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Consolidated Statements of Income - 3Q 2006 (Unaudited) (Note 1)
(All amounts in millions except percentages and per share figures)
| |
13 Weeks Ended |
| |
October 28,
2006 |
October 29,
2005 |
| |
$ |
% to
Net Sales |
$ |
% to
Net Sales |
| |
| Net sales |
$5,886 |
|
$5,555 |
|
| |
| Cost of sales – recurring (Note 2) |
3,513 |
59.7% |
3,312 |
59.6% |
| |
| Gross margin - recurring |
2,373 |
40.3% |
2,243 |
40.4% |
| |
Inventory valuation adjustments –
May integration (Note 3) |
(28) |
(0.5%) |
– |
–% |
| |
| Gross margin |
2,345 |
39.8% |
2,243 |
40.4% |
| |
| Selling, general and administrative expenses |
(2,094) |
(35.6%) |
(1,973) |
(35.5%) |
| |
| May integration costs (Note 4) |
(117) |
(1.9%) |
(63) |
(1.1%) |
| |
| Gain on sale of accounts receivable (Note 5) |
– |
–% |
480 |
8.6% |
| |
| Operating income |
134 |
2.3% |
687 |
12.4% |
| |
| Interest expense - net |
(104) |
|
(145) |
|
| |
| Income from continuing operations before income taxes |
30 |
|
542 |
|
| |
| Federal, state and local income tax expense |
(10) |
|
(118) |
|
| |
| Income from continuing operations |
20 |
|
424 |
|
| |
| Discontinued operations, net of income taxes (Note 6) |
(23) |
|
12 |
|
| |
| Net Income (loss) |
$(3) |
|
$436 |
|
| |
| Basic earnings (loss) per share: |
| Income from continuing operations |
$.03 |
|
$.88 |
|
| Income (loss) from discontinued operations |
(.04) |
|
.03 |
|
| Net income (loss) |
$(.01) |
|
$.91 |
|
| |
| Diluted earnings (loss) per share (Note 7): |
| Income from continuing operations |
$.03 |
|
$.87 |
|
| Income (loss) from discontinued operations |
(.04) |
|
.03 |
|
| Net income (loss) |
$(.01) |
|
$.90 |
|
| |
| Average common shares: |
| Basic |
541.7 |
|
478.5 |
|
| Diluted |
549.9 |
|
486.9 |
|
| |
| Depreciation and amortization expense |
$315 |
|
$283 |
|
Notes:
(1) Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended October 28, 2006 and October 29, 2005 (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. The results of operations of May have been included in Federated's results of operations from the date of acquisition. Certain reclassifications were made to prior period amounts to conform with the classifications of such amounts for the most recent period. Share and per share amounts have been adjusted for the two-for-one stock split effected in the form of a stock dividend distributed after the close of trading on June 9, 2006 to shareholders of record on May 26, 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 October 28, 2006 or October 29, 2005.
(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, primarily related to the closing of duplicate store locations.
(5) Represents the gain recognized on the sale of the Company's proprietary and non-proprietary credit card accounts and related receivables. For the 13 weeks ending October 29, 2005, the after-tax net gain amounted to $.79 per diluted share.
(6) Represents the results of operations of the acquired businesses of Lord & Taylor and the Bridal Group, including David's Bridal, After Hours Formalwear and Priscilla of Boston. The sale of the Lord & Taylor division was completed on October 3, 2006. For the 13 weeks ended October 28, 2006, discontinued operations also includes the loss on disposal of the Lord & Taylor division of $63 million on a pre-tax basis, or $38 million after income taxes, or $.07 per diluted share. The loss on disposal reflects a reduction to the fair value of the assets sold based on the actual purchase agreement.
(7) For the 13 weeks ended October 28, 2006, May integration costs and related inventory valuation adjustments (See Notes 3 and 4) amounted to $.17 per diluted share. For the 13 weeks ended October 29, 2005, May integration costs (See note 4) amounted to $.08 per diluted share.
