Saks Fifth Avenue 2010 Annual Report Download

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ÈAnnual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended: January 29, 2011
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 1-13113
SAKS INCORPORATED
(Exact name of registrant as specified in its charter)
Tennessee 62-0331040
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
12 East 49th Street
New York, New York 10017
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (212) 940-5305
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each Exchange on which registered
Common Shares, par value $0.10 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ÈNo
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No È
Indicate by check mark if the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ÈNo
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule-405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes ÈNo
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ÈAccelerated filer Non-accelerated filer Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No È
The aggregate market value of the voting stock held by non-affiliates of the registrant as of July 30, 2010 (the last
business day of the registrant’s most recently completed second fiscal quarter) was approximately $1,321,223,461.
As of March 11, 2011, the number of shares of the registrant’s Common Stock outstanding was 163,051,551.
DOCUMENTS INCORPORATED BY REFERENCE
Applicable portions of the Saks Incorporated Proxy Statement for the 2011 Annual Meeting of Shareholders to be
held on June 1, 2011 are incorporated by reference into Part III of this Form 10-K.

Table of contents

  • Page 1
    ...York (Address of principal executive offices) 10017 (Zip Code) Registrant's telephone number, including area code: (212) 940-5305 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each Exchange on which registered Common Shares, par value $0.10 New York Stock...

  • Page 2
    ... About Market Risk ...Item 8. Financial Statements and Supplementary Data ...Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...Item 9A. Controls and Procedures ...Item 9B. Other Information ...PART III Item 10. Directors, Executive Officers and Corporate...

  • Page 3
    ...square feet. Merchandising, sales promotion, and store operating support functions reside in New York, New York. The back office sales support functions for the Company, such as accounting, credit card administration, store planning, and information technology, are located principally in the Company...

  • Page 4
    ... the end of 2010; the system is expected to be fully operational by mid-2011. Return Policy The Company offers its customers a fair and liberal return policy, consistent with other luxury retailers, at SFA stores, OFF 5TH stores, and online at saks.com. Approximately 22% of merchandise sold is later...

  • Page 5
    ...point-of-sale and sales reporting, purchase order management, receiving, merchandise planning and control, payroll, human resources, general ledger, and accounts payable systems. Bar code ticketing is used, and scanning is utilized at point-of-sale terminals. Information is made available on Company...

  • Page 6
    ... operations, or liquidity. Reliance on Fifth Avenue Store The Company's flagship SFA store located on Fifth Avenue in New York City accounted for approximately 22% of total Company sales in 2010 and plays a significant role in creating awareness for the Saks Fifth Avenue brand name. Customer Service...

  • Page 7
    ... with the Company's high level of customer service, broad selection of quality fashion merchandise at appropriate prices, innovative marketing, and strategic store locations, positions the Company for a competitive advantage. Associates As of January 29, 2011, the Company employed approximately 12...

  • Page 8
    ... with the New York Stock Exchange ("NYSE") in fiscal 2010 as required pursuant to Section 303A.12(a) of the NYSE Listed Company Manual, and the Company has filed the Sarbanes-Oxley Act Section 302 and Section 906 certifications of its principal executive officer and principal financial officer with...

  • Page 9
    ... located within these tourist markets. The Company's business and results of operations are also subject to uncertainties arising out of world events. These uncertainties may include a global economic slowdown, changes in consumer spending or travel, an increase in gasoline and commodity prices...

  • Page 10
    ... sales, excess inventories, and lower profit margins, any of which could have a material adverse effect on the Company's results of operations and financial condition. The Company faces a number of risks in opening new stores. As part of its growth strategy, the Company could potentially increase...

  • Page 11
    ... represents unsurpassed customer service and quality merchandise. Any significant damage to the Company's brand or reputation may negatively impact same-store sales, lower employee morale and productivity, and diminish customer trust, resulting in a reduction in shareholder value. Fluctuations...

  • Page 12
    ...the use of the store, which may result from competition from similar stores in the area, as well as liability for environmental conditions. Store leases generally require the Company to pay a fixed minimum rent and a variable amount based on a percentage of annual sales at that location. The Company...

  • Page 13
    ... the legal department of General Foods Corporation from 1983 to 1989 and an associate with the New York law firm of Summit, Rovins and Feldesman (and its predecessors) from 1980 to 1983. Jennifer S. de Winter was named Executive Vice President of Stores in June 2008. She joined Saks Fifth Avenue in...

