Saks Fifth Avenue 2008 Annual Report Download - page 32

At January 31, 2009, the conversion criteria with respect to the credit rating requirements were met,
however the share price was significantly below the conversion price. Due to the share price being significantly
below the conversion price, the Company has classified the convertible notes in “long-term debt” on the
Company’s balance sheet as of January 31, 2009. At February 2, 2008, the holders of the convertible notes had
the ability to exercise their conversion rights as a result of the Company’s share price exceeding 120% of the
applicable conversion price for the trading period. Therefore, the convertible notes were classified within
“current portion of long-term debt” on the Company’s balance sheet as of February 2, 2008.
At January 31, 2009, the Company had $61.1 million in capital leases covering various properties and pieces
of equipment. The terms of the capital leases provide the lessor with a security interest in the asset being leased
and require the Company to make periodic lease payments, aggregating between $4 million and $6 million per
year.
The Company is obligated to fund a cash balance pension plan. The Company’s current policy is to maintain
at least the minimum funding requirements specified by the Employee Retirement Income Security Act of 1974.
The Company expects funding requirements of up to $1.0 million in 2009. As part of the sale of NDSG to
Bon-Ton, the NDSG pension assets and liabilities were acquired by Bon-Ton. Additionally, the Company
amended the SFA Pension Plan during 2006, freezing benefit accruals for all participants except those who have
attained age 55 and completed 10 years of credited service as of January 1, 2007, who are considered to be
non-highly compensated employees. In January 2009, the Company suspended future benefit accruals for all
remaining participants in the plan, effective March 13, 2009.
CONTRACTUAL OBLIGATIONS
The contractual cash obligations at January 31, 2009 associated with the Company’s capital structure, as
well as other contractual obligations are illustrated in the following table:
Payments Due by Period
(Dollars in Millions) Within 1 year Years 2-3 Years 4-5 After Year 5 Total
Long-Term Debt, including interest ................ $ 27 $388 $ 13 $279 $ 707
Capital Lease Obligations, including interest ........ 12 23 21 55 111
Operating Leases .............................. 67 126 95 189 477
Purchase Obligations ........................... 378 31 20 — 429
Total Contractual Cash Obligations ............ $484 $568 $149 $523 $1,724
The Company’s purchase obligations principally consist of purchase orders for merchandise, store
construction contract commitments, maintenance contracts, and services agreements and amounts due under
employment agreements. Amounts committed under open purchase orders for merchandise inventory represent
approximately $329.3 million of the purchase obligations within one year, a substantial portion of which are
cancelable without penalty prior to a date that precedes the vendor’s scheduled shipment date.
On March 6, 2006, the Company’s Board of Directors declared a cash dividend of $4.00 per common share,
and the Company reduced shareholders’ equity for the $547.5 million dividend. Approximately $539.0 million of
the dividend was paid on May 1, 2006 to shareholders of record as of April 14, 2006. On October 3, 2006 the
Company’s Board of Directors declared another cash dividend of $4.00 per common share, and the Company
reduced shareholders’ equity for the $558.6 million dividend. Approximately $552.0 million of the dividend was
paid on November 30, 2006 to shareholders of record as of November 15, 2006. The remaining portion of the
dividends will be paid prospectively as, and to the extent, certain awards of restricted stock vest.
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