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 November 1, 2014
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
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 accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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.
Class | Outstanding at November 28, 2014 | |
Common Stock, $0.01 par value per share | 345,286,715 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 | ||||||||||||||
November 1, 2014 | November 2, 2013 | November 1, 2014 | November 2, 2013 | ||||||||||||
Net sales | $ | 6,195 | $ | 6,276 | $ | 18,741 | $ | 18,729 | |||||||
Cost of sales | (3,766 | ) | (3,817 | ) | (11,274 | ) | (11,261 | ) | |||||||
Gross margin | 2,429 | 2,459 | 7,467 | 7,468 | |||||||||||
Selling, general and administrative expenses | (2,007 | ) | (2,099 | ) | (6,031 | ) | (6,139 | ) | |||||||
Operating income | 422 | 360 | 1,436 | 1,329 | |||||||||||
Interest expense | (97 | ) | (97 | ) | (298 | ) | (291 | ) | |||||||
Interest income | 1 | 1 | 2 | 2 | |||||||||||
Income before income taxes | 326 | 264 | 1,140 | 1,040 | |||||||||||
Federal, state and local income tax expense | (109 | ) | (87 | ) | (407 | ) | (365 | ) | |||||||
Net income | $ | 217 | $ | 177 | $ | 733 | $ | 675 | |||||||
Basic earnings per share | $ | .62 | $ | .47 | $ | 2.04 | $ | 1.77 | |||||||
Diluted earnings per share | $ | .61 | $ | .47 | $ | 2.01 | $ | 1.74 | |||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
2
MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(millions)
13 Weeks Ended | 39 Weeks Ended | ||||||||||||||
November 1, 2014 | November 2, 2013 | November 1, 2014 | November 2, 2013 | ||||||||||||
Net income | $ | 217 | $ | 177 | $ | 733 | $ | 675 | |||||||
Other comprehensive income: | |||||||||||||||
Amortization of net actuarial loss on post employment and postretirement benefit plans included in net income, before tax | 5 | 38 | 18 | 117 | |||||||||||
Tax effect related to items of other comprehensive income | (2 | ) | (14 | ) | (7 | ) | (45 | ) | |||||||
Total other comprehensive income, net of tax effect | 3 | 24 | 11 | 72 | |||||||||||
Comprehensive income | $ | 220 | $ | 201 | $ | 744 | $ | 747 | |||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
3
MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(millions)
November 1, 2014 | February 1, 2014 | November 2, 2013 | |||||||||
ASSETS | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 1,048 | $ | 2,273 | $ | 1,171 | |||||
Receivables | 292 | 438 | 276 | ||||||||
Merchandise inventories | 7,789 | 5,557 | 7,716 | ||||||||
Prepaid expenses and other current assets | 424 | 420 | 397 | ||||||||
Total Current Assets | 9,553 | 8,688 | 9,560 | ||||||||
Property and Equipment - net of accumulated depreciation and amortization of $6,633, $6,066 and $6,555 | 7,787 | 7,930 | 7,950 | ||||||||
Goodwill | 3,743 | 3,743 | 3,743 | ||||||||
Other Intangible Assets – net | 504 | 527 | 535 | ||||||||
Other Assets | 838 | 746 | 658 | ||||||||
Total Assets | $ | 22,425 | $ | 21,634 | $ | 22,446 | |||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current Liabilities: | |||||||||||
Short-term debt | $ | 76 | $ | 463 | $ | 465 | |||||
Merchandise accounts payable | 3,814 | 1,691 | 3,897 | ||||||||
Accounts payable and accrued liabilities | 2,563 | 2,810 | 2,323 | ||||||||
Income taxes | 114 | 362 | 78 | ||||||||
Deferred income taxes | 396 | 400 | 423 | ||||||||
Total Current Liabilities | 6,963 | 5,726 | 7,186 | ||||||||
Long-Term Debt | 7,143 | 6,728 | 6,732 | ||||||||
Deferred Income Taxes | 1,314 | 1,273 | 1,225 | ||||||||
Other Liabilities | 1,654 | 1,658 | 1,861 | ||||||||
Shareholders’ Equity | 5,351 | 6,249 | 5,442 | ||||||||