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Consolidated Statements of Income - 3Q 2006 (Unaudited) (Note 1)
(All amounts in millions except percentages and per share figures)
| |
39 Weeks Ended |
| |
October 28,
2006 |
October 29,
2005 |
| |
$ |
% to
Net Sales |
$ |
% to
Net Sales |
| |
| Net sales |
$17,811 |
|
$12,819 |
|
| |
| Cost of sales – recurring (Note 2) |
10,610 |
59.6% |
7,614 |
59.4% |
| |
| Gross margin - recurring |
7,201 |
40.4% |
5,205 |
40.6% |
| |
Inventory valuation adjustments –
May integration (Note 3) |
(168) |
(0.9%) |
– |
–% |
| |
| Gross margin |
7,033 |
39.5% |
5,205 |
40.6% |
| |
| Selling, general and administrative expenses |
(6,365) |
(35.8%) |
(4,392) |
(34.3%) |
| |
| May integration costs (Note 4) |
(283) |
(1.6%) |
(63) |
(0.5%) |
| |
| Gains on sale of accounts receivable (Note 5) |
191 |
1.1% |
480 |
3.8% |
| |
| Operating income |
576 |
3.2% |
1,230 |
9.6% |
| |
| Interest expense - net (Note 6) |
(341) |
|
(253) |
|
| |
| Income from continuing operations before income taxes |
235 |
|
977 |
|
| |
| Federal, state and local income tax expense (Note 7) |
(7) |
|
(282) |
|
| |
| Income from continuing operations |
228 |
|
695 |
|
| |
| Discontinued operations, net of income taxes (Note 8) |
34 |
|
12 |
|
| |
| Net Income |
$262 |
|
$707 |
|
| |
| Basic earnings per share: |
| Income from continuing operations |
$.42 |
|
$1.80 |
|
| Income from discontinued operations |
.06 |
|
.03 |
|
| Net income |
$.48 |
|
$1.83 |
|
| |
| Diluted earnings per share (Note 9): |
| Income from continuing operations |
$.41 |
|
$1.76 |
|
| Income from discontinued operations |
.06 |
|
.03 |
|
| Net income |
$.47 |
|
$1.79 |
|
| |
| Average common shares: |
| Basic |
548.0 |
|
386.2 |
|
| Diluted |
555.7 |
|
394.6 |
|
| |
| Depreciation and amortization expense |
$945 |
|
$639 |
|
Notes:
(1) Because of the seasonal nature of the retail business, the results of operations for the 39 weeks ended October 28, 2006 and October 29, 2005 (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. The results of operations of May have been included in Federated's results of operations from the date of acquisition. Certain reclassifications were made to prior period amounts to conform with the classifications of such amounts for the most recent period. Share and per share amounts have been adjusted for the two-for-one stock split effected in the form of a stock dividend distributed after the close of trading on June 9, 2006 to shareholders of record on May 26, 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 39 weeks ended Oct. 28, 2006 or October 29, 2005.
(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, primarily related to the closing of duplicate store locations. The May integration costs for the 39 weeks ended October 28, 2006 were partially offset by gains from the sale of Federated locations.
(5) Represents the gain recognized on the sale of the Company's proprietary and non-proprietary credit card accounts and related receivables. For the 39 weeks ended October 28, 2006, the after-tax net gain amounted to $.21 per diluted share. For the 39 weeks ended October 29, 2005, the after-tax net gain amounted to $.97 per diluted share.
(6) Interest expense for the 39 weeks ended October 28, 2006 includes approximately $17 million of interest income related to the settlement of various tax examinations (See Note 7).
(7) Income tax expense for the 39 weeks ended October 28, 2006 reflects approximately $80 million of tax benefits related to the settlement of various tax examinations, primarily attributable to losses related to the disposition of a former subsidiary.
(8) Represents the acquired operations of Lord & Taylor and the Bridal Group, including David's Bridal, After Hours Formalwear and Priscilla of Boston. The sale of the Lord & Taylor division was completed on October 3, 2006. For the 39 weeks ended October 28, 2006, discontinued operations also includes the loss on disposal of the Lord & Taylor division of $63 million on a pre-tax basis, or $38 million after income taxes, or $.07 per diluted share. The loss on disposal reflects a reduction to the fair value of the assets sold based on the actual purchase agreement
(9) For the 39 weeks ended October 28, 2006 and October 29, 2005, May integration costs and related inventory valuation adjustments (See Notes 3 and 4) amounted to $.50 and $.10 per diluted share, respectively.
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Consolidated Financial Statements:
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