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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10Q
 
x
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended November 2, 2002
 
OR
 
¨
 
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from                 to                 
 
For Quarter Ended: November 2, 2002
 
Commission File Number: 1-13113
 
 
SAKS  INCORPORATED
(Exact name of registrant as specified in its charter)
 
Tennessee
  
62-0331040
(State of Incorporation)
  
(I.R.S.Employer Identification Number)
 
750 Lakeshore Parkway, Birmingham, Alabama 35211
(Address of Principal Executive Offices including zip code)
 
(205) 940-4000
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  x     No  ¨
 
APPLICABLE ONLY TO CORPORATE ISSUERS:
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
Common Stock, $.10 Par Value—142,457,366 shares as of November 2, 2002
 

Table of Contents
SAKS INCORPORATED
 
Index
 
  
Page No.
    
 
  
3
 
  
4
 
  
5
 
  
6
 
  
27
 
  
40
 
  
41
 
    
 
  
42
 
  
43
 
  
44

2

Table of Contents
SAKS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
(Unaudited)
 
    
November 2, 2002
   
February 2, 2002
   
November 3, 2001
ASSETS
                     
Current Assets
                     
Cash and cash equivalents
   
$
34,281
   
$
99,102
   
$
40,250
Retained interest in accounts receivable
   
 
243,261
   
 
239,420
   
 
211,042
Merchandise inventories
   
 
1,706,980
   
 
1,295,878
   
 
1,764,546
Other current assets
   
 
85,319
   
 
74,960
   
 
102,153
Deferred income taxes, net
   
 
43,873
   
 
60,569
   
 
42,489
    
  
  
Total current assets
   
 
2,113,714
   
 
1,769,929
   
 
2,160,480
Property and Equipment, net
   
 
2,203,090
   
 
2,246,818
   
 
2,278,281
Goodwill and Intangibles, net
   
 
316,807
   
 
363,528
   
 
366,795
Deferred Income Taxes, net
   
 
186,639
   
 
173,077
   
 
203,650
Other Assets
   
 
46,860
   
 
42,169
   
 
41,105
    
  
  
TOTAL ASSETS
   
$
4,867,110
   
$
4,595,521
   
$
5,050,311
    
  
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                     
Current Liabilities
                     
Trade accounts payable
   
$
506,051
   
$
238,819
   
$
495,786
Accrued expenses and other current liabilities
   
 
534,164
   
 
542,898
   
 
527,934
Current portion of long-term debt
   
 
4,762
   
 
5,061
   
 
5,240
    
  
  
Total current liabilities
   
 
1,044,977
   
 
786,778
   
 
1,028,960
Long-Term Debt
   
 
1,422,538
   
 
1,356,580
   
 
1,642,707
Other Long-Term Liabilities
   
 
166,621
   
 
180,726
   
 
133,573
    
  
  
Total liabilities
   
 
2,634,136
   
 
2,324,084
   
 
2,805,240
Commitments and Contingencies
                     
Shareholders’ Equity
   
 
2,232,974
   
 
2,271,437
   
 
2,245,071
    
  
  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   
$
4,867,110
   
$
4,595,521
   
$
5,050,311
    
  
  
 
See notes to condensed consolidated financial statements.

3

Table of Contents
SAKS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollar amounts in thousands, except per share amounts)
(Unaudited)
 
    
Three Months Ended
     
Nine Months Ended
  
    
November 2, 2002
     
November 3, 2001
     
November 2, 2002
     
November 3, 2001
  
Net sales
   
$
1,406,142
 
   
$
1,423,551
 
   
$
4,069,601
 
   
$
4,158,609
 
Cost of sales (excluding depreciation and amortization)
   
 
875,758
 
   
 
925,314
 
   
 
2,552,616
 
   
 
2,691,393
 
    
  
  
  
Gross margin
   
 
530,384
 
   
 
498,237
 
   
 
1,516,985
 
   
 
1,467,216
 
Selling, general and administrative expenses
   
 
342,929
 
   
 
353,910
 
   
 
988,872
 
   
 
1,027,077
 
Other operating expenses
   
 
147,116
 
   
 
148,412
 
   
 
425,361
 
   
 