Total Liabilities and Shareholders’ Equity | $ | 22,425 | $ | 21,634 | $ | 22,446 | |||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(millions)
39 Weeks Ended | |||||||
November 1, 2014 | November 2, 2013 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 733 | $ | 675 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 770 | 761 | |||||
Stock-based compensation expense | 55 | 48 | |||||
Amortization of financing costs and premium on acquired debt | (4 | ) | (7 | ) | |||
Changes in assets and liabilities: | |||||||
Decrease in receivables | 154 | 102 | |||||
Increase in merchandise inventories | (2,232 | ) | (2,408 | ) | |||
Increase in prepaid expenses and other current assets | (4 | ) | (25 | ) | |||
(Increase) decrease in other assets not separately identified | (46 | ) | 1 | ||||
Increase in merchandise accounts payable | 1,935 | 2,155 | |||||
Decrease in accounts payable and accrued liabilities not separately identified | (362 | ) | (320 | ) | |||
Decrease in current income taxes | (248 | ) | (277 | ) | |||
Increase (decrease) in deferred income taxes | 29 | (43 | ) | ||||
Increase (decrease) in other liabilities not separately identified | (3 | ) | 157 | ||||
Net cash provided by operating activities | 777 | 819 | |||||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (483 | ) | (381 | ) | |||
Capitalized software | (190 | ) | (180 | ) | |||
Disposition of property and equipment | 79 | 30 | |||||
Other, net | (2 | ) | (10 | ) | |||
Net cash used by investing activities | (596 | ) | (541 | ) | |||
Cash flows from financing activities: | |||||||
Debt issued | 500 | 400 | |||||
Financing costs | (5 | ) | (10 | ) | |||
Debt repaid | (462 | ) | (121 | ) | |||
Dividends paid | (314 | ) | (267 | ) | |||
Increase in outstanding checks | 123 | 73 | |||||
Acquisition of treasury stock | (1,456 | ) | (1,228 | ) | |||
Issuance of common stock | 208 | 210 | |||||
Net cash used by financing activities | (1,406 | ) | (943 | ) | |||
Net decrease in cash and cash equivalents | (1,225 | ) | (665 | ) | |||
Cash and cash equivalents beginning of period | 2,273 | 1,836 | |||||
Cash and cash equivalents end of period | $ | 1,048 | $ | 1,171 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 284 | $ | 268 | |||
Interest received | 2 | 1 | |||||
Income taxes paid (net of refunds received) | 565 | 582 | |||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
5
MACY’S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies
Nature of Operations
Macy's, Inc. and subsidiaries (the "Company") is an omnichannel retail organization operating stores, websites and mobile applications 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 840 stores, including thirteen Bloomingdale's Outlets, in 45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com and bloomingdales.com. In addition, Bloomingdale's in Dubai, United Arab Emirates 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 February 1, 2014 (the "2013 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2013 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 39 weeks ended November 1, 2014 and November 2, 2013, 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 39 weeks ended November 1, 2014 and November 2, 2013 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.
Comprehensive 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 Company, the only other component of total comprehensive income for the 13 and 39 weeks ended November 1, 2014 and November 2, 2013 is the amortization of post employment and postretirement plan items. These reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in selling, general and administrative expenses on the Consolidated Statements of Income. See Note 4, "Benefit Plans," for further information.
