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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended May 2, 2020

OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from    to

Commission file number: 1-13536
 
macysincrgbdigitalfilea02.jpg
Macy's, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
13-3324058
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 

151 West 34th Street, New York, New York 10001
(Address of Principal Executive Offices, including Zip Code)
(513) 579-7780
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value per share
M
New York Stock Exchange
    
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller Reporting Company Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class
 
Outstanding at May 30, 2020
Common Stock, $.01 par value per share
 
310,235,066 shares
 



EXPLANATORY NOTE
Macy's, Inc. is filing this quarterly report on Form 10-Q after the June 11, 2020 (the “Original Due Date”) deadline applicable to it for the filing of a Form 10-Q for the quarter ended May 2, 2020 (the “Quarterly Report”) in reliance on the 45-day extension provided by an order issued by the SEC under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies dated March 25, 2020 (Release No. 34-88465) (the "Order").
On May 7, 2020, Macy's, Inc. filed a Current Report on Form 8-K to indicate its intention to rely on the Order for such extension. Consistent with its statements made in the Current Report on Form 8-K, Macy's, Inc. was unable to file the Quarterly Report by the Original Due Date, and therefore relied on the Order. The Quarterly Report is hereby filed before the extended due date permitted under the Order, i.e., 45 days after the Original Due Date, or July 27, 2020.

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements



MACY’S, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(millions, except per share figures)
 
 
 
 
 
 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
Net sales
$
3,017

 
$
5,504

Credit card revenues, net
131

 
172

 
 
 
 
Cost of sales
(2,501
)
 
(3,403
)
Selling, general and administrative expenses
(1,598
)
 
(2,112
)
Gains on sale of real estate
16

 
43

Impairment, restructuring and other costs
(3,184
)
 
(1
)
Operating income (loss)
(4,119
)
 
203

Benefit plan income, net
9

 
7

Interest expense
(49
)
 
(54
)
Interest income
2

 
7

Income (loss) before income taxes
(4,157
)
 
163

Federal, state and local income tax benefit (expense)
576

 
(27
)
Net income (loss)
$
(3,581
)
 
$
136

Basic earnings (loss) per share
$
(11.53
)
 
$
0.44

Diluted earnings (loss) per share
$
(11.53
)
 
$
0.44


The accompanying notes are an integral part of these Consolidated Financial Statements.

3


MACY’S, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

(millions)

 
 
 
 
 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
Net income (loss)
$
(3,581
)
 
$
136

Reclassifications to net income (loss):
 
 
 
Amortization of net actuarial loss and prior service credit on post employment and postretirement benefit plans included in net income, before tax
12

 
8

Tax effect related to items of other comprehensive income
(3
)
 
(2
)
Total other comprehensive income, net of tax effect
9

 
6

Comprehensive income (loss)
$
(3,572
)
 
$
142


The accompanying notes are an integral part of these Consolidated Financial Statements.


4


MACY’S, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(millions)
 
 
 
 
 
 
 
 
May 2, 2020
 
February 1, 2020
 
May 4, 2019
ASSETS
 
 
 
 
 
Current Assets:
 
 
 
 
 
Cash and cash equivalents
$
1,523

 
$
685

 
$
737

Receivables
170

 
409

 
237

Merchandise inventories
4,923

 
5,188

 
5,498

Prepaid expenses and other current assets
519

 
528

 
633

Total Current Assets
7,135

 
6,810

 
7,105

Property and Equipment - net of accumulated depreciation and
amortization of $4,560, $4,392 and $4,621
6,425

 
6,633

 
6,499

Right of Use Assets
2,672

 
2,668

 
2,631

Goodwill
838

 
3,908

 
3,908

Other Intangible Assets – net
439

 
439

 
441

Other Assets
1,072

 
714

 
712

Total Assets
$
18,581

 
$
21,172

 
$
21,296

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
Short-term debt
$
739

 
$
539

 
$
41

Merchandise accounts payable
2,196

 
1,682

 
1,950

Accounts payable and accrued liabilities
2,757

 
3,448

 
2,846

Income taxes
80

 
81

 
182

Total Current Liabilities
5,772

 
5,750

 
5,019

Long-Term Debt
4,918

 
3,621

 
4,680

Long-Term Lease Liabilities
2,923

 
2,918

 
2,823

Deferred Income Taxes
944

 
1,169

 
1,193

Other Liabilities
1,327

 
1,337

 
1,258

Shareholders' Equity
2,697

 
6,377

 
6,323

Total Liabilities and Shareholders’ Equity
$
18,581

 
$
21,172

 
$
21,296


The accompanying notes are an integral part of these Consolidated Financial Statements.


