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Macy’s, Inc. Reports Its Fifth Consecutive Year Of Double-Digit Growth In Earnings Per Share

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(NOTE: Additional information on Macy’s, Inc., including past news releases, is available at www.macysinc.com/pressroom. A webcast of Macy's, Inc.’s call with analysts and investors will be held today (Feb. 25) at 10:30 a.m. (ET). The webcast is accessible to the media and general public via the company's website at www.macysinc.com. Analysts and investors may call in on 1-888-262-8795, passcode 5455814. A replay of the conference call can be accessed on the website or by calling 1-888 203-1112 (same passcode) about two hours after the conclusion of the call.)

 
 

MACY’S, INC.

 

Consolidated Statements of Income (Unaudited)

 

(All amounts in millions except percentages and per share figures)

           
13 Weeks Ended 14 Weeks Ended
February 1, 2014 February 2, 2013

$

    % to

Net sales

$

    % to

Net sales

 
Net sales $ 9,202 $ 9,350
 
Cost of sales (Note 1)   5,464   59.4 %   5,554   59.4 %
 
Gross margin 3,738 40.6 % 3,796 40.6 %
 
Selling, general and administrative expenses (2,301 ) (25.0 %) (2,400 ) (25.7 %)
 
Impairments, store closing and other costs (Note 2)   (88 ) (0.9 %)   (5 ) (0.0 %)
 
Operating income 1,349 14.7 % 1,391 14.9 %
 
Interest expense – net (99 ) (106 )
 
Premium on early retirement of debt (Note 3)   -     (133 )
 
Income before income taxes 1,250 1,152
 
Federal, state and local income tax expense (Note 4)   (439 )   (422 )
 
Net income $ 811   $ 730  
 
Basic earnings per share $ 2.21   $ 1.86  
 
Diluted earnings per share $ 2.16   $ 1.83  
 
Average common shares:
Basic 367.7 392.3
Diluted 375.1 399.4
 
End of period common shares outstanding 364.9 387.7
 
Depreciation and amortization expense $ 259 $ 267
 
 
 

MACY’S, INC.

 

Consolidated Statements of Income (Unaudited)

 
Notes:
 
(1)     Merchandise inventories are valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of the LIFO retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales for the 13 weeks ended February 1, 2014 or the 14 weeks ended February 2, 2013.
 
(2) For the 13 weeks ended February 1, 2014, includes $39 million of asset impairment charges primarily related to the store closings announced in January 2014, $43 million of restructuring-related costs and expenses associated with the cost-reduction initiatives and organization changes announced in January 2014, primarily severance and other human resource-related costs, and $6 million of other related costs and expenses. For the 14 weeks ended February 2, 2013, included $4 million of asset impairment charges primarily related to the store closings announced in January 2013 and $1 million of other costs and expenses primarily related to the announced store closings. These costs amounted to $.15 per diluted share for the 13 weeks ended February 1, 2014 and $.01 per diluted share for the 14 weeks ended February 2, 2013.
 
(3) For the 14 weeks ended February 2, 2013, included approximately $133 million on a pre-tax basis, or $85 million after tax or $.21 per diluted share, of expenses associated with the early retirement of approximately $700 million of outstanding debt.
 
(4) Federal, state and local income taxes differ from the federal income tax statutory rate of 35%, principally because of the effect of state and local taxes, including the settlement of various tax issues and tax examinations. Additionally, income tax expense for the 13 weeks ended February 1, 2014 benefited from a $13 million ($.03 per diluted share) reduction in the valuation allowance related primarily to state net operating loss carryforwards.
 
 
 

MACY’S, INC.

 

Consolidated Statements of Income (Unaudited)

 

(All amounts in millions except percentages and per share figures)

           
52 Weeks Ended 53 Weeks Ended
February 1, 2014 February 2, 2013

$

    % to

Net sales

$

    % to

Net sales

 
Net sales $ 27,931 $ 27,686
 
Cost of sales (Note 1)   16,725   59.9 %   16,538   59.7 %
 
Gross margin 11,206 40.1 % 11,148 40.3 %
 
Selling, general and administrative expenses (8,440 ) (30.2 %) (8,482 ) (30.7 %)
 
Impairments, store closing and other costs (Note 2)   (88 ) (0.3 %)   (5 ) (0.0 %)
 
Operating income 2,678 9.6 % 2,661 9.6 %
 
Interest expense – net (388 ) (422 )
 
Premium on early retirement of debt (Note 3)   -     (137 )
 
Income before income taxes 2,290 2,102
 
Federal, state and local income tax expense (Note 4)   (804 )   (767 )
 
Net income $ 1,486   $ 1,335  
 
Basic earnings per share $ 3.93   $ 3.29  
 
Diluted earnings per share $ 3.86   $ 3.24  
 
Average common shares:
Basic 378.3 405.5
Diluted 384.8 412.2
 
End of period common shares outstanding 364.9 387.7
 
Depreciation and amortization expense $ 1,020 $ 1,049
 
 
 

MACY’S, INC.

