Saks Fifth Avenue 2009 Annual Report Download - page 31

Table of Contents
part to utilizing the revolving credit facility to retire approximately $84.1 million in principal amount of senior notes which matured in November 2008. Noncash
interest expense associated with the adoption of ASC 470 related to accounting for convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) was $6.8 million and $6.4 million for the years ended January 31, 2009 and February 2, 2008, respectively.
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 NOL 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 27.9% and 36.2% in 2008 and 2007, respectively.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
The primary needs for cash are to fund operations, acquire or construct new stores, renovate and expand existing stores, provide working capital for new
and existing stores, invest in technology and distribution centers and service debt. The Company anticipates that cash on hand, cash generated from operating
activities and borrowings under its revolving credit facility will be sufficient to sustain its current level of operations.
Cash provided by operating activities from continuing operations was $205.9 million in 2009, $17.2 million in 2008 and $67.4 million in 2007. The
accompanying Consolidated Statements of Cash Flows identify major differences between net income (loss) and net cash provided by operating activities for
each of those years. Cash provided by operating activities principally represents income before depreciation and non-cash charges and after changes in working
capital. Working capital is significantly impacted by changes in inventory and accounts payable. Inventory levels typically increase or decrease to support
expected sales levels, and accounts payable fluctuations are generally determined by the timing of merchandise purchases and payments. The $188.7 million
increase in cash flows from continuing operations in 2009 from 2008 was primarily driven by the loss from continuing operations of $57.7 million in 2009
compared to a loss from continuing operations of $126.6 million in 2008 and a reduction in working capital needs as a result of reduced inventory purchases in
line with the 14.7% decrease in comparable store sales. The $50.2 million decrease in cash flows from continuing operations in 2008 from 2007 was primarily
driven by a loss from continuing operations of $126.6 million in 2008
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Source: SAKS INC, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