  • Page 14
    ... was named President, OFF 5TH and Executive Vice President of the Company in June 2010. Mr. Wallstrom joined the Company in June 1995 and has held various leadership positions since that time, including Senior Vice President and General Manager of the SFA flagship store in New York City between...

  • Page 15
    ...following tables set forth information about the Company's stores as of January 29, 2011: Owned Locations* Number Gross Square Of Units Feet (in mil.) Leased Locations Number Gross Square Of Units Feet (in mil.) Number Of Units Total Gross Square Feet (in mil.) SFA ...OFF 5TH ...Total ...* 27 1 28...

  • Page 16
    ... Private Attorneys General Act of 2004. The plaintiffs seek to proceed collectively under the FLSA and as a class under the California statutes on behalf of individuals who have been employed by OFF 5TH as Selling and Service Managers, Merchandise Team Managers, or Department Managers. The Company...

  • Page 17
    .... Market Information The Company's common stock trades on the NYSE under the symbol SKS. The prices in the table below represent the high and low sales prices for the stock as reported by the NYSE. Year Ended January 29, 2011 High Low Year Ended January 30, 2010 High Low First Quarter ...Second...

  • Page 18
    ... business, the Company assumed then-outstanding stock options previously granted to employees and directors of the acquired corporation. No additional grants or awards may be made under the plan pursuant to which these stock options were granted. As of January 29, 2011, the total number of shares...

  • Page 19
    ... the 1997 Plan equals the fair market value of the common stock on the date of grant. Most options vest in five installments over four years and expire after seven or ten years. Unvested options generally are forfeited if the executive's employment is terminated. In the event of a change in control...

  • Page 20
    ... and Analysis of Financial Condition and Results of Operations, the Company's Consolidated Financial Statements and notes thereto and the other information contained elsewhere in this Form 10-K. Year Ended January 29, January 30, January 31, February 2, February 3, 2011 2010 2009 2008 2007* $2,631...

  • Page 21
    ...5TH stores are primarily located in upscale mixed-use and off-price centers and offer luxury apparel, shoes, and accessories, targeting the value-conscious customer. As of January 29, 2011, the Company operated 47 SFA stores with a total of approximately 5.5 million square feet and 57 OFF 5TH stores...

  • Page 22
    ... Statement of Cash Flows for fiscal year 2008. Discontinued operations include nominal charges (income) for 2009 and 2010 from residual CLL store closing activities. FINANCIAL PERFORMANCE SUMMARY On a consolidated basis, total net sales and comparable store sales for the year ended January 29, 2011...

  • Page 23
    ... last year. The current year operating income was driven by a 6.4% increase in comparable store sales as well as a gross margin rate increase of 350 basis points for the year ended January 29, 2011. The year-over-year increase in the gross margin rate was principally due to increased full-price...

  • Page 24
    ... ended January 30, 2010. The increase in gross margin dollars and gross margin rate was primarily the result of higher sales, increased full-price selling and a reduced level of promotional activity. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") For the year ended January 29, 2011, SG&A was...

  • Page 25
    ...30, 2010 COMPARED TO FISCAL YEAR ENDED JANUARY 31, 2009 DISCUSSION OF OPERATING LOSS-CONTINUING OPERATIONS The following table shows the changes in operating loss from 2008 to 2009: (In Millions) Total Company 2008 Operating Loss-Continuing Operations ...Store sales and margin ...Operating expenses...

  • Page 26
    ... For the year ended January 30, 2010, gross margin was $963.4 million, or 36.6% of net sales, compared to $980.9 million, or 32.2% of net sales, for the year ended January 31, 2009. The increase in gross margin dollars and gross margin rate was primarily the result of controlled inventory levels and...

  • Page 27
    ...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. There are numerous general business and economic...

  • Page 28
    merchandise purchases and payments. The $81.5 million decrease in cash flows from continuing operations in 2010 as compared to 2009 was primarily the result of changes in working capital, driven by the increase in inventory levels to support the increased sales for the period. The $188.7 million ...

  • Page 29
    ...and operating leases. As of January 29, 2011, total funded debt (including the equity component of the convertible notes) was $549.3 million, representing a decrease of $26.4 million from the balance of $575.7 million at January 30, 2010. This decrease in debt was primarily the result of the payment...