5


MACY’S, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)

(millions)

 
 
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Equity
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Shareholders' Equity
Balance at February 1, 2020
$
3

 
$
621

 
$
7,989

 
$
(1,241
)
 
$
(995
)
 
$
6,377

Net loss
 
 
 
 
(3,581
)
 
 
 
 
 
(3,581
)
Other comprehensive income
 
 
 
 
 
 
 
 
9

 
9

Common stock dividends
  ($0.3775 per share)
 
 
 
 
(117
)
 
 
 
 
 
(117
)
Stock-based compensation expense
 
 
6

 
 
 
 
 
 
 
6

Stock issued under stock plans
 
 
(62
)
 
 
 
61

 
 
 
(1
)
Other
 
 
 
 
 
 
 
 
4

 
4

Balance at May 2, 2020
$
3

 
$
565

 
$
4,291

 
$
(1,180
)
 
$
(982
)
 
$
2,697




 
 
 
 
 
 
 
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Equity
 
Treasury
Stock
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total Shareholders' Equity
Balance at February 2, 2019
$
3

 
$
652

 
$
8,050

 
$
(1,318
)
 
$
(951
)
 
$
6,436

Cumulative-effect adjustment (a)
 
 
 
 
(158
)
 
 
 
 
 
(158
)
Net income
 
 
 
 
136

 
 
 
 
 
136

Other comprehensive income
 
 
 
 
 
 
 
 
6

 
6

Common stock dividends
   ($0.3775 per share)
 
 
 
 
(117
)
 
 
 
 
 
(117
)
Stock-based compensation expense
 
 
14

 
 
 
 
 
 
 
14

Stock issued under stock plans
 
 
(60
)
 
 
 
66

 
 
 
6

Balance at May 4, 2019
$
3

 
$
606

 
$
7,911

 
$
(1,252
)
 
$
(945
)
 
$
6,323

(a) Represents the cumulative-effect adjustment to retained earnings for the adoption of Accounting Standards Update 2016-02 (ASU-2016-02), Leases (Topic 842), on February 3, 2019.

The accompanying notes are an integral part of these Consolidated Financial Statements.

















6


MACY’S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(millions)
 
 
 
 
 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(3,581
)
 
$
136

Adjustments to reconcile net income (loss) to net cash used by operating activities:
 
 
 
Impairment, restructuring and other costs
3,184

 
1

Depreciation and amortization
237

 
236

Stock-based compensation expense
6

 
14

Gains on sale of real estate
(16
)
 
(43
)
Benefit plans
12

 
8

Deferred income taxes
(225
)
 
7

Changes in assets and liabilities:
 
 
 
Decrease in receivables
236

 
163

(Increase) decrease in merchandise inventories
265

 
(235
)
(Increase) decrease in prepaid expenses and other current assets
12

 
(6
)
Increase in merchandise accounts payable
629

 
247

Decrease in accounts payable and accrued liabilities
(531
)
 
(516
)
Increase (decrease) in current income taxes
(353
)
 
8

Change in other assets and liabilities
(39
)
 
(58
)
Net cash used by operating activities
(164
)
 
(38
)
Cash flows from investing activities:
 
 
 
Purchase of property and equipment
(122
)
 
(204
)
Capitalized software
(38
)
 
(60
)
Disposition of property and equipment
21

 
34

Other, net
26

 
(7
)
Net cash used by investing activities
(113
)
 
(237
)
Cash flows from financing activities:
 
 
 
Debt issued
1,500

 

Debt repaid
(4
)
 
(3
)
Dividends paid
(117
)
 
(116
)
Decrease in outstanding checks
(231
)
 
(45
)
Issuance of common stock

 
6

Net cash provided (used) by financing activities
1,148

 
(158
)
Net increase (decrease) in cash, cash equivalents and restricted cash
871

 
(433
)
Cash, cash equivalents and restricted cash beginning of period
731

 
1,248

Cash, cash equivalents and restricted cash end of period
$
1,602

 
$
815

Supplemental cash flow information:
 
 
 
Interest paid
$
38

 
$
46

Interest received
3

 
7

Income taxes paid (net of refunds received)
2

 
12

Note: Restricted cash of $79 million and $78 million have been included with cash and cash equivalents for the 13 weeks ended May 2, 2020 and May 4, 2019, respectively.