6
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
2. Earnings Per Share
The following tables set forth the computation of basic and diluted earnings per share:
13 Weeks Ended | |||||||||||||||||||||
November 1, 2014 | November 2, 2013 | ||||||||||||||||||||
Net Income | Shares | Net Income | Shares | ||||||||||||||||||
(millions, except per share data) | |||||||||||||||||||||
Net income and average number of shares outstanding | $ | 217 | 350.8 | $ | 177 | 373.9 | |||||||||||||||
Shares to be issued under deferred compensation and other plans | 0.8 | 0.9 | |||||||||||||||||||
$ | 217 | 351.6 | $ | 177 | 374.8 | ||||||||||||||||
Basic earnings per share | $ | .62 | $ | .47 | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options, restricted stock and restricted stock units | 6.1 | 5.4 | |||||||||||||||||||
$ | 217 | 357.7 | $ | 177 | 380.2 | ||||||||||||||||
Diluted earnings per share | $ | .61 | $ | .47 | |||||||||||||||||
39 Weeks Ended | |||||||||||||||||||||
November 1, 2014 | November 2, 2013 | ||||||||||||||||||||
Net Income | Shares | Net Income | Shares | ||||||||||||||||||
(millions, except per share data) | |||||||||||||||||||||
Net income and average number of shares outstanding | $ | 733 | 358.0 | $ | 675 | 380.8 | |||||||||||||||
Shares to be issued under deferred compensation and other plans | 0.9 | 1.0 | |||||||||||||||||||
$ | 733 | 358.9 | $ | 675 | 381.8 | ||||||||||||||||
Basic earnings per share | $ | 2.04 | $ | 1.77 | |||||||||||||||||
Effect of dilutive securities: | |||||||||||||||||||||
Stock options, restricted stock and restricted stock units | 6.3 | 6.2 | |||||||||||||||||||
$ | 733 | 365.2 | $ | 675 | 388.0 | ||||||||||||||||
Diluted earnings per share | $ | 2.01 | $ | 1.74 | |||||||||||||||||
In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 3.2 million shares of common stock and restricted stock units relating to 0.9 million shares of common stock were outstanding at November 1, 2014, but were not included in the computation of diluted earnings per share for the 13 or 39 weeks ended November 1, 2014 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 6.6 million shares of common stock and restricted stock units relating to 1.8 million shares of common stock were outstanding at November 2, 2013, but were not included in the computation of diluted earnings per share for the 13 or 39 weeks ended November 2, 2013 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
7
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
3. Financing Activities
The following table shows the detail of debt repayments:
39 Weeks Ended | |||||||
November 1, 2014 | November 2, 2013 | ||||||
(millions) | |||||||
5.75% Senior notes due 2014 | $ | 453 | $ | — | |||
7.625% Senior debentures due 2013 | — | 109 | |||||
9.5% amortizing debentures due 2021 | 4 | 4 | |||||
9.75% amortizing debentures due 2021 | 2 | 2 | |||||
Capital leases and other obligations | 3 | 6 | |||||
$ | 462 | $ | 121 | ||||
During the 39 weeks ended November 1, 2014, the Company repurchased approximately 25.3 million shares of its common stock pursuant to existing stock purchase authorizations for a total of approximately $1,483 million. As of November 1, 2014, the Company had $1,449 million of authorization remaining under its share repurchase program. 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 November 18, 2014, the Company issued $550 million aggregate principal amount of 4.5% senior notes due 2034. The Company intends to use the proceeds of this debt for general corporate purposes, which may include working capital, capital expenditures, retirement of indebtedness and the repurchase of outstanding common stock.
On November 14, 2014, the Company provided a notice of redemption related to all of the $407 million of 7.875% senior notes due 2015, as allowed under the terms of the indenture. The price for the redemption will be calculated pursuant to the indenture and will result in the recognition of additional interest expense of approximately $16 to $18 million during the 13 weeks ended January 31, 2015. This additional interest expense will be presented as a premium on early retirement of debt on the Consolidated Statements of Income. The redemption is expected to be completed on December 15, 2014, and will be financed with a portion of the proceeds from the debt issuance described above. As a result, this short-term debt was reclassified to long-term debt as of November 1, 2014.
On May 23, 2014, the Company issued $500 million aggregate principal amount of 3.625% senior unsecured notes due 2024. On July 15, 2014, the Company repaid $453 million of 5.75% senior unsecured notes at maturity.
