UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 27, 2012May 4, 2013
OR
| |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES |
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-13536
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| | |
Incorporated in Delaware | | I.R.S. Employer Identification No. |
| | 13-3324058 |
7 West Seventh Street
Cincinnati, Ohio 45202
(513) 579-7000
and
151 West 34th Street
New York, New York 10001
(212) 494-1602
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ��large“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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| | | | | | |
Large accelerated filer ý | | Accelerated filer o | | Non-accelerated filer o | | Smaller reporting company o |
| | (Do not check if a smaller reporting company) | | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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| | |
Class | | Outstanding at November 23, 2012May 31, 2013 |
Common Stock, $0.01 par value per share | | 395,275,822383,653,852 shares |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MACY’S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(millions, except per share figures)
| | | | | | | | | | | | |
| 13 Weeks Ended | | 39 Weeks Ended | 13 Weeks Ended |
| October 27, 2012 | | October 29, 2011 | | October 27, 2012 | | October 29, 2011 | May 4, 2013 | | April 28, 2012 |
Net sales | $ | 6,075 |
| | $ | 5,853 |
| | $ | 18,336 |
| | $ | 17,681 |
| $ | 6,387 |
| | $ | 6,143 |
|
Cost of sales | (3,672 | ) | | (3,544 | ) | | (10,984 | ) | | (10,587 | ) | (3,911 | ) | | (3,757 | ) |
Gross margin | 2,403 |
| | 2,309 |
| | 7,352 |
| | 7,094 |
| 2,476 |
| | 2,386 |
|
Selling, general and administrative expenses | (2,078 | ) | | (2,018 | ) | | (6,082 | ) | | (5,967 | ) | (2,041 | ) | | (1,995 | ) |
Operating income | 325 |
| | 291 |
| | 1,270 |
| | 1,127 |
| 435 |
| | 391 |
|
Interest expense | (104 | ) | | (109 | ) | | (322 | ) | | (338 | ) | (97 | ) | | (113 | ) |
Interest income | 1 |
| | 1 |
| | 2 |
| | 3 |
| — |
| | 1 |
|
Income before income taxes | 222 |
| | 183 |
| | 950 |
| | 792 |
| 338 |
| | 279 |
|
Federal, state and local income tax expense | (77 | ) | | (44 | ) | | (345 | ) | | (281 | ) | (121 | ) | | (98 | ) |
Net income | $ | 145 |
| | $ | 139 |
| | $ | 605 |
| | $ | 511 |
| $ | 217 |
| | $ | 181 |
|
Basic earnings per share | $ | .36 |
| | $ | .33 |
| | $ | 1.48 |
| | $ | 1.20 |
| $ | .56 |
| | $ | .43 |
|
Diluted earnings per share | $ | .36 |
| | $ | .32 |
| | $ | 1.45 |
| | $ | 1.18 |
| $ | .55 |
| | $ | .43 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(millions)
| | | | | | | | | | | | |
| 13 Weeks Ended | | 39 Weeks Ended | 13 Weeks Ended |
| October 27, 2012 | | October 29, 2011 | | October 27, 2012 | | October 29, 2011 | May 4, 2013 | | April 28, 2012 |
Net income | $ | 145 |
| | $ | 139 |
| | $ | 605 |
| | $ | 511 |
| $ | 217 |
| | $ | 181 |
|
Other comprehensive income (loss), before tax: | | | | | | | | |
Post employment and postretirement benefit plans | 37 |
| | 22 |
| | 115 |
| | 66 |
| |
Marketable securities | — |
| | — |
| | — |
| | (15 | ) | |
Total other comprehensive income, before tax | 37 |
| | 22 |
| | 115 |
| | 51 |
| |
Other comprehensive income: | | | | |
Amortization of net actuarial loss on post employment and postretirement benefit plans included in net income, before tax | | 38 |
| | 38 |
|
Tax effect related to items of other comprehensive income | (13 | ) | | (8 | ) | | (44 | ) | | (20 | ) | (14 | ) | | (15 | ) |
Total other comprehensive income, net of tax effect | 24 |
| | 14 |
| | 71 |
| | 31 |
| 24 |
| | 23 |
|
Comprehensive income | $ | 169 |
| | $ | 153 |
| | $ | 676 |
| | $ | 542 |
| $ | 241 |
| | $ | 204 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(millions)
| | | | | | | | | | | | |
| October 27, 2012 | | January 28, 2012 | | October 29, 2011 | May 4, 2013 | | February 2, 2013 | | April 28, 2012 |
ASSETS | | | | | | | | | | |
Current Assets: | | | | | | | | | | |
Cash and cash equivalents | $ | 1,264 |
| | $ | 2,827 |
| | $ | 1,097 |
| $ | 1,752 |
| | $ | 1,836 |
| | $ | 1,891 |
|
Receivables | 281 |
| | 368 |
| | 288 |
| 295 |
| | 371 |
| | 277 |
|
Merchandise inventories | 7,208 |
| | 5,117 |
| | 7,158 |
| 5,631 |
| | 5,308 |
| | 5,465 |
|
Prepaid expenses and other current assets | 410 |
| | 465 |
| | 408 |
| 388 |
| | 361 |
| | 400 |
|
Total Current Assets | 9,163 |
| | 8,777 |
| | 8,951 |
| 8,066 |
| | 7,876 |
| | 8,033 |
|
Property and Equipment - net of accumulated depreciation and amortization of $6,584, $5,986 and $6,720 | 8,212 |
| | 8,420 |
| | 8,423 |
| |
Property and Equipment - net of accumulated depreciation and amortization of $6,148, $5,947 and $6,159 | | 8,063 |
| | 8,196 |
| | 8,359 |
|
Goodwill | 3,743 |
| | 3,743 |
| | 3,743 |
| 3,743 |
| | 3,743 |
| | 3,743 |
|
Other Intangible Assets – net | 570 |
| | 598 |
| | 608 |
| 552 |
| | 561 |
| | 589 |
|
Other Assets | 582 |
| | 557 |
| | 538 |
| 616 |
| | 615 |
| | 553 |
|
Total Assets | $ | 22,270 |
| | $ | 22,095 |
| | $ | 22,263 |
| $ | 21,040 |
| | $ | 20,991 |
| | $ | 21,277 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | |
Short-term debt | $ | 123 |
| | $ | 1,103 |
| | $ | 805 |
| $ | 124 |
| | $ | 124 |
| | $ | 313 |
|
Merchandise accounts payable | 3,627 |
| | 1,593 |
| | 3,576 |
| 2,426 |
| | 1,579 |
| | 2,346 |
|
Accounts payable and accrued liabilities | 2,419 |
| | 2,788 |
| | 2,375 |
| 2,134 |
| | 2,610 |
| | 2,225 |
|
Income taxes | 89 |
| | 371 |
| | 66 |
| 91 |
| | 355 |
| | 104 |
|
Deferred income taxes | 426 |
| | 408 |
| | 388 |
| 426 |
| | 407 |
| | 411 |
|
Total Current Liabilities | 6,684 |
| | 6,263 |
| | 7,210 |
| 5,201 |
| | 5,075 |
| | 5,399 |
|
Long-Term Debt | 6,817 |
| | 6,655 |
| | 6,151 |
| 6,797 |
| | 6,806 |
| | 6,644 |
|
Deferred Income Taxes | 1,182 |
| | 1,141 |
| | 1,402 |
| 1,240 |
| | 1,238 |
| | 1,128 |
|
Other Liabilities | 2,024 |
| | 2,103 |
| | 1,648 |
| 1,831 |
| | 1,821 |
| | 2,073 |
|
Shareholders’ Equity | 5,563 |
| | 5,933 |
| | 5,852 |
| 5,971 |
| | 6,051 |
| | 6,033 |
|
Total Liabilities and Shareholders’ Equity | $ | 22,270 |
| | $ | 22,095 |
| | $ | 22,263 |
| $ | 21,040 |
| | $ | 20,991 |
| | $ | 21,277 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
| | | | | | | | |
| 39 Weeks Ended | 13 Weeks Ended |
| October 27, 2012 | | October 29, 2011 | May 4, 2013 | | April 28, 2012 |
Cash flows from operating activities: | | | | | | |
Net income | $ | 605 |
| | $ | 511 |
| $ | 217 |
| | $ | 181 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | |
Depreciation and amortization | 782 |
| | 818 |
| 251 |
| | 256 |
|
Stock-based compensation expense | 47 |
| | 54 |
| 17 |
| | 21 |
|
Amortization of financing costs and premium on acquired debt | (10 | ) | | (12 | ) | (2 | ) | | (5 | ) |
Changes in assets and liabilities: | | | | | | |
Decrease in receivables | 91 |
| | 28 |
| 78 |
| | 95 |
|
Increase in merchandise inventories | (2,091 | ) | | (2,400 | ) | (323 | ) | | (348 | ) |
(Increase) decrease in prepaid expenses and other current assets | 58 |
| | (32 | ) | (31 | ) | | 61 |
|
Decrease in other assets not separately identified | 23 |
| | 40 |
| 1 |
| | 21 |
|
Increase in merchandise accounts payable | 1,941 |
| | 2,023 |
| 754 |
| | 720 |
|
Decrease in accounts payable and accrued liabilities not separately identified | (323 | ) | | (220 | ) | (454 | ) | | (450 | ) |
Decrease in current income taxes | (282 | ) | | (117 | ) | (264 | ) | | (267 | ) |
Increase in deferred income taxes | 14 |
| | 162 |
| |
Increase (decrease) in other liabilities not separately identified | 34 |
| | (228 | ) | |
Increase (decrease) in deferred income taxes | | 5 |
| | (24 | ) |
Increase in other liabilities not separately identified | | 49 |
| | 4 |
|
Net cash provided by operating activities | 889 |
| | 627 |
| 298 |
| | 265 |
|
Cash flows from investing activities: | | | | | | |
Purchase of property and equipment | (464 | ) | | (359 | ) | (65 | ) | | (168 | ) |
Capitalized software | (169 | ) | | (141 | ) | (50 | ) | | (46 | ) |
Disposition of property and equipment | 36 |
| | 22 |
| 4 |
| | 23 |
|
Proceeds from insurance claims | — |
| | 6 |
| |
Other, net | (18 | ) | | — |
| 4 |
| | (11 | ) |
Net cash used by investing activities | (615 | ) | | (472 | ) | (107 | ) | | (202 | ) |
Cash flows from financing activities: | | | | | | |
Debt repaid | (803 | ) | | (451 | ) | (5 | ) | | (795 | ) |
Financing costs | — |
| | (8 | ) | |
Dividends paid | (246 | ) | | (106 | ) | (78 | ) | | (83 | ) |
Increase in outstanding checks | 38 |
| | 140 |
| |
Increase (decrease) in outstanding checks | | 44 |
| | (16 | ) |
Acquisition of treasury stock | (1,018 | ) | | (210 | ) | (336 | ) | | (246 | ) |
Issuance of common stock | 192 |
| | 113 |
| 100 |
| | 141 |
|
Net cash used by financing activities | (1,837 | ) | | (522 | ) | (275 | ) | | (999 | ) |
Net decrease in cash and cash equivalents | (1,563 | ) | | (367 | ) | (84 | ) | | (936 | ) |
Cash and cash equivalents beginning of period | 2,827 |
| | 1,464 |
| 1,836 |
| | 2,827 |
|
Cash and cash equivalents end of period | $ | 1,264 |
| | $ | 1,097 |
| $ | 1,752 |
| | $ | 1,891 |
|
Supplemental cash flow information: | | | | | | |
Interest paid | $ | 304 |
| | $ | 333 |
| $ | 70 |
| | $ | 89 |
|
Interest received | 2 |
| | 4 |
| — |
| | 1 |
|
Income taxes paid (net of refunds received) | 591 |
| | 272 |
| 333 |
| | 328 |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
MACY’S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Operations
Macy's, Inc. and subsidiaries (the "Company") is an omnichannel retail organization operating stores and Internet websites under two brands (Macy's and Bloomingdale's) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The Company's operations include approximately 850840 stores, including twelve Bloomingdale's Outlets, in 45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com and bloomingdales.com. In addition, there is a Bloomingdale's store in Dubai, United Arab Emirates which is operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 2012February 2, 2013 (the "2011"2012 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 20112012 10-K.
