Determining Planning Materiality for Anne Aylor, Inc. – A Case Study in Auditing

Anne Aylor, Inc. Determination of Planning Materiality and Tolerable Misstatement MARKS. BEASLEY· FRANK A. BucKLEss ·STEVEN M. GLOVER· DouGLAS F. PRAWITT LEARNING OBJECTIVES After completing and discussing this case you should be able to [1] [2] Determine planning materiality for an audit client Provide support for your materiality decisions [3] Allocate planning materiality to financial statement elements INTRODUCTION j-- Anne Aylor, Inc. (Anne Aylor) is a leading national specialty retailer ofhigh-qualitywomen's apparel, shoes, and accessories sold primarily under the "Anne Aylor" brand name.

Anne Aylor is a highly __ recognized national brand that defin_s_a _ e dis_tin_t_ c fashion_point of v:iew. --. Anne Aylor merchandise represents classic styles, updated to reflect current fashion trends. Company stores offer a full range of career and casual separates, dresses, tops, weekend wear, shoes and accessories coordinated as part of a total wardrobing strategy. The company places a significant emphasis on customer service. Company sales associates are trained to assist customers in merchandise selection and wardrobe coordination, helping them achieve the "Anne Aylor" look while maintaining the customers' personal styles.

The company follows the standard fiscal year of the retail industry, which is a 52-or 53week period ending on the Saturday closest to January 31 of the following year. Net revenue for the year ended January 291 2011 (referred to as fiscal2011) was $1. 4 billion and net income was $58 million. At the end of fiscal 2011, the company operated approximately 584 retail stores located in 46 states under the name Anne Aylor. The company's core business focuses on relatively affluent, fashion-conscious professional women with limited shopping time.

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Substantially all of the company's merchandise is developed in-house by its product design and development teams. Production of merchandise is sourced to 131 independent manufacturers located in 19 countries. Approximately 45 percent; 16 percent, 13 percent, 12 percent, and 9 percent of the company's merchandise is manufactured in China, Philippin~s, Indonesia, India, and Vietnam, respectively. Merchandise is distributed to the company's retail stores through a single distribution center, located in Louisville, Kentucky.

Anne Aylor stock trades on The New York Stock Exchange and Anne Aylor is required to have an integrated audit of its consolidated financial statements and its internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). As of the close of business on March 11, 2011 Anne Aylor had 48,879,663 shares of common stock outstanding with a trading price of $22. 57. The case was prepared by MarkS. Beasley, Ph. D. and Frank A. Buckless, 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 represented are fictitious; any similarity to existing companies or persons is purely coincidental. From Case 7. 1 of Auditing Cases: An Interactive Learning Approach. Fifth Edition. Mark S. Beasley, Frank A. Buckless, Steven M. Glover, Douglas F. Prawitt. Copyright e 2012 by Pearson Education, Inc. Published by Prentice Hall.

All rights reserved 77 Anne Aylor, Inc. BACKGROUND Your firm, Smith and Jones, PA. , is in the initial planning phase for the fiscal 2012 audit of Anne Aylor, Inc. (i. e. , the audit for the year that will end on January 28, 2012). As the audit manager, you have been assigned responsibility for determining planning materiality and tolerable misstatement for key financial statement accounts. Your firm's materiality and tolerable misstatement guidelines have been provided 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 management fraud is low. Donna's initial analysis of the company's performance is documented in the memo referenced as G-3 (top right hand comer of the document). Additionally, Donna has documented current events/issues noted while performing the preliminary analysis in a separate memo, G-4. You have recorded the audited fiscal 2011 and projected fiscal20 12 fmancial statement numbers on audit schedule G-7.

The company's accounting policies are 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 are different materiality bases considered when determining planning materiality? Why are different materiality thresholds relevant for different audit engagements?

