Express 2011 Annual Report Download - page 43

Tax Structure. After the Golden Gate Acquisition and prior to May 2, 2010, we were treated as a partnership for
tax purposes and, therefore, were not generally subject to federal and state income tax (subject to exceptions in a
limited number of state and local jurisdictions). Instead, our equity holders were subject to income tax on their
distributive share of our earnings. As a partnership, we made distributions to our equity holders to fund their
individual tax obligations related to their investment in us.
On May 12, 2010, we converted from a Delaware limited liability company to a Delaware corporation. See Note
1 and Note 8 to our Consolidated Financial Statements. In connection with the Reorganization, we elected to be
treated as a corporation under Subchapter C of Chapter 1 of the Code effective May 2, 2010 and are subject to
federal and state income tax expense. The Reorganization, for tax purposes, was deemed a contribution by
Express Parent of its assets and liabilities to Express, Inc., followed by the liquidation of Express Parent. As a
result, we recorded net deferred tax assets and a one-time, non-cash tax benefit of $31.8 million.
Senior Notes Offering and Prepayment of Term C Loan. On March 5, 2010, we issued, in a private placement,
$250.0 million of 8 3/4 % Senior Notes due 2018 at an offering price of 98.6% of the face value of the Senior
Notes. A portion of the proceeds from the Senior Notes offering was used to prepay all of the Term C Loan
outstanding under the Topco Credit Facility, plus accrued and unpaid interest and prepayment penalties, in an
aggregate amount equal to approximately $154.9 million.
Initial Public Offering and Prepayment of Term B Loan. On May 18, 2010, we issued 10.5 million shares of our
common stock during our IPO. The proceeds from the issuance of our common stock, together with cash on
hand, were used as follows:(1) $164.9 for the prepayment of the Term B Loan, including accrued and unpaid
interest of $5.9 million and a prepayment penalty of $9.0 million, (2) $10.0 million payment to Golden Gate to
terminate the Advisory Agreement and $3.3 million to Limited Brands to terminate its advisory relationship
under the LLC Agreement, and (3) approximately $5.0 million to pay related fees and expenses.
Additional Debt Reduction. During the first and second quarters of 2011, we repurchased $25.0 million and $24.2
million of Senior Notes, respectively, on the open market for a total $53.6 million. This resulted in a $6.9 million
loss on extinguishment of debt. In addition, in December 2011, we used cash on hand to prepay all of the Opco
Term Loan outstanding principal balance, plus accrued and unpaid interest, in an aggregate amount of
approximately $119.7 million. The prepayment of the Opco Term Loan resulted in a $2.4 million loss on
extinguishment.
Results of Operations
The table below sets forth the various line items in the Consolidated Statements of Income and Comprehensive
Income as a percentage of net sales for the last three years.
2011 2010 2009
Net sales ................................................. 100% 100% 100%
Cost of goods sold, buying and occupancy costs .................. 64% 64% 68%
Gross profit .............................................. 36% 36% 32%
Selling, general, and administrative expenses .................... 23% 24% 24%
Other operating expense, net ................................. — % 1% 1%
Operating income .......................................... 13% 10% 7%
Interest expense ........................................... 2% 3% 3%
Interest income ............................................ — % — % — %
Other income, net .......................................... — % — % — %
Income before income taxes ................................. 11% 7% 4%
Income tax expense ........................................ 5% 1% — %
Net income ............................................... 7% 7% 4%
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