Exhibit J 

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Form 8-K 

Macy's, Inc. - M 

Filed: May 16, 2007 (period: May 16, 2007) 

Report of unscheduled material events or corporate changes. 

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Table of Contents 

Item 2.02. Results of Operations and Financial Condition.

SIGNATURE

Index to Exhibits

EX-99.1 (PRESS RELEASE)

Case 1:07-cv-05862-RJH Document 35-11 Filed 11/08/2007 Page 3 of 11
UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549 

 

FORM 8-K 

 

CURRENT REPORT 

 

Pursuant to Section 13 or 15(d) of the 

Securities Exchange Act of 1934 

 

 

Date of Report: May 16, 2007 

 

 

FEDERATED DEPARTMENT STORES, INC. 

 

7 West Seventh Street, Cincinnati, Ohio 45202 

 (513) 579-7000 

 

-and- 

 

151 West 34th Street, New York, New York 10001 

 (212) 494-1602 

 

 

Delaware 1-13536 13-3324058 

(State of Incorporation) (Commission File Number) (IRS Employer Identification No.) 

 

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any 

of the following provisions: 

 

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 

 

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 

 

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 

 

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 

 

Case 1:07-cv-05862-RJH Document 35-11 Filed 11/08/2007 Page 4 of 11
 

 

Item 2.02. Results of Operations and Financial Condition.

 

 On May 16, 2007, Federated Department Stores, Inc. ("Federated") issued a press release announcing 

Federated's financial condition and results of operations for the 13 weeks ended May 5, 2007. The full text of 

the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. 

 

 The press release referred to above contains certain non-GAAP financial measures of operating income and 

diluted earnings per share from continuing operations, excluding May Company merger integration costs and 

related inventory valuation adjustments. Management believes that operating income and diluted earnings per 

share from continuing operations, excluding May Company merger integration costs and related inventory 

valuation adjustments, is a useful measure in evaluating Federated's ability to generate earnings from 

continuing operations and that providing such measure will allow investors to more readily compare the 

earnings referred to in the press release to the earnings provided by Federated in past and future periods. 

Management believes that excluding May Company merger integration costs and related inventory valuation 

adjustments from these calculations is particularly useful where the amount of such items are not consistent in 

the periods presented. However, the reader is cautioned that any non-GAAP financial measures provided by 

Federated are provided in addition to, and not as an alternative for, Federated's reported results prepared in 

accordance with GAAP. Certain items that may have a significant impact on Federated's financial position, 

results of operations and cash flows must be considered when assessing Federated's actual financial condition 

and performance regardless of whether these items are included in these non-GAAP financial measures. 

Additionally, the methods used by Federated 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 provided by Federated may not be comparable to similar measures provided by other 

companies. 

 

Item 9.01. Financial Statements and Exhibits.

 

 (d) Exhibits 

 

 99.1 Press Release of Federated dated May 16, 2007. 

 

 

 

 

 

FEDERATED DEPARTMENT STORES, INC. 

 

SIGNATURE

 

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 hereunto duly authorized. 

 

 FEDERATED DEPARTMENT STORES, INC. 

 

Dated: May 16, 2007 By: /s/ Dennis J. Broderick 

 Name: Dennis J. Broderick 

 Title: Senior Vice President, General Counsel and Secretary 

 

 

Index to Exhibits

 

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Index Number 

 

99.1 Press Release of Federated dated May 16, 2007. 

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Exhibit 99.1 

FEDERATED DEPARTMENT STORES, INC. Contacts: 

 Media - Jim Sluzewski 

 513/579-7764 

 Investor - Susan Robinson 

 513/579-7780 

 

FOR IMMEDIATE RELEASE 

 

FEDERATED REPORTS FIRST QUARTER EARNINGS OF 11 CENTS 

 PER DILUTED SHARE FROM CONTINUING OPERATIONS, 

 UP FROM A LOSS OF 13 CENTS PER DILUTED SHARE LAST YEAR 

Diluted EPS is 16 cents, excluding merger integration costs 

CINCINNATI, Ohio, May 16, 2007 - Federated Department Stores, Inc. today reported diluted earnings per share from continuing 

operations of 11 cents for the first quarter of 2007, ended May 5, 2007. This compares with a loss of 13 cents per diluted share from 

continuing operations for the same 13-week period last year. 

Excluding May Company merger integration costs of $36 million ($22 million after tax or 5 cents per diluted share), first quarter 

diluted earnings per share from continuing operations was 16 cents. This compares with diluted earnings per share from continuing 

operations of 1 cent for the first quarter of 2006, excluding merger integration costs and related inventory valuation adjustments of 

$129 million ($81 million after tax or 14 cents per diluted share). The first quarter 2007 earnings per diluted share is within the 

company's guidance for 15 to 20 cents excluding merger integration costs. 