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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.
The Consolidated Financial Statements for the 13 and 3913 weeks ended October 27, 2012May 4, 2013 and October 29, 2011April 28, 2012, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.
Seasonality
Because of the seasonal nature of the retail business, the results of operations for the 13 and 3913 weeks ended October 27, 2012May 4, 2013 and October 29, 2011April 28, 2012 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.
Certain reclassifications were made to prior year's amounts to conformComprehensive Income
Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income. For the classificationsCompany, the only other component of such amountstotal comprehensive income for the most recent year.
In 13 weeks endedMay 2011,4, 2013 and April 28, 2012 is the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update No. 2011-04, which amends Accounting Standards Codification ("ASC") Topic 820, "Fair Value Measurementsamortization of post employment and Disclosures," to result in common fair value measurements and disclosures between accounting principles generally acceptedpostretirement plan items. These reclassifications out of accumulated other comprehensive loss are included in the United Statescomputation of America and International Financial Reporting Standards. The amendments explain how to measure fair value. They do not require additional fair value measurementsnet period benefit costs and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. The amendments change the wording used to describe fair value measurement requirementsincluded in selling, general and disclosures, but often do not result in a change in the application of current guidance. Certain amendments clarify the intent about the application of existing fair value measurement requirements, while certain other amendments change a principle or requirement for fair value measurement or disclosure. The Company adopted this guidance as of January 29, 2012, and adoption did not have an impactadministrative expenses on the Company's consolidated financial position, resultsConsolidated Statements of operations or cash flows.Income. See Note 4, "Benefit Plans," for further information.
In June 2011, the FASB issued Accounting Standard Update No. 2011-05, which amends ASC Topic 220, "Comprehensive Income," to increase the prominence of items reported in other comprehensive income by eliminating the option of presenting components of comprehensive income as part of the statement of changes in shareholders' equity. The updated guidance requires that all nonowner changes in shareholders' equity be presented either as a single continuous statement of comprehensive income or in two separate but consecutive statements. In December 2011, the FASB issued Accounting Standards Update No. 2011-12, which defers the requirement to present on the face of the financial statements items that are reclassified from other comprehensive income to net income, while the FASB further deliberates this aspect of the proposal. The guidance is limited to the form and content of the financial statements and disclosures. The Company adopted this guidance, as amended, as of January 29, 2012, and adoption did not have an impact on the Company's consolidated financial position, results of operations or cash flows.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
In September 2011, the FASB issued Accounting Standards Update No. 2011-08, which amends ASC Topic 350, "Intangibles - Goodwill and Other." The guidance amends the impairment test for goodwill by allowing companies to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than the carrying amount and whether it is necessary to perform the current two-step goodwill impairment test. The Company adopted this guidance as of January 29, 2012, and adoption did not have an impact on the Company's consolidated financial position, results of operations or cash flows.
In December 2011, the FASB issued Accounting Standards Update No. 2011-11, which amends ASC Subtopic 210-20, "Offsetting." The guidance requires enhanced disclosures with improved information about financial instruments and derivative instruments that are either (i) offset in accordance with current guidance or (ii) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with current guidance. This guidance is effective for interim and annual periods beginning after January 1, 2013. The guidance is limited to the form and content of disclosures, and the Company does not anticipate that the adoption of this guidance will have an impact on the Company's consolidated financial position, results of operations or cash flows.
In July 2012, the FASB issued Accounting Standards Update No. 2012-02, which amends ASC Topic 350, "Intangibles - Goodwill and Other." The guidance amends the impairment test for indefinite lived intangible assets other than goodwill by allowing companies to first assess qualitative factors to determine if it is more likely than not that an indefinite lived intangible asset is impaired and whether it is necessary to perform the impairment test of comparing the carrying amount with the recoverable amount of the indefinite lived intangible asset. This guidance is effective for interim and annual periods beginning after September 15, 2012. The Company does not anticipate that the adoption of this guidance will have an impact on the Company's consolidated financial position, results of operations or cash flows.
2. Earnings Per Share
The following tables settable sets forth the computation of basic and diluted earnings per share:
|
| | | | | | | | | | | | | | | | | | | | | |
| 13 Weeks Ended |
| October 27, 2012 | | October 29, 2011 |
| Net Income | | | | Shares | | Net Income | | | | Shares |
| (millions, except per share data) |
Net income and average number of shares outstanding | $ | 145 |
| | | | 400.3 |
| | $ | 139 |
| | | | 424.3 |
|
Shares to be issued under deferred compensation plans | | | | | 1.0 |
| | | | | | 1.0 |
|
| $ | 145 |
| | | | 401.3 |
| | $ | 139 |
| | | | 425.3 |
|
Basic earnings per share | | | $ | .36 |
| | | | | | $ | .33 |
| | |
Effect of dilutive securities: | | | | | | | | | | | |
Stock options, restricted stock and restricted stock units | | | | | 6.6 |
| | | | | | 6.5 |
|
| $ | 145 |
| | | | 407.9 |
| | $ | 139 |
| | | | 431.8 |
|
Diluted earnings per share | | | $ | .36 |
| | | | | | $ | .32 |
| | |
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
| | | 39 Weeks Ended | 13 Weeks Ended |
| October 27, 2012 | | October 29, 2011 | May 4, 2013 | | April 28, 2012 |
| Net Income | | | | Shares | | Net Income | | | | Shares | Net Income | | | | Shares | | Net Income | | | | Shares |
| (millions, except per share data) | (millions, except per share data) |
Net income and average number of shares outstanding | $ | 605 |
| | | | 408.7 |
| | $ | 511 |
| | | | 425.0 |
| $ | 217 |
| | | | 387.0 |
| | $ | 181 |
| | | | 415.4 |
|
Shares to be issued under deferred compensation plans | | | | | 1.2 |
| | | | | | 1.0 |
| |
Shares to be issued under deferred compensation and other plans | | | | | | 1.2 |
| | | | | | 1.7 |
|
| $ | 605 |
| | | | 409.9 |
| | $ | 511 |
| | | | 426.0 |
| $ | 217 |
| | | | 388.2 |
| | $ | 181 |
| | | | 417.1 |
|
Basic earnings per share | | | $ | 1.48 |
| | | | | | $ | 1.20 |
| | | | | $ | .56 |
| | | | | | $ | .43 |
| | |
Effect of dilutive securities: | | | | | | | | | | | | | | | | | | | | | | |
Stock options, restricted stock and restricted stock units | | | | | 6.6 |
| | | | | | 6.2 |
| | | | | 6.3 |
| | | | | | 7.2 |
|
| $ | 605 |
| | | | 416.5 |
| | $ | 511 |
| | | | 432.2 |
| $ | 217 |
| | | | 394.5 |
| | $ | 181 |
| | | | 424.3 |
|
Diluted earnings per share | | | $ | 1.45 |
| | | | | | $ | 1.18 |
| | | | | $ | .55 |
| | | | | | $ | .43 |
| | |
In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 7.610.9 million shares of common stock, 237,000 shares of restricted stock and restricted stock units relating to 2.51.8 million shares of common stock were outstanding at October 27, 2012May 4, 2013, but were not included in the computation of diluted earnings per share for the 13 or 3913 weeks ended October 27, 2012May 4, 2013 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 17.58.3 million shares of common stock, 250,000 shares of restricted stock and restricted stock units relating to 2.12.5 million shares of common stock were outstanding at October 29, 2011April 28, 2012, but were not included in the computation of diluted earnings per share for the 13 or 3913 weeks ended October 29, 2011April 28, 2012 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
3. Financing Activities
On January 10, 2012,The following table shows the Company issued $550 million aggregate principal amountdetail of 3.875% senior notes due 2022 and $250 million aggregate principal amount of 5.125% senior notes due 2042, the proceeds of which were used to retire indebtedness maturing during the 39 weeks endedOctober 27, 2012.debt repayments:
|
| | | | | | | |
| 13 Weeks Ended |
| May 4, 2013 | | April 28, 2012 |
| (millions) |
5.35% Senior notes due 2012 | $ | — |
| | $ | 616 |
|
8.0% Senior debentures due 2012 | — |
| | 173 |
|
9.5% amortizing debentures due 2021 | 2 |
| | 2 |
|
9.75% amortizing debentures due 2021 | 1 |
| | 1 |
|
Capital leases and other obligations | 2 |
| | 3 |
|
| $ | 5 |
| | $ | 795 |
|
On March 29, 2012, the Company redeemed the $173 million of 8.0% senior debentures due July 15, 2012, as allowed under the terms of the indenture. The price for the redemption was calculated pursuant to the indenture and resulted in the recognition of additional interest expense of approximately $4 million. By redeeming this debt early, the Company saved approximately $4 million of interest expense during the 39 weeks endedOctober 27, 2012. In addition, the Company repaid $616 million of 5.35% senior notes due March 15, 2012 at maturity.
During the 39 weeks endedOctober 29, 2011, the Company repaid $439 million of indebtedness at maturity.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following table shows the detail of debt repayments:
|
| | | | | | | |
| 39 Weeks Ended |
| October 27, 2012 | | October 29, 2011 |
| (millions) |
5.35% Senior notes due 2012 | $ | 616 |
| | $ | — |
|
8.0% Senior debentures due 2012 | 173 |
| | — |
|
6.625% Senior notes due 2011 | — |
| | 330 |
|
7.45% Senior debentures due 2011 | — |
| | 109 |
|
9.5% amortizing debentures due 2021 | 4 |
| | 4 |
|
9.75% amortizing debentures due 2021 | 2 |
| | 2 |
|
Capital leases and other obligations | 8 |
| | 6 |
|
| $ | 803 |
| | $ | 451 |
|
During the 3913 weeks ended October 27, 2012May 4, 2013, the Company repurchased approximately 26,256,5768.4 million shares of its common stock pursuant to existing stock purchase authorizations at an approximate costfor a total of approximately $991360 million. As of October 27, 2012May 4, 2013, the Company had approximately $3611,142 million of authorization remaining under its share repurchase program. On May 14, 2013, the Company's board of directors approved an additional $1,500 million in authorization to purchase common stock, bringing the Company's remaining authorization under its share repurchase program including this increase to $2,642 million. The Company may continue or, from time to time, suspend repurchases of shares under its share repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors.
