UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
| x | Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For Fiscal Year Ended: December 31, 2008
| ¨ | Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number: 1-13113
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
Saks Incorporated 401 (k) Retirement Plan
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
Saks Incorporated
12 East 49th Street
New York, New York 10017
Telephone No: (212) 940-5305
Saks Incorporated
401(k) Retirement Plan
Financial Statements and Supplemental Schedule
December 31, 2008
Saks Incorporated 401(k) Retirement Plan
Index
December 31, 2008 and 2007
| | |
| Note: | | Other schedules required by 29 CFR 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable. |
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
Saks Incorporated 401(k) Retirement Plan
In our opinion, the accompanying statements of net assets available for benefits and the related statement of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the Saks Incorporated 401(k) Retirement Plan (the “Plan”) at December 31, 2008 and 2007, and the changes in net assets available for benefits for the year ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental Schedule of Assets (Held at End of Year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Birmingham, Alabama
June 19, 2009
1
Saks Incorporated 401(k) Retirement Plan
Statements of Net Assets Available for Benefits
December 31, 2008 and 2007
| | | | | | |
| | | 2008 | | 2007 |
Assets | | | | | | |
Investments, at fair value | | $ | 350,067,769 | | $ | 510,451,687 |
Participant contributions receivable | | | 358,018 | | | 457,759 |
Employer contributions receivable | | | 105,314 | | | 123,713 |
Interest and dividends receivable | | | 12,426 | | | 97 |
| | | | | | |
Total assets | | | 350,543,527 | | | 511,033,256 |
| | |
Liabilities and Net Assets Available for Benefits | | | | | | |
Accrued administrative fees | | | 54,578 | | | 67,243 |
| | | | | | |
Total liabilities | | | 54,578 | | | 67,243 |
| | | | | | |
Net assets available for benefits, at fair value | | | 350,488,949 | | | 510,966,013 |
Adjustment from fair value to contract value for fully benefit-responsive investment contracts | | | 6,560,270 | | | 325,660 |
| | | | | | |
Net assets available for benefits | | $ | 357,049,219 | | $ | 511,291,673 |
| | | | | | |
The accompanying notes are an integral part of these financial statements.
2
Saks Incorporated 401(k) Retirement Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2008
| | | | |
Increase in net assets available for benefits | | | | |
Interest and dividend income | | $ | 11,791,064 | |
Contributions | | | | |
Employer | | | 8,691,878 | |
Participant | | | 27,777,819 | |
Rollover | | | 1,447,358 | |
| | | | |
Total increases | | | 49,708,119 | |
| | | | |
| |
Decrease in net assets available for benefits | | | | |
Net depreciation in fair value of investments | | | 152,331,765 | |
Benefit payments | | | 51,252,895 | |
Administrative fees | | | 365,913 | |
| | | | |
Total decreases | | | 203,950,573 | |
| | | | |
Net decrease in net assets available for benefits | | | (154,242,454 | ) |
Net assets available for benefits, beginning of year | | | 511,291,673 | |
| | | | |
Net assets available for benefits, end of year | | $ | 357,049,219 | |
| | | | |
The accompanying notes are an integral part of these financial statements.
3
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
| 1. | Description of the Plan |
The following description of the Saks Incorporated 401(k) Retirement Plan (the “Plan”) is for general information purposes only. Participants should refer to the Plan for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan covering all eligible employees of Saks Incorporated (the “Employer” or “Company”) and its subsidiaries who are a minimum of 21 years of age and have completed a minimum service hour requirement as provided for in the Plan. At December 31, 2008, the Company operated Saks Fifth Avenue, Saks Fifth Avenue OFF 5th, SFA’s e-commerce operations, and Club Libby Lu (“CLL”). Previously, the Company also operated the Northern Department Store Group (“NDSG”) (operating under the nameplates of Bergner’s, Boston Store, Carson Pirie Scott, Herberger’s and Younkers which was sold to the Bon-Ton Stores, Inc. (“Bon-Ton”) in March 2006) and Parisian, which was sold to Belk Inc. (“Belk”) in October 2006. The operations of CLL were discontinued in January 2009. The Plan is subject to the provisions of the Employee Retirement Income Security Act (“ERISA”) of 1974.
