'Anne Aylor Case\r'

'Anne Aylor, Inc. De experimental conditionination of blueprintning Materiality and check Mis debate MARKS. BEASLEY· FRANK A. BucKLEss ·STEVEN M. GLOVER· DouGLAS F. PRAWITT LEARNING OBJECTIVES After completing and discussing this deter rental example you should be able to [1] [2] De stipulationine provision corporeality for an study client Provide support for your physicalness decisions [3] Allocate cooking frameworkity to m iodintary direction elements INTRODUCTION j†Anne Aylor, Inc. (Anne Aylor) is a leading interior(a) specialty seller ofhigh-qualitywomens app bel, shoes, and accessories sold principally to a unhorse place the â€Å"Anne Aylor” brand charge.Anne Aylor is a highly __ recognized field brand that defin_s_a _ e dis_tin_t_ c fashion_point of v:iew. â€. Anne Aylor trade in represents varianceic styles, up go throughd to reflect accredited fashion trends. keep comp whatsoever hive aways offer a full range of course and ca sual sepa order, dresses, tops, workweekend wear, shoes and accessories coordinated as part of a wide wardrobing schema. The comp any(prenominal) places a significant emphasis on customer function. fellowship gross revenue associates be trained to assist customers in merchandise selection and wardrobe coordination, helping them attain the â€Å"Anne Aylor” look while maintaining the customers personal styles.The company follows the precedent financial year of the retail industry, which is a 52-or 53week conclusion ending on the Saturday closest to January 31 of the side by side(p) year. profits revenue for the year ended January 291 2011 (referred to as fiscal2011) was $1. 4 billion and profit income was $58 million. At the end of fiscal 2011, the company operated close to 584 retail stores located in 46 states at a lower place the name Anne Aylor. The companys core product line focuses on relatively affluent, fashion-conscious lord women with limited shoppi ng snip.Substanti bothy all of the companys merchandise is unquestionable in-house by its product design and development teams. surgical process of merchandise is sourced to 131 independent manufacturers located in 19 countries. Approximately 45 per centumage; 16 per centum, 13 share, 12 percent, and 9 percent of the companys merchandise is fabricate in China, Philippin~s, Indonesia, India, and Vietnam, loveively. Merchandise is distributed to the companys retail stores through a single dispersal center, located in Louisville, Kentucky.Anne Aylor gillyflower trades on The New York Stock Exchange and Anne Aylor is necessary to contribute an integrated canvass of its consolidated pecuniary avouchments and its internal control over fiscal reporting in accordance with the standards of the Public order write up Oversight instrument panel (United resigns). As of the close of business on March 11, 2011 Anne Aylor had 48,879,663 shargons of normal stock capital wit h a trading impairment of $22. 57. The case was disposed(p) by MarkS. Beasley, Ph. D. and Frank A. Buck little, Ph. D. f North Carolina State University and Steven M. Glover, Ph. D. and Douglas F. Prawitt, Ph. D. of Brigham Young University, as a basis for class discussion. Anne Aylor, Inc. is a fictitious company. All characters and names be ar fictitious; any similarity to actual companies or persons is purely coinci dental. From Case 7. 1 of Auditing Cases: An synergetic Learning Approach. Fifth Edition. Mark S. Beasley, Frank A. Buckless(prenominal), Steven M. Glover, Douglas F. Prawitt. procure e 2012 by Pearson Education, Inc. Published by learner Hall.All rights provided 77 Anne Aylor, Inc. BACKGROUND Your firm, metalworker and Jones, PA. , is in the initial homework phase for the fiscal 2012 audit of Anne Aylor, Inc. (i. e. , the audit for the year that depart end on January 28, 2012). As the audit manager, you have been assigned responsibleness for determine com puter programning physicalness and suppor plug-in misassertion for beneathlying mo elucidateary t from severally oneing circulars. Your firms corporality and tolerable mis pedagogy guidelines have been come throughd to assist you with this assignment (see Exhibit 1).Donna Fontain, the audit partner, has performed a preliminary analysis of the company and its performance and believes the likelihood of charge fraud is low. Donnas initial analysis of the companys performance is documented in the memo referenced as G-3 (top right hand comer of the document). Additionally, Donna has documented new events/issues noted while performing the preliminary analysis in a separate memo, G-4. You have save the audited fiscal 2011 and projected fiscal20 12 fmancial statement come on audit schedule G-7.The companys accounting policies atomic number 18 provided in Exhibit 2. Assume no material misstatements were discovered during the fiscal 2011 audit. REQUIRED [1] Review Exhibits 1 and 2; audit memos G-3, and G-4i and audit schedules G-5, G-6 and G-7. Based on your review, answer each of the following questions: [a] [b] [c) [d) [e) [f) [g) [2) Why ar diffe bring physicalness lower-rankings considered when determining intentning corporeality? Why atomic number 18 different physicalness room accesss germane(predicate) for different audit engagements?Why is the materiality base that results in the smallest threshold for the most part utilize for planning purposes? Why is the risk of solicitude fraud considered when determining tolerable misstatement? Why might an auditor not use the same tolerable misstatement f be or percentage of account balance for all fmancial statement accounts? Why does the feature total of undivided account tolerable misstatements commonly exceed the estimate of planning materiality? Why might certain audition balance amounts be projected when considering planning materiality?Based on your review of the Exhibits ( 1 and 2) 1 audit memos ( G-3, and G-4), and audit schedules ( G-5, G 6-1, and G 6-2), bed audit schedules G-5, G-6 and G-7. 78 Anne Aylor, In(. evidence 1 Smith and Jones, PA. Polley line: course of studyning Materiality This polity statement provides widely distributed guidelines for firm personnel when establishing planning materiality and tolerable misstatement for purposes of determining the nature, timing, and extent of audit procedures. The design of this policy statement is not to suggest that these materiality guidelines must be followed on all audit engagements.The appropriateness of these materiality guidelines must be find out on an engagement by engagement basis, employ professional judgment. be afterning Materiality Guidelines think materiality represents the maximum, feature financial statement misstatement or neglect that could occur in front Influencing the decisions of liable individuals relying on the financial. statements. The magnitude and nature of financi al statement misstatements or omissions pass on not have the same work on all financial statement users.For example, a 5 percent misstatement with ongoing pluss may be much relevant for a creditor than a stockholder, while a 5 percent misstatement with concluding income before Income taxes may be to a greater extent relevant for a stockholder ttian a creditor. Therefore, the primary conside symmetryn when determining materiality Is the expected users of the financial statements. Relevant financial statement elements and presumptions on the effect of combined misstatements or omissions that would be considered Immaterial and material ar provided below: • web Income-Before-Income Taxes †·combined misstatements or omissions less than 2 percent of.. ·- dinero Income Before Income Taxes are presumed to be sassy and combined misstatements or -····———- omissions-greater than·7″percenfare-pfes-umecrtob8·-material. -(Not e: lolly lncome.. Befofe.. lncome______ .. Taxes may not be an appropriate base If the clienrs Net Income Before Income Taxes is substantially below separate companies of equal size or Is highly variable. ) • Net revenue †combined misstatements or omissions less than 0. 5 percent of Net Revenue are presumed to be Immaterial, and combined misstatements or omissions greater than 2 percent are presumed to be material. Current Assets †combined misstatements or omissions less than 2 percent of Current Assets are presumed to be immaterial, and combin9d misstatements or omissions greater than 7 percent are presumed to be material. • Current Liabilities †combined misstatements or omissions less than 2 percent of Current Uabilities are presumed to be immaterial and combined misstatements or omissions greater than 7 percent are presumed to be material. • join Assets- combined misstatements or omissions less than 0. percent of come Assets are presumed to b e immaterial, and combined misstatements or omissions greater than 2 percent are presumed to be material. (Note: enumerate Assets may not be an appropriate base for suffice organizations or former(a)wise organizations that have few direct assets. ) The particularized amounts established for each financial statement element must be pertinacious by considering the primary users as well as soft factors. For example, if the client is close to violating the lower limit current ratio trainment for a bring agreement, a smaller planning materiality amount should be used for current assets and liabilities.Conversely, if the client is substantially above the minimum current ratio exactment for a loan agreement, n would be middling to use a high planning materiality amount for current assets and current liabilnies. Planning materiality should be base on the smallest amount established from relevant materiality bases to provide reasonable assurance that the financial statements, interpreted as a whole, are not materially misstated for any user. Anne Aylor, Inc. tolerable Misstatement Guidelines In attachition to establishing materiality for the boilers suit financial statements, materiality for individual financial statement accounts should be established. The amount established for individual accounts is referred to as â€Å"tolerable misstatement. ” Tolerable misstatement represents the amount individual financial statement accounts can differ from their true amount without affecting the seemly presentation of the financial statements interpreted as a whole. Establishment of tolerable misstatement for individual accounts enables the auditor to design and execute an audn strategy for each audit cycle.The objective in setting tolerable misstatement for individual financial statement accounts is to provide reasonable assurance that the financial statements taken as a whole are fairly presented in all material respects at the lowest cost. To provide reasonable assurance that the financial statements taken as a whole do not inhibit material misstatements, the tolerable misstatement established for individual financial statement accounts should not exceed 75 percent of planning materiality. The percentage threshold should be lower as the expectation for management fraud extends.In many an early(a)(prenominal) audits it is reasonable to expect that individual financial accounts misstatements set go out be less than tolerable misstatement and that misstatements crosswise accounts will offset each other (some set misstatements will overstate net income and some identHied misstatements will understate net income). This expectation is not reasonable when the likelihood of management fraud is hi,gh. If management is purposely trying to misstate the financial statements, it is likely that misstatements will be systematically biased in one direction across accounts.The tolerable misstatement percentage threshold should not exceed: - — — ——·-· -· â€Â·â€ —- —-·â€ — ††·-· ·— —-··-····- †——7-5-percent-of-planning materJality-if low-likelihood-otmanagementfraud —————- _â€Â·-·- ·- -· -·â€Â·-· . • 50 percent of planning materiality if moderately low likelihood of management fraud, and • 25 percent of planning materiality if leave likelihood of management fraud Finally a lower tolerable misstatement may be take for specific accounts because of the relevance of the account to users.Tolerable misstatement for a specific account should not exceed that amount that would influence the decision of reasonable users. Approved: April 24, 2009 80 Anne Aylor, Inc. EXHIBIT 2 Anne Aylor, Inc. Accounting Policies Revenue Recognition -The association scans revenue as merchandise is sold to clients. The high societys policy with res pect to award certificates and gift fares is to record revenue as they are redeemed for merchandise. introductory to their redemption, these gift certificates and gift cards are enter as a liability.While the community honors all gift certificates and gift cards presented for payment, management reviews unclaimed position laws to determine gift certificate and gift card balances required for escheatment to the appropriate government agency. Amounts think to deportation and handling billed to clients in a gross revenue transaction are classify as revenue and the cost tie in to shipping product to clients are classified as cost of gross gross gross revenue. A reserve for estimated returns is established when sales are save. The company excludes sales taxes collected