Saks Fifth Avenue 2008 Annual Report Download - page 61

SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share amounts)
NOTE 1 — GENERAL
ORGANIZATION
The Company’s operations consist of Saks Fifth Avenue (“SFA”), Saks Fifth Avenue OFF 5th (“OFF 5th”),
and SFA’s e-commerce operations. Previously, the Company also operated Saks Department Store Group
(“SDSG”), which consisted of Proffitt’s and McRae’s (“Proffitt’s”) (sold to Belk, Inc. (“Belk”) in July 2005), the
Northern Department Store Group (“NDSG”) (operated under the nameplates of Bergner’s, Boston Store, Carson
Pirie Scott, Herberger’s and Younkers and sold to The Bon-Ton Stores, Inc. (“Bon-Ton”) in March 2006),
Parisian (sold to Belk in October 2006), and Club Libby Lu (“CLL”) (the operations of which were discontinued
in January 2009). The sold businesses and discontinued operations are presented as discontinued operations in
the consolidated statements of income and the consolidated statements of cash flows for the current and prior
year periods and are discussed below at “Discontinued Operations.”
DISCONTINUED OPERATIONS
On July 5, 2005, Belk acquired from the Company for approximately $623,000 in cash substantially all of
the assets directly involved in the Proffitt’s business operations, plus the assumption of approximately $1,000 in
capitalized lease obligations and the assumption of certain other ordinary course liabilities associated with the
acquired assets. The assets sold included the real and personal property and inventory associated with 22
Proffitt’s stores and 25 McRae’s stores that generated fiscal 2004 revenues of approximately $784,000. The
Company realized a net gain of $155,525 on the sale.
Upon the closing of the transaction, Belk entered into a Transition Services Agreement (“Proffitt’s TSA”)
whereby the Company continued to provide certain back office services related to the Proffitt’s operations.
Beginning with the second quarter of 2006, the back office services were substantially complete, and therefore,
the Proffitt’s TSA no longer qualified as continuing involvement in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”
(“SFAS No. 144”).
On March 6, 2006, the Company sold to Bon-Ton all outstanding equity interests of certain of the
Company’s subsidiaries that owned NDSG, either directly or indirectly. The consideration received consisted of
approximately $1,115,000 in cash (reduced as described below based on changes in working capital), plus the
assumption by Bon-Ton of approximately $35,000 of unfunded benefit liabilities and approximately $35,000 of
capital leases. A working capital adjustment based on working capital as of the effective time of the transaction
reduced the amount of cash proceeds by approximately $75,000 resulting in net cash proceeds to the Company of
approximately $1,040,000. The disposition included NDSG’s operations consisting of, among other things, the
following: the real and personal property, operating leases and inventory associated with 142 NDSG units (31
Carson Pirie Scott stores, 14 Bergner’s stores, 10 Boston Store stores, 40 Herberger’s stores, and 47 Younkers
stores), the administrative/headquarters facilities in Milwaukee, Wisconsin and distribution centers located in
Rockford, Illinois, Naperville, Illinois, Green Bay, Wisconsin, and Ankeny, Iowa. The Company realized a net
gain of $204,729 on the sale.
Bon-Ton entered into a Transition Service Agreement with the Company (“NDSG TSA”), whereby the
Company continued to provide, for varying transition periods, back office services related to the NDSG
operations. The back-office services included certain information technology, telecommunications, credit,
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