  • Page 30
    ... deducting initial purchasers' discounts and offering expenses. The Company used the net proceeds to pay down amounts outstanding under its revolving credit facility and for general corporate purposes. On February 1, 2009, the Company adopted a new standard related to accounting for convertible debt...

  • Page 31
    ... 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. In November 2010, the Company voluntarily contributed approximately 1.8 million newly issued shares of the...

  • Page 32
    ... On April 15, 2003, the Company sold its proprietary credit card portfolio, consisting of the proprietary credit card accounts owned by the National Bank of the Great Lakes and the Company's ownership interest in the assets of a trust, to HSBC, a third party financial institution. As part of the...

  • Page 33
    ... 22% of merchandise sold is later returned and that the vast majority of merchandise returns occur within a short time after the selling transaction, the risk of the Company realizing a materially different amount for sales and gross margin than reported in the consolidated financial statements is...

  • Page 34
    ...-line method over the estimated useful lives of the assets. Land is not depreciated. Buildings and building improvements are depreciated over 20 to 40 years. Store fixtures are depreciated over 10 years. Equipment utilized in stores (e.g., escalators) and in support areas (e.g., distribution centers...

  • Page 35
    ... include assumptions about key store variables, including sales, gross margin rates, and store expenses. • LEASES The Company leases certain stores, its distribution centers, and its administrative facilities under operating leases. Store lease agreements generally include rent holidays, rent...

  • Page 36
    .... The Pension Plan and SERP are valued annually as of the Company's fiscal year-end balance sheet date. The projected unit credit method is utilized in recognizing the pension liabilities. Effective January 31, 2009, in accordance with a new accounting pronouncement, the Company changed its...

  • Page 37
    ..., 2009, except for Level 3 reconciliation disclosures which are effective for periods beginning after December 15, 2010. Adoption of this accounting standard update as it relates to Level 1 and Level 2 fair value disclosures did not impact the Company's consolidated financial statements. The Company...

  • Page 38
    ... relationship marketing efforts of proprietary credit card loyalty programs; appropriate inventory management; effective expense control; successful operation of the Company's proprietary credit card strategic alliance with HSBC; geo-political risks; the performance of the financial markets; changes...

  • Page 39
    ... outstanding at January 29, 2011, the Company has determined that there was no material market risk exposure to the Company's consolidated financial position, results of operations, or cash flows as of such date. Item 8. Financial Statements and Supplementary Data. Information called for by this...

  • Page 40
    ... changes in the Company's internal control over financial reporting that occurred during the quarter ended January 29, 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Item 9B. Other Information Not applicable...

  • Page 41
    ...Directors, Executive Officers and Corporate Governance. The information required by this Item with respect to the Company's directors is incorporated by reference to the section entitled "Election of Directors" in the Company's Proxy Statement to be filed in connection with the Company's 2011 Annual...

  • Page 42
    ... are omitted since they are not required or are not applicable, or the required information is included in the consolidated financials statements or notes thereto. (2) Exhibits-The exhibits listed in the accompanying Index to Exhibits immediately following the signature page to this Report. 41

  • Page 43
    ... authorized on March 18, 2011. SAKS INCORPORATED By: /S/ KEVIN G. WILLS Kevin G. Wills Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant...

  • Page 44
    ...named therein, and The Bank of New York Mellon (successor in interest to J.P. Morgan Trust Company, National Association), as Trustee, related to the 2010 Notes (incorporated by reference to Exhibit 4.9 to the Company's Annual Report on Form 10-K for the fiscal year ended January 30, 2010 (the "2009...

  • Page 45
    ... to the Company's Current Report on Form 8-K filed on July 21, 2005) Eighth Supplemental Indenture, dated as of January 31, 2010, among the Company, the Subsidiary Guarantors named therein, and The Bank of New York Mellon (successor in interest to J.P. Morgan Trust Company, National Association), as...

  • Page 46
    ..., National Bank of the Great Lakes, Saks Credit Corporation, Household Finance Corporation, and Household Bank (SB), N.A. (incorporated by reference to Exhibit 2.2 to the Company's Current Report on Form 8-K filed on April 29, 2003) Servicing Agreement, dated as of April 15, 2003, between Saks Fifth...