429,199
 
Store pre-opening costs
   
 
2,848
 
   
 
3,568
 
   
 
3,744
 
   
 
5,170
 
Integration charges
   
 
2,305
 
   
 
91
 
   
 
2,305
 
   
 
1,539
 
Losses (gains) from long-lived assets
   
 
999
 
   
 
(1,902
)
   
 
1,925
 
   
 
18,604
 
    
  
  
  
Operating income (loss)
   
 
34,187
 
   
 
(5,842
)
   
 
94,778
 
   
 
(14,373
)
Other income (expense):
                                    
Interest expense
   
 
(30,826
)
   
 
(32,303
)
   
 
(93,019
)
   
 
(99,354
)
Other income (expense), net
   
 
(285
)
   
 
463
 
   
 
296
 
   
 
746
 
    
  
  
  
Income (loss) before income taxes, extraordinary items and cumulative effect of a change in accounting principle
   
 
3,076
 
   
 
(37,682
)
   
 
2,055
 
   
 
(112,981
)
Provision (benefit) for income taxes
   
 
1,154
 
   
 
(13,907
)
   
 
775
 
   
 
(42,898
)
    
  
  
  
Income (loss) before extraordinary items and cumulative effect of a change in accounting principle
   
 
1,922
 
   
 
(23,775
)
   
 
1,280
 
   
 
(70,083
)
Extraordinary gain on extinguishment of debt, net of taxes
   
 
—  
 
   
 
2,022
 
   
 
443
 
   
 
16,439
 
Cumulative effect of a change in accounting principle, net of taxes
   
 
—  
 
   
 
—  
 
   
 
(45,593
)
   
 
—  
 
    
  
  
  
Net income (loss)
   
$
1,922
 
   
$
(21,753
)
   
$
(43,870
)
   
$
(53,644
)
    
  
  
  
Basic earnings (loss) per common share:
                                    
Income (loss) before extraordinary items and cumulative effect of accounting change
   
$
0.01
 
   
$
(0.17
)
   
$
0.01
 
   
$
(0.49
)
Extraordinary items
   
 
—  
 
   
 
0.02
 
   
 
0.00
 
   
 
0.11
 
Cumulative effect of accounting change
   
 
—  
 
   
 
—  
 
   
 
(0.32
)
   
 
—  
 
    
  
  
  
Net income (loss)
   
$
0.01
 
   
$
(0.15
)
   
$
(0.31
)
   
$
(0.38
)
Diluted earnings (loss) per common share:
                                    
Income (loss) before extraordinary items and cumulative effect of accounting change
   
$
0.01
 
   
$
(0.17
)
   
$
0.01
 
   
$
(0.49
)
Extraordinary items
   
 
—  
 
   
 
0.02
 
   
 
0.00
 
   
 
0.11
 
Cumulative effect of accounting change
   
 
—  
 
   
 
—  
 
   
 
(0.31
)
   
 
—  
 
    
  
  
  
Net income (loss)
   
$
0.01
 
   
$
(0.15
)
   
$
(0.30
)
   
$
(0.38
)
Weighted average common shares:
                                    
Basic
   
 
142,791
 
   
 
141,969
 
   
 
142,720
 
   
 
141,955
 
Diluted
   
 
145,449
 
   
 
141,969
 
   
 
146,893
 
   
 
141,955
 
 
See notes to condensed consolidated financial statements.

4

Table of Contents
SAKS INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
 
<
    
Nine Months Ended
  
    
 
 
November 2,
2002
 
 
   
 
 
November 3,
2001
 
 
Operating Activities:
                  
Net income (loss)
   
$
(43,870
)
   
$
(53,644
)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                  
Depreciation and amortization
   
 
160,415
 
   
 
162,157
 
Losses from long-lived assets
   
 
1,925
 
   
 
18,604
 
Extraordinary gain on extinguishment of debt
   
 
(709
)
   
 
(26,729
)
Cumulative effect of accounting change
   
 
45,593
 
   
 
—  
 
Provision for employee deferred compensation
   
 
5,908
 
   
 
4,784
 
Deferred income taxes
   
 
4,312
 
   
 
(20,322
)
Change in operating assets and liabilities, net
   
 
(180,451
)