The accompanying notes are an integral part of these Consolidated Financial Statements.

7


MACY’S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

1.    Organization and Summary of Significant Accounting Policies
Nature of Operations
Macy's, Inc. and subsidiaries (the "Company") is an omnichannel retail organization operating stores, websites and mobile applications under three brands (Macy's, Bloomingdale's and bluemercury) that sell a wide range of merchandise, including apparel and accessories (men's, women's and kids'), cosmetics, home furnishings and other consumer goods. The Company has stores in 43 states, the District of Columbia, Guam and Puerto Rico. As of May 2, 2020, the Company's operations were conducted through Macy's, Bloomingdale's, Bloomingdale's The Outlet, Macy's Backstage and bluemercury.
Bloomingdale's in Dubai, United Arab Emirates and Al Zahra, Kuwait are operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
A description of the Company's significant accounting policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended February 1, 2020 (the "2019 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2019 10-K.
Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company considered the novel coronavirus ("COVID-19") related impacts to its estimates, as appropriate, within its Consolidated Financial Statements and there may be changes to those estimates in future periods. The Company believes that the accounting estimates are appropriate after giving consideration to the increased uncertainties surrounding the severity and duration of the COVID-19 pandemic. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.
The Consolidated Financial Statements for the 13 weeks ended May 2, 2020 and May 4, 2019, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) considered necessary to present fairly, in all material respects, the consolidated financial position and results of operations of the Company.
Seasonality
Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended May 2, 2020 and May 4, 2019 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.
Comprehensive Income (Loss)
Total comprehensive income (loss) represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income (loss). For the Company, the only other components of total comprehensive income (loss) for the 13 weeks ended May 2, 2020 and May 4, 2019 relate to post employment and postretirement plan items. Settlement charges incurred are included as a separate component of income (loss) before income taxes in the Consolidated Statements of Operations. Amortization reclassifications out of accumulated other comprehensive loss are included in the computation of net periodic benefit cost (income) and are included in benefit plan income, net on the Consolidated Statements of Operations. See Note 8, "Benefit Plans," for further information.



8

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


2.    Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread throughout the United States. The COVID-19 pandemic has had a negative impact on the Company's fiscal 2020 operations and financial results to date, and the full financial impact of the pandemic cannot be reasonably estimated at this time due to uncertainty as to the severity and duration of the pandemic. The following summarizes the actions taken and impacts from the COVID-19 pandemic during and subsequent to the 13 weeks ended May 2, 2020.

The Company temporarily closed all stores on March 18, 2020, which included all Macy’s, Bloomingdale’s, Bluemercury, Macy’s Backstage, Bloomingdales the Outlet and Market by Macy’s stores. The first tranche of stores began reopening on May 4, 2020 and nearly all the Company's stores have been reopened.

As a result of store closures, the Company recognized an approximate $300 million inventory write-down, primarily on fashion merchandise, during the 13 weeks ended May 2, 2020.

In an effort to increase liquidity, the Company fully drew on its $1,500 million credit facility, announced the suspension of quarterly cash dividends beginning in the second quarter of 2020 and took additional steps to reduce discretionary spending. The Company's Board of Directors rescinded its authorization of any unused amounts under the Company's share repurchase program. In June 2020, the Company completed financing activities of nearly $4.5 billion. See Note 7, "Financing Activities," for further discussion on these activities.

To improve the Company's current cash position and reduce its cash expenditures during this uncertain time, the Company's Board of Directors and Chief Executive Officer did not receive compensation from the beginning of the COVID-19 crisis through June 30, 2020. In addition, the Company deferred cash expenditures where possible and temporarily implemented a furlough for the majority of its employee population that will end at the beginning of July 2020. Certain executives not impacted by the furlough took a temporary reduction of their pay through June 30, 2020.

