Rue 21 2011 Annual Report Download - page 51

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rue21, inc. and subsidiary
Notes to Consolidated Financial Statements — (continued)
Advertising Costs
The Company expenses advertising costs when incurred. Advertising expense, which is classified in selling,
general, and administrative expense in the accompanying Consolidated Statements of Income, was $5,104, $3,936
and $3,000 for the fiscal years 2011, 2010, and 2009, respectively.
Repairs and Maintenance
The Company capitalizes costs that extend the life of an asset and that meet certain minimal dollar thresholds
depending on asset category. All other costs including maintenance agreements are charged to selling, general and
administrative expense in the accompanying Consolidated Statements of Income. Repairs and maintenance expense
was $2,112, $1,797 and $1,464 for the fiscal years 2011, 2010, and 2009, respectively. Repairs and maintenance
expense does not include any costs for store conversions.
Legal Proceedings and Claims
The Company is subject to certain legal proceedings and claims arising out of the conduct of its business. In
accordance with the FASB’s authoritative guidance for contingent losses management records a reserve for
estimated losses when the loss is probable and the amount can be reasonably estimated. If a range of possible loss
exists and no anticipated loss within the range is more likely than any other anticipated loss, the Company records
the accrual at the low end of the range. As the Company believes that it has provided adequate reserves, it
anticipates that the ultimate outcome of any matter currently pending against the Company will not materially affect
the consolidated financial position or results of operations of the Company.
Reserves are reviewed at least quarterly and are adjusted to reflect the impact and status of settlements, ruling,
advice of counsel and other information pertinent to a particular matter. Significant differences could exist between
the actual cost required to investigate, litigate and/or settle a claim or the ultimate outcome of a suit and
management’s estimate.
Earnings per Share
Basic earnings per common share amounts are calculated using the weighted average number of common
shares outstanding for the period. Diluted earnings per common share amounts are calculated using the weighted
average number of common shares outstanding plus the additional dilution for all potentially dilutive stock options
utilizing the treasury stock method.
The following table shows the amounts used in computing earnings per share and the effect on net income and
the weighted average number of shares of potential dilutive common stock (stock options):
Fiscal Year Ended
January 28,
2012
January 29,
2011
January 30,
2010
(in thousands, except per share data)
Net income ........................................... $38,950 $30,244 $22,017
Weighted average basic common shares outstanding .......... 24,417 24,277 22,267
Impact of dilutive securities ............................. 634 725 770
Weighted average diluted common shares outstanding ........ 25,051 25,002 23,037
Per common share:
Basic income per common share .......................... $ 1.60 $ 1.25 $ 0.99
Diluted income per common share ........................ $ 1.55 $ 1.21 $ 0.96
48