Express 2010 Annual Report Download - page 90

As a result of the termination of the Advisory Agreement, the Company no longer has a financial obligation to
Golden Gate as of January 29, 2011. The Company’s outstanding liability related to the Golden Gate Advisory
Agreement, included in accounts payable and accrued expenses—related parties on the Consolidated Balance
Sheets, was $7.1 million as of January 30, 2010.
Transactions with Other Golden Gate Affiliates
The Company also transacts with affiliates of Golden Gate for software license purchases, consulting and
software maintenance services, and e-commerce warehouse and fulfillment services. The Company incurred the
following charges, included in selling, general, and administrative expenses in the Consolidated Statements of
Income:
2010 2009 2008
(in thousands)
Software licenses and maintenance and consulting ........ $ 323 $ 255 $ 576
E-commerce warehouse and fulfillment ................ $8,541 $19,248 $7,846
On March 25, 2010, the Company elected to prepay its e-commerce service provider, a Golden Gate affiliate,
$10.2 million for services from April 2010 through January 2011 in exchange for a discount on those services.
This prepaid amount is expensed as services are rendered. In addition to the amounts shown in the table above,
the Company also recognized expense of $10.2 million in 2010 related to the prepaid e-commerce warehouse and
fulfillment services. The prepaid balance related to this Golden Gate affiliate was fully amortized as of
January 29, 2011. There was not a prepaid balance related to this Golden Gate affiliate as of January 30, 2010.
The Company’s outstanding liability to other Golden Gate affiliates, included in accounts payable and accrued
expenses—related parties on the Consolidated Balance Sheets, was $3.0 million and $3.5 million as of
January 29, 2011 and January 30, 2010, respectively.
In December 2009, the Company began providing real estate services to multiple Golden Gate affiliates. Income
recognized for these services during 2010 was $0.4 million, and minimal income was recognized during 2009. As
of January 29, 2011, the Company’s receivable balance related to these services was $0.1 million.
Prior to the prepayment of the Term C and Term B Loans in February 2010 and May 2010, respectively, an
affiliate of Golden Gate was owed $50.0 million and $58.3 million, respectively. Total interest expense on the
Topco credit facility attributed to the Golden Gate affiliates was $7.9 million, $14.5 million, and $2.9 million in
2010, 2009 and 2008, respectively.
An affiliate of Golden Gate owns $50.0 million in face value of the Senior Notes issued on March 5, 2010 which
is described further in Note 8. Interest expense incurred on the Senior Notes attributable to Golden Gate affiliates
was $4.0 million during 2010. There was no interest on the Senior Notes in 2009.
7. Income Taxes
Prior to May 2, 2010, the Company was a partnership for federal income tax purposes, and therefore had not
been subject to federal and state income tax (subject to exception in a limited number of state and local
jurisdictions).
On May 12, 2010, the Company elected to be treated as a corporation under Subchapter C of Chapter 1 of the
United States Internal Revenue Code, effective May 2, 2010. The Company, therefore, is subject to federal and
state tax expense beginning May 2, 2010.
The Reorganization, for tax purposes, was deemed a contribution by Express Parent of its assets and liabilities to
the Company, followed by the liquidation of Express Parent. The Reorganization resulted in a taxable gain to
Express Parent. Except in those few jurisdictions where Express Parent is taxed directly, the taxable gain flowed
74