SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal quarter ended
October 28, 2000.
FEDERATED DEPARTMENT STORES, INC.
151 West 34th Street
New York, New York 10001
(212) 494-1602
and
7 West Seventh St.
Cincinnati, Ohio 45202
(513) 579-7000
Delaware 1-13536 13-3324058
(State of (Commission File No.) (I.R.S. Employer
Incorporation) Identification Number)
The Registrant has filed all reports required to be filed by
Section 12, 13 or 15 (d) of the Act during the preceding 12
months and has been subject to such filing requirements for the
past 90 days.
198,739,448 shares of the Registrant's Common Stock, $.01 par
value, were outstanding as of November 25, 2000.
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(MILLIONS, EXCEPT PER SHARE FIGURES)
13 Weeks Ended 39 Weeks Ended
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
Net Sales $ 4,195 $ 4,137 $12,292 $11,743
Cost of sales:
Recurring 2,515 2,454 7,289 6,947
Inventory valuation
adjustments related to
Fingerhut restructuring 35 - 35 -
Total cost of sales 2,550 2,454 7,324 6,947
Selling, general and
administrative expenses 1,476 1,381 4,326 3,951
Asset impairment and
restructuring charges 760 - 760 -
Operating Income (loss) (591) 302 (118) 845
Interest expense (113) (95) (323) (260)
Interest income 2 4 5 9
Income (Loss) Before Income
Taxes (702) 211 (436) 594
Federal, state and local income
tax benefit (expense) 34 (88) (80) (247)
Net Income (loss) $ (668) $ 123 $ (516) $ 347
Basic earnings (loss)
per share $ (3.32) $ .59 $ (2.50) $ 1.65
Diluted earnings (loss)
per share $ (3.32) $ .56 $ (2.50) $ 1.58
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(MILLIONS)
October 28, January 29, October 30,
2000 2000 1999
ASSETS:
Current Assets:
Cash $ 303 218 $ 595
Accounts receivable 3,826 4,313 3,731
Merchandise inventories 5,045 3,589 4,741
Supplies and prepaid expenses 269 230 269
Deferred income tax assets 255 172 162
Total Current Assets 9,698 8,522 9,498
Property and Equipment - net 6,808 6,828 6,739
Intangible Assets - net 913 1,735 1,771
Other Assets 627 607 551
Total Assets $ 18,046 $ 17,692 $ 18,559
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 2,593 $ 1,284 $ 2,078
Accounts payable and accrued
liabilities 3,859 3,043 3,688
Income taxes 3 225 84
Total Current Liabilities 6,455 4,552 5,850
Long-Term Debt 4,033 4,589 4,658
Deferred Income Taxes 1,485 1,444 1,345
Other Liabilities 548 555 582
Shareholders' Equity 5,525 6,552 6,124
Total Liabilities and
Shareholders' Equity $ 18,046 $ 17,692 $ 18,559
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(MILLIONS)
39 Weeks Ended 39 Weeks Ended
October 28, 2000 October 30, 1999
Cash flows from operating activities:
Net income (loss) $ (516) $ 347
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 486 493
Amortization of intangible assets 62 57
Amortization of financing costs 5 5
Amortization of unearned restricted stock 5 1
Asset impairment and restructuring charges 795 -
Changes in assets and liabilities:
Decrease in accounts receivable 489 109
Increase in merchandise inventories (1,489) (1,317)
Increase in supplies and prepaid expenses (39) (67)
Increase in other assets not separately
identified (44) (18)
Increase in accounts payable and accrued
liabilities not separately identified 688 741
Decrease in current income taxes (220) (64)
Increase in deferred income taxes 52 17
Increase (decrease) in other liabilities
not separately identified (6) 3
Net cash provided by operating activities 268 307
Cash flows from investing activities:
Purchase of property and equipment (490) (470)
Capitalized software (62) (34)
Investments in companies (31) (90)
Acquisition of Fingerhut Companies, Inc.,
net of cash acquired - (1,539)
Disposition of property and equipment 62 32
Net cash used by investing activities (521) (2,101)
Cash flows from financing activities:
Debt issued 802 2,055
Financing costs (4) (10)
Debt repaid (50) (158)
Increase in outstanding checks 101 140
Acquisition of treasury stock (551) -
Issuance of common stock 40 55
Net cash provided by financing activities 338 2,082
Net increase in cash $ 85 $ 288
Cash at beginning of period 218 307
Cash at end of period $ 303 $ 595
Supplemental cash flow information:
Interest paid $ 317 $ 259
Interest received 5 8
Income taxes paid (net of refunds received) 251 278
Schedule of noncash investing and
financing activities:
Debt assumed in acquisition - 125
Equity issued in acquisition - 12
Consolidation of net assets and debt of
previously unconsolidated subsidiary - 1,132
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 29, 2000 (the "1999 10-K"). The accompanying
Consolidated Financial Statements should be read in conjunction with
the Consolidated Financial Statements and notes thereto in the 1999
10-K.
