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Consolidated Statements of Income - 3Q 2007 (Unaudited) (Note 1)
(All amounts in millions except percentages and per share figures)
| |
39 Weeks Ended |
| |
November 3, 2007 |
October 28, 2006 |
| |
$ |
% to
Net sales |
$ |
% to
Net sales |
| |
| Net sales |
$17,719 |
|
$17,811 |
|
| |
| Cost of sales – recurring (Note 2) |
10,656 |
60.1% |
10,610 |
59.6% |
| |
| Gross margin - recurring |
7,063 |
39.9% |
7,201 |
40.4% |
| |
| Inventory valuation adjustments - May integration (Note 3) |
- |
-% |
(168) |
(0.9%) |
| |
| Gross margin |
7,063 |
39.9% |
7,033 |
39.5% |
| |
| Selling, general and administrative expenses |
(6,272) |
(35.4%) |
(6,365) |
(35.8%) |
| |
| May integration costs (Note 4) |
(150) |
(0.9%) |
(283) |
(1.6%) |
| |
| Gains on the sale of accounts receivable (Note 5) |
– |
–% |
191 |
1.1% |
| |
| Operating income |
641 |
3.6% |
576 |
3.2% |
| |
| Interest expense - net (Note 6) |
(407) |
|
(341) |
|
| |
Income from continuing operations
before income taxes |
234 |
|
235 |
|
| |
| Federal, state and local income tax expense (Note 7) |
(75) |
|
(7) |
|
| |
| Income from continuing operations |
159 |
|
228 |
|
| |
| Discontinued operations, net of income taxes (Note 8) |
(16) |
|
34 |
|
| |
| Net income |
$143 |
|
$262 |
|
| |
| Basic earnings (loss) per share: |
| Income from continuing operations |
$.35 |
|
$.42 |
|
| Income (loss) from discontinued operations |
(.03) |
|
.06 |
|
| Net income |
$.32 |
|
$.48 |
|
| |
| Diluted earnings (loss) per share (Note 9): |
| Income from continuing operations |
$.35 |
|
$.41 |
|
| Income (loss) from discontinued operations |
(.04) |
|
.06 |
|
| Net income |
$.31 |
|
$.47 |
|
| |
| Average common shares: |
| Basic |
451.4 |
|
548.0 |
|
| Diluted |
457.4 |
|
555.7 |
|
| |
| End of period common shares outstanding |
433.0 |
|
530.8 |
|
| |
| Depreciation and amortization expense |
$977 |
|
$945 |
|
Notes:
(1) Because of the seasonal nature of the retail business, the results of operations for the 39 weeks ended November 3, 2007 and October 28, 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. The Lord & Taylor division and the Bridal Group, consisting of David's Bridal, After Hours Formalwear and Priscilla of Boston, were subsequently sold to third parties. 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.
(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 November 3, 2007 or October 28, 2006.
(3) Represents inventory valuation adjustments associated with the combination and integration of Macy's and May's merchandise assortments.
(4) Represents costs and expenses associated with the integration and consolidation of May's operations into Macy's operations, including costs related to closed locations, system conversion costs and costs related to other operational consolidations. May integration costs for the 39 weeks ended October 28, 2006 were partially offset by gains from the sale of Macy's locations.
(5) Represents the gains recognized on the sale of Macy's remaining 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.
(6) Interest expense for the 39 weeks ended October 28, 2006 included approximately $17 million of interest income related to the settlement of various tax examinations (see Note 7).
(7) The income tax expense for the 39 weeks ended November 3, 2007 reflects approximately $10 million of tax benefits related to the adjustment or settlement of various tax issues. The income tax expense for the 39 weeks ended October 28, 2006 reflected 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. The total impact of the tax settlement in the 39 weeks ended October 28, 2006, including interest income (see Note 6), amounted to $.16 per diluted share.
(8) Represents the results of operations of Lord & Taylor and the Bridal Group. For the 39 weeks ended November 3, 2007, discontinued operations includes the loss on disposal of After Hours Formalwear of $7 million on a pre-tax and after-tax basis, or $.01 per diluted share. For the 39 weeks ended October 28, 2006, discontinued operations also included 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.
(9) For the 39 weeks ended November 3, 2007 and October 28, 2006, May integration costs and related inventory valuation adjustments (see Notes 3 and 4) amounted to $.20 and $.50 per diluted share, respectively.
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