The Company entered into a credit agreement with certain financial institutions on May 10, 2013 providing for revolving credit
On November 28, 2012,borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which may be increased to $1,750 million at the option of the Company, repurchasedsubject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time. This agreement is set to expire May 10, 2018 and replaces a $7001,500 million aggregate principal amountfacility which was set to expire June 20, 2015. As of its outstanding senior unsecured notes, which had a net book value of approximatelyand during the 13 weeks ended $706 million. The repurchased senior unsecured notes had stated interest rates ranging from 5.9% to 7.875% and maturities in 2015 and 2016. The Company expects to record the redemption premium and other costs related to these repurchases as additional interest expense of approximately $133 million ($83 million after income taxes) prior to February 2, 2013. On November 20, 2012May 4, 2013, the Company issued $750 million aggregate principal amounthad no borrowings outstanding under its then existing credit agreement, and as of 2.875% senior unsecured notes due 2023 and $250 million aggregate principal amount of 4.3% senior unsecured notes due 2043. This debt was used to pay for the repurchased notes described above. Remaining proceedsdate of this debt will be used to retire $298 million of 5.875% senior unsecured notes maturing during January 2013, and as a result this short-term debt was reclassified to long-term debt as of October 27, 2012. Through these transactions,report, the Company has improveddoes not expect to borrow under its debt maturity profile, decreased its ongoing interest expense by taking advantage of the current low interest rate environment and reduced its refinancing and interest rate risk over the next few years. The Company's annual interest expense is anticipated to be reduced on a full year basis by approximately $30 million.new credit agreement during fiscal 2013.
4. Benefit Plans
The Company has a funded defined benefit plan ("Pension Plan") and a defined contribution plan, which cover substantially all employees who work 1,000 hours or more in a year. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions. The Company also has an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees, in excess of qualified plan limitations. Effective January 2, 2012, the supplementary retirement planSERP was closed to new participants.
During the 39 weeks endedOctober 29, 2011, the Company made a funding contribution to After December 31, 2013, with limited exceptions, employees will no longer earn future pension service credits under the Pension Plan of $225 million. The Company is currently planningand SERP, and retirement benefits attributable to make a fundingservice after that date will be provided solely through defined contribution to the Pension Plan of approximately $150 million prior to February 2, 2013.plans.
In addition, certain retired employees currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible employees who were hired prior to a certain date and retire after a certain age with specified years of service. Certain employees are subject to having such benefits modified or terminated.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
In March 2010, President Obama signed into law the "Patient Protection and Affordable Care Act" and the "Health Care and Education Affordability Reconciliation Act of 2010" (the "2010 Acts"). The 2010 Acts contain provisions which impact the accounting for postretirement obligations. Based on the analysis to date, the impact of the provisions in the 2010 Acts on the Company's postretirement obligations has not and is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. The Company continues to evaluate the impact of the 2010 Acts on the active and retiree benefit plans offered by the Company.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The actuarially determined components of the net periodic benefit cost are as follows:
| | | 13 Weeks Ended | | 39 Weeks Ended | 13 Weeks Ended |
| October 27, 2012 | | October 29, 2011 | | October 27, 2012 | | October 29, 2011 | May 4, 2013 | | April 28, 2012 |
| (millions) | (millions) |
Pension Plan | | | | | | | | | | |
Service cost | $ | 30 |
| | $ | 25 |
| | $ | 88 |
| | $ | 76 |
| $ | 28 |
| | $ | 28 |
|
Interest cost | 40 |
| | 40 |
| | 118 |
| | 120 |
| 36 |
| | 39 |
|
Expected return on assets | (64 | ) | | (61 | ) | | (190 | ) | | (185 | ) | (60 | ) | | (63 | ) |
Recognition of net actuarial loss | 35 |
| | 22 |
| | 106 |
| | 66 |
| 35 |
| | 35 |
|
Amortization of prior service credit | (1 | ) | | (1 | ) | | (1 | ) | | (1 | ) | — |
| | — |
|
| $ | 40 |
| | $ | 25 |
| | $ | 121 |
| | $ | 76 |
| $ | 39 |
| | $ | 39 |
|
Supplementary Retirement Plan | | | | | | | | | | |
Service cost | $ | 1 |
| | $ | 1 |
| | $ | 4 |
| | $ | 4 |
| $ | 2 |
| | $ | 2 |
|
Interest cost | 9 |
| | 9 |
| | 26 |
| | 27 |
| 8 |
| | 8 |
|
Recognition of net actuarial loss | 4 |
| | 2 |
| | 13 |
| | 6 |
| 4 |
| | 4 |
|
Amortization of prior service credit | — |
| | — |
| | — |
| | (1 | ) | — |
| | — |
|
| $ | 14 |
| | $ | 12 |
| | $ | 43 |
| | $ | 36 |
| $ | 14 |
| | $ | 14 |
|
Postretirement Obligations | | | | | | | | | | |
Service cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | — |
| | $ | — |
|
Interest cost | 3 |
| | 3 |
| | 9 |
| | 10 |
| 3 |
| | 3 |
|
Recognition of net actuarial gain | (1 | ) | | (1 | ) | | (3 | ) | | (4 | ) | (1 | ) | | (1 | ) |
Amortization of prior service cost | — |
| | — |
| | — |
| | — |
| — |
| | — |
|
| $ | 2 |
| | $ | 2 |
| | $ | 6 |
| | $ | 6 |
| $ | 2 |
| | $ | 2 |
|
5. Fair Value Measurements
The following table shows the Company's financial assets that are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| October 27, 2012 | | October 29, 2011 |
| | | Fair Value Measurements | | | | Fair Value Measurements |
| Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (millions) |
Marketable equity and debt securities | $ | 83 |
| | $ | — |
| | $ | 83 |
| | $ | — |
| | $ | 91 |
| | $ | — |
| | $ | 91 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| May 4, 2013 | | April 28, 2012 |
| | | Fair Value Measurements | | | | Fair Value Measurements |
| Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (millions) |
Marketable equity and debt securities | $ | 64 |
| | $ | — |
| | $ | 64 |
| | $ | — |
| | $ | 76 |
| | $ | — |
| | $ | 76 |
| | $ | — |
|
On February 25, 2011, the Company sold its investment in The Knot, Inc. and unrecognized gains in accumulated other comprehensive income were reclassified and recognized into Selling, General and Administrative expenses in the Consolidated Statements of Income.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for publicly traded debtidentical or by using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements,instruments, and are classified as level 3Level 2 measurements within the hierarchy as defined by applicable accounting standards.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
The following table shows the estimated fair value of the Company's long-term debt:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| October 27, 2012 | | October 29, 2011 |
| Notional Amount | | Carrying Amount | | Fair Value | | Notional Amount | | Carrying Amount | | Fair Value |
| (millions) |
Long-term debt | $ | 6,583 |
| | $ | 6,784 |
| | $ | 7,736 |
| | $ | 5,903 |
| | $ | 6,124 |
| | $ | 6,500 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| May 4, 2013 | | April 28, 2012 |
| Notional Amount | | Carrying Amount | | Fair Value | | Notional Amount | | Carrying Amount | | Fair Value |
| (millions) |
Long-term debt | $ | 6,578 |
| | $ | 6,765 |
| | $ | 7,536 |
| | $ | 6,399 |
| | $ | 6,609 |
| | $ | 7,312 |
|
6. Condensed Consolidating Financial Information
Certain debt obligations of the Company, which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"), a wholly-owned100%-owned subsidiary of Macy's, Inc. ("Parent"), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, "Other Subsidiaries" includes all other direct subsidiaries of Parent, including FDS Bank, West 34th Street Insurance Company (prior to a merger, known separately as Leadville Insurance Company and Snowdin Insurance Company) and its subsidiary West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy's Merchandising Group, Inc. and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy's Merchandising Group International, LLC, and Macy's Merchandising Group International (Hong Kong) Limited. "Subsidiary Issuer" includes operating divisions and non-guarantor subsidiaries of the Subsidiary Issuer on an equity basis. The assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in "Other Subsidiaries."
Condensed Consolidating Balance Sheets as of October 27, 2012May 4, 2013, October 29, 2011April 28, 2012 and January 28, 2012February 2, 2013, the related Condensed Consolidating Statements of Comprehensive Income for the 13 and 3913 weeks ended October 27, 2012May 4, 2013 and October 29, 2011April 28, 2012, and the related Condensed Consolidating Statements of Cash Flows for the 3913 weeks ended October 27, 2012May 4, 2013 and October 29, 2011April 28, 2012 are presented on the following pages.
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of October 27, 2012May 4, 2013
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
ASSETS: | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 938 |
| | $ | 36 |
| | $ | 290 |
| | $ | — |
| | $ | 1,264 |
| $ | 1,404 |
| | $ | 43 |
| | $ | 305 |
| | $ | — |
| | $ | 1,752 |
|
Receivables | — |
| | 31 |
| | 250 |
| | — |
| | 281 |
| — |
| | 50 |
| | 245 |
| | — |
| | 295 |
|