Because of the seasonal nature of the retail business, the results
of operations for the 13 and 39 weeks ended October 28, 2000 and
October 30, 1999 (which do not include the Christmas season) are not
indicative of such results for the fiscal year.
Substantially all department store merchandise inventories are
valued by the retail method and stated on the LIFO (last-in, first-
out) basis, which is generally lower than market. Direct-to-
customer merchandise inventories are stated at the lower of FIFO
(first-in, first-out) cost or market.
The Consolidated Financial Statements for the 13 and 39 weeks ended
October 28, 2000 and October 30, 1999, 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 and its subsidiaries.
Certain reclassifications were made to prior period amounts to
conform with the classifications of such amounts for the most recent
periods.
2. ACQUISITION
On March 18, 1999, the Company purchased Fingerhut Companies, Inc.
("Fingerhut") for a purchase price of approximately $1,720 million,
including the assumption of $125 million of debt. The Fingerhut
acquisition is being accounted for under the purchase method of
accounting. Accordingly, the Company's results of operations do not
include Fingerhut's results of operations for any period prior to
March 18, 1999, and the purchase price has been allocated to
Fingerhut's assets and liabilities based on the estimated fair value
of these assets and liabilities as of March 18, 1999.
3. ASSET IMPAIRMENT AND RESTRUCTURING CHARGES
In the 13 weeks ended October 28, 2000, the Company recorded asset
impairment and restructuring charges related to its Fingerhut
businesses totaling $795 million, $35 million of which are included
in cost of sales.
In response to a significant credit delinquency problem associated
with Fingerhut's core catalog operations, the Company reevaluated
the long-term operating projections of, and performed an asset
impairment analysis for, each Fingerhut business. This analysis
included projected future undiscounted and discounted cash flows
disaggregated for each Fingerhut business unit under a variety of
operating assumptions.
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Using undiscounted projected future cash flows, management
determined that an impairment existed for one of the Fingerhut
businesses, and a write-down of certain fixed assets and goodwill
was recorded in accordance with Statement of Financial Accounting
Standards No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." Using
discounted projected cash flows at a discount rate commensurate with
the Company's cost of capital, management determined that an
impairment existed at several other Fingerhut businesses, including
the core catalog business, and a write-down of goodwill and credit
file intangibles was recorded in accordance with Accounting
Principles Board Opinion No. 17, "Intangible Assets."
As a result of the above, the Company recorded asset write-downs of
$673 million for goodwill and credit file intangibles and $18
million for fixed assets in the 13 weeks ended October 28, 2000.
During this same period, the Company recorded a write-down of $60
million for certain non-public Internet-related investments as a
result of the Company's determination, based on uncertain financing
alternatives and comparisons with market values of similar publicly
traded businesses, that these equity investments were permanently
impaired.
The Company also recorded restructuring costs during the 13 weeks
ended October 28, 2000 related to the downsizing of the Fingerhut
core catalog operations, consisting of $35 million of inventory
valuation adjustments included in cost of sales and $9 million of
severance costs. The severance costs cover approximately 250
employees of which $2 million had been paid to employees and $7
million was accrued as of October 28, 2000.