During the 39 weeks ended November 2, 2013, the Company issued $400 million aggregate principal amount of 4.375% senior notes due 2023 and also repaid $109 million of indebtedness at maturity.
4. Benefit Plans
The Company has a funded defined benefit plan ("Pension Plan") and defined contribution plans, 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 SERP was closed to new participants. After December 31, 2013, with limited exceptions, employees no longer earn future pension service credits under the Pension Plan and SERP, and retirement benefits attributable to service after that date are provided solely through defined contribution 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.
8
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Expense related to matching contributions for the 401(k) defined contribution plan amounted to $21 million and $71 million for the 13 and 39 weeks ended November 1, 2014, respectively, and $4 million and $14 million for the 13 and 39 weeks ended November 2, 2013, respectively. The actuarially determined components of the net periodic benefit cost (income) are as follows:
13 Weeks Ended | 39 Weeks Ended | ||||||||||||||
November 1, 2014 | November 2, 2013 | November 1, 2014 | November 2, 2013 | ||||||||||||
(millions) | |||||||||||||||
Pension Plan | |||||||||||||||
Service cost | $ | 2 | $ | 28 | $ | 5 | $ | 84 | |||||||
Interest cost | 38 | 36 | 113 | 107 | |||||||||||
Expected return on assets | (62 | ) | (60 | ) | (185 | ) | (181 | ) | |||||||
Recognition of net actuarial loss | 6 | 34 | 19 | 105 | |||||||||||
Amortization of prior service credit | — | — | — | — | |||||||||||
$ | (16 | ) | $ | 38 | $ | (48 | ) | $ | 115 | ||||||
Supplementary Retirement Plan | |||||||||||||||
Service cost | $ | — | $ | 2 | $ | — | $ | 5 | |||||||
Interest cost | 8 | 8 | 25 | 24 | |||||||||||
Recognition of net actuarial loss | 1 | 4 | 3 | 14 | |||||||||||
Amortization of prior service cost | — | — | — | — | |||||||||||
$ | 9 | $ | 14 | $ | 28 | $ | 43 | ||||||||
Postretirement Obligations | |||||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Interest cost | 3 | 2 | 7 | 7 | |||||||||||
Recognition of net actuarial gain | (2 | ) | — | (4 | ) | (2 | ) | ||||||||
Amortization of prior service cost | — | — | — | — | |||||||||||
$ | 1 | $ | 2 | $ | 3 | $ | 5 | ||||||||
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:
November 1, 2014 | November 2, 2013 | ||||||||||||||||||||||||||||||
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 | $ | 94 | $ | — | $ | 94 | $ | — | $ | 78 | $ | — | $ | 78 | $ | — | |||||||||||||||
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 identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.
9
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:
November 1, 2014 | November 2, 2013 | ||||||||||||||||||||||
Notional Amount | Carrying Amount | Fair Value | Notional Amount | Carrying Amount | Fair Value | ||||||||||||||||||
(millions) | |||||||||||||||||||||||
Long-term debt | $ | 6,947 | $ | 7,114 | $ | 7,747 | $ | 6,522 | $ | 6,701 | $ | 7,002 | |||||||||||
6. Condensed Consolidating Financial Information
Certain debt obligations of the Company, which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"), a 100%-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 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 November 1, 2014, November 2, 2013 and February 1, 2014, the related Condensed Consolidating Statements of Comprehensive Income for the 13 and 39 weeks ended November 1, 2014 and November 2, 2013, and the related Condensed Consolidating Statements of Cash Flows for the 39 weeks ended November 1, 2014 and November 2, 2013 are presented on the following pages.