Contributions
The Plan allows for discretionary employer contributions, participant contributions and rollover contributions. The Employer contributes a discretionary amount of cash to the Plan as approved by the Employer’s Board of Directors. The Employer’s contributions are not mandatory and are not based on the operations or net profits of the Employer. Employer contributions may be 0% or any positive percentage multiplied by matchable participant salary deferrals, as defined in the Plan. Employer contributions may not exceed 5% of the compensation of each participant making salary deferral contributions. For the plan year ended December 31, 2008, the Employer’s matching contribution was 50% of the first 5% of compensation that a participant elected to contribute. In December 2008, the Company approved the suspension of the matching contribution for the plan year ending December 31, 2009.
Participants may elect regular payroll deductions of up to 90% of compensation, as defined in the Plan, to be contributed to the Plan on a before tax basis. No participant shall be permitted to elect before tax contributions under the Plan during any calendar year in excess of the amount prescribed by the Internal Revenue Code (the “Code”) ($15,500 for 2008). Participants who are age 50 or older are eligible to contribute catch-up contributions, subject to certain Code limits ($5,000 in 2008). Participants may also contribute amounts representing distributions from other qualified defined benefit or defined contribution plans (“rollover contributions”) provided such rollover contributions meet the requirements of the Plan. Participants may direct the investment of their contributions, as well as the Employer’s contributions, into various investment options offered by the Plan. As of December 31, 2008, the Plan offered twelve mutual funds, one collective investment trust and an Employer common stock fund as investment options for participants. In addition, the Plan offers five target retirement portfolios which are comprised of a mix of the Plan’s mutual funds based on an expected retirement date.
Effective August 31, 2006, the percentage of future employee contributions invested in the Employer common stock fund is limited to 25%. Certain “grandfather” rules apply to participants over the 25% limit on the effective date. Transfers of assets to the Employer common stock fund are limited to the maximum amount such that after any such transfer, the percentage of the participant’s account invested in the Employer common stock fund does not exceed 25%. Effective January 1, 2009, the Company has restricted future contributions from being invested in, or existing assets transferred into, the Company’s common stock.
4
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
Participant Accounts
Each participant’s account is credited with the participant’s contributions, the Employer’s discretionary contributions, and an allocation of the Plan’s earnings or losses. Allocations are based on account balances as defined in the Plan.
Vesting
All participants are at all times fully vested in their contributions, including rollover contributions, plus actual earnings thereon. Plan participants vest in the Employer’s discretionary contributions in addition to actual earnings thereon, based on years of credited service in accordance with the following vesting schedule:
| | | |
Years of Service | | Vested
Percentage | |
Less than 3 | | 0 | % |
3 or more | | 100 | % |
The vested percentage shall be 100% for a participant on and after attainment of normal retirement age, death, or disability, as defined in the Plan.
Participant Loans
A participant may borrow a minimum of $1,000 and up to a maximum of $50,000 or 50% of the vested value of his or her account, less the highest outstanding loan balance during the 12 months before the loan is issued. Loans are collateralized by the balance in the participant’s account and bear interest at a rate commensurate with the prime rate plus 1%, as established by the Plan trustee at the time of the loan. At December 31, 2008 and 2007, interest rates on outstanding loans ranged from 4.25% to 10.50%. At December 31, 2008 and 2007, the total outstanding loan balance for the Plan was $12,986,769 and $12,278,677 respectively.
Forfeitures
Forfeitures occur when a nonvested participant has terminated employment and receives a distribution of the vested value of his or her participant account or incurs five consecutive breaks in service, as defined in the Plan. Forfeitures may be used to reinstate previously forfeited amounts, provide funds necessary for the correction of errors, and to reduce future employer contributions. At December 31, 2008 and 2007, the Plan had $79,184 and $99,214 of unallocated forfeitures included in net assets available for benefits, respectively.
Distribution of Benefits
Vested plan benefits can be distributed upon retirement, death, or termination of service. A participant may elect to receive a lump sum distribution equal to the vested balance of his/her account or periodic installments over a period of time not exceeding the participant’s life expectancy (or the joint life expectancy of the participant and his/her beneficiary).