4. SEGMENT DATA
The Company conducts its business through two segments, department
stores and direct-to-customer. The department store segment sells a
wide range of merchandise, including men's, women's and children's
apparel and accessories, cosmetics, home furnishings and other
consumer goods. The direct-to-customer segment (Fingerhut,
Bloomingdale's By Mail, bloomingdales.com, Macy's By Mail, macys.com
and certain other direct marketing activities) sells a broad range
of products and services directly to consumers via catalogs, direct
marketing and the Internet. "Corporate and other" consists of the
assets and liabilities, and related income or expense, associated
with the corporate office and certain items managed on a company-
wide basis (e.g., intangibles, financial instruments, investments,
income taxes, retirement benefits and properties held for sale or
disposition).
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The financial information for each segment is reported on the basis
used internally by the Company to evaluate performance and allocate
resources.
13 Weeks Ended 39 Weeks Ended
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
(millions)
Net Sales:
Department Stores $3,742 $3,646 $10,927 $10,652
Direct-to-Customer 453 491 1,365 1,091
Total $4,195 $4,137 $12,292 $11,743
Operating income (loss):
Department Stores $ 329 $ 328 $ 1,065 $ 999
Direct-to-Customer (138) 25 (344) (4)
Corporate and other (782) (51) (839) (150)
Total $ (591) $ 302 $ (118) $ 845
For the 13 and 39 weeks ended October 28, 2000, the operating loss
for the direct-to-customer segment includes restructuring costs
related to the downsizing of the Fingerhut core catalog operations,
consisting of $35 million of inventory valuation adjustments and $9
million of severance costs as well as an asset impairment charge of
$18 million for fixed assets of another Fingerhut business. For the
13 and 39 weeks ended October 28, 2000, the operating loss for the
corporate and other segment includes asset impairment charges of
$673 million for goodwill and credit file intangibles and $60
million for certain Internet-related investments.
Depreciation and amortization expense:
Department Stores $ 153 $ 157 $ 451 $ 461
Direct-to-Customer 11 11 33 28
Corporate and other 22 23 69 62
Total $ 186 $ 191 $ 553 $ 551
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
October 28, October 30,
2000 1999
(millions)
Total assets for each segment at the end
of the reporting period were as follows:
Department Stores $13,852 $13,604
Direct-to-Customer 2,512 2,582
Corporate and other 1,682 2,373
Total $18,046 $18,559
5. EARNINGS (LOSS) PER SHARE
The following tables set forth the computation of basic and diluted
earnings (loss) per share:
13 Weeks Ended
October 28, 2000 October 30, 1999
Loss Shares Income Shares
(millions, except per share data)
Net income (loss) and average
number of shares outstanding $(668) 200.5 $ 123 210.0
Shares to be issued under deferred
compensation plans - .6 - .4
$(668) 201.1 $ 123 210.4
Basic earnings (loss) per share $(3.32) $ .59
Effect of dilutive securities:
Warrants - - - 7.3
Stock options - - - 2.2
$(668) 201.1 $ 123 219.9
Diluted earnings (loss) per share $(3.32) $ .56
FEDERATED DEPARTMENT STORES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
39 Weeks Ended
October 28, 2000 October 30, 1999
Loss Shares Income Shares
(millions, except per share data)
Net income (loss) and average
number of shares outstanding $(516) 206.3 $347 209.3
Shares to be issued under deferred
compensation plans - .5 - .4
$(516) 206.8 $347 209.7
Basic earnings (loss) per share $(2.50) $1.65
Effect of dilutive securities:
Warrants - - - 7.3
Stock options - - - 2.4
$(516) 206.8 $347 219.4
Diluted earnings (loss) per share $(2.50) $1.58
For the 13 and 39 weeks ended October 28, 2000, warrants and stock
options to purchase 34.2 million shares of common stock at prices
ranging from $11.63 to $79.44 per share were outstanding at October
28, 2000, but were not included in the computation of diluted
earnings per share because, as a result of the Company's net loss
during these periods, their inclusion would have been antidilutive.
In addition to the stock options reflected in the foregoing tables
for the 13 and 39 weeks ended October 30, 1999, stock options to
purchase 4.7 million shares of common stock at prices ranging from
$46.75 to $79.44 per share were outstanding at October 30, 1999,
but were not included in the computation of diluted earnings per
share because the exercise price thereof exceeded the average
market price and their inclusion would have been antidilutive.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For purposes of the following discussion, all references to "third
quarter of 2000" and "third quarter of 1999" are to the Company's 13-
week fiscal periods ended October 28, 2000 and October 30, 1999,
respectively, and all references to "2000" and "1999" are to the
Company's 39-week fiscal periods ended October 28, 2000 and October
30, 1999, respectively.