Why is the materiality base that results in the smallest threshold generally used for planning purposes? Why is the risk of management fraud considered when determining tolerable misstatement? Why might an auditor not use the same tolerable misstatement amount or percentage of account balance for all fmancial statement accounts? Why does the combined total of individual account tolerable misstatements commonly exceed the estimate of planning materiality? Why might certain trial 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), complete audit schedules G-5, G-6 and G-7. 78 Anne Aylor, In(. EXHIBIT 1 Smith and Jones, PA. Polley Statement: Planning Materiality This policy statement provides general guidelines for firm personnel when establishing planning materiality and tolerable misstatement for purposes of determining the nature, timing, and extent of audit procedures. The intent 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 determined on an engagement by engagement basis, using professional judgment. Planning Materiality Guidelines Planning materiality represents the maximum, combined financial statement misstatement or omission that could occur before Influencing the decisions of reasonable individuals relying on the financial. statements. The magnitude and nature of financial statement misstatements or omissions will not have the same influence on all financial statement users.

For example, a 5 percent misstatement with current assets may be more relevant for a creditor than a stockholder, while a 5 percent misstatement with net income before Income taxes may be more relevant for a stockholder ttian a creditor. Therefore, the primary consideration 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 are provided below: • Net Income-Before-Income Taxes - ·combined misstatements or omissions less than 2 percent of.. ·- Net Income Before Income Taxes are presumed to be immaterial and combined misstatements or -····---------- omissions-greater than·7"percenfare-pfes-umecrtob8·-material. -(Note: Net lncome.. Befofe.. lncome______ .. Taxes may not be an appropriate base If the clienrs Net Income Before Income Taxes is substantially below other 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. • Total Assets- combined misstatements or omissions less than 0. percent of Total Assets are presumed to be immaterial, and combined misstatements or omissions greater than 2 percent are presumed to be material. (Note: Total Assets may not be an appropriate base for service organizations or other organizations that have few operating assets. ) The specific amounts established for each financial statement element must be determined by considering the primary users as well as qualitative factors. For example, if the client is close to violating the minimum current ratio requirement for a loan 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 requirement for a loan agreement, n would be reasonable to use a higher planning materiality amount for current assets and current liabilnies. Planning materiality should be based on the smallest amount established from relevant materiality bases to provide reasonable assurance that the financial statements, taken as a whole, are not materially misstated for any user. Anne Aylor, Inc.

Tolerable Misstatement Guidelines In addition to establishing materiality for the overall financial statements, materiality for individual financial statement accounts should be established. The amount established for individual accounts is referred to as "tolerable misstatement. " Tolerable misstatement represents the amount individual financial statement accounts can differ from their true amount without affecting the fair presentation of the financial statements taken 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 contain 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 increases.

In many audits it is reasonable to expect that individual financial accounts misstatements identified will be less than tolerable misstatement and that misstatements across accounts will offset each other (some identified 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 intentionally 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:- -- -- ------·-· -· --·-- ---- ----·-- -- - - ·-· ·--- ----··-····- - ------7-5-percent-of-planning materJality-if low-likelihood-otmanagementfraud ---------------- _--·-·- ·- -· -·--·-· . • 50 percent of planning materiality if reasonably low likelihood of management fraud, and • 25 percent of planning materiality if moderate likelihood of management fraud Finally a lower tolerable misstatement may be required 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 Company records revenue as merchandise is sold to clients. The Company's policy with respect to gift certificates and gift cards is to record revenue as they are redeemed for merchandise. Prior to their redemption, these gift certificates and gift cards are recorded as a liability.

While the Company honors all gift certificates and gift cards presented for payment, management reviews unclaimed property laws to determine gift certificate and gift card balances required for escheatment to the appropriate government agency. Amounts related to shipping and handling billed to clients in a sales transaction are classified as revenue and the costs related to shipping product to clients are classified as cost of sales. A reserve for estimated returns is established when sales are recorded. 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 costs classified in each major expense category: Cost of Sales Cost of merchandise sold; Freight costs associated with moving merchandise from our suppliers to our distribution center; __ • . - Costs asSociated with the rilovein8nt Of - merchandise-through. customsrCosts associated with the fulfUiment of online customer orders; Depreciation related to merchandise management systems; Sample development costs; Merchandise shortage; and Client shipping costs.

