is incurred. In accordance with EITF Issue No. 02-16, “Accounting by a Reseller for Cash Consideration from a Vendor,”
the Company accounts for reimbursements received in excess of expenses incurred related to specific, incremental,
identifiable advertising, as a reduction to the cost of merchandise and is reflected in cost of sales as the merchandise
is sold.
Advertising costs, which are included as a component of selling, general and administrative expenses were
as follows:
Advertising expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cooperative advertising reimbursements . . . . . . . . . . . . . . . .
Net advertising expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
(in millions)
2006
$106.8
(40.2)
$ 66.6
$105.9
(34.8)
$ 71.1
$ 92.5
(23.0)
$ 69.5
Catalog Costs
Catalog costs, which primarily comprise paper, printing, and postage, are capitalized and amortized over the
expected customer response period related to each catalog, which is generally 90 days. Cooperative reimbursements
earned for the promotion of certain products are agreed upon with vendors and is recorded in the same period as the
associated catalog expenses are amortized. Prepaid catalog costs totaled $3.1 million and $4.0 million at January 31,
2009 and February 2, 2008, respectively.
Catalog costs, which are included as a component of selling, general and administrative expenses were as follows:
Catalog costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cooperative reimbursements. . . . . . . . . . . . . . . . . . . . . . . . . .
Net catalog expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
2007
(in millions)
2006
$48.0
(4.1)
$ 43.9
$ 45.6
(3.8)
$ 41.8
$ 47.0
(3.5)
$ 43.5
Earnings Per Share
Basic earnings per share is computed using the weighted-average number of common shares outstanding for the
period. Diluted earnings per share uses the weighted-average number of common shares outstanding during the period
plus dilutive common stock equivalents, such as stock options and awards. The computation of earnings per share is
as follows:
2008
2007
2006
(in millions)
Net income (loss) from continuing operations . . . . . . . . . . . . .
Weighted-average common shares outstanding. . . . . . . . . .
Basic Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average common shares outstanding. . . . . . . . . .
Stock options and awards . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average common shares outstanding
assuming dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (79)
$
43
$ 247
154.0
154.0
155.0
$ (0.52)
$ 0.29
$ 1.59
154.0
—
154.0
1.6
155.0
1.8
154.0
155.6
156.8
$ (0.52)
$ 0.28
$ 1.58
Options to purchase 4.8 million, 3.4 million, and 2.8 million shares of common stock as of January 31, 2009,
February 2, 2008, and February 3, 2007, respectively, were not included in the computations because the exercise price of
the options was greater than the average market price of the common shares and, therefore, the effect of their inclusion
would be antidilutive. Additionally, due to a loss reported for the year ended January 31, 2009, options and awards of 1.2
million shares of common stock were excluded from the calculation of diluted earnings per share as the effect would be
antidilutive.
34