RESULTS OF OPERATIONS
COMPARISON OF THE 13 WEEKS ENDED OCTOBER 28, 2000 AND OCTOBER 30, 1999
Net sales for the third quarter of 2000 totaled $4,195 million,
compared to net sales of $4,137 million for the third quarter of
1999, an increase of 1.4%. Net sales for department stores for the
third quarter of 2000 were $3,742 million compared to $3,646 million
for the third quarter of 1999, an increase of 2.6%. On a comparable
store basis (sales from stores in operation throughout 1999 and
2000), net sales for the third quarter of 2000 increased 1.9%
compared to the third quarter of 1999. Net sales for the direct-to-
customer segment were $453 million for the third quarter of 2000
compared to $491 million for the third quarter of 1999, a decrease
of 7.6%, reflecting credit tightening policies at Fingerhut.
Cost of sales was 60.8% of net sales for the third quarter of 2000,
compared to 59.3% for the third quarter of 1999. Cost of sales as a
percent of net sales for department stores increased 0.2 percentage
points as a result of higher markdowns taken through the third
quarter of 2000, which enabled the Company to keep in-store
inventories fresh. Cost of sales for the direct-to-customer segment
increased 11.2 percentage points as a percent of net sales during
the third quarter of 2000, primarily as a result of the $35 million
of inventory valuation adjustments related to the Fingerhut
restructuring. The valuation of department store merchandise
inventories on the last-in, first-out basis did not impact cost of
sales in either period.
Selling, general and administrative ("SG&A") expenses were 35.2% of
net sales for the third quarter of 2000 compared to 33.4% for the
third quarter of 1999. Department store SG&A expenses as a percent
of department store net sales were flat compared to the same period
a year ago. Higher pre-opening expenses associated with the large
number of store openings planned for the fall season were offset by
lower other non-payroll expenses during the third quarter of 2000.
SG&A expenses for the direct-to-customer segment in the third
quarter of 2000 were negatively impacted by higher bad debt expenses
resulting from increased credit delinquencies at Fingerhut. The
higher credit related expenses in the direct-to-customer segment
during the third quarter of 2000 and increased costs related to the
macys.com and bloomingdales.com businesses contributed to the 1.8
percentage point increase in the overall SG&A expense rate for the
third quarter of 2000.
During the third quarter of 2000, the Company recorded asset
impairment and restructuring charges related to its Fingerhut
businesses. The Company recorded asset write-downs of $673 million
for goodwill and credit file intangibles, $18 million for fixed
assets and $60 million for certain Internet-related investments.
The Company also recorded $9 million of severance costs related to
the downsizing of the Fingerhut core catalog operations. The Company
anticipates incurring an additional $30-$55 million of restructuring
charges during the remainder of the fiscal year. In fiscal year
2001, amortization expense of intangible assets will be
approximately $29 million lower as a result of the write-down of
goodwill and credit file intangibles.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net interest expense was $111 million for the third quarter of 2000,
compared to $91 million for the third quarter of 1999. The higher
interest expense for the third quarter of 2000 is due primarily to
the increased outstanding debt resulting from the consolidation of
the Fingerhut Master Trust for financial reporting purposes, and to
a lesser extent the higher interest rate environment.
The income tax benefit was $34 million for the third quarter of
2000. This amount differs from the amount computed by applying the
federal income tax statutory rate of 35.0% to the loss before income
taxes because of permanent differences arising from the write-off
and amortization of intangible assets and the effect of state and
local income taxes.
COMPARISON OF THE 39 WEEKS ENDED OCTOBER 28, 2000 AND OCTOBER 30, 1999
Net sales for 2000 totaled $12,292 million, compared to net sales of
$11,743 million for 1999, an increase of 4.7%. Net sales for
department stores for 2000 were $10,927 million compared to $10,652
million for 1999, an increase of 2.6%. On a comparable store basis,
net sales for 2000 increased 2.3% compared to 1999. Net sales for
the direct-to-customer segment were $1,365 million for 2000 (which
includes Fingerhut for the entire period) compared to $1,091 million
for 1999 (which includes Fingerhut from and after the March 18, 1999
acquisition date).