  • Page 47
    ... McRae's, Inc.), and HSBC Bank Nevada, National Association (incorporated by reference to Exhibit 10.7.3 to the 2007 10-K) Fifth Amendment to the Program Agreement, dated as of October 19, 2009, among the Company, Saks Fifth Avenue, Inc. (successor by merger to Jackson Office Properties, Inc.), and...

  • Page 48
    ....37 to the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2006) Employment Agreement, dated as of July 31, 2007, between the Company and Stephen I. Sadove, Chief Executive Officer (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed...

  • Page 49
    ..., Executive Vice President and Chief Financial Officer (to comply with IRC 409A) * Employment Agreement, dated as of July 31, 2007, between the Company and Ronald L. Frasch, President and Chief Merchandising Officer (incorporated by reference to the Exhibit 10.2 to the Company's Current Report on...

  • Page 50
    ..., formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at January 29, 2011 and January 30, 2010, (ii) Consolidated Statements of Income for the years ended January 29, 2011, January 30, 2010, and January 31, 2009, (iii) Consolidated Statements of Cash Flows for...

  • Page 51
    ... STATEMENTS Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm ...Consolidated Statements of Income for the fiscal years ended January 29, 2011, January 30, 2010, and January 31, 2009 ...Consolidated Balance Sheets at January 29, 2011 and January 30, 2010...

  • Page 52
    ... 30, 2010, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in...

  • Page 53
    ... CONSOLIDATED STATEMENTS OF INCOME (In Thousands, except per share amounts) January 29, 2011 Year Ended January 30, 2010 January 31, 2009 NET SALES ...Cost of sales (excluding depreciation and amortization) ...Gross margin ...Selling, general and administrative expenses ...Other operating expenses...

  • Page 54
    SAKS INCORPORATED & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In Thousands, except per share amounts) January 29, 2011 January 30, 2010 ASSETS CURRENT ASSETS Cash and cash equivalents ...Merchandise inventories ...Other current assets ...Deferred income taxes, net ...TOTAL CURRENT ASSETS ......

  • Page 55
    ... 2010 ...Net income ...Change in minimum pension liability, net of tax ...Comprehensive income ...Issuance of common stock, net ...Income tax provision adjustment related to employee stock plans ...Net activity under stock compensation plans ...Stock-based compensation ...Balance at January 29, 2011...

  • Page 56
    ...Amortization of discount on convertible notes ...Deferred income taxes ...Impairments and dispositions ...Excess tax benefits from stock-based compensation ...Gain on sale of property ...Changes in operating assets and liabilities: Merchandise inventories ...Other current assets ...Accounts payable...

  • Page 57
    ... Flows for fiscal year 2008. Discontinued operations include nominal charges (income) for 2009 and 2010 from residual CLL store closing activities. NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The preparation of financial statements in conformity with generally accepted accounting principles...

  • Page 58
    ... effective for fiscal years ending after December 15, 2009. See Note 8 for the disclosures required in accordance with this accounting standard. NET SALES Net sales include sales of merchandise (net of returns and exclusive of sales taxes), commissions from leased departments, shipping and handling...

  • Page 59
    ... STATEMENTS-(Continued) (In thousands, except per share amounts) The Company estimates the amount of goods that will be returned for a refund and reduces sales and gross margin by that amount. Commissions from leased departments included in net sales were $31,832, $27,180, and $28,083 in 2010, 2009...

  • Page 60
    ...advertising expenses were $45,465, $36,025, and $39,358 in 2010, 2009, and 2008, respectively. Expense reimbursements received from the owner of the Company's proprietary credit card portfolio are discussed at Note 3 to these financial statements. • • STORE PRE-OPENING COSTS Store pre-opening...

  • Page 61
    ... dictate. During 2010, the Company closed six SFA locations, as well as one OFF 5TH location and announced an agreement to close another SFA location during the first quarter ending April 30, 2011. The Company incurred $12,045 of store closing-related costs associated with these locations, including...

  • Page 62
    ... the grant date. Restricted stock and performance share awards generally vest over periods ranging from three to five years from the grant date, although the equity incentive plan permits accelerated vesting in certain circumstances at the discretion of the Human Resources and Compensation Committee...

  • Page 63
    ...: 2010 2009 2008 Stock Options and Employee Stock Purchase Plan Shares ...Unvested Restricted Stock Awards and Performance Shares ...Total ...Securities excluded from the diluted earnings (loss) per share calculation because the exercise prices was greater than the average market price Stock...

