Saks Fifth Avenue 2011 Annual Report Download - page 26

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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the year ended January 29, 2011, SG&A was $716.0 million, or 25.7% of net sales, compared to $674.3
million, or 25.6% of net sales, for the year ended January 30, 2010. The increase of $41.6 million in expenses
was primarily driven by higher variable costs associated with the $154.2 million sales increase for the year as
well as incremental expenses incurred to support the growth in Saks Direct. Additionally, the Company
experienced a reduction in proprietary credit card income related to contract changes with HSBC.
OTHER OPERATING EXPENSES
For the year ended January 29, 2011, other operating expenses were $298.1 million, or 10.7% of net sales,
compared to $314.3 million, or 12.0% of net sales, for the year ended January 30, 2010. The decrease of $16.2
million was principally driven by a decrease in depreciation and amortization expense of $16.5 million as a
result of reduced capital expenditures during 2010 and asset impairment charges recorded during the year
ended January 30, 2010. Additionally, the Company incurred lower property and equipment rentals of $3.3
million and a decrease in store pre-opening costs of $1.0 million. These decreases were partially offset by an
increase in taxes other than income taxes of $4.6 million.
IMPAIRMENTS AND DISPOSITIONS
For the year ended January 29, 2011, impairments and dispositions included net charges of $13.1 million
compared to net charges of $29.3 million for the year ended January 30, 2010. The 2010 charges included
closing costs associated with the Plano, Texas; Mission Viejo, California; Southampton, New York; Portland,
Oregon; San Diego, California; and Charleston, South Carolina SFA store closures, the Reno, Nevada OFF 5TH
store closure, and the previously announced agreement to close the Denver, Colorado SFA store during the first
quarter ending April 30, 2011. The Company incurred $12.1 million of store closing-related costs associated with
those locations, including $10.1 million of net lease termination costs, $4.2 million of asset impairment and
disposal costs, $2.5 million of severance costs, and $3.8 million of other store-closing related costs, all of which
were offset in part by a deferred rent benefit of $8.5 million. Also included in impairments and dispositions for
2010 were $1.0 million of asset impairments and dispositions in the normal course of business. The 2009
charges were primarily due to asset impairments and dispositions in the normal course of business.
INTEREST EXPENSE
Interest expense increased to $56.7 million in 2010 from $49.5 million in 2009 and, as a percentage of net sales,
was 2.0% in 2010 and 1.9% in 2009. The increase of $7.2 million was primarily due to the issuance of $120.0
million of convertible notes in May 2009 and the amortization of financing costs associated with these notes
and the amended revolving credit facility. Non-cash interest expense associated with the amortization of the
debt discount on the Company’s convertible notes was $11.9 million and $9.8 million for the years ended
January 29, 2011 and January 30, 2010, respectively.
GAIN (LOSS) ON EXTINGUISHMENT OF DEBT
During the year ended January 29, 2011, the Company repurchased $0.8 million of the 7.0% senior notes which
resulted in a loss on extinguishment of debt of $4.0 thousand. During the year ended January 30, 2010, the
Company extinguished approximately $23.0 million of senior notes. The repurchase of these notes resulted in a
gain on extinguishment of debt of $0.8 million.
OTHER INCOME, NET
Other income decreased to $0.1 million in 2010 from $1.0 million in 2009. Other income in 2010 was primarily
related to $0.7 million of interest income which was offset by $0.6 million of casualty losses relating to the May
2010 flood at the Nashville, Tennessee OFF 5TH store. Other income in 2009 was primarily attributable to
interest income.
INCOME TAXES
For 2010 and 2009, the effective income tax rate for continuing operations differed from the federal statutory
tax rate due to state income taxes and other items such as the change in the valuation allowance against state
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