Cost of sales was 59.6% of net sales for 2000, compared to 59.2% for
1999. Cost of sales as a percent of net sales for department stores
increased 0.2 percentage points as a result of higher markdowns
taken throughout 2000, which enabled the Company to keep in-store
inventories fresh. Cost of sales for the direct-to-customer segment
increased 3.9 percentage points as a percent of net sales during
2000, primarily as a result of the $35 million of inventory
valuation adjustments related to the Fingerhut restructuring taken
in the third quarter of 2000. The valuation of department store
merchandise inventories on the last-in, first-out basis did not
impact cost of sales in either period.
SG&A expenses were 35.2% of net sales for 2000, compared to 33.6%
for 1999. Department store SG&A expenses improved 0.5 percentage
points as a percent of department store net sales, reflecting the
impact of lower non-payroll expenses, including depreciation
expense, and higher finance charge income. SG&A expenses for the
direct-to-customer segment in 2000 were negatively impacted by
higher bad debt expenses resulting primarily from increased credit
delinquencies at Fingerhut during 2000. The higher credit related
expenses in the direct-to-customer segment during 2000, increased
costs related to the macys.com and bloomingdales.com businesses and
increased amortization expense resulting from the Fingerhut
acquisition combined to offset the improvement in the department
store SG&A expense rate and produce a 1.6 percentage point increase
in the overall SG&A expense rate for 2000.
During the third quarter of 2000, the Company recorded asset
impairment and restructuring charges related to its Fingerhut
businesses. The Company recorded asset write-downs of $673 million
for goodwill and credit file intangibles, $18 million for fixed
assets and $60 million for certain Internet-related investments.
The Company also recorded $9 million of severance costs related to
the downsizing of the Fingerhut core catalog operations.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net interest expense was $318 million for 2000 compared to $251
million for 1999. The higher interest expense for 2000 is due
primarily to the increased outstanding debt resulting from the
Fingerhut acquisition and the consolidation of the Fingerhut Master
Trust for financial reporting purposes.
Income tax expense was $80 million for 2000. This amount differs
from the amount computed by applying the federal income tax
statutory rate of 35.0% to the loss before income taxes because of
permanent differences arising from the write-off and amortization of
intangible assets and the effect of state and local income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash from
operations, cash on hand and certain available credit facilities.
Net cash provided by operating activities in 2000 was $268 million,
a decrease of $39 million compared to the $307 million provided in
1999. This reflects greater decreases in 2000 in non-merchandise
accounts payable and accrued liabilities due to the timing of the
Fingerhut acquisition and greater decreases in income tax
liabilities. The impact on net income resulting from higher
reserves for bad debt at Fingerhut was offset by greater decreases
in 2000 in accounts receivable. The greater increases in 2000 in
merchandise inventories were offset by greater increases in
merchandise accounts payable.
Net cash used by investing activities was $521 million for 2000.
Investing activities for 2000 included purchases of property and
equipment totaling $490 million, capitalized software of $62 million
and investments in companies engaged in complementary businesses
totaling $31 million. The Company opened four new department
stores and one new furniture gallery during 2000. In addition, five
department stores were opened in November and the Company plans to
open two additional furniture galleries before the end of the fiscal
year.
Net cash provided to the Company by all financing activities was
$338 million in 2000. During 2000, the Company issued debt totaling
$802 million, consisting of $452 million of borrowings under the
Company's commercial paper program and receivables backed commercial
paper and $350 million of 8.5% Senior Notes due 2010. The Company
purchased 16.0 million shares of its Common Stock under its stock
repurchase program during 2000 at a cost of $549 million. On August
25, 2000, the Board of Directors approved a $500 million increase to
the current stock repurchase program increasing the authorization to
$1 billion. As of October 28, 2000, the Company had $451 million of
the $1 billion authorization remaining. The Company may continue or,
from time to time, suspend repurchases of shares under its stock
repurchase program, depending on prevailing market conditions,
alternate uses of capital and other factors. Also during 2000, the
Company issued 1.0 million shares of its Common Stock and received
$35 million in proceeds from the exercise of the Company's Series B
Warrants, which expired on February 15, 2000.