Termination of the Plan
Although it has not expressed any intent to do so, the Company has the right to terminate the Plan subject to the provisions of ERISA. In the event of a termination of the plan, participants become fully vested in all individual account balances.
In conjunction with the sale of NDSG to Bon-Ton in March 2006 and the sale of Parisian to Belk in October 2006, to the extent not vested, terminated employees became immediately vested in their
5
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
accrued benefits. For the year ended December 31, 2008, $10,102,956 was distributed to NDSG terminated employees and $3,022,668 was distributed to Parisian terminated employees who elected to receive a distribution of their account balances, and is included in the Statement of Changes in Net Assets Available for Benefits as a component of benefit payments.
| 2. | Significant Accounting Policies |
Basis of Accounting
The financial statements of the Plan are maintained on the accrual basis of accounting and have been prepared in conformity with accounting principles generally accepted in the United States of America.
Valuation of Investments
Investments of the Plan, other than participant loans, are stated in the accompanying financial statements at fair value as determined by the Plan’s trustee as described later in this note. Purchases and sales of investments are reflected as of the trade date. Since the Plan has one fund that includes fully benefit-responsive investment contracts, net assets at fair value have been adjusted to net assets at contract value for the collective investment trust fund. Investment income is recorded when earned.
The Plan presents in the Statement of Changes in Net Assets Available for Benefits, the net appreciation (depreciation) in the fair value of its investments which consists of the realized gains or losses and the unrealized appreciation (depreciation) on those investments.
As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the “FSP”), investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan invests in investment contracts through a collective investment trust. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment in the collective investment trust as well as the adjustment of the investment in the collective investment trust from fair value to contract value relating to the investment contracts. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.
6
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
Contributions
Contributions receivable from the Employer are calculated based on amounts approved by the Human Resources and Compensation Committee of the Employer’s Board of Directors and are accrued based on a percentage of the employee’s contributions. Contributions receivable from employees are accrued based on unremitted deductions from the participants’ payroll compensation.
Administrative Fees
Expenses of $365,913 incurred in the administration of the Plan during the 2008 plan year were paid by the Plan. The Plan funds payment of expenses by assessing a proportional annual charge on the fair value of each fund. Certain plan expenses are paid by the Employer on behalf of the Plan.
Benefit Payments
Benefits are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of additions and deductions during the reporting periods. Actual results could differ from those estimates.
7
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
| 3. | Fair Value Measurements |
In September 2006, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 clarifies that fair value is the price that would be received to sell an asset or the price paid to transfer a liability in the principal or most advantageous market available to the entity in an orderly transaction between market participants on the measurement date. SFAS 157 is required to be applied whenever another financial accounting standard requires or permits an asset or liability to be measured at fair value. SFAS 157 does not expand the use of fair value to any new circumstances. The Plan adopted SFAS 157 for financial assets and financial liabilities within its scope in 2008. A summary of the fair value hierarchy under SFAS is described below.
Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:
Level 1: Quoted market prices in active markets for identical assets or liabilities
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data
Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions
The following is a description of valuation methodologies used for the fair value measurement of investments:
| | |
Collective Investment Trust | | Collective Investment Trust is valued at the unit value, which approximates fair value, as reported by the trustee of the collective investment trust fund on each valuation date. |
| |
Mutual Funds | | Mutual funds are valued at the net asset value, based on quoted market prices in active markets, of shares held by the Plan at year end. |
| |
Common Stock | | Common stock is valued at the closing price reported on the active market on which the security is traded. |
| |
Participant Loans | | Participant loans are valued at outstanding balance, which approximates fair value. |
The following table sets forth the fair value of the Plan’s financial assets by level within the fair value hierarchy as of December 31, 2008.