Merchandise inventories | — |
| | 3,712 |
| | 3,496 |
| | — |
| | 7,208 |
| — |
| | 2,909 |
| | 2,722 |
| | — |
| | 5,631 |
|
Prepaid expenses and other current assets | — |
| | 103 |
| | 307 |
| | — |
| | 410 |
| — |
| | 89 |
| | 299 |
| | — |
| | 388 |
|
Income taxes | 127 |
| | — |
| | — |
| | (127 | ) | | — |
| 36 |
| | — |
| | — |
| | (36 | ) | | — |
|
Total Current Assets | 1,065 |
| | 3,882 |
| | 4,343 |
| | (127 | ) | | 9,163 |
| 1,440 |
| | 3,091 |
| | 3,571 |
| | (36 | ) | | 8,066 |
|
Property and Equipment – net | — |
| | 4,696 |
| | 3,516 |
| | — |
| | 8,212 |
| — |
| | 4,583 |
| | 3,480 |
| | — |
| | 8,063 |
|
Goodwill | — |
| | 3,315 |
| | 428 |
| | — |
| | 3,743 |
| — |
| | 3,315 |
| | 428 |
| | — |
| | 3,743 |
|
Other Intangible Assets – net | — |
| | 131 |
| | 439 |
| | — |
| | 570 |
| — |
| | 116 |
| | 436 |
| | — |
| | 552 |
|
Other Assets | 4 |
| | 65 |
| | 513 |
| | — |
| | 582 |
| 4 |
| | 69 |
| | 543 |
| | — |
| | 616 |
|
Deferred Income Tax Assets | 11 |
| | — |
| | — |
| | (11 | ) | | — |
| |
Intercompany Receivable | 1,260 |
| | — |
| | 3,114 |
| | (4,374 | ) | | — |
| 566 |
| | — |
| | 3,095 |
| | (3,661 | ) | | — |
|
Investment in Subsidiaries | 3,467 |
| | 2,675 |
| | — |
| | (6,142 | ) | | — |
| 4,109 |
| | 2,660 |
| | — |
| | (6,769 | ) | | — |
|
Total Assets | $ | 5,807 |
| | $ | 14,764 |
| | $ | 12,353 |
| | $ | (10,654 | ) | | $ | 22,270 |
| $ | 6,119 |
| | $ | 13,834 |
| | $ | 11,553 |
| | $ | (10,466 | ) | | $ | 21,040 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | |
Short-term debt | $ | — |
| | $ | 121 |
| | $ | 2 |
| | $ | — |
| | $ | 123 |
| $ | — |
| | $ | 122 |
| | $ | 2 |
| | $ | — |
| | $ | 124 |
|
Merchandise accounts payable | — |
| | 1,730 |
| | 1,897 |
| | — |
| | 3,627 |
| — |
| | 1,124 |
| | 1,302 |
| | — |
| | 2,426 |
|
Accounts payable and accrued liabilities | 212 |
| | 919 |
| | 1,288 |
| | — |
| | 2,419 |
| 71 |
| | 821 |
| | 1,242 |
| | — |
| | 2,134 |
|
Income taxes | — |
| | 54 |
| | 162 |
| | (127 | ) | | 89 |
| — |
| | 49 |
| | 78 |
| | (36 | ) | | 91 |
|
Deferred income taxes | — |
| | 322 |
| | 104 |
| | — |
| | 426 |
| — |
| | 324 |
| | 102 |
| | — |
| | 426 |
|
Total Current Liabilities | 212 |
| | 3,146 |
| | 3,453 |
| | (127 | ) | | 6,684 |
| 71 |
| | 2,440 |
| | 2,726 |
| | (36 | ) | | 5,201 |
|
Long-Term Debt | — |
| | 6,793 |
| | 24 |
| | — |
| | 6,817 |
| — |
| | 6,774 |
| | 23 |
| | — |
| | 6,797 |
|
Intercompany Payable | — |
| | 4,374 |
| | — |
| | (4,374 | ) | | — |
| — |
| | 3,661 |
| | — |
| | (3,661 | ) | | — |
|
Deferred Income Taxes | — |
| | 389 |
| | 804 |
| | (11 | ) | | 1,182 |
| 8 |
| | 433 |
| | 799 |
| | — |
| | 1,240 |
|
Other Liabilities | 32 |
| | 746 |
| | 1,246 |
| | — |
| | 2,024 |
| 69 |
| | 605 |
| | 1,157 |
| | — |
| | 1,831 |
|
Shareholders' Equity (Deficit) | 5,563 |
| | (684 | ) | | 6,826 |
| | (6,142 | ) | | 5,563 |
| 5,971 |
| | (79 | ) | | 6,848 |
| | (6,769 | ) | | 5,971 |
|
Total Liabilities and Shareholders' Equity | $ | 5,807 |
| | $ | 14,764 |
| | $ | 12,353 |
| | $ | (10,654 | ) | | $ | 22,270 |
| $ | 6,119 |
| | $ | 13,834 |
| | $ | 11,553 |
| | $ | (10,466 | ) | | $ | 21,040 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended October 27, 2012May 4, 2013
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Net sales | $ | — |
| | $ | 2,979 |
| | $ | 5,820 |
| | $ | (2,724 | ) | | $ | 6,075 |
| $ | — |
| | $ | 3,034 |
| | $ | 5,548 |
| | $ | (2,195 | ) | | $ | 6,387 |
|
Cost of sales | — |
| | (1,901 | ) | | (4,480 | ) | | 2,709 |
| | (3,672 | ) | — |
| | (1,897 | ) | | (4,196 | ) | | 2,182 |
| | (3,911 | ) |
Gross margin | — |
| | 1,078 |
| | 1,340 |
| | (15 | ) | | 2,403 |
| — |
| | 1,137 |
| | 1,352 |
| | (13 | ) | | 2,476 |
|
Selling, general and administrative expenses | (2 | ) | | (1,132 | ) | | (959 | ) | | 15 |
| | (2,078 | ) | (3 | ) | | (1,050 | ) | | (1,001 | ) | | 13 |
| | (2,041 | ) |
Operating income (loss) | (2 | ) | | (54 | ) | | 381 |
| | — |
| | 325 |
| (3 | ) | | 87 |
| | 351 |
| | — |
| | 435 |
|
Interest (expense) income, net: | | | | | | | | | | | | | | | | | | |
External | — |
| | (103 | ) | | — |
| | — |
| | (103 | ) | — |
| | (97 | ) | | — |
| | — |
| | (97 | ) |
Intercompany | — |
| | (35 | ) | | 35 |
| | — |
| | — |
| — |
| | (40 | ) | | 40 |
| | — |
| | — |
|
Equity in earnings of subsidiaries | 147 |
| | 29 |
| | — |
| | (176 | ) | | — |
| 219 |
| | 55 |
| | — |
| | (274 | ) | | — |
|
Income (loss) before income taxes | 145 |
| | (163 | ) | | 416 |
| | (176 | ) | | 222 |
| |
Income before income taxes | | 216 |
| | 5 |
| | 391 |
| | (274 | ) | | 338 |
|
Federal, state and local income tax benefit (expense) | — |
| | 50 |
| | (127 | ) | | — |
| | (77 | ) | 1 |
| | 27 |
| | (149 | ) | | — |
| | (121 | ) |
Net income (loss) | $ | 145 |
| | $ | (113 | ) | | $ | 289 |
| | $ | (176 | ) | | $ | 145 |
| |
Comprehensive income (loss) | $ | 169 |
| | $ | (89 | ) | | $ | 299 |
| | $ | (210 | ) | | $ | 169 |
| |
Net income | | $ | 217 |
| | $ | 32 |
| | $ | 242 |
| | $ | (274 | ) | | $ | 217 |
|
Comprehensive income | | $ | 241 |
| | $ | 56 |
| | $ | 252 |
| | $ | (308 | ) | | $ | 241 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 39 Weeks EndedOctober 27, 2012
(millions)
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Net sales | $ | — |
| | $ | 9,024 |
| | $ | 15,672 |
| | $ | (6,360 | ) | | $ | 18,336 |
|
Cost of sales | — |
| | (5,640 | ) | | (11,661 | ) | | 6,317 |
| | (10,984 | ) |
Gross margin | — |
| | 3,384 |
| | 4,011 |
| | (43 | ) | | 7,352 |
|
Selling, general and administrative expenses | (6 | ) | | (3,282 | ) | | (2,837 | ) | | 43 |
| | (6,082 | ) |
Operating income (loss) | (6 | ) | | 102 |
| | 1,174 |
| | — |
| | 1,270 |
|
Interest (expense) income, net: | | | | | | | | | |
External | 1 |
| | (320 | ) | | (1 | ) | | — |
| | (320 | ) |
Intercompany | (1 | ) | | (106 | ) | | 107 |
| | — |
| | — |
|
Equity in earnings of subsidiaries | 609 |
| | 222 |
| | — |
| | (831 | ) | | — |
|
Income (loss) before income taxes | 603 |
| | (102 | ) | | 1,280 |
| | (831 | ) | | 950 |
|
Federal, state and local income tax benefit (expense) | 2 |
| | 87 |
| | (434 | ) | | — |
| | (345 | ) |
Net income (loss) | $ | 605 |
| | $ | (15 | ) | | $ | 846 |
| | $ | (831 | ) | | $ | 605 |
|
Comprehensive income | $ | 676 |
| | $ | 56 |
| | $ | 876 |
| | $ | (932 | ) | | $ | 676 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the 3913 Weeks Ended October 27, 2012May 4, 2013
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | |
Net income (loss) | $ | 605 |
| | $ | (15 | ) | | $ | 846 |
| | $ | (831 | ) | | $ | 605 |
| |
Net income | | $ | 217 |
| | $ | 32 |
| | $ | 242 |
| | $ | (274 | ) | | $ | 217 |
|
Equity in earnings of subsidiaries | (609 | ) | | (222 | ) | | — |
| | 831 |
| | — |
| (219 | ) | | (55 | ) | | — |
| | 274 |
| | — |
|
Dividends received from subsidiaries | 455 |
| |
|
| | — |
| | (455 | ) | | — |
| 161 |
| | — |
| | — |
| | (161 | ) | | — |
|
Depreciation and amortization | — |
| | 356 |
| | 426 |
| | — |
| | 782 |
| — |
| | 118 |
| | 133 |
| | — |
| | 251 |
|
Increase in working capital | (173 | ) | | (66 | ) | | (367 | ) | | — |
| | (606 | ) | |
(Increase) decrease in working capital | | (31 | ) | | 81 |
| | (290 | ) | | — |
| | (240 | ) |
Other, net | (17 | ) | | 64 |
| | 61 |
| | — |
| | 108 |
| 9 |
| | 48 |
| | 13 |
| | — |
| | 70 |
|
Net cash provided by operating activities | 261 |
| | 117 |
| | 966 |
| | (455 | ) | | 889 |
| 137 |
| | 224 |
| | 98 |
| | (161 | ) | | 298 |
|
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | |
Purchase of property and equipment and capitalized software, net | — |
| | (210 | ) | | (387 | ) | | — |
| | (597 | ) | — |
| | (43 | ) | | (68 | ) | | — |
| | (111 | ) |
Other, net | — |
| | — |
| | (18 | ) | | — |
| | (18 | ) | — |
| | — |
| | 4 |
| | — |
| | 4 |
|
Net cash used by investing activities | — |
| | (210 | ) | | (405 | ) | | — |
| | (615 | ) | — |
| | (43 | ) | | (64 | ) | | — |
| | (107 | ) |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | |
Debt repaid | — |
| | (800 | ) | | (3 | ) | | — |
| | (803 | ) | — |
| | (5 | ) | | — |
| | — |
| | (5 | ) |
Dividends paid | (246 | ) | | — |
| | (455 | ) | | 455 |
| | (246 | ) | (78 | ) | | — |
| | (161 | ) | | 161 |
| | (78 | ) |
Common stock acquired, net of issuance of common stock | (826 | ) | | — |
| | — |
| | — |
| | (826 | ) | (236 | ) | | — |
| | — |
| | — |
| | (236 | ) |
Intercompany activity, net | (733 | ) | | 892 |
| | (159 | ) | | — |
| | — |
| 91 |
| | (173 | ) | | 82 |
| | — |
| | — |
|
Other, net | (51 | ) | | (1 | ) | | 90 |
| | — |
| | 38 |
| (48 | ) | | (1 | ) | | 93 |
| | — |
| | 44 |
|
Net cash provided (used) by financing activities | (1,856 | ) | | 91 |
| | (527 | ) | | 455 |
| | (1,837 | ) | (271 | ) | | (179 | ) | | 14 |
| | 161 |
| | (275 | ) |
Net increase (decrease) in cash and cash equivalents | (1,595 | ) | | (2 | ) | | 34 |
| | — |
| | (1,563 | ) | (134 | ) | | 2 |
| | 48 |
| | — |
| | (84 | ) |
Cash and cash equivalents at beginning of period | 2,533 |
| | 38 |
| | 256 |
| | — |
| | 2,827 |
| 1,538 |
| | 41 |
| | 257 |
| | — |
| | 1,836 |
|
Cash and cash equivalents at end of period | $ | 938 |
| | $ | 36 |
| | $ | 290 |
| | $ | — |
| | $ | 1,264 |
| $ | 1,404 |
| | $ | 43 |
| | $ | 305 |
| | $ | — |
| | $ | 1,752 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of October 29, 2011April 28, 2012
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
ASSETS: | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 779 |
| | $ | 34 |
| | $ | 284 |
| | $ | — |
| | $ | 1,097 |
| $ | 1,520 |
| | $ | 36 |
| | $ | 335 |
| | $ | — |
| | $ | 1,891 |
|
Receivables | — |
| | 49 |
| | 239 |
| | — |
| | 288 |
| — |
| | 46 |
| | 231 |
| | — |
| | 277 |
|
Merchandise inventories | — |
| | 3,781 |
| | 3,377 |