In the first quarter of 2020, the Company deferred rent payments for a significant number of its stores. The Company has elected to treat the COVID-19 pandemic-related rent deferrals as accrued liabilities. The Company will continue to recognize expense during the deferral periods.

In June 2020, the Company announced a restructuring that will align its cost base with anticipated near-term sales as the business recovers from the impact of the COVID-19 pandemic. The Company will reduce corporate and management headcount by approximately 3,900. Additionally, the Company has reduced staffing across its stores portfolio, supply chain and customer support network, which it will adjust as sales recover. For fiscal 2020, the Company expects pre-tax costs of approximately $180 million for these restructuring activities, the majority of which will be recorded in the second quarter of 2020 and all of which will be in cash.

During the 13 weeks ended May 2, 2020, the Company incurred non-cash impairment charges on long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value. The Company also incurred a non-cash impairment charge on goodwill as a result of the sustained decline in the Company's market capitalization and decline in projected cash flows primarily as a result of the COVID-19 pandemic. See Note 3, "Impairment, Restructuring and Other Costs" and Note 4, "Goodwill and Indefinite Lived Intangible Assets", respectively, for further discussion of these charges.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("the CARES Act") was signed into law, providing payroll tax credits for employee retention, deferral of payroll taxes, and several income tax provisions including modifications to the net interest deduction limitation, changes to certain property depreciation and allows for carryback of certain operating losses.

The impacts of the CARES Act have been included in the estimation of the Company's annual effective tax rate and the income tax benefit recognized during the 13 weeks ended May 2, 2020. Specifically, the Company has estimated an annual net operating loss that will be available for carryback at a 35% federal income tax rate rather than the current 21% federal income tax rate. The resultant benefit of this rate differential was offset by the impact of the non-tax deductible component of the goodwill impairment charge and additional income tax expense associated with deferred

9

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


tax remeasurement during the first quarter of 2020. The net impact of these items is the primary driver of the effective tax rate decrease when compared to the same period in 2019. As of May 2, 2020, the Company recognized a $351 million income tax receivable, which is included within Other Assets on the Consolidated Balance Sheets.

In addition, during the 13 weeks ended May 2, 2020, the Company recognized $42 million in employee retention payroll tax credits and elected to defer payment of the employer portion of social security taxes.

3.    Impairment, Restructuring and Other Costs

 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
 
(millions)
Impairments
$
3,150

 
$

Restructuring
25

 

Other
9

 
1

Total
$
3,184

 
$
1



During the 13 weeks ended May 2, 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment charges totaling $3,150 million consisting of:

$3,070 million of goodwill impairments, with $2,972 million attributable to the Macy's reporting unit and $98 million attributable to the Bluemercury reporting unit. See discussion at Note 4, "Goodwill and Indefinite Lived Intangible Assets."

$80 million of impairments on long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value.

A summary of the restructuring and other cash activity for the 13 weeks ended May 2, 2020 related to the Polaris strategy, which was announced in February 2020 and are included within accounts payable and accrued liabilities, is as follows:

 
Severance and other benefits
 
Professional fees and other related charges
 
Total
 
(millions)
Balance at February 1, 2020
$
115

 
$
9

 
$
124

Additions charged to expense
25

 
7

 
32

Cash payments
(82
)
 
(6
)
 
(88
)
Balance at May 2, 2020
$
58

 
$
10

 
$
68





10

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



4.    Goodwill and Indefinite Lived Intangible Assets

 
May 2,
2020
 
February 1,
2020
 
May 4,
2019
 
(millions)
Non-amortizing intangible assets
 
 
 
 
 
Goodwill
$
9,290

 
$
9,290

 
$
9,290

Accumulated impairment losses
(8,452
)
 
(5,382
)
 
(5,382
)
 