 

Consolidated Statements of Income (Unaudited)

 
Notes:
 
(1)     Merchandise inventories are valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of the LIFO retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales for the 52 weeks ended February 1, 2014 or the 53 weeks ended February 2, 2013.
 
(2) For the 52 weeks ended February 1, 2014, includes $39 million of asset impairment charges primarily related to the store closings announced in January 2014, $43 million of restructuring-related costs and expenses associated with the cost-reduction initiatives and organization changes announced in January 2014, primarily severance and other human resource-related costs, and $6 million of other related costs and expenses. For the 53 weeks ended February 2, 2013, included $4 million of asset impairment charges primarily related to the store closings announced in January 2013 and $1 million of other costs and expenses primarily related to the announced store closings. These costs amounted to $.14 per diluted share for the 52 weeks ended February 1, 2014 and $.01 per diluted share for the 53 weeks ended February 2, 2013.
 
(3) For the 53 weeks ended February 2, 2013, included approximately $137 million on a pre-tax basis, or $87 million after tax or $.21 per diluted share, of expenses associated with the early retirement of approximately $873 million of outstanding debt.
 
(4) Federal, state and local income taxes differ from the federal income tax statutory rate of 35%, principally because of the effect of state and local taxes, including the settlement of various tax issues and tax examinations. Additionally, income tax expense for the 52 weeks ended February 1, 2014 benefited from a $13 million ($.03 per diluted share) reduction in the valuation allowance related primarily to state net operating loss carryforwards.
 
 
 

MACY’S, INC.

 

Consolidated Balance Sheets (Unaudited)

 

(millions)

           
February 1, February 2,
2014 2013
ASSETS:
Current Assets:
Cash and cash equivalents $ 2,273 $ 1,836
Receivables 438 371
Merchandise inventories 5,557 5,308
Prepaid expenses and other current assets   420   361
Total Current Assets 8,688 7,876
 
Property and Equipment – net 7,930 8,196
Goodwill 3,743 3,743
Other Intangible Assets – net 527 561
Other Assets   735   615
 
Total Assets $ 21,623 $ 20,991
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt $ 463 $ 124
Merchandise accounts payable 1,691 1,579
Accounts payable and accrued liabilities 2,810 2,610
Income taxes 362 355
Deferred income taxes   400   407
Total Current Liabilities 5,726 5,075
 
Long-Term Debt 6,728 6,806
Deferred Income Taxes 1,269 1,238
Other Liabilities 1,658 1,821
Shareholders’ Equity   6,242   6,051
 
Total Liabilities and Shareholders’ Equity $ 21,623 $ 20,991
 
 
 

MACY’S, INC.

 

Consolidated Statements of Cash Flows (Unaudited)

 

(millions)

           
52 Weeks Ended

February 1, 2014

53 Weeks Ended

February 2, 2013

Cash flows from operating activities:
Net income $ 1,486 $ 1,335

Adjustments to reconcile net income to net cash provided by operating activities:

Impairments, store closing and other costs 88 5
Depreciation and amortization 1,020 1,049
Stock-based compensation expense 62 61

Amortization of financing costs and premium on acquired debt

(8 ) (16 )
Changes in assets and liabilities:
(Increase) decrease in receivables (58 ) 7
Increase in merchandise inventories (249 ) (191 )

Increase in prepaid expenses and other current assets

(2 ) (7 )

(Increase) decrease in other assets not separately identified

(1 ) 23
Increase in merchandise accounts payable 101 23

Increase (decrease) in accounts payable and accrued liabilities not separately identified

48 (33 )
Increase (decrease) in current income taxes 7 (16 )
Increase (decrease) in deferred income taxes (142 ) 14

Increase (decrease) in other liabilities not separately identified

  197     (75 )
Net cash provided by operating activities   2,549     2,179  
 
Cash flows from investing activities:
Purchase of property and equipment (607 ) (698 )
Capitalized software (256 ) (244 )
Disposition of property and equipment 132 66
Other, net   (57 )   95  
Net cash used by investing activities   (788 )   (781 )
 

Cash flows from financing activities:

Debt issued

400 1,000
Financing costs (9 ) (11 )
Debt repaid (124 ) (1,803 )
Dividends paid (359 ) (324 )
Increase (decrease) in outstanding checks 24 (88 )
Acquisition of treasury stock (1,571 ) (1,397 )
Issuance of common stock   315     234  
Net cash used by financing activities   (1,324 )   (2,389 )
 
Net increase (decrease) in cash and cash equivalents 437 (991 )
Cash and cash equivalents at beginning of period   1,836     2,827  
 
Cash and cash equivalents at end of period $ 2,273   $ 1,836  
 
Note: Certain reclassifications were made to prior year’s amounts to conform with the classifications of such amounts in the most recent years.
 
 
 

MACY’S, INC.

Important Information Regarding Non-GAAP Financial Measures

The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information. See the tables below for supplemental financial data and corresponding reconciliations to GAAP financial measures. These non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in these non-GAAP financial measures may be significant items that could impact the Company's financial position, results of operations and cash flows and should therefore be considered in assessing the Company's actual financial condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies.

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