| | — |
| | 7,158 |
| — |
| | 2,840 |
| | 2,625 |
| | — |
| | 5,465 |
|
Prepaid expenses and other current assets | — |
| | 102 |
| | 306 |
| | — |
| | 408 |
| — |
| | 89 |
| | 311 |
| | — |
| | 400 |
|
Income taxes | 44 |
| | — |
| | — |
| | (44 | ) | | — |
| 43 |
| | — |
| | — |
| | (43 | ) | | — |
|
Total Current Assets | 823 |
| | 3,966 |
| | 4,206 |
| | (44 | ) | | 8,951 |
| 1,563 |
| | 3,011 |
| | 3,502 |
| | (43 | ) | | 8,033 |
|
Property and Equipment – net | — |
| | 4,812 |
| | 3,611 |
| | — |
| | 8,423 |
| — |
| | 4,736 |
| | 3,623 |
| | — |
| | 8,359 |
|
Goodwill | — |
| | 3,315 |
| | 428 |
| | — |
| | 3,743 |
| — |
| | 3,315 |
| | 428 |
| | — |
| | 3,743 |
|
Other Intangible Assets – net | — |
| | 161 |
| | 447 |
| | — |
| | 608 |
| — |
| | 145 |
| | 444 |
| | — |
| | 589 |
|
Other Assets | 4 |
| | 92 |
| | 442 |
| | — |
| | 538 |
| 4 |
| | 70 |
| | 479 |
| | — |
| | 553 |
|
Deferred Income Tax Assets | — |
| | — |
| | — |
| | — |
| | — |
| |
Intercompany Receivable | 2,176 |
| | — |
| | 2,954 |
| | (5,130 | ) | | — |
| 1,398 |
| | — |
| | 2,754 |
| | (4,152 | ) | | — |
|
Investment in Subsidiaries | 3,094 |
| | 2,790 |
| | — |
| | (5,884 | ) | | — |
| 3,228 |
| | 2,508 |
| | — |
| | (5,736 | ) | | — |
|
Total Assets | $ | 6,097 |
| | $ | 15,136 |
| | $ | 12,088 |
| | $ | (11,058 | ) | | $ | 22,263 |
| $ | 6,193 |
| | $ | 13,785 |
| | $ | 11,230 |
| | $ | (9,931 | ) | | $ | 21,277 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | |
Short-term debt | $ | — |
| | $ | 802 |
| | $ | 3 |
| | $ | — |
| | $ | 805 |
| $ | — |
| | $ | 310 |
| | $ | 3 |
| | $ | — |
| | $ | 313 |
|
Merchandise accounts payable | — |
| | 1,748 |
| | 1,828 |
| | — |
| | 3,576 |
| — |
| | 1,106 |
| | 1,240 |
| | — |
| | 2,346 |
|
Accounts payable and accrued liabilities | 211 |
| | 928 |
| | 1,236 |
| | — |
| | 2,375 |
| 120 |
| | 871 |
| | 1,234 |
| | — |
| | 2,225 |
|
Income taxes | — |
| | 30 |
| | 80 |
| | (44 | ) | | 66 |
| — |
| | 18 |
| | 129 |
| | (43 | ) | | 104 |
|
Deferred income taxes | — |
| | 293 |
| | 95 |
| | — |
| | 388 |
| — |
| | 313 |
| | 98 |
| | — |
| | 411 |
|
Total Current Liabilities | 211 |
| | 3,801 |
| | 3,242 |
| | (44 | ) | | 7,210 |
| 120 |
| | 2,618 |
| | 2,704 |
| | (43 | ) | | 5,399 |
|
Long-Term Debt | — |
| | 6,125 |
| | 26 |
| | — |
| | 6,151 |
| — |
| | 6,619 |
| | 25 |
| | — |
| | 6,644 |
|
Intercompany Payable | — |
| | 5,130 |
| | — |
| | (5,130 | ) | | — |
| — |
| | 4,152 |
| | — |
| | (4,152 | ) | | — |
|
Deferred Income Taxes | 1 |
| | 446 |
| | 955 |
| | — |
| | 1,402 |
| 7 |
| | 341 |
| | 780 |
| | — |
| | 1,128 |
|
Other Liabilities | 33 |
| | 648 |
| | 967 |
| | — |
| | 1,648 |
| 33 |
| | 795 |
| | 1,245 |
| | — |
| | 2,073 |
|
Shareholders' Equity (Deficit) | 5,852 |
| | (1,014 | ) | | 6,898 |
| | (5,884 | ) | | 5,852 |
| 6,033 |
| | (740 | ) | | 6,476 |
| | (5,736 | ) | | 6,033 |
|
Total Liabilities and Shareholders' Equity | $ | 6,097 |
| | $ | 15,136 |
| | $ | 12,088 |
| | $ | (11,058 | ) | | $ | 22,263 |
| $ | 6,193 |
| | $ | 13,785 |
| | $ | 11,230 |
| | $ | (9,931 | ) | | $ | 21,277 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended October 29, 2011April 28, 2012
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Net sales | $ | — |
| | $ | 2,941 |
| | $ | 5,733 |
| | $ | (2,821 | ) | | $ | 5,853 |
| $ | — |
| | $ | 3,041 |
| | $ | 5,144 |
| | $ | (2,042 | ) | | $ | 6,143 |
|
Cost of sales | — |
| | (1,899 | ) | | (4,452 | ) | | 2,807 |
| | (3,544 | ) | — |
| | (1,956 | ) | | (3,829 | ) | | 2,028 |
| | (3,757 | ) |
Gross margin | — |
| | 1,042 |
| | 1,281 |
| | (14 | ) | | 2,309 |
| — |
| | 1,085 |
| | 1,315 |
| | (14 | ) | | 2,386 |
|
Selling, general and administrative expenses | 11 |
| | (1,174 | ) | | (869 | ) | | 14 |
| | (2,018 | ) | (2 | ) | | (1,060 | ) | | (947 | ) | | 14 |
| | (1,995 | ) |
Operating income (loss) | 11 |
| | (132 | ) | | 412 |
| | — |
| | 291 |
| (2 | ) | | 25 |
| | 368 |
| | — |
| | 391 |
|
Interest (expense) income, net: | | | | | | | | | | | | | | | | | | |
External | — |
| | (108 | ) | | — |
| | — |
| | (108 | ) | 1 |
| | (113 | ) | | — |
| | — |
| | (112 | ) |
Intercompany | (1 | ) | | (47 | ) | | 48 |
| | — |
| | — |
| (1 | ) | | (35 | ) | | 36 |
| | — |
| | — |
|
Equity in earnings of subsidiaries | 132 |
| | 21 |
| | — |
| | (153 | ) | | — |
| 183 |
| | 63 |
| | — |
| | (246 | ) | | — |
|
Income (loss) before income taxes | 142 |
| | (266 | ) | | 460 |
| | (153 | ) | | 183 |
| 181 |
| | (60 | ) | | 404 |
| | (246 | ) | | 279 |
|
Federal, state and local income tax benefit (expense) | (3 | ) | | 101 |
| | (142 | ) | | — |
| | (44 | ) | — |
| | 35 |
| | (133 | ) | | — |
| | (98 | ) |
Net income (loss) | $ | 139 |
| | $ | (165 | ) | | $ | 318 |
| | $ | (153 | ) | | $ | 139 |
| $ | 181 |
| | $ | (25 | ) | | $ | 271 |
| | $ | (246 | ) | | $ | 181 |
|
Comprehensive income (loss) | $ | 153 |
| | $ | (151 | ) | | $ | 324 |
| | $ | (173 | ) | | $ | 153 |
| $ | 204 |
| | $ | (2 | ) | | $ | 281 |
| | $ | (279 | ) | | $ | 204 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 39 Weeks EndedOctober 29, 2011
(millions)
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Net sales | $ | — |
| | $ | 8,967 |
| | $ | 15,188 |
| | $ | (6,474 | ) | | $ | 17,681 |
|
Cost of sales | — |
| | (5,614 | ) | | (11,406 | ) | | 6,433 |
| | (10,587 | ) |
Gross margin | — |
| | 3,353 |
| | 3,782 |
| | (41 | ) | | 7,094 |
|
Selling, general and administrative expenses | 7 |
| | (3,303 | ) | | (2,712 | ) | | 41 |
| | (5,967 | ) |
Operating income | 7 |
| | 50 |
| | 1,070 |
| | — |
| | 1,127 |
|
Interest (expense) income, net: | | | | | | | | | |
External | 1 |
| | (336 | ) | | — |
| | — |
| | (335 | ) |
Intercompany | (1 | ) | | (144 | ) | | 145 |
| | — |
| | — |
|
Equity in earnings of subsidiaries | 506 |
| | 175 |
| | — |
| | (681 | ) | | — |
|
Income (loss) before income taxes | 513 |
| | (255 | ) | | 1,215 |
| | (681 | ) | | 792 |
|
Federal, state and local income tax benefit (expense) | (2 | ) | | 132 |
| | (411 | ) | | — |
| | (281 | ) |
Net income (loss) | $ | 511 |
| | $ | (123 | ) | | $ | 804 |
| | $ | (681 | ) | | $ | 511 |
|
Comprehensive income (loss) | $ | 542 |
| | $ | (92 | ) | | $ | 822 |
| | $ | (730 | ) | | $ | 542 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the 3913 Weeks Ended October 29, 2011April 28, 2012
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
Cash flows from operating activities: | | | | | | | | | | | | | | | | | | |
Net income (loss) | $ | 511 |
| | $ | (123 | ) | | $ | 804 |
| | $ | (681 | ) | | $ | 511 |
| $ | 181 |
| | $ | (25 | ) | | $ | 271 |
| | $ | (246 | ) | | $ | 181 |
|
Equity in earnings of subsidiaries | (506 | ) | | (175 | ) | | — |
| | 681 |
| | — |
| (183 | ) | | (63 | ) | | — |
| | 246 |
| | — |
|
Dividends received from subsidiaries | 352 |
| | — |
| | — |
| | (352 | ) | | — |
| 188 |
| | — |
| | — |
| | (188 | ) | | — |
|
Depreciation and amortization | — |
| | 390 |
| | 428 |
| | — |
| | 818 |
| — |
| | 118 |
| | 138 |
| | — |
| | 256 |
|
Increase in working capital | (73 | ) | | (213 | ) | | (432 | ) | | — |
| | (718 | ) | |
(Increase) decrease in working capital | | (104 | ) | | 85 |
| | (170 | ) | | — |
| | (189 | ) |
Other, net | 1 |
| | 23 |
| | (8 | ) | | — |
| | 16 |
| 2 |
| | 38 |
| | (23 | ) | | — |
| | 17 |
|
Net cash provided (used) by operating activities | 285 |
| | (98 | ) | | 792 |
| | (352 | ) | | 627 |
| |
Net cash provided by operating activities | | 84 |
| | 153 |
| | 216 |
| | (188 | ) | | 265 |
|
Cash flows from investing activities: | | | | | | | | | | | | | | | | | | |
Purchase of property and equipment and capitalized software, net | — |
| | (194 | ) | | (278 | ) | | — |
| | (472 | ) | — |
| | (23 | ) | | (168 | ) | | — |
| | (191 | ) |
Other, net | — |
| | 38 |
| | (38 | ) | | — |
| | — |
| — |
| | — |
| | (11 | ) | | — |
| | (11 | ) |
Net cash used by investing activities | — |
| | (156 | ) | | (316 | ) | | — |
| | (472 | ) | — |
| | (23 | ) | | (179 | ) | | — |
| | (202 | ) |
Cash flows from financing activities: | | | | | | | | | | | | | | | | | | |
Debt repaid | — |
| | (449 | ) | | (2 | ) | | — |
| | (451 | ) | — |
| | (794 | ) | | (1 | ) | | — |
| | (795 | ) |
Dividends paid | (106 | ) | | — |
| | (352 | ) | | 352 |
| | (106 | ) | (83 | ) | | — |
| | (188 | ) | | 188 |
| | (83 | ) |
Acquisition of common stock, net of common stock issued | (97 | ) | | — |
| | — |
| | — |
| | (97 | ) | |
Common stock acquired, net of issuance of common stock | | (105 | ) | | — |
| | — |
| | — |
| | (105 | ) |
Intercompany activity, net | (488 | ) | | 705 |
| | (217 | ) | | — |
| | — |
| (865 | ) | | 666 |
| | 199 |
| | — |
| | — |
|
Other, net | 11 |
| | (9 | ) | | 130 |
| | — |
| | 132 |
| (44 | ) | | (4 | ) | | 32 |
| | — |
| | (16 | ) |
Net cash provided (used) by financing activities | (680 | ) | | 247 |
| | (441 | ) | | 352 |
| | (522 | ) | (1,097 | ) | | (132 | ) | | 42 |
| | 188 |
| | (999 | ) |
Net increase (decrease) in cash and cash equivalents | (395 | ) | | (7 | ) | | 35 |
| | — |
| | (367 | ) | (1,013 | ) | | (2 | ) | | 79 |
| | — |
| | (936 | ) |
Cash and cash equivalents at beginning of period | 1,174 |
| | 41 |
| | 249 |
| | — |
| | 1,464 |
| 2,533 |
| | 38 |
| | 256 |
| | — |
| | 2,827 |
|
Cash and cash equivalents at end of period | $ | 779 |
| | $ | 34 |
| | $ | 284 |
| | $ | — |
| | $ | 1,097 |
| $ | 1,520 |
| | $ | 36 |
| | $ | 335 |
| | $ | — |
| | $ | 1,891 |
|
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of January 28, 2012February 2, 2013
(millions)
| | | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated | Parent | | Subsidiary Issuer | | Other Subsidiaries | | Consolidating Adjustments | | Consolidated |
ASSETS: | | | | | | | | | | | | | | | | | | |
Current Assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 2,533 |
