Condensed Consolidating Financial Information | Condensed Consolidating Financial Information Certain debt obligations of the Company described in Note 6, "Financing," which constitute debt obligations of Parent’s 100%-owned subsidiary, Macy’s Retail Holdings, Inc. (“Subsidiary Issuer”), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, “Other Subsidiaries” includes all other direct subsidiaries of Parent, including Bluemercury, Inc., FDS Bank, 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, Macy's Merchandising Group International (Hong Kong) Limited, and its majority-owned subsidiary Macy's China 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 Statements of Comprehensive Income for 2016 , 2015 and 2014 , Consolidating Balance Sheets as of January 28, 2017 and January 30, 2016 , and the related Condensed Consolidating Statements of Cash Flows for 2016 , 2015 , and 2014 are presented on the following pages. MACY’S, INC. Condensed Consolidating Statement of Comprehensive Income For 2016 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated Net sales $ — $ 10,677 $ 23,436 $ (8,335 ) $ 25,778 Cost of sales — (6,787 ) (17,169 ) 8,335 (15,621 ) Gross margin — 3,890 6,267 — 10,157 Selling, general and administrative expenses (2 ) (3,739 ) (4,524 ) — (8,265 ) Impairments, store closing and other costs — (295 ) (184 ) — (479 ) Settlement charges — (34 ) (64 ) — (98 ) Operating income (loss) (2 ) (178 ) 1,495 — 1,315 Interest (expense) income, net: External 2 (366 ) 1 — (363 ) Intercompany — (200 ) 200 — — Equity in earnings of subsidiaries 619 255 — (874 ) — Income (loss) before income taxes 619 (489 ) 1,696 (874 ) 952 Federal, state and local income — 281 (622 ) — (341 ) Net income (loss) 619 (208 ) 1,074 (874 ) 611 Net loss attributable to noncontrolling interest — — 8 — 8 Net income (loss) attributable to Macy's, Inc. shareholders $ 619 $ (208 ) $ 1,082 $ (874 ) $ 619 Comprehensive income (loss) $ 766 $ (61 ) $ 1,153 $ (1,100 ) $ 758 Comprehensive loss attributable to noncontrolling interest — — 8 — 8 Comprehensive income (loss) attributable to Macy's, Inc. shareholders $ 766 $ (61 ) $ 1,161 $ (1,100 ) $ 766 MACY’S, INC. Condensed Consolidating Statement of Comprehensive Income For 2015 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated Net sales $ — $ 11,959 $ 24,037 $ (8,917 ) $ 27,079 Cost of sales — (7,670 ) (17,743 ) 8,917 (16,496 ) Gross margin — 4,289 6,294 — 10,583 Selling, general and administrative expenses (2 ) (3,980 ) (4,274 ) — (8,256 ) Impairments, store closing and other costs — (170 ) (118 ) — (288 ) Operating income (loss) (2 ) 139 1,902 — 2,039 Interest (expense) income, net: External 1 (361 ) (1 ) — (361 ) Intercompany — (230 ) 230 — — Equity in earnings of subsidiaries 1,072 421 — (1,493 ) — Income (loss) before income taxes 1,071 (31 ) 2,131 (1,493 ) 1,678 Federal, state and local income 1 120 (729 ) — (608 ) Net income 1,072 89 1,402 (1,493 ) 1,070 Net loss attributable to noncontrolling interest — — 2 — 2 Net income attributable to $ 1,072 $ 89 $ 1,404 $ (1,493 ) $ 1,072 Comprehensive income $ 1,101 $ 118 $ 1,415 $ (1,535 ) $ 1,099 Comprehensive loss attributable to — — 2 — 2 Comprehensive income attributable to $ 1,101 $ 118 $ 1,417 $ (1,535 ) $ 1,101 MACY’S, INC. Condensed Consolidating Statement of Comprehensive Income For 2014 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated Net sales $ — $ 13,078 $ 23,522 $ (8,495 ) $ 28,105 Cost of sales — (8,127 ) (17,231 ) 8,495 (16,863 ) Gross margin — 4,951 6,291 — 11,242 Selling, general and administrative expenses (3 ) (4,351 ) (4,001 ) — (8,355 ) Impairments, store closing and other costs — (45 ) (42 ) — (87 ) Operating income (loss) (3 ) 555 2,248 — 2,800 Interest (expense) income, net: External 1 (394 ) — — (393 ) Intercompany — (230 ) 230 — — Premium on early retirement of debt — (17 ) — — (17 ) Equity in earnings of subsidiaries 1,528 624 — (2,152 ) — Income before income taxes 1,526 538 2,478 (2,152 ) 2,390 Federal, state and local income — 25 (889 ) — (864 ) Net income 1,526 563 1,589 (2,152 ) 1,526 Net loss attributable to noncontrolling interest — — — — — Net income attributable to $ 1,526 $ 563 $ 1,589 $ (2,152 ) $ 1,526 Comprehensive income $ 1,119 $ 156 $ 1,338 $ (1,494 ) $ 1,119 Comprehensive loss attributable to — — — — — Comprehensive income attributable to $ 1,119 $ 156 $ 1,338 $ (1,494 ) $ 1,119 MACY’S, INC. Condensed Consolidating Balance Sheet As of January 28, 2017 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated ASSETS: Current Assets: Cash and cash equivalents $ 938 $ 81 $ 278 $ — $ 1,297 Receivables — 169 353 — 522 Merchandise inventories — 2,565 2,834 — 5,399 Prepaid expenses and other current assets — 84 324 — 408 Total Current Assets 938 2,899 3,789 — 7,626 Property and Equipment – net — 3,397 3,620 — 7,017 Goodwill — 3,315 582 — 3,897 Other Intangible Assets – net — 51 447 — 498 Other Assets — 47 766 — 813 Deferred Income Taxes 26 — — (26 ) — Intercompany Receivable 375 — 2,428 (2,803 ) — Investment in Subsidiaries 3,137 3,540 — (6,677 ) — Total Assets $ 4,476 $ 13,249 $ 11,632 $ (9,506 ) $ 19,851 LIABILITIES AND SHAREHOLDERS’ EQUITY: Current Liabilities: Short-term debt $ — $ 306 $ 3 $ — $ 309 Merchandise accounts payable — 590 833 — 1,423 Accounts payable and accrued liabilities 15 1,064 2,484 — 3,563 Income taxes 71 16 265 — 352 Total Current Liabilities 86 1,976 3,585 — 5,647 Long-Term Debt — 6,544 18 — 6,562 Intercompany Payable — 2,803 — (2,803 ) — Deferred Income Taxes — 688 781 (26 ) 1,443 Other Liabilities 66 500 1,311 — 1,877 Shareholders’ Equity: Macy's, Inc. 4,323 738 5,939 (6,677 ) 4,323 Noncontrolling Interest — — (1 ) — (1 ) Total Shareholders’ Equity 4,323 738 5,938 (6,677 ) 4,322 Total Liabilities and Shareholders’ Equity $ 4,475 $ 13,249 $ 11,633 $ (9,506 ) $ 19,851 MACY’S, INC. Condensed Consolidating Balance Sheet As of January 30, 2016 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated ASSETS: Current Assets: Cash and cash equivalents $ 741 $ 91 $ 277 $ — $ 1,109 Receivables — 217 341 — 558 Merchandise inventories — 2,702 2,804 — 5,506 Prepaid expenses and other current assets — 135 344 — 479 Income taxes 44 — — (44 ) — Total Current Assets 785 3,145 3,766 (44 ) 7,652 Property and Equipment – net — 3,925 3,691 — 7,616 Goodwill — 3,315 582 — 3,897 Other Intangible Assets – net — 52 462 — 514 Other Assets — 154 743 — 897 Deferred Income Taxes 14 — — (14 ) — Intercompany Receivable — — 3,800 (3,800 ) — Investment in Subsidiaries 4,725 3,804 — (8,529 ) — Total Assets $ 5,524 $ 14,395 $ 13,044 $ (12,387 ) $ 20,576 LIABILITIES AND SHAREHOLDERS’ EQUITY: Current Liabilities: Short-term debt $ — $ 641 $ 1 $ — $ 642 Merchandise accounts payable — 667 859 — 1,526 Accounts payable and accrued liabilities 35 1,439 1,859 — 3,333 Income taxes — 41 230 (44 ) 227 Total Current Liabilities 35 2,788 2,949 (44 ) 5,728 Long-Term Debt — 6,976 19 — 6,995 Intercompany Payable 1,218 2,582 — (3,800 ) — Deferred Income Taxes — 693 798 (14 ) 1,477 Other Liabilities 21 558 1,544 — 2,123 Shareholders’ Equity: Macy's, Inc. 4,250 798 7,731 (8,529 ) 4,250 Noncontrolling Interest — — 3 — 3 Total Shareholders’ Equity 4,250 798 7,734 (8,529 ) 4,253 Total Liabilities and Shareholders’ Equity $ 5,524 $ 14,395 $ 13,044 $ (12,387 ) $ 20,576 MACY’S, INC. Condensed Consolidating Statement of Cash Flows For 2016 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated Cash flows from operating activities: Net income (loss) $ 619 $ (208 ) $ 1,074 $ (874 ) $ 611 Impairments, store closing and other costs — 295 184 — 479 Settlement