  • Page 64
    ... 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...

  • Page 65
    ... a traditional proprietary credit card when used at any SFA or OFF 5TH store and at Saks Direct or as a MasterCard card when used at any unaffiliated location that accepts MasterCard cards. HSBC establishes and owns the co-brand accounts, retains the benefits and sales associated with the ownership...

  • Page 66
    ... CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Amounts above include gross assets recorded under capital leases for buildings and equipment of $98,594 and $7,056, respectively as of January 29, 2011 and $100,730 and $4,436, respectively as of January 30, 2010...

  • Page 67
    SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Components of the net deferred tax asset or liability recognized in the consolidated balance sheets were as follows: January 29, 2011 January 30, 2010 Current: Deferred ...

  • Page 68
    ... and ending amount of gross unrecognized tax benefits follows: January 29, 2011 January 30, 2010 January 31, 2009 Balance at beginning of year ...Gross amount of increases for tax positions of prior years ...Gross amount of decreases for tax positions of prior years ...Gross amount of decreases due...

  • Page 69
    ... CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) NOTE 6-DEBT A summary of long-term debt and capital lease obligations is as follows: January 29, 2011 Carrying Fair Amount Value January 30, 2010 Carrying Fair Amount Value Notes 7.50%, matured fiscal year 2010...

  • Page 70
    ... around the use of proceeds generated from a sale/leaseback transaction. The terms of each senior note require all principal to be repaid at maturity. There are no financial covenants associated with these notes, and there are no debt-rating triggers. In May 2010, the Company repurchased $797...

  • Page 71
    ...; or upon the occurrence of certain consolidations, mergers or share exchange transactions involving the Company. As of January 29, 2011, the conversion criteria with respect to the credit rating requirements were met. The Company estimated the fair value of the liability component as of the date of...

  • Page 72
    ... 2011, the if-converted value of the notes did not exceed its principal amount. The 2.0% Convertible Notes are classified within "long-term debt" on the consolidated balance sheet as of January 29, 2011 and January 30, 2010 because the Company can settle the principal amount of the notes with shares...

  • Page 73
    ... amounts and normally require the Company to pay real estate taxes, insurance, common area maintenance costs and other occupancy costs. Generally, the leases have primary terms ranging from 20 to 30 years and include renewal options ranging from 5 to 20 years. At January 29, 2011, future minimum...

  • Page 74
    ... Private Attorneys General Act of 2004. The plaintiffs seek to proceed collectively under the FLSA and as a class under the California statutes on behalf of individuals who have been employed by OFF 5TH as Selling and Service Managers, Merchandise Team Managers, or Department Managers. The Company...

  • Page 75
    ... invested in the Company's stock at the discretion of the participating employees. In February 2011, the employer matching contribution rate was increased from 10% to 35%. DEFINED BENEFIT PLANS The Company sponsors a funded defined-benefit cash balance pension plan ("Pension Plan") and an unfunded...

  • Page 76
    ... loss related to the Pension Plan and SERP for the years ended January 29, 2011, January 30, 2010, and January 31, 2009 were as follows: 2010 2009 2008 Net periodic pension expense (benefit): Service cost ...$ - $ 70 $ 846 Interest cost ...7,315 8,442 10,613 Expected return on plan assets ...(6,920...

  • Page 77
    ... FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The following provides a reconciliation of benefit obligations, plan assets and the funded status of the Pension Plan and SERP as of January 29, 2011 and January 30, 2010: 2010 2009 Change in benefit obligation: Benefit...

  • Page 78
    SAKS INCORPORATED & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) 2010 2009 2008 Weighted-average assumptions used to determine the net periodic benefit expense: Pension Plan: Discount rate ...Expected long-term rate of return on plan ...

  • Page 79
    ... FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) The following table sets forth the fair value of the Pension Plan's financial assets by level within the fair value hierarchy as of January 29, 2011 and January 30, 2010: 2010 Quoted Prices In Active Significant Markets...

  • Page 80
    ... and for general corporate purposes. In November 2010, the Company contributed 1,755 shares of the Company's common stock to the Company's Pension Plan, in consideration for a credit against future funding obligations, which is considered a non-cash financing activity. The shares were valued for...