Selling, General and Administrative Expenses Payroll, bonus and benefit costs for retail and corporate associates; --~- __Design and merchandising oosts;____ _ _ _ Occupancy costs for retail and corporate facilities; -Depreciation related to retail and corporate assets;· Advertising and marketing 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 costs.

Advenlslng- Costs associated with the production of advertising, such 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 fully expensed when the advertising Is scheduled to first arrive in clients' homes. Leases and Oete"ed Rent 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 five-year periods under substantially the same terms and conditions as the original leases. Some store leases also contain early termination options, which can be exercised by the Company under specific conditions. Most of the store leases require payment of a specified minimum rent, plus a contingent rent based on a percentage of the store's 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 future minimum lease payments. Rent expense under non-cancelable operating leases with scheduled rent increases or free rent periods is accounted for on a straight-line basis over the initial lease term beginning on the date of initial possession, which is generally when the Company enters the space and begins construction build-out Any reasonably assured renewals are considered. The amount of the excess of straight-line rent expense over scheduled payments is recorded as adeferred liability. 1 Anne Aylor, IlK. Construction allowances and other such lease incentives are recorded as deferred credits, and are amortized on a straight-line basis as a reduction of rent expense beginning in the period they are deemed to be earned, which often is subsequent to the date of initial possession and generally coincides with the store opening date. The current portion of unamortized deferred lease costs and construction allowances is included in "Accrued tenancy", and the long-term portion is included in "Deferred lease costs" on the Company's Balance Sheets.

Restructuring Costs - On January 30, 2008, the Company inniated a multi-year restructuring program designed to enhance protnability and improve overall operating effectiveness. The restructuring program, includes closing underperforming stores over a three-year period, reducing the Company's corporate staff by approximately 1Oo/o and undertaking a broad-based productivity initiative that includes, among other things, the strategic procurement of non-merchandise goods and services.

Restructuring costs include non-cash expenses, primarily associated wnh the write-down of assets related to store closures, cash charges related primarily to severance and various other costs to implement the restructuring program. Liabilities associated with restructuring charges are included in "Accrued salaties and bonus," Accrued tenancy," "Accrued expenses and other current liabilities," and "Other liabilities. " Cash and Cash Equivalents - Cash and short-term highly liquid investments with original maturity dates of 3 months or less are considered cash or cash equivalents.

The Company invests excess cash primarily in money market accounts and short-term commercial paper. Financial Instruments- The Company's auction rate securities are classified as available-for-sale and are --- -··-·· -----carried at. cost or_ par_ value,. which _appro,droaJe$J~! mM~~LV~-~~~ . I~_s. e_ sepurities have stated maturities beyond three months but are priced and traded as short-term instruments due to theliquiditY-provided fnrougn --- -· --· ·· ·------- · -··----- --·-ttie interesrratereset·mechanism-of-2B-or35-days:--·-----·------------------------- ·----. -··-·--··-······ Merchandise Inventories - Merchandise inventories are valued 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 selling price. Merchandise inventory levels are monitored to identify slow-moving items and broken assortments (items no longer in stock in a sufficient 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 - Non-capital expendnures, such as rent, advertising and payroll costs incurred prior 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 useful lives: Building ......................................................................... 0 years Leasehold improvements ............................................. 10 years or term of lease, if shorter Furniture, fixtures and equipment.. ............................... 2-1 0 years Software ....................................................................... 5 years Accounting for the Impairment or Disposal of Long-Lived Assets - The assessment of possible impairment is based on tbe Company's 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 measurement 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 Company's recorded goodwill and indefinite-lived intangible assets.