"Sales in the quarter were soft, particularly in April. For the quarter as a whole, we were pleased with sales in the legacy Macy's and 

Bloomingdale's stores," said Terry J. Lundgren, Federated's chairman, president and chief executive officer. "However, sales in the 

new Macy's locations were disappointing in the quarter. In spite of weak sales, we achieved strong gross margin results and reduction 

in expense as a percent to sales. We are on track to deliver at least $450 million in annual expense savings as a result of the May 

Company acquisition. While April has given us some concern about the consumer and the economic environment, we remain 

optimistic that our trends will improve particularly in the back half of the year as we reach the first anniversary of the Macy's brand 

conversion." 

Sales

Sales in the first quarter totaled $5.921 billion, a decrease of 0.2 percent compared to sales of $5.930 billion in the same period last 

year. This is below the company's guidance for first quarter sales to be in the range of $6 billion to $6.1 billion. On a same-store basis, 

Federated's first quarter sales were up 0.6 percent. 

In the first quarter of 2007, the company opened six new stores - Macy's in Bolingbrook, IL; Boston and Hyannis, MA; Collierville, 

TN; and Austin, TX, as well as a Bloomingdale's in Costa Mesa, CA. A Macy's store in Salt Lake City, UT, was closed. 

Operating Income

Federated's operating income totaled $208 million or 3.5 percent of sales for the quarter ended May 5, 2007, compared with operating 

income of $20 million or 0.3 percent of sales for the same period last year. Federated's first quarter 2007 operating income includes 

$36 million in May Company integration costs, compared with $129 million in integration costs and related inventory valuation 

adjustments in the first quarter of 2006. Excluding these items, operating income was $244 million or 4.1 percent of sales in the first 

quarter of 2007, and $149 million or 2.5 percent of sales in the first quarter of 2006. 

The recurring gross margin rate for the first quarter of 2007 was 39.8 percent, compared with 38.8 percent in the same quarter a year 

earlier. 

First quarter 2007 selling, general and administrative expenses as a percent of sales improved by 0.6 of a percentage point compared 

with last year. 

Cash Flow

Net cash used by continuing operating activities was $370 million in the first quarter of 2007, compared with $114 million in the first 

quarter last year. The difference reflects the fact that the company no longer owns proprietary credit receivables. In addition, inventory 

Case 1:07-cv-05862-RJH Document 35-11 Filed 11/08/2007 Page 7 of 11
levels in the first quarter of 2006 were impacted by the liquidation of merchandise in the former May Company stores. 

Net cash used by continuing investing activities in the first quarter of 2007 was $31 million, compared with $84 million a year ago. 

Net cash used by continuing financing activities was $309 million in the first quarter of 2007, compared with $178 million in cash 

provided by continuing financing activities in the first quarter last year. The company issued $1.6 billion in long-term debt in the first 

quarter. 

The company repurchased 45 million outstanding shares of common stock on Feb. 27, 2007 for an initial payment of approximately 

$2 billion through accelerated share repurchase agreements. Credit Suisse has completed the variableterm accelerated share repurchase 

agreement, involving 22.5 million shares. The second part of the program, representing 22.5 million shares, is ongoing. At the end of 

the quarter, the company had remaining authorization to repurchase up to approximately $2.2 billion of its common stock. 

Looking Ahead

Federated reiterated its full-year 2007 earnings guidance of $2.45 to $2.60 per diluted share from continuing operations, excluding 

merger integration costs. 

Federated's guidance is for total sales of $6.0 billion to $6.1 billion in the second quarter, compared with previous guidance of $6.1 

billion to $6.2 billion. On a same-store basis, the company expects second quarter sales to be flat to up 2 percent, versus prior 

guidance of up 1.5 percent to 2.5 percent. Earnings per diluted share, excluding merger integration costs, are now expected to be in the 

range of 35 to 45 cents, compared with previous guidance of 40 to 45 cents, in the second quarter. The revised second quarter 

guidance reflects management's concern about uncertainty in the economic environment. 

Federated, with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2006 sales of $27 

billion. Federated operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the 

names of Macy's and Bloomingdale's. The company also operates macys.com, bloomingdales.com and Bloomingdale's By Mail. 

Contingent on shareholder approval, Federated's name will change to Macy's, Inc. and trade on the New York Stock Exchange under

ticker symbol "M", effective June 1, 2007. 