838

 
3,908

 
3,908

Tradenames
403

 
403

 
403

 
$
1,241

 
$
4,311

 
$
4,311



As a result of the sustained decline in the Company's market capitalization and changes in the Company's long-term projections driven largely by the impacts of the COVID-19 pandemic, the Company determined a triggering event had occurred that required an interim impairment assessment for all of its reporting units and indefinite lived intangible assets. The Company determined the fair value of each of its reporting units using a market approach, an income approach, or a combination of both, where appropriate. Relative to the prior assessment, as part of this current assessment, it was determined that an increase in the discount rate applied in the valuation was required to align with market-based assumptions and company-specific risk. This higher discount rate, in conjunction with revised long-term projections, resulted in lower fair values of the reporting units. As a result the Company recognized $2,972 million and $98 million of goodwill impairment for the Macy's and bluemercury reporting units, respectively, during the first quarter of 2020.

5.    Earnings (Loss) Per Share
The following tables set forth the computation of basic and diluted earnings (loss) per share:

 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
 
Net
Loss
 
 
 
Shares
 
Net
Income
 
 
 
Shares
 
(millions, except per share data)
Net income (loss)
$
(3,581
)
 
 
 
309.7

 
$
136

 
 
 
308.2

Shares to be issued under deferred compensation and other plans

 
 
 
 
0.9

 
 
 
 
 
0.9

 
$
(3,581
)
 
 
 
310.6

 
$
136

 
 
 
309.1

Basic earnings (loss) per share
 
 
$
(11.53
)
 
 
 
 
 
$
0.44

 
 
Effect of dilutive securities:
 
 
 
 
 
 
 
 
 
 
 
Stock options and restricted stock units
 
 
 
 

 
 
 
 
 
2.3

 
$
(3,581
)
 
 
 
310.6

 
$
136

 
 
 
311.4

Diluted earnings (loss) per share
 
 
$
(11.53
)
 
 
 
 
 
$
0.44

 
 


For the 13 weeks ended May 2, 2020, as a result of the net loss for the quarter, all options and restricted stock units have been excluded from the calculation of diluted earnings per share and, therefore, there was no difference in the weighted average number of common shares for basic and diluted loss per share as the effect of all potentially dilutive shares outstanding was anti-dilutive. Stock options to purchase 17.3 million shares of common stock and restricted stock units relating to 3.4 million shares of common stock outstanding at May 2, 2020 were excluded from the computation of diluted earnings per share.

In addition to the stock options and restricted stock units reflected in the foregoing tables, stock options to purchase 16.9 million shares of common stock and restricted stock units relating to 2.2 million shares of common stock were outstanding at May 4, 2019, but were not included in the computation of diluted earnings per share because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.

11

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


6. Revenue
Net sales
Revenue is recognized when customers obtain control of goods and services promised by the Company. The amount of revenue recognized is based on the amount that reflects the consideration that is expected to be received in exchange for those respective goods and services. The Company's revenue generating activities include the following:
Retail Sales
Retail sales include merchandise sales, inclusive of delivery income, licensed department income, sales of private brand goods directly to third party retailers and sales of excess inventory to third parties. Sales of merchandise are recorded at the time of shipment to the customer and are reported net of estimated merchandise returns and certain customer incentives. Commissions earned on sales generated by licensed departments are included as a component of total net sales and are recognized as revenue at the time merchandise is sold to customers. Service revenues (e.g., alteration and cosmetic services) are recorded at the time the customer receives the benefit of the service. The Company has elected to present sales taxes on a net basis and, as such, sales taxes are included in accounts payable and accrued liabilities until remitted to the taxing authorities.
For the 13 weeks ended May 2, 2020 and May 4, 2019, Macy's accounted for 87% and 88% of the Company's net sales, respectively. Disaggregation of the Company's net sales by family of business for the 13 weeks ended May 2, 2020 and May 4, 2019 were as follows:
 
13 Weeks Ended
Net sales by family of business
May 2, 2020
 
May 4, 2019
 
(millions)
Women's Accessories, Intimate Apparel, Shoes, Cosmetics and Fragrances
$
1,215

