(1) Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended October 27, 2012 and October 29, 2011 (which do not include the Christmas season) are not necessarily indicative of such results for the fiscal year.

(2) 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 October 27, 2012 or October 29, 2011.

(3) 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.
 
MACY’S, INC.
 

Consolidated Statements of Income (Unaudited) (Note 1)
 

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

 
  39 Weeks Ended   39 Weeks Ended
October 27, 2012 October 29, 2011

$
 

% to Net sales

$
 

% to Net sales
 
Net sales $ 18,336 $ 17,681
 
Cost of sales (Note 2)   10,984   59.9 %   10,587   59.9 %
 
Gross margin 7,352 40.1 % 7,094 40.1 %
 
Selling, general and administrative expenses   (6,082 ) (33.2 %)   (5,967 ) (33.7 %)
 
Operating income 1,270 6.9 % 1,127 6.4 %
 
Interest expense – net   (320 )   (335 )
 
Income before income taxes 950 792
 
Federal, state and local income tax expense (Note 3)   (345 )   (281 )
 
Net income $ 605   $ 511  
 
Basic earnings per share $ 1.48   $ 1.20  
 
Diluted earnings per share $ 1.45   $ 1.18  
 
Average common shares:
Basic 409.9 426.0
Diluted 416.5 432.2
 
End of period common shares outstanding 395.5 420.6
 
Depreciation and amortization expense $ 782 $ 818
 

MACY’S, INC.

Consolidated Statements of Income (Unaudited)

Notes:

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