10
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of November 1, 2014
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 650 | $ | 105 | $ | 293 | $ | — | $ | 1,048 | |||||||||
Receivables | — | 58 | 234 | — | 292 | ||||||||||||||
Merchandise inventories | — | 3,997 | 3,792 | — | 7,789 | ||||||||||||||
Prepaid expenses and other current assets | — | 95 | 329 | — | 424 | ||||||||||||||
Income taxes | — | — | — | — | — | ||||||||||||||
Total Current Assets | 650 | 4,255 | 4,648 | — | 9,553 | ||||||||||||||
Property and Equipment – net | — | 4,447 | 3,340 | — | 7,787 | ||||||||||||||
Goodwill | — | 3,315 | 428 | — | 3,743 | ||||||||||||||
Other Intangible Assets – net | — | 80 | 424 | — | 504 | ||||||||||||||
Other Assets | 3 | 135 | 700 | — | 838 | ||||||||||||||
Deferred Income Taxes | 15 | — | — | (15 | ) | — | |||||||||||||
Intercompany Receivable | 245 | — | 5,106 | (5,351 | ) | — | |||||||||||||
Investment in Subsidiaries | 4,596 | 3,362 | — | (7,958 | ) | — | |||||||||||||
Total Assets | $ | 5,509 | $ | 15,594 | $ | 14,646 | $ | (13,324 | ) | $ | 22,425 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 75 | $ | 1 | $ | — | $ | 76 | |||||||||
Merchandise accounts payable | — | 1,763 | 2,051 | — | 3,814 | ||||||||||||||
Accounts payable and accrued liabilities | 115 | 1,067 | 1,381 | — | 2,563 | ||||||||||||||
Income taxes | 3 | 38 | 73 | — | 114 | ||||||||||||||
Deferred income taxes | — | 310 | 86 | — | 396 | ||||||||||||||
Total Current Liabilities | 118 | 3,253 | 3,592 | — | 6,963 | ||||||||||||||
Long-Term Debt | — | 7,123 | 20 | — | 7,143 | ||||||||||||||
Intercompany Payable | — | 3,641 | 1,710 | (5,351 | ) | — | |||||||||||||
Deferred Income Taxes | — | 524 | 805 | (15 | ) | 1,314 | |||||||||||||
Other Liabilities | 40 | 520 | 1,094 | — | 1,654 | ||||||||||||||
Shareholders' Equity | 5,351 | 533 | 7,425 | (7,958 | ) | 5,351 | |||||||||||||
Total Liabilities and Shareholders' Equity | $ | 5,509 | $ | 15,594 | $ | 14,646 | $ | (13,324 | ) | $ | 22,425 | ||||||||
11
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended November 1, 2014
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 2,920 | $ | 6,338 | $ | (3,063 | ) | $ | 6,195 | ||||||||
Cost of sales | — | (1,916 | ) | (4,940 | ) | 3,090 | (3,766 | ) | |||||||||||
Gross margin | — | 1,004 | 1,398 | 27 | 2,429 | ||||||||||||||
Selling, general and administrative expenses | — | (1,069 | ) | (911 | ) | (27 | ) | (2,007 | ) | ||||||||||
Operating income (loss) | — | (65 | ) | 487 | — | 422 | |||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | — | (96 | ) | — | — | (96 | ) | ||||||||||||
Intercompany | — | (56 | ) | 56 | — | — | |||||||||||||
Equity in earnings of subsidiaries | 217 | 21 | — | (238 | ) | — | |||||||||||||
Income (loss) before income taxes | 217 | (196 | ) | 543 | (238 | ) | 326 | ||||||||||||
Federal, state and local income tax benefit (expense) | — | 60 | (169 | ) | — | (109 | ) | ||||||||||||
Net income (loss) | $ | 217 | $ | (136 | ) | $ | 374 | $ | (238 | ) | $ | 217 | |||||||
Comprehensive income (loss) | $ | 220 | $ | (133 | ) | $ | 377 | $ | (244 | ) | $ | 220 | |||||||
12
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 39 Weeks Ended November 1, 2014
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 8,799 | $ | 16,816 | $ | (6,874 | ) | $ | 18,741 | ||||||||