from customers from net sales in Its Statement of Operations.Cost of sales and Selling, General and Administrative Expenses- The following table Illustrates the primary be classified in each major write o ff category: Cost of Sales Cost of merchandise sold; Freight cost associated with moving merchandise from our suppliers to our dispersion center; __ • . †be asSociated with the rilovein8nt Of †merchandise-through. customsrcost associated with the fulfUiment of online customer orders; Depreciation related to merchandise management systems; Sample development cost; Merchandise shortage; and Client shipping cost.Selling, General and Administrative Expenses Payroll, premium and make costs for retail and corporeal associates; â€~- __Design and merchandising oosts;____ _ _ _ Occupancy costs for retail and corporate facilities; -Depreciation related to retail and corporate assets;· Advertising and tradeing costs; Occupancy and other costs associated with operating our distribution center; Freight expenses associated with moving merchandise from our distribution center to our retail stores; and Legal, finance, Information systems and other corporate overhead cos ts.Advenlslng- Costs associated with the production of advertising, much(prenominal)(prenominal) as printing and other costs, as well as costs associated with communicating advertising that has been produced, such as magazine ads, are expensed when the advertising first appears In print. Costs of direct mall catalogs and postcards are amply expensed when the advertising Is scheduled to first arrive in clients homes. Leases and Oete”ed involve Obligations †Retail stores and administrative facilities are occupied under operating leases, most of which are non-cancelable.Some of the store leases grant the right to extend the term for one or two additional quintuplet-year halts under substantially the same terms and conditions as the pilot leases. Some store leases also contain untimely termination options, which can be exercised by the smart set under specific conditions. Most of the store leases require payment of a specified minimum rent, accession a contingent re nt found on a percentage of the stores net sales in excess of a specified threshold.In addition, most of the leases require payment of real estate taxes, Insurance and certain common area and maintenance costs In addition to the upcoming minimum lease payments. Rent expense under non-cancelable operating leases with scheduled rent increases or free rent finishs is accounted for on a straight-line basis over the initial lease term beginning on the date of initial possession, which is in the main when the political party enters the space and begins verbalism build-out Any reasonably assured renewals are considered. The amount of the excess of straight-line rent expense over scheduled payments is record as adeferred liability. 1 Anne Aylor, IlK. Construction allowances and other such lease incentives are preserve as deferred credits, and are amortized on a straight-line basis as a decline of rent expense beginning in the rate of flow they are deemed to be earned, which often i s subsequent to the date of initial possession and generally coincides with the store rise date. The current portion of unamortized deferred lease costs and construction allowances is acceptd in â€Å"Accrued occupation”, and the long-run portion is included in â€Å"Deferred lease costs” on the Companys Balance Sheets.Restructuring Costs †On January 30, 2008, the Company inniated a multi-year restructuring program designed to enhance protnability and better overall operating goodness. The restructuring program, includes closing underperforming stores over a three-year period, reducing the Companys corporate staff by approximately 1Oo/o and undertaking a broad- ground productivity enterprisingness that includes, among other things, the strategic procurement of non-merchandise goods and services.Restructuring costs include non- coin expenses, primarily associated wnh the write-down of assets related to store closures, coin charges related primarily to severa nce and various other costs to implement the restructuring program. Liabilities associated with restructuring charges are included in â€Å"Accrued salaties and bonus,” Accrued tenancy,” â€Å"Accrued expenses and other current liabilities,” and â€Å"Other liabilities. ” Cash and Cash Equivalents †Cash and short-run