 
$
2,152

Women's Apparel
579

 
1,313

Men's and Kids'
573

 
1,202

Home/Other (a)
650

 
837

Total
$
3,017

 
$
5,504

(a) Other primarily includes restaurant sales, allowance for merchandise returns adjustments and breakage income from unredeemed gift cards.
Merchandise Returns
The Company estimates merchandise returns using historical data and recognizes an allowance that reduces net sales and cost of sales. The liability for merchandise returns is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $184 million, $269 million and $294 million as of May 2, 2020, February 1, 2020 and May 4, 2019, respectively. Included in prepaid expenses and other current assets is an asset totaling $130 million, $147 million and $200 million as of May 2, 2020, February 1, 2020 and May 4, 2019, respectively, for the recoverable cost of merchandise estimated to be returned by customers.
Gift Cards and Customer Loyalty Programs
The Company only offers no-fee, non-expiring gift cards to its customers. At the time gift cards are sold or issued, no revenue is recognized; rather, the Company records an accrued liability to customers. The liability is relieved and revenue is recognized equal to the amount redeemed at the time gift cards are redeemed for merchandise. The Company records revenue from unredeemed gift cards (breakage) in net sales on a pro-rata basis over the time period gift cards are actually redeemed. At least three years of historical data, updated annually, is used to determine actual redemption patterns.
The Company maintains customer loyalty programs in which customers earn points based on their purchases. Under the Macy’s brand, points are earned based on customers’ spending on Macy’s private label and co-branded credit cards as well as third-party credit cards. Under the Bloomingdale’s brand, the Company offers a tender-neutral points-based program. The Company recognizes the estimated net amount of the rewards that will be earned and redeemed as a reduction to net sales at the time of the initial transaction and as tender when the points are subsequently redeemed by a customer.
The liability for unredeemed gift cards and customer loyalty programs is included in accounts payable and accrued liabilities on the Company's Consolidated Balance Sheets and was $732 million, $839 million and $696 million as of May 2, 2020, February 1, 2020 and May 4, 2019, respectively.

12

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


Credit Card Revenues, net
In 2005, the Company entered into an arrangement with Citibank, N.A. ("Citibank") to sell the Company's private label and co-branded credit cards ("Credit Card Program"). Subsequent to this initial arrangement and associated amendments, in 2014, the Company entered into an amended and restated Credit Card Program Agreement (the "Program Agreement") with Citibank. As part of the Program Agreement, the Company receives payments for providing a combination of interrelated services and intellectual property to Citibank in support of the underlying Credit Card Program. Revenue based on the spending activity of the underlying accounts is recognized as the respective card purchases occur and the Company’s profit share is recognized based on the performance of the underlying portfolio. Revenue associated with the establishment of new credit accounts and assisting in the receipt of payments for existing accounts is recognized as such activities occur. Credit card revenues include finance charges, late fees and other revenue generated by the Company’s Credit Card Program, net of fraud losses and expenses associated with establishing new accounts.


7.    Financing Activities
The following table shows the detail of debt repayments:
 
 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
 
(millions)
9.5% Amortizing debentures due 2021
$
2

 
$
2

9.75% Amortizing debentures due 2021
1

 
1

 
$
3

 
$
3



As of May 2, 2020, the Company was party to a credit agreement with certain financial institutions. The credit agreement provided for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million. The credit agreement was scheduled to expire on May 9, 2024, subject to up to two one-year extensions that may be requested by the Company and agreed to by the lenders. On March 19, 2020, due to the impacts of the COVID-19 pandemic, the Company elected to draw on the full $1,500 million available under the agreement. This amount remained outstanding as of May 2, 2020.

June 2020 Financing Activities

Secured Debt Issuance

On June 8, 2020, the Company issued $1,300 million aggregate principal amount of 8.375% senior secured notes due 2025 (the "Notes"). The Notes bear interest at a rate of 8.375% per annum, which accrues from June 8, 2020 and is payable in arrears on June 15 and December 15 of each year, commencing on December 15, 2020. The Notes mature on June 15, 2025, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the related indenture. The Notes were issued by Macy’s, Inc. and are secured on a first-priority basis by (i) a first mortgage/deed of trust in certain real property of subsidiaries of Macy’s, Inc. that were transferred to Macy’s Propco Holdings, LLC, a newly created direct, wholly-owned subsidiary of Macy’s, Inc. (“Propco”), and (ii) a pledge by Propco of the equity interests in its subsidiaries that own such transferred real property. The Notes are, jointly and severally, unconditionally guaranteed on a secured basis by Propco and its subsidiaries and unconditionally guaranteed on an unsecured basis by Macy’s Retail Holdings, LLC (f/k/a Macy’s Retail Holdings, Inc.) (“MRH”), a direct, wholly owned subsidiary of Macy’s, Inc. The Company used the proceeds of the Notes offering, along with cash on hand, to repay the outstanding borrowings under the existing $1,500 million unsecured credit agreement.