| | | | | | | | | | | | |
| | | | | Fair Value Measurements at Reporting Date Using |
Description | | December 31,
2008 | | Quoted Market
Prices in Active
Market for
Identical
Assets/Liabilities
(Level 1) | | Significant
Other
Observable
Inputs
(Level 2) | | Significant
Unobservable
Inputs
(Level 3) |
Assets: | | | | | | | | | | | | |
Collective Investment Trust | | $ | 117,218,402 | | $ | — | | $ | 117,218,402 | | $ | — |
Mutual Funds | | | 216,285,255 | | | 216,285,255 | | | — | | | — |
Common Stock | | | 3,577,343 | | | 3,577,343 | | | — | | | — |
Participant Loans | | | 12,986,769 | | | — | | | — | | | 12,986,769 |
| | | | | | | | | | | | |
Grand Total | | $ | 350,067,769 | | $ | 219,862,598 | | $ | 117,218,402 | | $ | 12,986,769 |
The following table provides a summary of changes in the fair value of the Plan’s level 3 assets.
| | | |
| | | Participant Loans |
January 1, 2008 | | $ | 12,278,677 |
Purchases, sales, issuances, and settlements, net | | | 708,092 |
| | | |
December 31, 2008 | | $ | 12,986,769 |
| | | |
Investment information as of December 31, 2008 and 2007 and for the year ended December 31, 2008 is as follows:
8
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
| | | | | | |
| | | 2008 | | 2007 |
Collective Investment Trust: | | | | | | |
Wells Fargo Stable Return Fund | | $ | 117,218,402 | | $ | 108,227,525 |
Mutual funds: | | | | | | |
Vanguard Institutional Index Fund | | | 41,548,642 | | | 74,866,124 |
PIMCO Total Return Fund | | | 28,354,089 | | | 25,694,774 |
Dodge & Cox Balanced Fund | | | 29,066,436 | | | 48,353,005 |
Neuberger & Berman Genesis Trust Fund | | | 31,440,711 | | | 53,546,811 |
Neuberger & Berman Partners Fund | | | 28,354,355 | | | 61,349,489 |
Hotchkis & Wiley Large Cap Value Fund | | | 6,530,910 | | | 12,163,053 |
Alliance Bernstein International Value Fund | | | 13,724,558 | | | 28,533,196 |
Fidelity Low-Priced Stock Fund | | | 11,845,390 | | | 23,719,344 |
Columbia Acorn Fund | | | 16,840,635 | | | 33,102,794 |
American AMCAP Fund | | | 7,403,565 | | | 10,508,930 |
Columbia Small Cap Value Fund (b) | | | 574,379 | | | — |
Royce Value Plus Fund (b) | | | 601,585 | | | — |
Common stock: | | | | | | |
Saks Incorporated Stock Fund (a) | | | 3,577,343 | | | 18,107,965 |
Participant loans | | | 12,986,769 | | | 12,278,677 |
| | | | | | |
Investments at Fair Value | | $ | 350,067,769 | | $ | 510,451,687 |
| | | | | | |
Adjustment for fully benefit-responsive investment contracts | | $ | 6,560,270 | | $ | 325,660 |
| | | | | | |
Investments | | $ | 356,628,039 | | $ | 510,777,347 |
| | | | | | |
| | (a) | The Saks Incorporated Stock Fund is measured in “units of participation” rather than in shares of Saks Incorporated common stock. In order to facilitate daily participant transactions of Saks Inc. common stock, a minimal daily cash balance is maintained in the Fund. |
| | (b) | Mutual Funds added as investment options beginning September 10, 2008. |
The Vanguard Institutional Index Fund, Neuberger & Berman Genesis Trust Fund, Neuberger & Berman Partners Fund, Wells Fargo Stable Return Fund, PIMCO Total Return Fund and Dodge & Cox Balanced Fund each exceeded 5% of the Plan’s net assets available for benefits at December 31, 2008 and 2007. The Columbia Acorn Fund and Alliance Bernstein International Value Fund exceeded 5% of the Plan’s net assets available for benefits at December 31, 2007.
The Plan’s investments (including investments bought and sold, as well as those held during the year) had net depreciation in value of $152,331,765 during the year ended December 31, 2008, as follows:
| | | | |
Collective investment trust | | $ | 4,938,456 | |
Mutual funds | | | (143,639,327 | ) |
Common stock | | | (13,630,894 | ) |
| | | | |
| | $ | (152,331,765 | ) |
| | | | |
9
Saks Incorporated 401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008
| 5. | Risks and Uncertainties |
The Plan provides for various investment options in any combination of Saks Incorporated common stock (subject to limitations previously stated), collective investment trust fund, and mutual funds offered by the Plan. Generally all investments are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in risks in the near term could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits.