Cost of sales | — | (5,580 | ) | (12,568 | ) | 6,874 | (11,274 | ) | |||||||||||
Gross margin | — | 3,219 | 4,248 | — | 7,467 | ||||||||||||||
Selling, general and administrative expenses | (2 | ) | (3,122 | ) | (2,907 | ) | — | (6,031 | ) | ||||||||||
Operating income (loss) | (2 | ) | 97 | 1,341 | — | 1,436 | |||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | — | (296 | ) | — | — | (296 | ) | ||||||||||||
Intercompany | — | (172 | ) | 172 | — | — | |||||||||||||
Equity in earnings of subsidiaries | 735 | 200 | — | (935 | ) | — | |||||||||||||
Income (loss) before income taxes | 733 | (171 | ) | 1,513 | (935 | ) | 1,140 | ||||||||||||
Federal, state and local income tax benefit (expense) | — | 102 | (509 | ) | — | (407 | ) | ||||||||||||
Net income (loss) | $ | 733 | $ | (69 | ) | $ | 1,004 | $ | (935 | ) | $ | 733 | |||||||
Comprehensive income (loss) | $ | 744 | $ | (58 | ) | $ | 1,011 | $ | (953 | ) | $ | 744 | |||||||
13
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the 39 Weeks Ended November 1, 2014
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 733 | $ | (69 | ) | $ | 1,004 | $ | (935 | ) | $ | 733 | |||||||
Equity in earnings of subsidiaries | (735 | ) | (200 | ) | — | 935 | — | ||||||||||||
Dividends received from subsidiaries | 775 | 1 | — | (776 | ) | — | |||||||||||||
Depreciation and amortization | — | 331 | 439 | — | 770 | ||||||||||||||
(Increase) decrease in working capital | 99 | (284 | ) | (572 | ) | — | (757 | ) | |||||||||||
Other, net | (14 | ) | (29 | ) | 74 | — | 31 | ||||||||||||
Net cash provided (used) by operating activities | 858 | (250 | ) | 945 | (776 | ) | 777 | ||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property and equipment and capitalized software, net | — | (175 | ) | (419 | ) | — | (594 | ) | |||||||||||
Other, net | — | 6 | (8 | ) | — | (2 | ) | ||||||||||||
Net cash used by investing activities | — | (169 | ) | (427 | ) | — | (596 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt issued, net of debt repaid | — | 39 | (1 | ) | — | 38 | |||||||||||||
Dividends paid | (314 | ) | — | (776 | ) | 776 | (314 | ) | |||||||||||
Common stock acquired, net of issuance of common stock | (1,248 | ) | — | — | — | (1,248 | ) | ||||||||||||
Intercompany activity, net | (553 | ) | 416 | 137 | — | — | |||||||||||||
Other, net | (48 | ) | (15 | ) | 181 | — | 118 | ||||||||||||
Net cash provided (used) by financing activities | (2,163 | ) | 440 | (459 | ) | 776 | (1,406 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | (1,305 | ) | 21 | 59 | — | (1,225 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 1,955 | 84 | 234 | — | 2,273 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 650 | $ | 105 | $ | 293 | $ | — | $ | 1,048 | |||||||||
14
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of November 2, 2013
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 807 | $ | 21 | $ | 343 | $ | — | $ | 1,171 | |||||||||
Receivables | — | 44 | 232 | — | 276 | ||||||||||||||
Merchandise inventories | — | 3,946 | 3,770 | — | 7,716 | ||||||||||||||
Prepaid expenses and other current assets | — | 99 | 298 | — | 397 | ||||||||||||||
Income taxes | 38 | — | — | (38 | ) | — | |||||||||||||
Total Current Assets | 845 | 4,110 | 4,643 | (38 | ) | 9,560 | |||||||||||||
Property and Equipment – net | — | 4,531 | 3,419 | — | 7,950 | ||||||||||||||
