PART II for Saks (SKS)

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Saks (SKS)

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SKS » Topics » PART II

These excerpts taken from the SKS 10-K filed Mar 23, 2009.

PART I

STYLE="margin-top:0px;margin-bottom:0px">Item 1. Business.

STYLE="margin-top:0px;margin-bottom:0px; margin-left:2%">General

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%;padding-bottom:3px;line-height:95%; vertical-align:top">The operations of Saks Incorporated, a Tennessee corporation first incorporated in 1919, and its
subsidiaries (together the “Company”) consist of Saks Fifth Avenue (“SFA”), Saks Fifth Avenue OFF 5^TH (“OFF 5FACE="Times New Roman" SIZE="1">^th”), and SFA’s e-commerce operations. Previously, the Company also operated Saks Department Store Group (“SDSG”), which consisted of
Proffitt’s and McRae’s (“Proffitt’s”) (sold to Belk, Inc. (“Belk”) in July 2005), the Northern Department Store Group (“NDSG”) (operated under the nameplates of Bergner’s, Boston Store, Carson Pirie
Scott, Herberger’s and Younkers and sold to The Bon-Ton Stores, Inc. (“Bon-Ton”) in March 2006), Parisian (sold to Belk in October 2006), and Club Libby Lu (“CLL”) (the operations of which were discontinued in January 2009).
The sold businesses and discontinued operations are presented as discontinued operations in the consolidated statements of income and the consolidated statements of cash flows for the current and prior year periods and are discussed below in
“Discontinued Operations.”

FACE="Times New Roman" SIZE="2">The Company is a fashion retail organization offering a wide assortment of distinctive luxury fashion apparel, shoes, accessories, jewelry, cosmetics and gifts. SFA stores are principally free-standing stores in
exclusive shopping destinations or anchor stores in upscale regional malls. Customers may also purchase SFA products by catalog or online at www.saks.com. OFF 5^thFACE="Times New Roman" SIZE="2"> is intended to be the premier luxury off-price retailer in the United States. OFF 5^th stores are primarily located
in upscale mixed-use and off-price centers and offer luxury apparel, shoes, and accessories, targeting the value-conscious customer. As of January 31, 2009, the Company operated 53 SFA stores with a total of approximately
5.9 million square feet and 51 OFF 5^th stores with a total of approximately 1.4 million square feet.

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Merchandising, sales promotion, and store operating support functions reside
in New York, New York. The back office sales support functions for the Company, such as accounting, credit card administration, store planning, and information technology, principally are located in the Company’s operations center in Jackson,
Mississippi or in the SFA corporate offices in New York City.

SIZE="2">The Company’s fiscal year ends on the Saturday closest to January 31. Fiscal years 2008 and 2007 each contained 52 weeks and ended on January 31, 2009 and February 2, 2008, respectively. Fiscal year 2006 contained 53
weeks and ended on February 3, 2007.

Discontinued
Operations

On July 5, 2005, Belk acquired from
the Company for $622.7 million in cash substantially all of the assets directly involved in the Company’s Proffitt’s business operations, plus the assumption of approximately $1 million in capitalized lease obligations and the assumption
of certain other ordinary course liabilities associated with the acquired assets. The assets sold included the real and personal property and inventory associated with 22 Proffitt’s stores and 25 McRae’s stores that generated fiscal 2004
revenues of approximately $784 million. The Company realized a net gain of $155.5 million on the sale.

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">On March 6, 2006, the Company sold to Bon-Ton all outstanding equity interests of certain of the Company’s subsidiaries that owned NDSG, either
directly or indirectly. The consideration received consisted of approximately $1.12 billion in cash (reduced as described below based on changes in working capital), plus the assumption by Bon-Ton of approximately $35 million of unfunded benefit
liabilities and approximately $35 million of capital leases. A working capital adjustment based on working capital as of the effective time of the transaction reduced the amount of cash proceeds by approximately $75 million resulting in net cash
proceeds to

the Company of approximately $1.04 billion. The disposition included NDSG’s operations consisting of, among other things, the following: the real and
personal property, operating leases and inventory associated with 142 NDSG units (31 Carson Pirie Scott stores, 14 Bergner’s stores, 10 Boston Store stores, 40 Herberger’s stores, and 47 Younkers stores), the administrative/headquarters
facilities in Milwaukee, Wisconsin, and distribution centers located in Rockford, Illinois, Naperville, Illinois, Green Bay, Wisconsin, and Ankeny, Iowa. NDSG generated fiscal 2005 revenues of approximately $2.2 billion. The Company realized a net
gain of $204.7 million on the sale.

On October 2, 2006,
the Company sold to Belk all of the outstanding equity interests of the Company’s subsidiaries that conducted the Parisian specialty department store business (“Parisian”). The consideration received consisted of $285.0 million in
cash (increased in accordance with a working capital adjustment described below). In addition, Belk reimbursed the Company at closing for $6.7 million in capital expenditures incurred in connection with the construction of four new Parisian stores.
Belk also paid the Company a premium associated with the purchase of accounts and accounts receivable from Household Bank (SB), N.A. (now known as HSBC Bank Nevada, N.A., “HSBC”), in the amount of $2.3 million. A working capital adjustment
based on working capital as of the effective time of the transaction increased the amount of cash proceeds by $14.2 million resulting in net cash proceeds of $308.2 million. The disposition included Parisian’s operations consisting of, among
other things, the following: real and personal property, operating leases and inventory associated with 38 Parisian stores (which generated fiscal 2005 revenues of approximately $740 million), an administrative/headquarters facility in Birmingham,
Alabama and a distribution center located in Steele, Alabama. The Company realized a net loss of $12.8 million on the sale.

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">As of January 31, 2009, the Company discontinued the operations of its CLL business, which consisted of 98 leased, mall-based specialty stores,
targeting girls aged 4-12 years old. CLL generated revenues of approximately $52.2 million for 2008 and was not profitable. The Company incurred charges of $44.5 million in 2008 associated with closing the stores. The Company expects to incur
nominal charges relating to CLL in 2009.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

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PART IV

STYLE="margin-top:0px;margin-bottom:0px">Item 15. Exhibits and Financial Statement Schedules.

(a)	The following documents are filed as a part of this report:

(1)

Financial Statements — The financial statements listed on page F-1 herein.

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(2)

Financial Statement Schedule — The financial statement schedule listed on page F-1 herein.

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(3)

Exhibits — The exhibits listed on the accompanying Index to Exhibits appearing at page E-1.

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(b)	The exhibits listed on the accompanying Index to Exhibits appearing at page E-1 are filed as exhibits to this report.

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(c)	Financial Statement Schedule

STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%">Schedule II — Valuation and Qualifying Accounts

STYLE="margin-top:0px;margin-bottom:0px; margin-left:4%">All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are either included in
the financial statements or notes thereto or are not required or are not applicable and therefore have been omitted.

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10-K (4 sections)	Mar 23, 2009

Saks (SKS)

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