On December 7, 2000, the Company's wholly owned, special purpose
subsidiary, Prime Receivables Corporation, completed a public
offering of $400 million principal amount of 6.70% asset backed
certificates issued by the Prime Credit Card Master Trust, with a
expected final payment date of November 15, 2005. The proceeds from
the offering were used for general corporate purposes.
FEDERATED DEPARTMENT STORES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management believes the department store business and other retail
businesses will continue to consolidate. Accordingly, the Company
intends from time to time to consider additional acquisitions of,
and investments in, department stores, Internet-related companies,
catalog companies and other complementary assets and companies.
Management believes that, with respect to its current operations,
cash on hand and funds from operations, together with its credit
facilities, will be sufficient to cover its reasonably foreseeable
working capital, capital expenditure and debt service requirements.
Acquisition transactions, if any, are expected to be financed
through a combination of cash on hand and from operations and the
possible issuance from time to time of long-term debt or other
securities. Depending upon 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, the proceeds of which could be used to
refinance current indebtedness or for other corporate purposes.
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
ITEM 1. LEGAL PROCEEDINGS
The Company and certain members of its senior management have
been named defendants in five substantially identical
purported class action complaints (the "Complaints") filed on
behalf of persons who purchased shares of the Company between
February 23, 2000 and July 20, 2000. The Complaints were
filed on August 24, August 30, September 15, September 26,
and October 6, 2000, in the United States District Court for
the Southern District of New York. The Complaints allege
violation of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, and Rule 10b-5 thereunder, on the basis
that the Company, among other things, made false and
misleading statements regarding its financial condition and
results of operations and failed to disclose material
information relating to the credit delinquency problem at
Fingerhut. The plaintiffs are seeking unspecified amounts
of compensatory damages and costs, including legal fees.
Management believes that the allegations contained in the
Complaints are without merit and intends to vigorously defend
against the allegations contained in the Complaints.
ITEM 5. OTHER INFORMATION
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," "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 (i) risks and
uncertainties relating to the possible invalidity of the
underlying beliefs and assumptions, (ii) possible changes or
developments in social, economic, business, industry,
market, legal and regulatory circumstances and conditions,
and (iii) 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. 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 reflected in such forward-
looking statements.
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Third Amendment to Series 1998-3 Supplement, dated as of
August 28, 2000, by and among Fingerhut Receivables,
Inc., as Transferor, Axsys National Bank (formerly named
Fingerhut National Bank), as Servicer and The Bank of
New York (Delaware), as Trustee.
10.2 Third Amendment Agreement to Fingerhut Receivables, Inc.
Security Purchase Agreement, dated as of August 28, 2000,
by and among Fingerhut Receivables, Inc., Quincy Capital
Corporation, Falcon Asset Securitization Corporation, Four
Winds Funding Corporation, Bank of America, N.A., Bank One,
NA (Main Office Chicago), and Commerzbank Aktiengesellschaft,
Chicago Branch.
10.3 Assignment and Assumption Agreement, dated as of August 28,
2000, by and among Fingerhut Receivables, Inc., as Tranferor,
certain Purchasers and Managing Agents parties thereto, and
Bank of America, N.A., as Administrative Agent for such
Purchasers.
10.4 Reassignment of Receivables, dated as of October 27, 2000,
by and between Fingerhut Receivables, Inc. and The Bank of
New York.
27 Financial Data Schedule
(b) Report on Form 8-K
Current Report on Form 8-K, dated August 29, 2000, reporting
matters under Items 5 and 7 thereof.
Current Report on Form 8-K, dated October 16, 2000 reporting
matters under Items 5 and 7 thereof.
FEDERATED DEPARTMENT STORES, INC.
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 thereunder duly authorized.
FEDERATED DEPARTMENT STORES, INC.
Date December 12, 2000 /s/ Dennis J. Broderick
Dennis J. Broderick
Senior Vice President, General Counsel
and Secretary
/s/ Joel A. Belsky
Joel A. Belsky
Vice President and Controller
(Principal Accounting Officer)