  • Page 81
    ... FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) Total stock-based compensation expense and related tax benefits recognized in fiscal years 2010, 2009, and 2008 are as follows: 2010 2009 2008 Stock options ...Restricted stock ...Performance share awards ...Employee stock...

  • Page 82
    ... FINANCIAL STATEMENTS-(Continued) (In thousands, except per share amounts) A summary of the stock options for the year ended January 29, 2011 is presented below: 2010 Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Shares Aggregate Intrinsic Value Outstanding...

  • Page 83
    ... value of the performance share awards is based on the market value of the Company's common stock on the date of grant. Compensation expense for the performance shares that cliff vest is expensed on a straight-line basis over the requisite service period. As of January 29, 2011, total unrecognized...

  • Page 84
    ...the CLL store closings. NOTE 12-QUARTERLY FINANCIAL INFORMATION (UNAUDITED) Summarized quarterly financial information for 2010 and 2009 is as follows: First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal year ended January 29, 2011: Total sales ...Gross margin ...Operating income (loss...

  • Page 85
    ... owned subsidiaries of Saks Incorporated). The condensed consolidating financial statements presented as of and for the years ended January 29, 2011, January 30, 2010, and January 31, 2009 reflect the legal entity compositions at the respective dates. Separate financial statements of the guarantor...

  • Page 86
    ...CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED JANUARY 29, 2011 (In Thousands) SAKS GUARANTOR INCORPORATED SUBSIDIARIES ELIMINATIONS CONSOLIDATED NET SALES ...Cost of sales ...GROSS MARGIN ...Selling, general and administrative expenses . . Other operating expenses ...Store pre-opening costs...

  • Page 87
    ... CONDENSED CONSOLIDATING BALANCE SHEETS AS OF JANUARY 29, 2011 (In Thousands) SAKS GUARANTOR INCORPORATED SUBSIDIARIES ELIMINATIONS CONSOLIDATED ASSETS CURRENT ASSETS Cash and cash equivalents ...Merchandise inventories ...Other current assets ...Deferred income taxes, net ...TOTAL CURRENT ASSETS...

  • Page 88
    ... and amortization ...Stock-based compensation ...Excess tax benefit from stock-based compensation ...Amortization of discount on convertible notes ...Loss on extinguishment of debt ...Deferred income taxes ...Impairments and dispositions ...Gain on sale of property ...Changes in operating assets and...

  • Page 89
    ... CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED JANUARY 30, 2010 (In Thousands) SAKS INCORPORATED GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED NET SALES ...Cost of sales ...GROSS MARGIN ...Selling, general and administrative expenses ...Other operating expenses ...Store pre-opening costs...

  • Page 90
    ... CONDENSED CONSOLIDATING BALANCE SHEETS AS OF JANUARY 30, 2010 (In Thousands) SAKS GUARANTOR INCORPORATED SUBSIDIARIES ELIMINATIONS CONSOLIDATED ASSETS CURRENT ASSETS Cash and cash equivalents ...Merchandise inventories ...Other current assets ...Deferred income taxes, net ...TOTAL CURRENT ASSETS...

  • Page 91
    ... CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JANUARY 30, 2010 (In Thousands) OPERATING ACTIVITIES Net loss ...Loss from discontinued operations ...Loss from continuing operations ...Adjustments to reconcile net loss to net Cash provided by (used in) operating activities...

  • Page 92
    ... CONSOLIDATING STATEMENTS OF INCOME FOR THE YEAR ENDED JANUARY 31, 2009 (In Thousands) SAKS INCORPORATED GUARANTOR SUBSIDIARIES ELIMINATIONS CONSOLIDATED NET SALES ...Cost of sales ...GROSS MARGIN ...Selling, general and administrative expenses ...Other operating expenses ...Store pre-opening costs...

  • Page 93
    ... of discount on convertible senior notes ...Gain on sale of building ...Deferred income taxes ...Impairments and dispositions ...Changes in operating assets and liabilities, net ...NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES- CONTINUING OPERATIONS ...NET CASH USED IN OPERATING ACTIVITIES...

  • Page 94
    SAKS INCORPORATED & SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS January 29, 2011 Year Ended January 30, 2010 January 31, 2009 (Dollars In Thousands) Allowance for sales returns, net: Balance at Beginning of Year ...$ 3,905 $ 4,238 $ 7,255 Charged to Costs and Expenses ...775,092 765...