| | $ | 38 |
| | $ | 256 |
| | $ | — |
| | $ | 2,827 |
| $ | 1,538 |
| | $ | 41 |
| | $ | 257 |
| | $ | — |
| | $ | 1,836 |
|
Receivables | — |
| | 58 |
| | 310 |
| | — |
| | 368 |
| — |
| | 58 |
| | 313 |
| | — |
| | 371 |
|
Merchandise inventories | — |
| | 2,722 |
| | 2,395 |
| | — |
| | 5,117 |
| — |
| | 2,804 |
| | 2,504 |
| | — |
| | 5,308 |
|
Prepaid expenses and other current assets | — |
| | 152 |
| | 313 |
| | — |
| | 465 |
| — |
| | 97 |
| | 264 |
| | — |
| | 361 |
|
Income taxes | | 30 |
| | — |
| | — |
| | (30 | ) | | — |
|
Total Current Assets | 2,533 |
| | 2,970 |
| | 3,274 |
| | — |
| | 8,777 |
| 1,568 |
| | 3,000 |
| | 3,338 |
| | (30 | ) | | 7,876 |
|
Property and Equipment – net | — |
| | 4,827 |
| | 3,593 |
| | — |
| | 8,420 |
| — |
| | 4,649 |
| | 3,547 |
| | — |
| | 8,196 |
|
Goodwill | — |
| | 3,315 |
| | 428 |
| | — |
| | 3,743 |
| — |
| | 3,315 |
| | 428 |
| | — |
| | 3,743 |
|
Other Intangible Assets – net | — |
| | 153 |
| | 445 |
| | — |
| | 598 |
| — |
| | 124 |
| | 437 |
| | — |
| | 561 |
|
Other Assets | 4 |
| | 73 |
| | 480 |
| | — |
| | 557 |
| 3 |
| | 71 |
| | 541 |
| | — |
| | 615 |
|
Intercompany Receivable | 520 |
| | — |
| | 2,963 |
| | (3,483 | ) | | — |
| 641 |
| | — |
| | 3,190 |
| | (3,831 | ) | | — |
|
Investment in Subsidiaries | 3,210 |
| | 2,435 |
| | — |
| | (5,645 | ) | | — |
| 4,027 |
| | 2,595 |
| | — |
| | (6,622 | ) | | — |
|
Total Assets | $ | 6,267 |
| | $ | 13,773 |
| | $ | 11,183 |
| | $ | (9,128 | ) | | $ | 22,095 |
| $ | 6,239 |
| | $ | 13,754 |
| | $ | 11,481 |
| | $ | (10,483 | ) | | $ | 20,991 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY: | | | | | | | | | | | | | | | | | | |
Current Liabilities: | | | | | | | | | | | | | | | | | | |
Short-term debt | $ | — |
| | $ | 1,099 |
| | $ | 4 |
| | $ | — |
| | $ | 1,103 |
| $ | — |
| | $ | 121 |
| | $ | 3 |
| | $ | — |
| | $ | 124 |
|
Merchandise accounts payable | — |
| | 731 |
| | 862 |
| | — |
| | 1,593 |
| — |
| | 733 |
| | 846 |
| | — |
| | 1,579 |
|
Accounts payable and accrued liabilities | 248 |
| | 1,103 |
| | 1,437 |
| | — |
| | 2,788 |
| 119 |
| | 1,023 |
| | 1,468 |
| | — |
| | 2,610 |
|
Income taxes | 46 |
| | 29 |
| | 296 |
| | — |
| | 371 |
| — |
| | 69 |
| | 316 |
| | (30 | ) | | 355 |
|
Deferred income taxes | — |
| | 314 |
| | 94 |
| | — |
| | 408 |
| — |
| | 323 |
| | 84 |
| | — |
| | 407 |
|
Total Current Liabilities | 294 |
| | 3,276 |
| | 2,693 |
| | — |
| | 6,263 |
| 119 |
| | 2,269 |
| | 2,717 |
| | (30 | ) | | 5,075 |
|
Long-Term Debt | — |
| | 6,630 |
| | 25 |
| | — |
| | 6,655 |
| — |
| | 6,783 |
| | 23 |
| | — |
| | 6,806 |
|
Intercompany Payable | — |
| | 3,483 |
| | — |
| | (3,483 | ) | | — |
| — |
| | 3,831 |
| | — |
| | (3,831 | ) | | — |
|
Deferred Income Taxes | 4 |
| | 351 |
| | 786 |
| | — |
| | 1,141 |
| 11 |
| | 410 |
| | 817 |
| | — |
| | 1,238 |
|
Other Liabilities | 36 |
| | 771 |
| | 1,296 |
| | — |
| | 2,103 |
| 58 |
| | 596 |
| | 1,167 |
| | — |
| | 1,821 |
|
Shareholders' Equity (Deficit) | 5,933 |
| | (738 | ) | | 6,383 |
| | (5,645 | ) | | 5,933 |
| 6,051 |
| | (135 | ) | | 6,757 |
| | (6,622 | ) | | 6,051 |
|
Total Liabilities and Shareholders' Equity | $ | 6,267 |
| | $ | 13,773 |
| | $ | 11,183 |
| | $ | (9,128 | ) | | $ | 22,095 |
| $ | 6,239 |
| | $ | 13,754 |
| | $ | 11,481 |
| | $ | (10,483 | ) | | $ | 20,991 |
|
| |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
For purposes of the following discussion, all references to "thirdfirst quarter of 20122013" and "thirdfirst quarter of 20112012" are to the Company's 13-week fiscal periods ended October 27, 2012May 4, 2013 and October 29, 2011, respectively, and all references to "April 28, 2012" and "2011" are to the Company's 39-week fiscal periods ended October 27, 2012 and October 29, 2011, respectively.
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2012 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Forward-Looking Statements") and in the 2012 10-K (particularly in "Risk Factors").
Overview
The Company is an omnichannel retail organization operating stores and websites under two brands (Macy's and Bloomingdale's) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The Company's operations include approximately 850840 stores, including twelve Bloomingdale's Outlets, in 45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com and bloomingdales.com. In addition, there is a Bloomingdale's store in Dubai, United Arab Emirates which is operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
The Company is focused on three key strategies for continued growth in sales, earnings and cash flow in the years ahead: (i) maximizing the My Macy's localization initiative; (ii) driving the omnichannel business; and (iii) embracing customer centricity, including engaging customers on the selling floor through the MAGIC sellingSelling program.
Through the My Macy's localization initiative, the Company has invested in talent, technology and marketing which ensures that core customers surrounding each Macy's store find merchandise assortments, size ranges, marketing programs and shopping experiences that are custom-tailored to their needs. My Macy's has provided for more local decision-making in every Macy's community, and involves tailoring merchandise assortments, space allocations, service levels, visual merchandising and special events store-by-store.on a store-by-store basis.
The Company's omnichannel strategy allows customers to shop seamlessly in stores, online and via mobile devices. A pivotal part of the omnichannel strategy is the Company's capabilityability to allow associates in any store to sell a product that may be unavailable locally by selecting merchandise from other stores or online fulfillment centers for shipment to the customer's door. Likewise, the Company's online fulfillment centers can draw on store inventories nationwide to fill orders that originate on the Internet or via mobile devices. AsBy the end of October 27, 2012,fiscal 2013, approximately 290500 Macy's stores wereare expected to be fulfilling orders from other stores, and/or from the Internet and mobile devices, as compared to approximately 20 Macy's292 stores as of October 29, 2011.February 2, 2013.
Macy's MAGIC sellingSelling program is an approach to customer engagement that helps Macy's to better understand the needs of customers, as well as to provide options and advice. This comprehensive ongoing training and coaching program is designed to improve the in-store shopping experience.
In fiscal 2010,During the Company piloted a new Bloomingdale's Outlet store concept. Bloomingdale's Outlet stores are each approximately 25,000 square feet and offer a rangefirst quarter of apparel and accessories, including women's ready-to-wear, men's, children's, women's shoes, fashion accessories, jewelry, handbags and intimate apparel.
During 2011 the Company opened two new Bloomingdale's Outlet stores and re-opened one Macy's store that had been closed in 2010 due to flood damage. During 2012, the Company opened two new Macy's storesstores. During the first quarter of 2013, the Company opened one new Macy's store and fivealso expanded into an additional Macy's location in an existing mall. The Company intends to open one additional new Bloomingdale's Outlet stores, includingMacy's store, a Macy's replacement store, a new Bloomingdale's store, and a Bloomingdale's Outlet store opened in November 2012. Also during 2012 the Company opened its new 1.3 million square foot fulfillment center in Martinsburg, West Virgina.remainder of fiscal 2013.
The Company's operations are impacted by competitive pressures from department stores, specialty stores, mass merchandisers, Internet websites and all other retail channels. The Company's operations are also impacted by general consumer spending levels, including the impact of general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, the costs of basic necessities and other goods and the effects of weather or natural disasters and other factors over which the Company has little or no control.
In recent years, consumer spending levels have been affected to varying degrees by a number of factors, including substantial declines in the level of generalmodest economic activitygrowth, a slowly improving housing market, a rising stock market, uncertainty regarding governmental spending and real estatetax policies, high unemployment levels and investment values, substantial increases in consumer pessimism, unemployment and the costs of basic necessities, and a significant tightening oftightened consumer credit. These factors have affected to varying degrees the amount of funds that consumers are willing and able to spend for discretionary purchases, including purchases of some of the merchandise offered by the Company.
The effects of economic conditions have been, and may continue to be, experienced differently, or at different times, in the various geographic regions in which the Company operates, in relation to the different types of merchandise that the Company offers for sale, or in relation to the Company's Macy's-branded and Bloomingdale's-branded operations. All economic conditions, however, ultimately affect the Company's overall operations. As of the date of this report, based on its assessment of current and anticipated market conditions and its recent performance, the Company is assuming that its comparable store sales in fiscal 2012 will increase approximately 3.9% from fiscal 2011 levels, as adjusted for the impact of the 53rd week in fiscal 2012.
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2011 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Forward-Looking Statements" and in the 2011 10-K (particularly in "Risk Factors").