highly liquid investments with original maturity dates of 3 months or less are considered specie or cash equivalents.The Company invests excess cash primarily in money market accounts and short-run commercialised paper. monetary Instruments- The Companys auction rate securities are classified as available-for-sale and are — -··-·· —â€carried at. cost or_ par_ apprise,. which _appro,droaJe$J~! mM~~LV~-~~~ . I~_s. e_ sepurities have stated maturities beyond three months but are hurtd and traded as short-term instruments overdue(p) to theliquiditY-provided fnrougn — -· â€Â· ·· ·̵ 2;—- · -··—†â€Â·-ttie interesrratereset·mechanism-of-2B-or35-days:â€Â·—â€Â·————————- ·—-. -··-·â€Â·Â·-······ Merchandise Inventories †Merchandise inventories are esteem at the lower of average cost or market, at the individual item level. Market is determined based on the estimated net realizable value, which is generally the merchandise exchange price. Merchandise account levels are monitored to identify slow-moving items and broken assortments (items no weeklong in stock in a ample range of sizes) and markdowns are used to clear such merchandise. Merchandise inventory value is reduced if the selling price is marked below cost.Physical inventory counts are performed annually in January, and estimates are made for any shortage between the date of the physical inventory count and the balance sheet date. Store Pre-Opening Costs †N on-capital expendnures, such as rent, advertising and payroll costs incurred former to the opening of a new store are charged to expense in the period they are incurred. Property and Equipment- Property and equipment are recorded at cost. Depreciation and amortization are computed on a straight-line basis over the following estimated helpful lives: Building ………………………………………………………………. 0 long time Leasehold improvements ……………………………………… 10 years or term of lease, if shorter Furniture, fixtures and equipment.. …………………………. 2-1 0 years software program ………………………………………………………à ¢â‚¬Â¦Ã¢â‚¬Â¦.. 5 years Accounting for the Impairment or Disposal of Long-Lived Assets †The assessment of possible equipment casualty is based on tbe Companys ability to recover the carrying value of the long-lived asset from the expected future pre-tax cash flows (undiscounted and wnhout interest charges).If these cash flows are Jess tha11 the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The primary measure of fair value is based on discounted cash flows. The beat of impairment requires management to make estimates of these cash flows related to long- 82 Anne Aylor, In(. lived assets, as well as other fair value determinations. Goodwill and lnde”nlte-llved Intangible Assets †The Company performs annual impairment testing related to the carrying value of the Companys recorded goodwill and indefinite-lived intangible assets.Defe”ed support Costs- Deferred financing costs are amortized using the effective interest mode over the term of the related debt. Self Insurance †The Company is self-insured for certain losings related to its employee point of service medical and dental plans, its workers compensation plan and for short-term disability up to certain thresholds. Costs for self-insurance claims filed, as well as claims incurred but not describe, are accumulated based on managements estimates, using information received from plan administrators, third party activities, historic analysis, and other relevant data.Costs for seH-insurance claims filed and claims incurred but not reported are accrued based on known claims and historical experience. Income Taxes †The Company accounts for income using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized, and income or expense is recorded, for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. exchequer Stock Re procures †The Company repurchases common stock from time to time, subject to market conditions and at prevailing market prices, through open market purchases or in privately negotiated transactions. Repurchased shares of common stock are recorded using the ~ost method. -·——†—†—· ††††††††††††· ——-·————- -·—· —- ———· —-··â€Â·Â·Â·——-·——†————-Stock-based Compensation- The Company uses the modified prospective method to record stock-based —···——··- —compensation-:-Thecalculaticinof stocK-baseifcompensatiOn exp-ense requirestne input ofnigtily subjective___ ·â€Â·Â·Â· à ‚·—â€.. -… assumptions, including the expected