Express 2010 Annual Report Download - page 81

totaled $72.6 million, $53.7 million and $57.6 million in 2010, 2009, and 2008, respectively. Advertising costs
are included in selling, general, and administrative expenses in the Consolidated Statements of Income.
Private Label Credit Card Rewards
The Company has a credit card agreement (the “Card Agreement”) with a third party to provide customers with
private label credit cards. Each private label credit card bears the logo of the Express brand and can be used at
any of the Company’s retail store locations or website. A third-party financing company is the sole owner of the
accounts issued under the private label credit card program and absorbs the losses associated with non-payment
by the private label card holders and a portion of any fraudulent usage of the accounts. The Company receives
reimbursement funds for expenses incurred from the third-party financing company in accordance with the Card
Agreement based on usage of the private label credit cards. These reimbursement funds are used to fund
marketing programs associated with the private label credit card. Income is recognized when the amounts are
fixed or determinable and collectability is reasonably assured, which is generally at the time that the actual usage
of the private label credit cards or specified transaction occurs. The income related to these private label credit
cards is classified in selling, general, and administrative expenses in the Consolidated Statements of Income.
Card holders earn reward certificates that result in discounts on future purchases. Upon reaching the target-
earned threshold, card holders receive reward certificates for these discounts that expire within three months of
issuance, at which time the certificate is forfeited. The Company accrues the anticipated redemptions of the
discount earned. To calculate this expense, the Company estimates margin rates and makes assumptions related
to card holder redemption rates, which are both based on historical experience. The accrued liability as of
January 29, 2011 and January 30, 2010 was $4.4 million and $3.5 million, respectively, and is included in
accrued expenses on the Consolidated Balance Sheets.
Property and Equipment, Net
Property and equipment are stated at cost. Depreciation of property and equipment is computed on a straight-line
basis, using the following useful lives:
Category Depreciable Life
Software, including software developed for internal use 3 years
Store related assets and other property and equipment 3 - 10 years
Leasehold improvements Shorter of lease term or 10 years
When a decision is made to dispose of property and equipment prior to the end of the previously estimated useful
life, depreciation estimates are revised to reflect the use of the asset over the shortened estimated useful life. The
cost of assets sold or retired and the related accumulated depreciation are removed from the accounts with any
resulting gain or loss included in other operating expense, net, in the Consolidated Statements of Income.
Maintenance and repairs are charged to expense as incurred. Major renewals and betterments that extend useful
lives are capitalized.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable. The reviews are conducted at the store asset level, the
lowest identifiable level of cash flow. If the estimated undiscounted future cash flows related to the property and
equipment are less than the carrying value, the Company recognizes a loss equal to the difference between the
carrying value and the fair value, usually determined by the estimated discounted cash flow analysis of the asset.
Factors used to assess the fair value of property and equipment include, but are not limited to, management’s
plans for future operations, brand initiatives, recent operating results, and projected future cash flows. The
Company recorded impairment charges related to store leasehold improvements of $0.5 million, $2.6 million,
and $2.4 million in 2010, 2009, and 2008, respectively. Impairment charges are included in cost of goods sold,
buying and occupancy costs in the Consolidated Statements of Income.
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