Express 2012 Annual Report Download - page 67

Gate affiliate acquired approximately 75% of the outstanding equity interests in the Company from L Brands,
and the Company began its transition to a stand-alone Company. In May 2010, the Company completed an IPO
whereby Golden Gate and L Brands sold a portion of their shares. Since the IPO, both Golden Gate and L Brands
gradually reduced their ownership interest in the Company. On July 29, 2011, L Brands sold its remaining
ownership interest in the Company and, as a result of this disposition, ceased to be a related party as of the end of
the second quarter of 2011. On March 19, 2012, Golden Gate sold its remaining ownership interest in the
Company and, as of May 31, 2012, Golden Gate no longer had representation on the Company’s Board of
Directors (“Board”). As a result, Golden Gate ceased to be a related party as of June 1, 2012.
Transactions with L Brands
The Company is party to a logistics services agreement with an affiliate of L Brands, which provides certain
inbound and outbound transportation and delivery services, distribution services, and customs and brokerage
services. In addition, the Company is also party to a merchandise sourcing services agreement and a lease
agreement for its home office and distribution center, each with separate affiliates of L Brands and different from
the affiliate of L Brands that is party to the logistics agreement.
The 2011 related party activity with affiliates of L Brands described in this note includes only those expenses
incurred through L Brands’ disposition of the Company’s common stock on July 29, 2011.
The Company incurred charges from affiliates of L Brands for various services, including home office rent,
which are included in selling, general, and administrative expenses, and for merchandise sourcing and logistics
services, including distribution center rent, which are included in cost of goods sold, buying and occupancy costs.
The amounts included in the Consolidated Statements of Income and Comprehensive Income are as follows:
2011 2010
(in thousands)
Merchandise sourcing ............................ $198,162 $434,642
Transaction and logistics services ................... $ 24,788 $ 58,098
Prior to the IPO, under the Limited Liability Company Agreement of Express Parent (“LLC Agreement”), L
Brands was entitled to receive a cash payment at the same time payments were made under an advisory
agreement with Golden Gate (“Advisory Agreement”) equal to the product of (i) the amount of the fees actually
paid in cash under the Advisory Agreement and (ii) the quotient of the number of units held by L Brands over the
number of units held by Golden Gate at the time of payment of such Advisory Agreement fees. Effective
May 12, 2010, the LLC Agreement, including the advisory arrangement with L Brands, was terminated in
connection with the Company’s conversion to a corporation and IPO. The Company paid L Brands a one-time
termination fee of $3.3 million in the second quarter of 2010 in connection with the termination of the LLC
Agreement.
In 2010, the Company incurred the following charges from L Brands related to advisory fees and the termination
of the LLC Agreement. These charges are included in other operating (income) expense, net, in the Consolidated
Statements of Income and Comprehensive Income:
2010
(in thousands)
L Brands LLC Agreement Fee
(including termination fee) ...................... $4,156
Transactions with Golden Gate
In connection with the Golden Gate Acquisition, the Company entered into an Advisory Agreement with Golden
Gate that was originally scheduled to expire in July 2017. Pursuant to the Advisory Agreement, the Company
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