Results of Operations
|
| | | | | | | | | | | | | | | | | |
| | First Quarter of 2013 | | | First Quarter of 2012 | | |
| | Amount | | % to Sales | | | Amount | | % to Sales | | |
| | (dollars in millions, except per share figures) |
Net sales | | $ | 6,387 |
| | | | | $ | 6,143 |
| | | | |
Increase in sales | | 4.0 |
| % | | | 4.3 |
| % | | |
Increase in comparable sales | | 3.8 |
| % | | | 4.4 |
| % | | |
Cost of sales | | (3,911 | ) | | (61.2 | ) | % | (3,757 | ) | | (61.2 | ) | % |
Gross margin | | 2,476 |
| | 38.8 |
| % | 2,386 |
| | 38.8 |
| % |
Selling, general and administrative expenses | | (2,041 | ) | | (32.0 | ) | % | (1,995 | ) | | (32.4 | ) | % |
Operating income | | 435 |
| | 6.8 |
| % | 391 |
| | 6.4 |
| % |
Interest expense - net | | (97 | ) | | | | | (112 | ) | | | | |
Income before income taxes | | 338 |
| | | | | 279 |
| | | | |
Federal, state and local income tax expense | | (121 | ) | | | | | (98 | ) | | | | |
Net income | | $ | 217 |
| | 3.4 |
| % | $ | 181 |
| | 3.0 |
| % |
| | | | | | | | | | | |
Diluted earnings per share | | $ | 0.55 |
| | | | | $ | 0.43 |
| | | | |
Comparison of the 13 Weeks EndedOctober 27, 2012First Quarter of 2013 and the October 29, 2011First Quarter of 2012
Net Income
Net income for the thirdfirst quarter of 20122013 was $145 million,increased compared to net income of $139 millionfor the thirdfirst quarter of 20112012, reflecting the benefits of the key strategies at Macy's and Bloomingdale's.Macy's.
Net Sales
Net sales for the thirdfirst quarter of 2013 increased $244 million or 4.0% compared to the first quarter of 2012 totaled $6,075 million, compared to net sales of $5,853 million for the third quarter of 2011, an increase of $222 million or 3.8%, reflecting growth in both Macy's and Bloomingdale's and in stores as well as online.. On a comparable basis, net sales for the thirdfirst quarter of 2013 were up 3.8% compared to the first quarter of 2012 were up 3.7% compared to the third quarter of 2011. Sales from the Company's Internet businesses in the third quarter of 2012 increased 40.4% compared to the third quarter of 2011 and positively affected the Company's third quarter of 2012 comparable sales by 2.2%. The Company continues to benefit from the successful execution of the My Macy's localization, Omnichannel and MagicMAGIC selling strategies. Geographically, sales in the thirdfirst quarter of 20122013 were strongest in the Houston-based South Central region.southern regions. By family of business, sales in the thirdfirst quarter of 20122013 were strongest in handbags, watches, handbags, fragrances, women's suits,active apparel, men's, shoes, men's tailored clothing,home textiles, luggage, furniture and mattresses. Sales in the thirdfirst quarter of 20122013 were less strong in juniors, tabletopwomen's apparel and housewares.the millennial businesses. The Company calculates comparable sales as sales from stores in operation throughout 2011 and 2012 and 2013 and all Internet sales. Comparable sales exclude licensed department income, shipping and handling fees, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Stores undergoing remodeling, expansion or relocation remain in the comparable sales calculation unless the store is closed for a significant period of time. Definitions and calculations of comparable sales figures differ among companies in the retail industry.
Cost of Sales
Cost of sales was $3,672 million or 60.4% of net sales for the thirdfirst quarter of 2013 increased $154 million from the first quarter of 2012, compared to $3,544 million or 60.6% of net sales for the third quarter of 2011, an increase of $128 million. The cost of sales rate and was flat as a percent to net sales was lower in the third quarter of 2012, as compared to the thirdfirst quarter of 2011, despite being impacted by the growth of the omnichannel businesses and the resulting impact of free shipping. Application2012. The application of the last-in, first-out (LIFO) retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales in either period.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses werefor the first quarter of 2013 increased $2,07846 million or 34.2% of net sales for2.3% from the thirdfirst quarter of 2012, compared to $2,018 million or 34.4% of net sales for the third quarter of 2011, an increase of $60 million. The SG&A rate as a percent ofto net sales was 2040 basis points lower in the thirdfirst quarter of 20122013, as compared to the thirdfirst quarter of 20112012, reflecting increased net sales. SG&A expenses in the thirdfirst quarter of 20122013 were impacted by higher selling costs as a result of stronger sales higher pension and supplementary retirement plan expense, lower income from credit operations and greatercontinued investments in the Company's omnichannel operations, partially offset by lower depreciation and amortization expense.higher income from credit operations. Income from credit operations was $162$166 million in the thirdfirst quarter of 2013, compared to $143 million in the first quarter of 2012, compared to $185 millionreflecting continued improvement in the third quarter of 2011.collection rates. The Company expects to continue to experience continued improvement in collection rateshigher income from credit operations in the near term, and income from credit operationshowever the increase is anticipatedexpected to be higherlower in the third and fourth quarterquarters of fiscal 2012 and the full fiscal year 20122013 as compared to the fourth quarterfirst and second quarters of fiscal 2011 and the full fiscal year 2011.2013.
Net Interest Expense
Net interest expense was $103 millionfor the thirdfirst quarter of 20122013, compared to decreased $10815 million forfrom the thirdfirst quarter of 2011, a decrease of $5 million2012. Net interest expense for the thirdfirst quarter of 20122013 benefited from lower levels of borrowings and lower rates on outstanding borrowings as compared to the thirdfirst quarter of 20112012.
Effective Tax Rate
The Company's effective tax rate of 34.5%35.8% for the thirdfirst quarter of 20122013 and 24.2%34.9% for the thirdfirst quarter of 2011 differ from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income taxes, including the settlement of various tax issues and tax examinations.
Comparison of the 39 Weeks EndedOctober 27, 2012 and October 29, 2011
Net income for 2012 was $605 million, compared to net income of $511 million for 2011, reflecting the benefits of the key strategies at Macy's and Bloomingdale's.
Net sales for 2012 totaled $18,336 million, compared to net sales of $17,681 million for 2011, an increase of $655 million or 3.7%, reflecting growth in both Macy's and Bloomingdale's and in stores as well as online. On a comparable basis, net sales for 2012 were up 3.7% compared to 2011. Sales from the Company's Internet businesses in 2012 increased 36.8% compared to 2011 and positively affected the Company's 2012 comparable sales by 1.8%. The Company continues to benefit from the successful execution of the My Macy's localization, Omnichannel and Magic selling strategies. Geographically, sales in 2012 were strongest in the southern regions. By family of business, sales in 2012 were strongest in watches, handbags, cosmetics, textiles, furniture and mattresses. Sales in 2012 were less strong in juniors. The Company calculates comparable sales as sales from stores in operation throughout 2011 and 2012 and Internet sales. Stores undergoing remodeling, expansion or relocation remain in the comparable sales calculation unless the store is closed for a significant period of time. Definitions and calculations of comparable sales figures differ among companies in the retail industry.
Cost of sales was $10,984 million or 59.9% of net sales for 2012, compared to $10,587 million or 59.9% of net sales for 2011, an increase of $397 million. Application of the last-in, first-out (LIFO) retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales in either period.
SG&A expenses were $6,082 million or 33.2% of net sales for 2012, compared to $5,967 million or 33.7% of net sales for 2011, an increase of $115 million. The SG&A rate as a percent of net sales was 50 basis points lower in 2012, as compared to 2011, reflecting increased net sales and higher income from credit operations. SG&A expenses in 2012 were impacted by higher selling costs as a result of stronger sales, higher pension and supplementary retirement plan expense, and greater investments in the Company's omnichannel operations, partially offset by higher income from credit operations and lower depreciation and amortization expense. SG&A expenses in 2011 included the $12 million gain on the sale of the investment in The Knot, Inc. Income from credit operations was $451 million in 2012, compared to $414 million in 2011. The Company has experienced and expects to experience continued improvement in collection rates in the near term. Income from credit operations is anticipated to be higher in the fourth quarter of fiscal 2012 and the full fiscal year 2012 as compared to the fourth quarter of fiscal 2011 and the full fiscal year 2011.
Net interest expense was $320 million for 2012, compared to $335 million for 2011, a decrease of $15 million. Net interest expense for 2012 benefited from lower levels of borrowings and lower rates on outstanding borrowings as compared to 2011. Net interest expense for 2012 included approximately $4 million relating to the early redemption on March 29, 2012 of $173 million of 8.0% senior debentures due July 15, 2012.
The Company's effective tax rate of 36.3% for 2012 and 35.5% for 2011 differ from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income taxes, including the settlement of various tax issues and tax examinations.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the credit facility described below.
Operating Activities
Net cash provided by operating activities in the first quarter of 20122013 was $889298 million, compared to $627265 million provided in the first quarter of 20112012, reflecting higher net income in the first quarter of 2012 and a $225 million pension contribution in 20112013. The Company is currently planning to make a pension contribution of approximately $150 million prior to February 2, 2013.
Investing Activities
Net cash used by investing activities was $615107 million for the first quarter of 20122013, compared to net cash used by investing activities of $472202 million for the first quarter of 20112012. Investing activities for the first quarter of 20122013 include purchases of property and equipment totaling $46465 million and capitalized software of $16950 million, compared to purchases of property and equipment totaling $359168 million and capitalized software of $14146 million for the first quarter of 20112012. Purchases of property and equipment during the first quarter of 2012 includes included the purchase of two parcels of the Macy's flagship Union Square location in San Francisco. This purchase was primarily funded through the proceeds in a qualified escrow account from the sale of store leases related to the 2006 divestiture of Lord & Taylor and other closed stores. The Company anticipates capital expenditures for fiscal 2012 will be approximately $950 million.
Net cash used by the Company for all financing activities was $1,837275 million for the first quarter of 20122013, including the repayment of $803 million of debt, $1,018336 million for the acquisition of the Company's common stock, primarily under its share repurchase program, and to cover employee tax liabilities related to stock plan activity and the payment of $24678 million of cash dividends and the repayment of $5 million of debt, partially offset by $192100 million from the issuance of common stock, primarily related to the exercise of stock options, and an increase in outstanding checks of $3844 million. The debt repaid during 2012 includes $616 million of 5.35% senior notes due March 15, 2012 paid at maturity and the early redemption on March 29, 2012 of $173 million of 8.0% senior debentures due July 15, 2012.
During the first quarter of 20122013, the Company repurchased approximately 26,256,5768.4 million shares of its common stock pursuant to existing stock purchase authorizations at an approximate costfor a total of approximately $991360 million. As of October 27, 2012May 4, 2013, the Company had approximately $3611,142 million of authorization remaining under its share repurchase program. On May 14, 2013, the Company's board of directors approved an additional $1,500 million in authorization to purchase common stock, bringing the Company's remaining authorization under its share repurchase program including this increase to $2,642 million. The Company may continue or, from time to time, suspend repurchases of shares under its share repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors.
On March 29, 2012, the Company redeemed the $173 million of 8.0% senior debentures due July 15, 2012, as allowed under the terms of the indenture. The price for the redemption was calculated pursuant to the indenture and resulted in the recognition of additional interest expense of approximately $4 million. By redeeming this debt early, the Company saved approximately $4 million of interest expense during 2012.