term of the stock-based awards, stock price excitability, and pre-vesting forfeitures. The Company estimates the expected IHe of shares granted in connection with stock-based awards using historical exercise patterns, which is untrue to be representative of future behavior.The volatility of common stock at the date of grant is estimated based on an average of the historical volatility and the implied volatility of publicly traded options on the common stock. In add”ion, the expected forfe”ure rate is estimated and expense is only recorded for those shares expected to vest. Forfeitures are estimated based on historical experience of stock-based awards granted, exercised and cancelled, as well as considering future expected behavior.savings Plan and pension Plan -In June 2006, the Companys Board of Directors authorized management to freeze â€Å"s non-contributory defined benefit pension plan (the â€Å" p remium Plan”) and enhance its defined contribution 401 (k) savings plan (the â€Å"401 (k) Plan;. These plan changes became effective on October 1, 2006. Savings Plan †Substantially all employees of the Company and â€Å"s subsidiaries who work at least 30 hours per week or who work 1,000 hours during a consecutive 12 month period are eligible to move into in the Companys 401 (k) Plan.Under the plan, participants can contribute an aggregate of up to 75o/o of their annual earnings in any combination of pre-tax and after-tax contributions, subject to certain lim”ations. The Company makes a matching -contribution of 1OOo/o w”h respect to the first 3o/o of each participants contributions to the 401 (k) Plan and makes a matching contribution of 50o/o with respect to the plunk for 3o/o of each participants contributions to the 401 (k) Plan.Pension Plan- Substantially all employees of the Company who began employment prior to October 1, 2006, and completed 1,000 hours of service during a consecutive 12 month period prior to that date are eligible for benefits under the Companys Pension Plan. The Pension Plan calculates benefits based on a career average formula. Only those associates who were eligible under the Pension Plan on or before September 30, 2006 are eligible to receive benefits from the Pension P! an once they have completed the five years of 83 Anne Aylor, Inc. ervice required to become in full vested. As a resu~t of the Pension Plan freeze, no associate may become a participant in the Pension Plan on or after October 1, 2006, and no additional benefits will be earned under the Pension Plan on or after October 1, 2006. The Company records the net over- or under-funded position of a defined benefit postretirement plan as an other asset or other liability, with any unrecognized prior service costs, transition obligations or actuarial gains/losses reported as a component of accumulated other comprehensive income in stockholders equ ity.Other Liabilities †Other liabil~ies includes liabilities associated with the Companys restructuring program, pension plan, borrowings for the purchase of fixed assets, and obligation tor excess corporate sureness space. —··—-·—†—â€Â·Â·—— —-·—-·- -·——·- ·—- â€Â·—··—-·-·â€ -·-·-·—· —·—â€Â·—-·. ·-·—·· ·-·- -· ·-·â€Â· ·-·-·- —â€Â·- 84 Anne Aylor, In(. Anne Aylor, Inc. Memo: Analysis of Performance first off Quarter Year stop: January 28,2012 Reference: prompt by: Date: G3 DF 6115111 Reviewed by: Net sales for the first dirt of fiscal 2012 increased 7. 5 percent from the first o twenty-five percent †f fiscal 2011.Comparable store sales for the first guide of fiscal 2012 increased 5. 1 percent, compared to a alike(p) store sales inc rease of 2. 5 percent in the first quarter offiscal201 J. The Company axiom improvement in same store sales as a result of a targeted promotional strategy that helped drive increased traffic to Company stores. The Company also continues to experience growth in e-commerce sales that are up by more than 20% over the previous comparable period. consummate(a) valuation account as a percentage of net sales increased to 54. 5 percent in the first quarter of fiscal 2012, compared to 53. 