Participants are exposed to credit loss in the event of non-performance by the trustee or non-performance by the entities in which the investments are placed.
The Internal Revenue Service has determined and informed the Employer by a letter dated September 7, 2001, that the Plan is designed in accordance with applicable sections of the Code. The Plan has been amended since receiving the determination letter. However, the Plan administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the Code. Therefore, no provision for income taxes has been included in the financial statements.
| 7. | Related Party Transactions |
The Plan allows for transactions with certain parties who may perform services or have fiduciary responsibilities to the Plan, including the Company. The Plan invests in common stock of the Company and issues loans to participants, which are collateralized by the balances in the participant’s account. During the year ended December 31, 2008, the Plan purchased 73,774 units of the Saks Incorporated Stock Fund for $690,586 and disposed of 130,200 units for $1,431,427. During the year ended December 31, 2007, the Plan purchased 49,800 units of the Saks Incorporated Stock Fund for $988,493 and disposed of 234,000 units for $3,299,686.
The Wells Fargo Stable Return Fund is managed by Wells Fargo, the trustee, and therefore these transactions qualify as party-in-interest transactions. Fees paid by the Plan to Wells Fargo for investment management services amounted to $215,754 for the year ended December 31, 2008.
10
Supplemental Schedule
Saks Incorporated 401(k) Retirement Plan
Schedule of Assets (Held at End of Year) Schedule H, line 4(i)
December 31, 2008
| | | | | | | | | | |
(a) | | (b) | | (c) | | (d) | | (e) | |
| | | Identity of issuer, borrower, lessor or similar party | | Description of investment including, maturity date, rate of interest, collateral par, or maturity value | | Cost** | | Current value | |
| | Vanguard Institutional Index Fund | | Mutual fund | | | | $ | 41,548,642 | |
| | PIMCO Total Return Fund | | Mutual fund | | | | | 28,354,089 | |
| | Dodge & Cox Balanced Fund | | Mutual fund | | | | | 29,066,436 | |
| | Neuberger & Berman Genesis Trust Fund | | Mutual fund | | | | | 31,440,711 | |
| | Neuberger & Berman Partners Fund | | Mutual fund | | | | | 28,354,355 | |
| | Hotchkis & Wiley Large Cap Value Fund | | Mutual fund | | | | | 6,530,910 | |
| | Alliance Bernstein International Value Fund | | Mutual fund | | | | | 13,724,558 | |
| | Fidelity Low-Priced Stock Fund | | Mutual fund | | | | | 11,845,390 | |
| | Columbia Acorn Fund | | Mutual fund | | | | | 16,840,635 | |
| | American AMCAP Fund | | Mutual fund | | | | | 7,403,565 | |
| | Columbia Small Cap Value Fund | | Mutual fund | | | | | 574,379 | |
| | Royce Value Plus Fund | | Mutual fund | | | | | 601,585 | |
| * | | Wells Fargo Stable Return Fund | | Collective investment trust | | | | | 123,778,672 | 1 |
| * | | Saks Incorporated Stock Fund | | Common stock units | | | | | 3,577,343 | |
| * | | Participant loans | | Various maturity dates and rates ranging from 4.25% - 10.50% | | | | | 12,986,769 | |
| | | | | | | | | | |
| | | | | | | | $ | 356,628,039 | |
| | | | | | | | | | |
| * | Party-in-interest to the Plan. |
| ** | Cost information has not been disclosed as all investments are participant directed. |
12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
| | | | |
| | | | Saks Incorporated 401(k) Retirement Plan |
| | |
| Date: June 25, 2009 | | | | /s/ Kevin G. Wills |
| | | | Kevin G. Wills |
| | | | on behalf of Saks Incorporated 401(k) Retirement Plan as Executive Vice President and Chief Financial Officer of Saks Incorporated |
INDEX TO EXHIBITS
| | |
Exhibit No. | | Description of Exhibit |
| |
| 23 | | Consent of Independent Registered Public Accounting Firm |