On November 28, 2012, the Company repurchased $700 million aggregate principal amount of its outstanding senior unsecured notes, which had a net book value of approximately $706 million. The repurchased senior unsecured notes had stated interest rates ranging from 5.9% to 7.875% and maturities in 2015 and 2016. The Company expects to record the redemption premium and other costs related to these repurchases as additional interest expense of approximately $133 million ($83 million after income taxes) prior to February 2, 2013. On November 20, 2012, the Company issued $750 million aggregate principal amount of 2.875% senior unsecured notes due 2023 and $250 million aggregate principal amount of 4.3% senior unsecured notes due 2043. This debt was used to pay for the repurchased notes described above. Remaining proceeds of this debt will be used to retire $298 million of 5.875% senior unsecured notes maturing during January 2013, and as a result this short-term debt was reclassified to long-term debt as of October 27, 2012. Through these transactions, the Company has improved its debt maturity profile, decreased its ongoing interest expense by taking advantage of the current low interest rate environment and reduced its refinancing and interest rate risk over the next few years. The Company's annual interest expense is anticipated to be reduced on a full year basis by approximately $30 million.
Net cash used by the Company for all financing activities was $522999 million for the first quarter of 20112012, includingand included the repayment of $451795 million of debt, $210246 million for the acquisition of the Company's common stock under its share repurchase program and to cover employee tax liabilities related to stock plan activity, the payment of $10683 million of cash dividends, and a decrease in outstanding checks of $16 million, partially offset by the issuance of $113141 million from the issuance of common stock, primarily related to the exercise of stock options, and an increase in outstanding checks of $140 million.options. The debt repaid during the first quarter of 20112012 included $330$616 million of 6.625%5.35% senior notes due April 1, 2011March 15, 2012 paid at maturity and $109the early redemption on March 29, 2012 of $173 million of 7.45%8.0% senior debentures due SeptemberJuly 15, 2011.2012.
As of May 4, 2013, the Company entered intowas a party to a credit agreement with certain financial institutions on June 20, 2011 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which amount may be increased to $1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time.
The Company entered into a new credit agreement with certain financial institutions on May 10, 2013 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which may be increased to $1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time. This agreement is set to expire May 10, 2018 and replaces the prior agreement which was set to expire June 20, 2015. As of October 27, 2012May 4, 2013 and throughout all of 2012,the first quarter of 2013, the Company had no borrowings outstanding under its then existing credit agreement.agreement, and as of the date of this report, the Company does not expect to borrow under its new credit agreement during fiscal 2013.
The credit agreement requiresagreements require the Company to maintain a specified interest coverage ratio for the latest four quarters of no less than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75. The Company's interest coverage ratio for the thirdfirst quarter of 20122013 was 8.048.77 and its leverage ratio at October 27, 2012May 4, 2013 was 1.88,1.79, in each case as calculated in accordance with the credit agreement.
On October 26, 2012,May 14, 2013, the Company's board of directors declared a quarterly dividend of 2025 cents per share on its common stock, payable January 2,July 1, 2013 to Macy's shareholders of record at the close of business on DecemberJune 14, 2012.
2013. This dividend is an increase from the previous quarterly dividend rate of 20 cents per share and represents the third increase in the dividend in the past two years.
MACY'S, INC.Liquidity and Capital Resources Outlook
Management believes that, with respect to the Company's current operations, cash on hand and funds from operations, together with its credit facility and other capital resources, will be sufficient to cover the Company's reasonably foreseeable working capital, capital expenditure and debt service requirements and other cash requirements in both the near term and over the longer term. The Company's ability to generate funds from operations may be affected by numerous factors, including general economic conditions and levels of consumer confidence and demand; however, the Company expects to be able to manage its working capital levels and capital expenditure amounts so as to maintain sufficient levels of liquidity. To the extent that the Company's cash balances from time to time exceed amounts that are needed to fund its immediate liquidity requirements, the Company will consider alternative uses of some or all of such excess cash. Such alternative uses may include, among others, the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations. Depending upon its actual and anticipated sources and uses of liquidity, conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital markets transactions, for the purpose of raising capital which could be used to refinance current indebtedness or for other corporate purposes including the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations.
The Company intends from time to time to consider additional acquisitions of, and investments in, retail businesses and other complementary assets and companies. Acquisition transactions, if any, are expected to be financed from one or more of the following sources: cash on hand, cash from operations, borrowings under existing or new credit facilities and the issuance of long-term debt or other securities, including common stock.
| |
Item 4. | Controls and Procedures. |
The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of October 27, 2012May 4, 2013, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company's internal controls over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II - OTHER INFORMATION
| |
Item 1. | Legal Proceedings. |
On October 3, 2007, Ebrahim Shanehchian, an alleged participant in the Macy's, Inc. Profit Sharing 401(k) Investment Plan (now known as the Macy's, Inc. 401(k) Retirement Investment Plan) (the "401(k) Plan"), filed a lawsuit in the United States District Court for the Southern District of Ohio on behalf of persons who participated in the 401(k) Plan and The May Department Stores Company Profit Sharing Plan (the "May Plan") between February 27, 2005 and the present. The lawsuit has been conditionally certified as a class action. The complaint alleges that the Company, as well as members of the Company's board of directors and certain members of senior management, breached various fiduciary duties owed under the Employee Retirement Income Security Act ("ERISA") to participants in the 401(k) Plan and the May Plan, by making false and misleading statements regarding the Company's business, operations and prospects in relation to the integration of the acquired May operations, resulting in supposed "artificial inflation" of the Company's stock price and "imprudent investment" by the 401(k) Plan and the May Plan in Macy's stock. The plaintiff seeks an unspecified amount of compensatory damages and costs. The parties have reached an agreement to settle the matter, subject tomatter. On May 8, 2013, the court granted final approval of the settlement terms.terms and entered a judgment terminating the litigation.
The Company and its subsidiaries are also involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.
There have been no material changes to the Risk Factors described in Part I, "Item 1A. Risk Factors" in the Company's Annual Report of Form 10-K for the fiscal year ended January 28, 2012February 2, 2013 as filed with the SEC.
| |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
The following table provides information regarding the Company's purchases of Common Stock during the thirdfirst quarter of 20122013.
|
| | | | | | | | | | | |
| Total Number of Shares Purchased | | Average Price per Share ($) | | Number of Shares Purchased under Program (1) | | Open Authorization Remaining (1)($) |
| (thousands) | | | | (thousands) | | (millions) |
July 29, 2012 – August 25, 2012 | 2,067 |
| | 38.76 |
| | 2,067 |
| | 684 |
|
August 26, 2012 – September 29, 2012 | 4,697 |
| | 39.24 |
| | 4,697 |
| | 500 |
|
September 30, 2012 – October 27, 2012 | 3,515 |
| | 39.49 |
| | 3,515 |
| | 361 |
|
| 10,279 |
| | 39.23 |
| | 10,279 |
| | |
|
| | | | | | | | | | | |
| Total Number of Shares Purchased | | Average Price per Share ($) | | Number of Shares Purchased under Program (1) | | Open Authorization Remaining (1)($) |
| (thousands) | | | | (thousands) | | (millions) |
February 3, 2013 – March 2, 2013 | — |
| | — |
| | — |
| | 1,502 |
|
March 3, 2013 – April 6, 2013 | 4,542 |
| | 41.99 |
| | 4,531 |
| | 1,312 |
|
April 7, 2013 – May 4, 2013 | 3,830 |
| | 44.29 |
| | 3,829 |
| | 1,142 |
|
| 8,372 |
| | 43.05 |
| | 8,360 |
| | |
___________________
| |
(1) | Commencing in January 2000, the Company's board of directors has from time to time approved authorizations to purchase, in the aggregate, up to $10,500$12,000 million of Common Stock.Stock as of May 4, 2013. All authorizations are cumulative and do not have an expiration date. As of October 27, 2012May 4, 2013, $3611,142 million of authorization remained unused. On May 14, 2013, the Company's board of directors approved an additional $1,500 million in authorization to purchase common stock, bringing the Company's remaining authorization under its share repurchase program including this increase to $2,642 million. The Company may continue, discontinue or resume purchases of Common Stock under these or possible future authorizations in the open market, in privately negotiated transactions or otherwise at any time and from time to time without prior notice. |
| |
Item 4. | Mine Safety Disclosures. |
Not Applicable.
| |
Item 5. | Other Information. |
Forward-Looking Statements
This report and other reports, statements and information previously or subsequently filed by the Company with the Securities and Exchange Commission (the "SEC") contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "think," "estimate" or "continue" or the negative or other variations thereof, and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and uncertainties relating to:
the possible invalidity of the underlying beliefs and assumptions;
competitive pressures from department and specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, and all other retail channels, including the Internet, mail-order catalogs and television;
general consumer-spending levels, including the impact of general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, the costs of basic necessities and other goods and the effects of the weather or natural disasters;
conditions to, or changes in the timing of, proposed transactions and changes in expected synergies, cost savings and non-recurring charges;
possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions;
possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials;
changes in relationships with vendors and other product and service providers;
currency, interest and exchange rates and other capital market, economic and geo-political conditions;
severe or unseasonable weather, natural disasters and changes in weather patterns;
possible outbreaks of epidemic or pandemic diseases;diseases and natural disasters;
the potential impact of nationalunstable political conditions, civil unrest, terrorist activities and international security concerns on the retail environment, including any possible military action, terrorist attacks or other hostilities;armed conflicts;
the possible inability of the Company's manufacturers to deliver products in a timely manner or meet the Company's quality standards;
the Company's reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional health pandemics, and regional political and economic conditions;
duties, taxes, other charges and quotas on imports; and
possible systems failures and/or security breaches, including, any security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach.
In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" and "Special Considerations" in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those expressed in or implied by such forward-looking statements.
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10.1+10.1 | | Eighth Amendment to Credit Card Program Agreement, effectivedated as of April 16, 2012, by andMay 10, 2013, among Macy's, Inc., f/k/a Federated Department Stores, Inc., a Delaware corporation, ("Macy's, Inc."), FDS Bank, a federally-chartered stock savings bank ("FDS Bank" (the "Company"), Macy's Credit and Customer Services,Retail Holdings, Inc., f/k/a FACS Group, Inc., an Ohio corporation ("MCCS"Macy's Retail"), the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and paying agent, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.01 to the Company's Current Report on Form 8-K dated May 14, 2013) |
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10.1.1 | | Amendment, dated as of May 30, 2013, to the Credit Agreement, among Macy's West Stores, Inc.Retail and JPMorgan Chase Bank, N.A. and Bank of America, N.A., f/k/aas Administrative Agents |
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10.2 | | Guarantee Agreement, dated as of May 10, 2013, among the Company, Macy's Department Stores, Inc.Retail and JPMorgan Chase Bank, N.A., an Ohio corporation ("Macy's"), Bloomingdale's, Inc., an Ohio corporation ("Bloomingdale's") (collectivelyas paying agent (incorporated by reference to Exhibit 10.02 to the "Macy's Companies"), and Department Stores National Bank, a national banking association, as assignee of Citibank, N.A. ("Bank").Company's Current Report on Form 8-K dated May 14, 2013) |
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31.1 | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) |
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31.2 | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) |
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32.1 | | Certification by Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act |
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32.2 | | Certification by Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act |
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101** | | The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended October 27, 2012,May 4, 2013, filed on December 3, 2012,June 10, 2013, formatted in XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail. |
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+ | Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The confidential portions have been provided to the SEC. |
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** | As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| MACY’S, INC. |
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| By: | /s/ DENNIS J. BRODERICK |
| | Dennis J. Broderick Executive Vice President, General Counsel and Secretary |
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| By: | /s/ JOEL A. BELSKY |
| | Joel A. Belsky Executive Vice President and Controller (Principal Accounting Officer) |
Date: December 3, 2012June 10, 2013