0 percent in the first quarter of fiscal 2011.The increase in gross margin as a percentage of net sales for the first quarter of fiscal 2012 as compared to the comparable fiscal 2011 period was due primarily to higher full price sales as a percentage of total sales coupled with higher margin rates achieved on both full price and non-full price sales at stores. This performance was the result of change product offerings, effective marketing initiatives and the success of the Companys strategy to appropri ately position inventory levels. ——————————————â€Â·——â€Â· -·—- ————·—··—·—· ——â€Â·â€Â·Â·-···Selling, general and administrative expenses as a percentage of net sales falloffd —— — ——†———-roâ€48:1 percent; -;n-rhe first quanero jlsCiir20n ;â€co paredto5o:g peicenroj ner — — ———†—â€f m sales in the first quarter of fiscal 2011. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to improved operating leverage as a result of higher net sales, payroll and tenancy related savings associated with the restructuring program, and continued focus on cost savings initiatives.The decrease in selling, general and administrative expenses was partially offset by higher marketing and performance-based compensation expenses. Net income as a percentage of net sales increased to 3. 8 percent in the first quarter of fiscal 2012, compared to 2. 6 percent in the first quarter of fiscal 2011. The increase in net income as a percentage of net sales is due to strong full price selling at Company stores and improved operating efficiencies. 85 Anne A~or, Inc. Anne Aylor, Inc.Planning Materiality AsiiiSrnent Year Ended: January 28, 2012 Primary Users of financial Statements (llat): Reference: Prepared by: Date: Reviewed by: G5 Materla! ltl_Bases On thousands_}: Flscal2011 Actual Financial Statement thrash Amounts Income Before Taxes Net Revenues Current Uabilltles Current Assets—†inwardness Assets Planning Materiality On thousands): commentary: Flscal2012 Planning Materiality Levels Projected Upper Limit get down Limit Financial dollar mark Statement Dollar Amount Percent Amounts Percent Amount 2 7 †2†⠀0. 5 †â€7 2 7 2 0. 5 2 †††I$ 87 Anne Aylor, Inc. Anne Aylor, Inc. Tolerable Mlutatement Assessment Year Ended: January 28, 2012 Reference: Prepared by: Dale: Reviewed by: G6 likelihood of perplexity pretender (check one): Low Likelihood of vigilance Fraud Reasonably Low Likelihood of Management Fraud Moderate Likelihood of Management Fraud Tolerable Misstatement (In thousands): Planning Materiality: Multiplication reckon (0. 75 if low likelihood of management fraud, 0. 50 if reasonably low likelihood of management fraud, and 0. 25 if moderate likelihood of management fraud).Tolerable Misstatement (In thousands) $ X $ :; work S lflc Accounts Requiring Lower Tolerable Mlsstatement: Account Tolerable Misstatement Explanation;- — —â€Â·Â·—â€Â·-·-·———————- — —————-· . ——-· —â€~†———·-··· · .•. —†——-â€Å"‘ —- †—- ——- -· ·—-·- — †…. ——— —·— —- Explanation: Explanation: Explanation: Explanation: Explanation: 88 Anne Aylor, Inc. Anne Aylor, Inc. Planning Materiality Financial Information YearEnded:January28,2012 Reference: Prepared by: G7 selective information: Reviewed by: 1/28/2012 1/29/2011Projected Actual All amonts are in thousands 1,355,400 $ $ 1,243,788 Net sales 599,700 562,427 Cost of sales 755,700 681,361 Gross margin 659,800 627,622 SeiUng, general and administrative expenses 3,856 Restructuring charges 0 95,900 Operating income/(loss 49,883 pursuance income 700 636 1,200 Interest expense 1,009 95,400 lncome/(loss) before income taxes 49,510 Income tax provlsion/(beneflt) 36,900 18,408 Net lncome/(loss) 58,500 $—-~=-$—=-3a1,~10•2 A11ets Current assets Cash and cash equivalents $ 156,600 $ 138,194 . ___ Accountsreceivable ____ -·—·——- â€Â·-··——·â€Â·Â·——-··â€Â·—â€Â·12,100†—— 12,67o-·-.. —-· Merchandise Inventories 133,800 111,229 ·Refundable Income- taxes-·—-~—· â€Â·- ·- ·- — ······â€ —-·-·· ··- · ·-· —â€Â· ··· —- —†â€Â· ·-·- †·-· —- ——· ·—â€18,400 16,394 Deferred income taxes Prepaid expenses and other current assets Total current assets Property and equipment net Deferred financing costs, net Deferred Income taxes Other assets Total assets Uabllltles and Stockholdn Equity Current llabllltles Accounts due Accrued salaries and bonus Accrued tenancy seat certificates and merchandise credits redeemable Accrued expenses and other current Uabilltles Total current liabilities Deferred lease costs Deferred income taxes Long-term performance compensation Other liabilities Total liabilities Stockholders equity Common stock and paid in capital Retained earnings Accumulated other comprehensive loss Treasury stock Total stockholders equity . Total liabilities and stockholders equity $\r\n'