Saks Fifth Avenue 2008 Annual Report Download - page 67

SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
Effective January 29, 2006, the Company adopted SFAS No.123 (revised 2004) “Share-Based Payment”
(“SFAS No. 123R”) under the modified prospective method. The Company adopted the alternative transition
method, as permitted by FASB Staff Position (“FSP”) No. FAS 123R-3, “Transition Election Related to
Accounting for the Tax Effects of Share-Based Payment Awards” (“FSP FAS 123R-3”) to calculate the tax
effects of stock-based compensation pursuant to SFAS No. 123R for these awards that were outstanding upon
adoption of SFAS No. 123R. The alternative transition method allows the use of simplified methods to calculate
the beginning capital-in-excess-of-par pool for the consolidated statements of cash flows. Prior to the adoption of
SFAS No. 123R, the Company presented all tax benefits resulting from the exercise of stock options as operating
cash inflows in the consolidated statements of cash flows, in accordance with the provisions of Emerging Issues
Task Force (“EITF”) No. 00-15, “Classification in the Statements of Cash Flows of the Income Tax Benefit
Received by a Company upon Exercise of a Nonqualified Employee Stock Option.” SFAS No. 123R requires the
benefits of tax deductions in excess of the compensation cost recognized for those options to be classified as
financing cash inflows rather than operating cash inflows, on a prospective basis. This amount is shown as
“Excess tax benefit from stock based compensation” in the accompanying consolidated statements of cash flows.
In December 2007, the U.S. Securities and Exchange Commission (“SEC”) issued Staff Accounting
Bulletin (“SAB”) No. 110, “Year-End Help For Expensing Employee Stock Options” (“SAB 110”), which was
effective for the Company beginning in the first quarter of 2008. SAB 110 amends the SEC’s views discussed in
Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”) regarding the use of the simplified
method in developing estimates of the expected lives of share options in accordance with SFAS No. 123R. The
amendment, in part, allowed the continued use, subject to specific criteria, of the simplified method in estimating
the expected lives of share options granted after December 31, 2007. The Company will continue to use the
simplified method until it has the historical data necessary to provide reasonable estimates of expected lives in
accordance with SAB 107, as amended by SAB 110.
EARNINGS PER SHARE
Basic earnings per share (“EPS”) have been computed based on the weighted average number of common
shares outstanding.
2008 2007 2006
Net Loss Shares
Per
Share
Amount
Net
Income Shares
Per
Share
Amount
Net
Income Shares
Per
Share
Amount
Basic EPS ............ $(154,941) 138,384 $(1.12) $47,473 140,402 $0.34 $53,742 135,880 $0.40
Effect of dilutive stock
options and
convertible
debentures ......... — — — — 13,128 (.03) — — —
Diluted EPS .......... $(154,941) 138,384 $(1.12) $47,473 153,530 $0.31 $53,742 135,880 $0.40
For the years ended January 31, 2009 and February 3, 2007, the Company generated net losses from
continuing operations, and therefore the inclusion of potential common shares would have had an anti-dilutive
effect on the Company’s calculation of the diluted loss per share. Accordingly, the Company’s diluted loss per
share equals basic loss per share for both of these periods.
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