Saks Fifth Avenue 2009 Annual Report Download - page 72

Table of Contents
SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
and the shares to be issued upon the exercise of a call option the Company sold at the time of issuance of the convertible debentures. For the year ended
February 2, 2008 there were also 19,219 potentially dilutive shares under the 2.0% Convertible Notes that were not included in the computation of diluted EPS
due to the assumption of net share settlement as discussed below.
In 2007, if the holders of the convertible notes exercised their conversion rights, the Company intended to pay cash equal to 100 percent of the principal
amount of the convertible notes. In the event that the cash conversion price exceeded 100 percent of the principal amount of the 2% convertible notes, the
Company’s intention was to issue common stock for the difference between the par value and fair value at the time of conversion. The Company had $101,162 of
cash available as well as availability under the senior revolving credit facility as of February 2, 2008. The cash on hand as well as the availability of borrowings
under the senior credit facility provided an adequate source of liquidity to pay 100% of the principal amount of the notes if the holders had elected to exercise
their conversion rights.
PENSION PLANS
Pension expense is based on actuarial models used to estimate the total benefits ultimately payable to participants and is allocated to the respective service
periods. The Company’s funding policy provides that contributions to the pension trusts shall be at least equal to the minimum funding requirement of the
Employee Retirement Income Security Act of 1974. The Company may provide additional contributions from time to time, generally not to exceed the maximum
tax-deductible limitation. The Company’s pension plans are valued annually as of the fiscal year-end balance sheet date.
GIFT CARDS
The Company sells gift cards with no expiration dates. At the time gift cards are sold, no revenue is recognized; rather a liability is established for the
value of the card. The liability is relieved and revenue is recognized when the gift cards are redeemed by the customer for merchandise. The liability for
unredeemed gift cards aggregated $30,422 and $33,315 at January 30, 2010, and January 31, 2009, respectively.
Outstanding gift cards may be subject to state escheatment laws. The Company periodically evaluates unredeemed gift cards and if a determination is
made that it is remote that the gift card will be redeemed and if it is determined that the gift card is not subject to escheatment, then the Company will reverse the
unredeemed liability. The total reversal reflected in net sales for the years ended January 30, 2010, January 31, 2009, and February 2, 2008 was $5,751, $5,397
and $11,701, respectively.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
SEGMENT REPORTING
SFA, OFF 5TH and SFA’s e-commerce operations have been aggregated into one reportable segment based on the aggregation criteria outlined in the
authoritative accounting guidance.
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Source: SAKS INC, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