 million. At
January 31, 2009, there were 32.7 million shares remaining available for repurchase under the Company’s
existing shares repurchase program.
CASH BALANCES AND LIQUIDITY
The Company’s primary sources of short-term liquidity comprises cash on hand and availability under its
revolving credit facility. At the Company’s request, due to the sale of NDSG, the revolving credit facility was
reduced from $800 million to $500 million in March 2006. In September 2006, the maturity date of the revolving
credit facility was extended to September 2011. At January 31, 2009 and February 2, 2008, the Company
maintained cash and cash equivalent balances of $10.3 million and $101.2 million, respectively. Exclusive of
approximately $10.0 million and $15.7 million of store operating cash at January 31, 2009 and February 2, 2008,
respectively, cash was invested principally in various money market funds. There was no restricted cash at
January 31, 2009 and February 2, 2008.
At January 31, 2009, the Company had $156.7 million of direct borrowings under its revolving credit
facility, and had $21.5 million in unfunded letters of credit. The Company had maximum unfunded letters of
credit of $34.3 million on its revolving credit facility during 2008, which reduces the amount of borrowings
under the facility. Borrowings are limited to a prescribed percentage of eligible inventories and receivables.
There are no debt ratings-based provisions in the revolving credit facility. The facility includes a fixed-charge
coverage ratio requirement of 1 to 1 that the Company is subject to only if availability under the facility becomes
less than $60 million. The Company had unutilized availability under the facility of $261.8 million after factoring
in the outstanding borrowings and outstanding letters of credit at year end and excluding the last $60 million of
availability due to the fixed charge ratio falling below the required 1 to 1 coverage. The amount of cash on hand
and borrowings under the facility are influenced by a number of factors, including sales, inventory levels, vendor
terms, the level of capital expenditures, cash requirements related to financing instruments, and the Company’s
tax payment obligations, among others.
The Company is very focused on cash management and capital preservation and has implemented a number
of actions in an effort to be free cash flow positive in 2009. The planned actions include an approximate 50%
reduction in year over year capital expenditures, an approximate 20% reduction in year over year inventory
purchases, an approximate 9% reduction in force that was implemented in January 2009, and general operating
expense reductions throughout the Company. Based on these actions and the fact that the Company has no
maturities of debt until late 2010, the Company expects to have sufficient liquidity to fund operations in 2009.
CAPITAL STRUCTURE
The Company continuously evaluates its debt-to-capitalization ratio in light of economic trends, business
trends, levels of interest rates, and terms, conditions and availability of capital in the capital markets. At
January 31, 2009, the Company’s capital and financing structure was comprised of a revolving credit agreement,
senior unsecured notes, convertible senior unsecured notes, and capital and operating leases. At January 31,
2009, total debt was $640.1 million, representing an increase of $67.5 million from the balance of $572.6 million
at February 2, 2008. This increase in debt was primarily the result of $156.7 million in new borrowings under the
revolving credit agreement partially off-set by the $84.1 million maturity of senior notes in 2008. Additionally,
the debt-to-capitalization ratio increased to 39.9% in 2008, from 32.8% in 2007, primarily as a result of the
increase in debt in 2008.
At January 31, 2009, the Company maintained a senior revolving credit facility maturing in 2011, which is
secured by inventory and certain third party credit card accounts receivable. Borrowings are limited to a
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