Defe"ed Financing Costs- Deferred financing costs are amortized using the effective interest method over the term of the related debt. Self Insurance - The Company is self-insured for certain losses 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 reported, are accrued based on management's estimates, using information received from plan administrators, third party activities, historical 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. Treasury Stock Repurchases - 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. -·-------- ----- ---· - - - - - - - - - - - - · -------·------------- -·---· ---- ---------· ----··--···-------·-------- -------------

Stock-based Compensation- The Company uses the modified prospective method to record stock-based ---···------··- ---compensation-:-Thecalculaticinof stocK-baseifcompensatiOn exp-ense requirestne input ofnigtily subjective___ ·--··· ·-----.. -... assumptions, including the expected term of the stock-based awards, stock price volatility, 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 assumed 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 Company's Board of Directors authorized management to freeze "s non-contributory defined benefit pension plan (the "Pension Plan") and enhance its defined contribution 401 (k) savings plan (the "401 (k) Plan;. These plan changes became effective on October 1, 2006. Savings Plan - Substantially all employees of the Company and "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 participate in the Company's 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 participant's contributions to the 401 (k) Plan and makes a matching contribution of 50o/o with respect to the second 3o/o of each participant's 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 Company's 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 fully 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' equity.

Other Liabilities - Other liabil~ies includes liabilities associated with the Company's restructuring program, pension plan, borrowings for the purchase of fixed assets, and obligation tor excess corporate office space. ---··----·----- -----··------ ----·----·- -·------·- ·---- --·---··----·-·-- -·-·-·---· ---·-----·----·. ·-·---·· ·-·- -· ·-·--· ·-·-·- -----·- 84 Anne Aylor, In(. Anne Aylor, Inc. Memo: Analysis of Performance First Quarter Year Ended: January 28,2012 Reference: Prepared by: Date: G3 DF 6115111 Reviewed by: Net sales for the first quarter of fiscal 2012 increased 7. 5 percent from the first o quarter - f fiscal 2011.

Comparable store sales for the first quarter of fiscal 2012 increased 5. 1 percent, compared to a comparable store sales increase of 2. 5 percent in the first quarter offiscal201 J. The Company saw 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. Gross margin 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 improved product offerings, effective marketing initiatives and the success of the Company's strategy to appropriately position inventory levels. --------------------------------------------·--------· -·---- ------------·---··---·---· --------·--··-···

Selling, general and administrative expenses as a percentage of net sales decreased ------ -- -------- ----------ro--48:1 percent; -;n-rhe first quanero jlsCiir20n ;--co paredto5o:g peicenroj ner -- -- ----------- -----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 Bat Amounts Income Before Taxes Net Revenues Current Uabilltles Current Assets----- Total Assets Planning Materiality On thousands): Explanation: Flscal2012 Planning Materiality Levels Projected Upper Limit Lower Limit Financial Dollar Statement Dollar Amount Percent Amounts Percent Amount 2 7 - 2-- --0. 5 - --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 Management Fraud (check one): Low Likelihood of Management Fraud Reasonably Low Likelihood of Management Fraud Moderate Likelihood of Management Fraud Tolerable Misstatement (In thousands): Planning Materiality: Multiplication Factor (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 $ :;pee S lflc Accounts Requiring Lower Tolerable Mlsstatement: Account Tolerable Misstatement Explanation;- --- -----··-----·-·-·---------------------- --- ----------------· . -------· -----~-- ---------·-···· .•. ----- -------"' ---- - ---- ------- -· ·----·- --- - .... --------- ---·--- ---- Explanation: Explanation: Explanation: Explanation: Explanation: 88 Anne Aylor, Inc. Anne Aylor, Inc. Planning Materiality Financial Information YearEnded:January28,2012 Reference: Prepared by: G7 Data: Reviewed by: 1/28/2012 1/29/2011

Projected 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 Interest 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 ____ -·---·------- --·-··------·--··-------··--·-----·12,100-- ------ 12,67o-·-.. ----· Merchandise Inventories 133,800 111,229 ·Refundable Income- taxes-·----~---· --·- ·- ·- --- ······-- ----·-·· ··- · ·-· -----· ··· ---- ----- --· ·-·- - ·-· ---- ------· ·-----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 payable Accrued salaries and bonus Accrued tenancy Gift 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 $

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