All statements in this press release that are not statements of historical fact are forward-looking statements within the meaning of the 

Private Securities Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations of Federated's 

management and are subject to significant risks and uncertainties. Actual results could differ materially from those expressed in or 

implied by the forward-looking statements contained in this release because of a variety of factors, including conditions to, or changes 

in the timing of, proposed transactions, prevailing interest rates, competitive pressures from specialty stores, general merchandise 

stores, manufacturers' outlets, off-price and discount stores, new and established forms of home shopping (including the Internet, 

mail-order catalogs and television) and general consumer spending levels, including the impact of the availability and level of

consumer debt, the effect of weather and other factors identified in documents filed by the company with the Securities and Exchange 

Commission. 

(NOTE: Additional information on Federated is available on the Internet at www.fds.com/pressroom. A webcast of Federated's first 

quarter earnings call with analysts will be held beginning at 10:30 a.m. ET on Wednesday, May 16. Pre-registration is requested. 

Those unable to access the webcast at www.fds.com may call 1-800-946-0719, passcode 2749916, to listen to the audio in real time. 

The webcast will be archived for replay beginning approximately two hours after the conclusion of the live call.) 

FEDERATED DEPARTMENT STORES, INC. 

Consolidated Statements of Operations (Unaudited) (Note 1)

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

 13 Weeks Ended 

 May 5, 2007 April 29, 2006 

 

 $ 

% to 

 Net sales $ 

% to 

 Net sales

 

Net sales $ 5,921 $ 5,930 

 

Cost of sales - recurring (Note 2) 3,564 60.2% 3,627 61.2% 

 

Gross margin - recurring 2,357 39.8% 2,303 38.8% 

 

Inventory valuation adjustments - 

 May integration (Note 3) - - % (6) (0.1%)

 

Gross margin 2,357 39.8% 2,297 38.7% 

 

Selling, general and administrative expenses (2,113) (35.7%) (2,154) (36.3%)

Case 1:07-cv-05862-RJH Document 35-11 Filed 11/08/2007 Page 8 of 11
May integration costs (Note 4) (36) (0.6%) (123) (2.1%)

 

Operating income 208 3.5% 20 0.3% 

Interest expense - net (125) (138) 

 

Income (loss) from continuing operations before income 

taxes 83 (118) 

Federal, state and local income tax benefit (expense) (31) 44 

 

Income (loss) from continuing operations 52 (74) 

Discontinued operations, net of income taxes (Note 5) (16) 22 

 

Net income (loss) $ 36 $ (52) 

Basic earnings (loss) per share: 

 Income (loss) from continuing operations $ .11 $ (.13) 

 Income (loss) from discontinued operations (.03) .04 

 Net income (loss) $ .08 $ (.09) 

 

Diluted earnings (loss) per share (Note 6): 

 Income (loss) from continuing operations $ .11 $ (.13) 

 Income (loss) from discontinued operations (.03) .04 

 Net income (loss) $ .08 $ (.09) 

 

Average common shares: 

 Basic 468.2 550.2 

 Diluted 476.4 558.0 

 

Common shares outstanding 459.2 552.7 

 

Depreciation and amortization expense $ 329 $ 316 

 

 

FEDERATED DEPARTMENT STORES, INC. 

 Consolidated Statements of Operations (Unaudited) (Note 1)

 

Notes: 

(1) Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended May 5, 2007 and April 29, 

2006 (which do not include the Christmas season) are not necessarily indicative of such results for the fiscal year. The May 

Department Stores Company ("May") was acquired August 30, 2005, including the Lord & Taylor division and the Bridal Group, 

including David's Bridal, After Hours Formalwear and Priscilla of Boston. The sale of the Lord & Taylor division was completed in 

October 2006, the sale of David's Bridal and Priscilla of Boston was completed in January 2007 and the sale of After Hours 

Formalwear was completed in April 2007. Share and per share amounts have been adjusted for the two-for-one stock split effected in 

the form of a stock dividend distributed on June 9, 2006. 

(2) Merchandise inventories are primarily valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory 

method. Application of this method did not impact cost of sales for the 13 weeks ended May 5, 2007 or April 29, 2006. 

(3) Represents inventory valuation adjustments associated with the combination and integration of Federated and May merchandise 

assortments. 

(4) Represents costs and expenses associated with the integration and consolidation of May's operations into Federated's operations, 

including additional costs related to closed locations, final system conversion costs and costs related to other operational 

consolidations. 

(5) Represents the results of operations of Lord & Taylor and the Bridal Group, including David's Bridal, After Hours Formalwear 

and Priscilla of Boston. For the 13 weeks ended May 5, 2007, discontinued operations includes the loss on disposal of After Hours 

Case 1:07-cv-05862-RJH Document 35-11 Filed 11/08/2007 Page 9 of 11
Formalwear of $7 million on a pre-tax and after-tax basis, or $.01 per diluted share. 

