EXPRESS, INC. - 10-Q filing on 2012-08-30

Related Party Transactions

6 Months Ended

Jul. 28, 2012

The transactions described below are transactions between the Company and entities affiliated with Golden Gate Private Equity, Inc. (“Golden Gate”) and Limited Brands. Prior to July 2007, the Company operated as a division of Limited Brands. In July 2007, a Golden Gate affiliate acquired approximately 75% of the outstanding equity interests in the Company from Limited Brands, and the Company began its transition to a stand-alone Company. In May 2010, the Company launched an initial public offering ("IPO") whereby Golden Gate and Limited Brands sold a portion of their shares. Since the IPO, Golden Gate and Limited Brands gradually reduced their ownership interest in the Company. On July 29, 2011, Limited Brands sold its remaining ownership interest in the Company, and as a result of this disposition, ceased to be a related party as of the end of the second quarter of 2011. On March 19, 2012, Golden Gate sold its remaining ownership interest in the Company, and as of May 31, 2012, Golden Gate no longer had representation on the Board. As a result of the disposition and Board seat removal, Golden Gate ceased to be a related party as of June 1, 2012.

Transactions with Limited Brands

The Company is party to a logistics services agreement with an affiliate of Limited Brands. The Limited Brands affiliate provides certain inbound and outbound transportation and delivery services, distribution services, and customs and brokerage services. In addition, merchandise sourcing services are provided by Mast Global Fashions, an affiliate of Limited Brands and the Company also leases its home office and distribution center from an affiliate of Limited Brands.

The 2011 related party activity with Limited Brands and their affiliates described below includes only those expenses incurred through Limited Brands' disposition of the Company's common stock on July 29, 2011.

The Company incurred charges from affiliates of Limited Brands for various services, including home office rent, which is included in selling, general, and administrative expenses. The costs of merchandise sourcing services and logistics services, including distribution center rent, are included in cost of goods sold, buying and occupancy costs. The amounts included in the unaudited Consolidated Statements of Income and Comprehensive Income are as follows:



	Thirteen Weeks Ended		Twenty-Six Weeks Ended
	July 30, 2011		July 30, 2011
	(in thousands)		(in thousands)
Merchandise Sourcing	$	109,649	$	198,162
Transaction and Logistics Services	$	12,772	$	24,778

Transactions with Other Golden Gate Affiliates

The Company transacts with affiliates of Golden Gate for e-commerce warehouse and fulfillment services, software license purchases, and consulting and software maintenance services. The 2012 related party activity with affiliates of Golden Gate described below includes only those expenses incurred through Golden Gate's removal from the Board on May 31, 2012.

The Company incurred the following charges from various affiliates of Golden Gate, included primarily in cost of goods sold, buying and occupancy costs in the unaudited Consolidated Statements of Income and Comprehensive Income:



	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	July 28, 2012		July 30, 2011		July 28, 2012		July 30, 2011
	(in thousands)				(in thousands)
E-commerce warehouse and fulfillment	$	2,005	$	6,998	$	8,755	$	13,904
Software licenses and consulting and software maintenance	$	51	$	25	$	91	$	143

The Company provided real estate services to certain Golden Gate affiliates. Income recognized during the thirteen weeks ended July, 28, 2012 was minimal and during the twenty-six weeks ended July 28, 2012 was $0.2 million. Income recognized for these services during the thirteen and twenty-six weeks ended July 30, 2011 was $0.1 million and $0.3 million, respectively.

During the first and second quarters of 2011, the Company repurchased $25.0 million and $24.2 million of Senior Notes, respectively, in open market transactions. Of the $49.2 million of Senior Notes repurchased, $40.0 million were held by a Golden Gate affiliate. Interest expense incurred on the Senior Notes attributable to the Golden Gate affiliate was $0.1 million and $0.3 million, during the thirteen and twenty-six weeks ended July 28, 2012, respectively; and $0.4 million and $1.3 million during the thirteen and twenty-six weeks ended July 30, 2011, respectively.