  • Page 95
    ... "Release") by the fiftieth (50) day following the Employment Termination Date, the Company shall make the following payments and shall provide the following benefits, provided that if the Executive directly or indirectly engages in conduct that constitutes an Association (as defined in Section 12...

  • Page 96
    ... the Change in Control occurs and the termination of employment does not occur due to an event described in (x) above, an amount equal to the sum of two times the Executive's Base Salary and two times the Executive's target bonus potential amount of 150% of Base Salary for the fiscal year during...

  • Page 97
    ... be made upon a termination of employment under this Agreement may only be made upon a "separation from service" under Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement. Any tax gross-up payment made pursuant to this...

  • Page 98
    ... for reimbursement, or in-kind benefits to be provided, in any other calendar year, except, if such benefits consist of the reimbursement of expenses referred to in Section 105(b) of the Code, a maximum, if provided under the terms of the plan providing such medical benefit, may be imposed on the...

  • Page 99
    IN WITNESS WHEREOF, this Amendment has been duly executed as of the date and year first above written. SAKS INCORPORATED /s/ Christine Morena By: Christine Morena Title: EVP, HR EXECUTIVE /s/ Stephen I. Sadove STEPHEN I. SADOVE 5

  • Page 100
    ... INCORPORATED AND KEVIN G. WILLS THIS AMENDMENT TO THE EMPLOYMENT AGREEMENT (the "Amendment") is entered into as of December 14, 2010, by and between Kevin G. Wills (the "Executive") and Saks Incorporated (the "Company"). Capitalized terms used herein which are not otherwise defined have the same...

  • Page 101
    ... can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the service provider's employer (a "Disability...

  • Page 102
    ... the Plan and the performance share agreement or restricted stock agreement applicable to the award, (C) receive any annual cash bonus earned by the Executive and payable, but not yet paid, for the fiscal year prior to the fiscal year in which the Disability Termination occurs paid at the time that...

  • Page 103
    ... extent the Executive is considered a "key employee" (as defined in Code Section 416(i) without regard to Section 416(i)(5)) of a company that is publicly traded on an established securities market or otherwise, distributions will be delayed six months after the separation from service in accordance...

  • Page 104
    5. Except as expressly modified herein, all other terms of the Employment Agreement shall remain in full force and effect. [signature page follows] 5

  • Page 105
    IN WITNESS WHEREOF, this Amendment has been duly executed as of the date and year first above written. SAKS INCORPORATED /s/ Christine Morena By: Christine Morena Title: EVP, HR EXECUTIVE /s/ Kevin G. Wills Kevin G. Wills 6

  • Page 106
    ... "Release") by the fiftieth (50) day following the Employment Termination Date, the Company shall make the following payments and shall provide the following benefits, provided that if the Executive directly or indirectly engages in conduct that constitutes an Association (as defined in Section 12...

  • Page 107
    ...Release by the fiftieth (50) day following the Employment Termination Date, the Company shall make the following payments and shall provide the following benefits, provided that if the Executive directly or indirectly engages in conduct that constitutes an Association (as defined in Section 12(b)(iv...

  • Page 108
    ... be made upon a termination of employment under this Agreement may only be made upon a "separation from service" under Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement. Any tax gross-up payment made pursuant to this...

  • Page 109
    ... prior deferral elections made with respect to such amounts under the Company's Deferred Compensation Plan (as amended and restated effective January 1, 2009)." 7. Except as expressly modified herein, all other terms of the Employment Agreement shall remain in full force and effect. [signature page...

  • Page 110
    IN WITNESS WHEREOF, this Amendment has been duly executed as of the date and year first above written. SAKS INCORPORATED /s/ Christine Morena By: Christine Morena Title: EVP, HR EXECUTIVE /s/ Ronald L. Frasch RONALD L. FRASCH 5

  • Page 111
    ...if any payment or distribution by the Company or its affiliated companies to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this...

  • Page 112
    ..., by reducing cash payments that are subject to Code section 409A; (7) seventh, by reducing the payments of any restricted stock, restricted stock units, phantom shares or other similar equity based awards that have been awarded to the Executive by the Company that are subject to time based vesting...