Goodwill | — | 3,315 | 428 | — | 3,743 | ||||||||||||||
Other Intangible Assets – net | — | 103 | 432 | — | 535 | ||||||||||||||
Other Assets | 4 | 73 | 581 | — | 658 | ||||||||||||||
Deferred Income Taxes | 3 | — | — | (3 | ) | — | |||||||||||||
Intercompany Receivable | 464 | — | 3,218 | (3,682 | ) | — | |||||||||||||
Investment in Subsidiaries | 4,320 | 2,753 | — | (7,073 | ) | — | |||||||||||||
Total Assets | $ | 5,636 | $ | 14,885 | $ | 12,721 | $ | (10,796 | ) | $ | 22,446 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | |||||||||||||||||||
Current Liabilities: | |||||||||||||||||||
Short-term debt | $ | — | $ | 463 | $ | 2 | $ | — | $ | 465 | |||||||||
Merchandise accounts payable | — | 1,812 | 2,085 | — | 3,897 | ||||||||||||||
Accounts payable and accrued liabilities | 107 | 965 | 1,251 | — | 2,323 | ||||||||||||||
Income taxes | — | 6 | 110 | (38 | ) | 78 | |||||||||||||
Deferred income taxes | — | 322 | 101 | — | 423 | ||||||||||||||
Total Current Liabilities | 107 | 3,568 | 3,549 | (38 | ) | 7,186 | |||||||||||||
Long-Term Debt | — | 6,711 | 21 | — | 6,732 | ||||||||||||||
Intercompany Payable | — | 3,682 | — | (3,682 | ) | — | |||||||||||||
Deferred Income Taxes | — | 450 | 778 | (3 | ) | 1,225 | |||||||||||||
Other Liabilities | 87 | 619 | 1,155 | — | 1,861 | ||||||||||||||
Shareholders' Equity (Deficit) | 5,442 | (145 | ) | 7,218 | (7,073 | ) | 5,442 | ||||||||||||
Total Liabilities and Shareholders' Equity | $ | 5,636 | $ | 14,885 | $ | 12,721 | $ | (10,796 | ) | $ | 22,446 | ||||||||
15
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended November 2, 2013
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 2,979 | $ | 6,337 | $ | (3,040 | ) | $ | 6,276 | ||||||||
Cost of sales | — | (1,930 | ) | (4,913 | ) | 3,026 | (3,817 | ) | |||||||||||
Gross margin | — | 1,049 | 1,424 | (14 | ) | 2,459 | |||||||||||||
Selling, general and administrative expenses | (2 | ) | (1,113 | ) | (998 | ) | 14 | (2,099 | ) | ||||||||||
Operating income (loss) | (2 | ) | (64 | ) | 426 | — | 360 | ||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 1 | (96 | ) | (1 | ) | — | (96 | ) | |||||||||||
Intercompany | (1 | ) | (39 | ) | 40 | — | — | ||||||||||||
Equity in earnings of subsidiaries | 178 | (15 | ) | — | (163 | ) | — | ||||||||||||
Income (loss) before income taxes | 176 | (214 | ) | 465 | (163 | ) | 264 | ||||||||||||
Federal, state and local income tax benefit (expense) | 1 | 56 | (144 | ) | — | (87 | ) | ||||||||||||
Net income (loss) | $ | 177 | $ | (158 | ) | $ | 321 | $ | (163 | ) | $ | 177 | |||||||
Comprehensive income (loss) | $ | 201 | $ | (134 | ) | $ | 331 | $ | (197 | ) | $ | 201 | |||||||
16
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Comprehensive Income
For the 39 Weeks Ended November 2, 2013
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 8,911 | $ | 16,716 | $ | (6,898 | ) | $ | 18,729 | ||||||||
Cost of sales | — | (5,590 | ) | (12,529 | ) | 6,858 | (11,261 | ) | |||||||||||
Gross margin | — | 3,321 | 4,187 | (40 | ) | 7,468 | |||||||||||||
Selling, general and administrative expenses | (7 | ) | (3,217 | ) | (2,955 | ) | 40 | (6,139 | ) | ||||||||||
Operating income (loss) | (7 | ) | 104 | 1,232 | — | 1,329 | |||||||||||||
Interest (expense) income, net: | |||||||||||||||||||
External | 1 | (289 | ) | (1 | ) | — | (289 | ) | |||||||||||
Intercompany | (1 | ) | (118 | ) | 119 | — | — | ||||||||||||