charges — 34 64 — 98 Equity in earnings of subsidiaries (619 ) (255 ) — 874 — Dividends received from subsidiaries 957 575 — (1,532 ) — Depreciation and amortization — 407 651 — 1,058 (Increase) decrease in working capital 110 (482 ) 92 — (280 ) Other, net 28 51 (244 ) — (165 ) Net cash provided by 1,095 417 1,821 (1,532 ) 1,801 Cash flows from investing activities: Purchase of property and equipment and capitalized software, net — 12 (251 ) — (239 ) Other, net — 32 20 — 52 Net cash provided (used) by investing activities — 44 (231 ) — (187 ) Cash flows from financing activities: Debt repaid, net of debt issued — (750 ) 1 — (749 ) Dividends paid (459 ) — (1,532 ) 1,532 (459 ) Common stock acquired, net of (280 ) — — — (280 ) Proceeds from noncontrolling interest — — 4 — 4 Intercompany activity, net (144 ) 255 (111 ) — — Other, net (15 ) 24 49 — 58 Net cash used by (898 ) (471 ) (1,589 ) 1,532 (1,426 ) Net increase (decrease) in cash 197 (10 ) 1 — 188 Cash and cash equivalents at 741 91 277 — 1,109 Cash and cash equivalents at $ 938 $ 81 $ 278 $ — $ 1,297 MACY’S, INC. Condensed Consolidating Statement of Cash Flows For 2015 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated Cash flows from operating activities: Net income $ 1,072 $ 89 $ 1,402 $ (1,493 ) $ 1,070 Impairments, store closing and other costs — 170 118 — 288 Equity in earnings of subsidiaries (1,072 ) (421 ) — 1,493 — Dividends received from subsidiaries 1,086 — — (1,086 ) — Depreciation and amortization — 440 621 — 1,061 (Increase) decrease in working capital 25 (340 ) (81 ) — (396 ) Other, net (8 ) (78 ) 47 — (39 ) Net cash provided (used) by 1,103 (140 ) 2,107 (1,086 ) 1,984 Cash flows from investing activities: Purchase of property and equipment and capitalized software, net — (88 ) (821 ) — (909 ) Other, net — 83 (266 ) — (183 ) Net cash used by — (5 ) (1,087 ) — (1,092 ) Cash flows from financing activities: Debt issued, net of debt repaid — 348 (1 ) — 347 Dividends paid (456 ) — (1,086 ) 1,086 (456 ) Common stock acquired, net of (1,838 ) — — — (1,838 ) Proceeds from noncontrolling interest — — 5 — 5 Intercompany activity, net 12 (243 ) 231 — — Other, net 12 37 (136 ) — (87 ) Net cash provided (used) by financing activities (2,270 ) 142 (987 ) 1,086 (2,029 ) Net increase (decrease) in (1,167 ) (3 ) 33 — (1,137 ) Cash and cash equivalents at 1,908 94 244 — 2,246 Cash and cash equivalents at $ 741 $ 91 $ 277 $ — $ 1,109 MACY’S, INC. Condensed Consolidating Statement of Cash Flows For 2014 (millions) Parent Subsidiary Issuer Other Subsidiaries Consolidating Adjustments Consolidated Cash flows from operating activities: Net income $ 1,526 $ 563 $ 1,589 $ (2,152 ) $ 1,526 Impairments, store closing and other costs — 45 42 — 87 Equity in earnings of subsidiaries (1,528 ) (624 ) — 2,152 — Dividends received from subsidiaries 1,088 1 — (1,089 ) — Depreciation and amortization — 454 582 — 1,036 Increase (decrease) in working capital 9 74 (69 ) — 14 Other, net (20 ) (177 ) 243 — 46 Net cash provided by 1,075 336 2,387 (1,089 ) 2,709 Cash flows from investing activities: Purchase (disposition) of property and equipment and capitalized software, net — (260 ) (636 ) — (896 ) Other, net — (12 ) (62 ) — (74 ) Net cash used by — (272 ) (698 ) — (970 ) Cash flows from financing activities: Debt repaid, net of debt issued — 177 (3 ) — 174 Dividends paid (421 ) — (1,089 ) 1,089 (421 ) Common stock acquired, net of (1,643 ) — — — (1,643 ) Proceeds from noncontrolling interest — — — — — Intercompany activity, net 927 (283 ) (644 ) — — Other, net 15 52 57 — 124 Net cash used by (1,122 ) (54 ) (1,679 ) 1,089 (1,766 ) Net increase (decrease) in cash (47 ) 10 10 — (27 ) Cash and cash equivalents at 1,955 84 234 — 2,273 Cash and cash equivalents at $ 1,908 $ 94 $ 244 $ — $ 2,246 |