  • Page 113
    Except as expressly modified herein, all other terms of the Agreement shall remain in full force and effect. 3

  • Page 114
    In witness whereof, each of the Company and the Executive has executed this Amendment to be effective as of the date indicated above. SAKS INCORPORATED By: Name: Title: [Executive] 4

  • Page 115
    ... "Release") by the [fiftieth (50)] day following the Employment Termination Date, the Company shall make the following payments and shall provide the following benefits, provided that if the Executive directly or indirectly engages in conduct that constitutes an Association (as defined in Section 12...

  • Page 116
    ...the Release by the [fiftieth (50)] day following the Employment Termination Date, the Company shall make the following payments and shall provide the following benefits, provided that if the Executive directly or indirectly engages in conduct that constitutes an Association (as defined in Section 12...

  • Page 117
    ... be made upon a termination of employment under this Agreement may only be made upon a "separation from service" under Section 409A. In no event may the Executive, directly or indirectly, designate the calendar year of any payment under this Agreement. Any tax gross-up payment made pursuant to this...

  • Page 118
    ... prior deferral elections made with respect to such amounts under the Company's Deferred Compensation Plan (as amended and restated effective January 1, 2009)." 7. Except as expressly modified herein, all other terms of the Employment Agreement shall remain in full force and effect. [signature page...

  • Page 119
    DRAFT - For Discussion Purposes Only Employment Agreement Form "A1" IN WITNESS WHEREOF, this Amendment has been duly executed as of the date and year first above written. SAKS INCORPORATED By: Title: EXECUTIVE [EXECUTIVE] 5

  • Page 120
    ...29, 2011 Name of Subsidiary Jurisdiction Of Formation Tradenames Café SFA-Minneapolis, LLC Club Libby Lu, Inc. Fifth Floor Restaurant at SFA LLC Merchandise Credit, LLC Saks & Company California Illinois New York Virginia New York Saks Saks Fifth Avenue Club Libby Lu Saks Saks Fifth Avenue Saks...

  • Page 121
    ... PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on...Saks Incorporated of our report dated March 18, 2011 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting...

  • Page 122
    ... REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-91416) of Saks Incorporated of our report dated March 18, 2011 relating to the financial statements of the Saks Incorporated Employee Stock Purchase Plan, which...

  • Page 123
    ... financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 18, 2011 3. 4. /S/ STEPHEN I. SADOVE Stephen I. Sadove Chief Executive Officer

  • Page 124
    ...the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant...

  • Page 125
    ...; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 18, 2011 /S/ STEPHEN I. SADOVE Stephen I. Sadove Chief Executive Officer A signed original of this written statement required by...

  • Page 126
    ... G. Wills, Chief Financial Officer of Saks Incorporated (the "Company"), has executed this certification in connection with the filing with the Securities and Exchange Commission of the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2011 (the "Report"). The undersigned...

  • Page 127
    Exhibit 99.1 Saks Incorporated Employee Stock Purchase Plan Financial Statements December 31, 2010 and 2009

  • Page 128
    Saks Incorporated Employee Stock Purchase Plan Index December 31, 2010 and 2009 Page(s) Report of Independent Registered Public Accounting Firm Financial Statements Statements of Net Assets Available for Benefits Statements of Changes in Net Assets Available for Benefits Notes to Financial ...

  • Page 129
    ... and 2009, and the changes in net assets available for benefits for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management...

  • Page 130
    ...Employee Stock Purchase Plan Statements of Net Assets Available for Benefits December 31, 2010 and 2009 2010 2009 Assets Cash held by Saks Incorporated Liabilities Due to terminated employees Net assets available for benefits The accompanying notes are an integral part of these financial statements...

  • Page 131
    Saks Incorporated Employee Stock Purchase Plan Statements of Changes in Net Assets Available for Benefits For the Years Ended December 31, 2010, 2009, and 2008 2010 2009 2008 Additions Participant contributions Deductions Purchase of common stock Return of contributions to terminated employees Net ...

  • Page 132
    ... 85% of the lesser of the closing price per share as listed on the New York Stock Exchange on the last business day preceding (i) the grant of the option, or (ii) the exercise of the option. The Plan was suspended for the years ended December 31, 2010 and December 31, 2009 (see Note 2) and therefore...

  • Page 133
    Saks Incorporated Employee Stock Purchase Plan Notes to Financial Statements For the Years Ended December 31, 2010, 2009, and 2008 2. Plan Termination The HRCC has the right under the Plan document to alter, suspend, amend or terminate the Plan. On December 3, 2008, the HRCC suspended the Plan for ...