Equity in earnings of subsidiaries | 679 | 129 | — | (808 | ) | — | |||||||||||||
Income (loss) before income taxes | 672 | (174 | ) | 1,350 | (808 | ) | 1,040 | ||||||||||||
Federal, state and local income tax benefit (expense) | 3 | 93 | (461 | ) | — | (365 | ) | ||||||||||||
Net income (loss) | $ | 675 | $ | (81 | ) | $ | 889 | $ | (808 | ) | $ | 675 | |||||||
Comprehensive income (loss) | $ | 747 | $ | (9 | ) | $ | 919 | $ | (910 | ) | $ | 747 | |||||||
17
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Statement of Cash Flows
For the 39 Weeks Ended November 2, 2013
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income (loss) | $ | 675 | $ | (81 | ) | $ | 889 | $ | (808 | ) | $ | 675 | |||||||
Equity in earnings of subsidiaries | (679 | ) | (129 | ) | — | 808 | — | ||||||||||||
Dividends received from subsidiaries | 458 | — | — | (458 | ) | — | |||||||||||||
Depreciation and amortization | — | 349 | 412 | — | 761 | ||||||||||||||
Increase in working capital | (34 | ) | (185 | ) | (554 | ) | — | (773 | ) | ||||||||||
Other, net | 16 | 107 | 33 | — | 156 | ||||||||||||||
Net cash provided by operating activities | 436 | 61 | 780 | (458 | ) | 819 | |||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of property and equipment and capitalized software, net | — | (206 | ) | (325 | ) | — | (531 | ) | |||||||||||
Other, net | — | — | (10 | ) | — | (10 | ) | ||||||||||||
Net cash used by investing activities | — | (206 | ) | (335 | ) | — | (541 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt issued, net of debt repaid | — | 281 | (2 | ) | — | 279 | |||||||||||||
Dividends paid | (267 | ) | — | (458 | ) | 458 | (267 | ) | |||||||||||
Common stock acquired, net of issuance of common stock | (1,018 | ) | — | — | — | (1,018 | ) | ||||||||||||
Intercompany activity, net | 224 | (159 | ) | (65 | ) | — | — | ||||||||||||
Other, net | (106 | ) | 3 | 166 | — | 63 | |||||||||||||
Net cash provided (used) by financing activities | (1,167 | ) | 125 | (359 | ) | 458 | (943 | ) | |||||||||||
Net increase (decrease) in cash and cash equivalents | (731 | ) | (20 | ) | 86 | — | (665 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 1,538 | 41 | 257 | — | 1,836 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 807 | $ | 21 | $ | 343 | $ | — | $ | 1,171 | |||||||||
18
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheet
As of February 1, 2014
(millions)
Parent | Subsidiary Issuer | Other Subsidiaries | Consolidating Adjustments | Consolidated | |||||||||||||||
ASSETS: | |||||||||||||||||||
Current Assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 1,955 | $ | 84 | $ | 234 | $ | — | $ | 2,273 | |||||||||
Receivables | — | 102 | 336 | — | 438 | ||||||||||||||
Merchandise inventories | — | 2,896 | 2,661 | — | 5,557 | ||||||||||||||
Prepaid expenses and other current assets | — | 103 | 317 | — | 420 | ||||||||||||||
Income taxes | 80 | — | — | (80 | ) | — | |||||||||||||
Total Current Assets | 2,035 | 3,185 | 3,548 | (80 | ) | 8,688 | |||||||||||||
Property and Equipment – net | — | 4,590 | 3,340 | — | 7,930 | ||||||||||||||
Goodwill | — | 3,315 | 428 | — | 3,743 | ||||||||||||||
Other Intangible Assets – net | — | 97 | 430 | — | 527 | ||||||||||||||
Other Assets | 4 | 101 | 641 | — | 746 | ||||||||||||||
Deferred Income Taxes | 19 | — | — | (19 | ) | ||||||||||||||