(6) For the 13 weeks ended May 5, 2007 and April 29, 2006, May integration costs and related inventory valuation adjustments (see 

Notes 3 and 4) amounted to $.05 and $.14 per diluted share, respectively. 

FEDERATED DEPARTMENT STORES, INC. 

 Consolidated Balance Sheets (Unaudited)

 (millions) 

 

 May 5, February 3, April 29, 

 2007 2007 2006 

ASSETS: 

 Current Assets: 

 Cash and cash equivalents $ 500 $ 1,211 $ 241

 Accounts receivable 504 517 2,300

 Merchandise inventories 5,499 5,317 5,432

 Supplies and prepaid expenses 281 251 267

 Income tax receivable - - 217

 Assets of discontinued operations - 126 2,045

 Total Current Assets 6,784 7,422 10,502

 

 Property and Equipment - net 11,229 11,473 11,310

 Goodwill 9,199 9,204 9,368

 Other Intangible Assets - net 878 883 1,059

 Other Assets 541 568 888

 

 Total Assets $28,631 $29,550 $33,127

LIABILITIES AND SHAREHOLDERS' EQUITY: 

 Current Liabilities: 

 Short-term debt $ 648 $ 650 $ 1,346

 Accounts payable and accrued liabilities 4,694 4,944 5,154

 Income taxes 39 665 200

 Deferred income taxes 120 52 225

 Liabilities of discontinued operations - 48 624

 Total Current Liabilities 5,501 6,359 7,549

 

 Long-Term Debt 9,425 7,847 8,837

 Deferred Income Taxes 1,564 1,728 1,679

 Other Liabilities 1,692 1,362 1,550

 Shareholders' Equity 10,449 12,254 13,512

 

 Total Liabilities and Shareholders' Equity $28,631 $29,550 $33,127

 

 

FEDERATED DEPARTMENT STORES, INC. 

 Consolidated Statements of Cash Flows (Unaudited)

 (millions) 

 13 Weeks Ended 

 May 5, 2007

13 Weeks Ended 

 April 29, 2006

Cash flows from continuing operating activities: 

 Net income (loss) $ 36 $ (52)

 Adjustments to reconcile net income (loss) to net cash 

 used by continuing operating activities: 

 (Income) loss from discontinued operations 16 (22)

 Stock-based compensation expense 28 26 

Case 1:07-cv-05862-RJH Document 35-11 Filed 11/08/2007 Page 10 of 11
 May integration costs 36 129 

 Depreciation and amortization 329 316 

 Amortization of financing costs and premium on 

 acquired debt (9) (12)

 Changes in assets and liabilities: 

 Decrease in proprietary and other accounts 

 receivable not separately identified 12 222 

 (Increase) decrease in merchandise inventories (182) 27 

 Increase in supplies and prepaid expenses (30) (65)

 Decrease in other assets not separately identified 9 8 

 Decrease in accounts payable and accrued 

 liabilities not separately identified (220) (312)

 Decrease in current income taxes (342) (471)

 Increase (decrease) in deferred income taxes (77) 50 

 Increase in other liabilities not separately identified 24 42 

 Net cash used by continuing operating activities (370) (114)

 

Cash flows from continuing investing activities: 

 Purchase of property and equipment (125) (86)

 Capitalized software (25) (17)

 Proceeds from the disposition of After Hours Formalwear 66 - 

 Proceeds from hurricane insurance claim 1 - 

 Disposition of property and equipment 52 19 

 Net cash used by continuing investing activities (31) (84)

 

 

FEDERATED DEPARTMENT STORES, INC. 

 Consolidated Statements of Cash Flows (Unaudited)

 (millions) 

 13 Weeks Ended 

 May 5, 2007

13 Weeks Ended 

 April 29, 2006

Cash flows from continuing financing activities: 

 Debt issued 1,600 124 

 Financing costs (15) - 

 Debt repaid (8) (110)

 Dividends paid (58) (69)

 Increase (decrease) in outstanding checks (63) 71 

 Acquisition of treasury stock (1,991) - 

 Issuance of common stock 226 162 

 Net cash provided (used) by continuing 

 financing activities (309) 178 

 

Net cash used by continuing operations (710) (20)

 

Net cash provided by discontinued operating activities 7 34 

Net cash used by discontinued investing activities (7) (33)

Net cash provided (used) by discontinued financing activities (1) 12 

Net cash provided (used) by discontinued operations (1) 13 

 

Net decrease in cash and cash equivalents (711) (7)

Cash and cash equivalents at beginning of period 1,211 248 

 

Cash and cash equivalents at end of period $ 500 $ 241 

_______________________________________________ 

 Created by 10KWizard www.10KWizard.comSource: Macy's, Inc., 8-K, May 16, 2007

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