Entry into Asset-Based Credit Facility

On June 8, 2020, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect wholly owned subsidiary of the Company, and its parent, Macy’s Inventory Holdings LLC (the “ABL Parent”), entered into an asset-based credit agreement (the “ABL Credit Facility”) with Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto. The ABL Credit Facility provides the ABL Borrower with (i) a $2,851 million revolving credit facility (the “Revolving ABL

13

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


Facility”), including a swingline sub-facility and a letter of credit sub-facility, and (ii) a bridge revolving credit facility of up to $300 million (the “Bridge Facility”). The ABL Borrower may request increases in the size of the Revolving ABL Facility up to an additional aggregate principal amount of $750 million.

Additionally on June 8, 2020 and concurrently with closing the ABL Credit Facility, the ABL Borrower purchased all presently existing inventory, and assumed the liabilities in respect of all presently existing and outstanding trade payables owed to vendors in respect of such inventory, from MRH and certain wholly owned subsidiaries of MRH. The ABL Credit Facility is secured on a first priority basis (subject to customary exceptions) by (i) all assets of the ABL Borrower including all such inventory and the proceeds thereof and (ii) the equity of the ABL Borrower. The ABL Parent guaranteed the ABL Borrower’s obligations under the ABL Credit Facility. The Revolving ABL Facility matures on May 9, 2024, and the Bridge Facility matures on December 30, 2020.

The ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (a) 80% (which shall automatically increase to 90% upon the satisfaction of certain conditions, including the delivery of an initial appraisal of the inventory) of the net orderly liquidation percentage of eligible inventory, minus (b) customary reserves. Amounts borrowed under the ABL Credit Facility are subject to interest at a rate per annum equal to (i) prior to the Step Down Date (as defined in the ABL Credit Facility), at the ABL Borrower’s option, either (a) adjusted LIBOR plus a margin of 2.75% to 3.00% or (b) a base rate plus a margin of 1.75% to 2.00%, in each case depending on revolving line utilization and (ii) after the Step Down Date, at the ABL Borrower’s option, either (a) adjusted LIBOR plus a margin of 2.25% to 2.50% or (b) a base rate plus a margin of 1.25% to 1.50%, in each case depending on revolving line utilization. The ABL Credit Facility also contains customary covenants that provide for, among other things, limitations on indebtedness, liens, fundamental changes, restricted payments, cash hoarding, and prepayment of certain indebtedness as well as customary representations and warranties and events of default typical for credit facilities of this type.
 
The ABL Credit Facility also requires (1) the Company and its restricted subsidiaries to maintain a fixed charge coverage ratio of at least 1.00 to 1.00 as of the end of any fiscal quarter on or after April 30, 2021 if (a) certain events of default have occurred and are continuing or (b) Availability plus Suppressed Availability (each as defined in the ABL Credit Facility) is less than the greater of (x) 10% of the Loan Cap (as defined in the ABL Credit Facility) and (y) $250 million, in each case, as of the end of such fiscal quarter and (2) prior to April 30, 2021, that the ABL Borrower not permit Availability plus Suppressed Availability to be lower than the greater of (x) 10% of the Loan Cap and (y) $250 million.

Amendment to Existing Credit Agreement

The Company substantially reduced the credit commitments of its existing $1,500 million unsecured credit agreement which now provides the Company with unsecured revolving credit of up to $75 million. The unsecured revolving credit facility contains covenants that provide for, among other things, limitations on fundamental changes, use of proceeds, and maintenance of property, as well as customary representations and warranties and events of default.

Commencement of Exchange Offers and Consent Solicitations for Certain Outstanding Debt Securities of Macy’s Retail Holdings, LLC

In June 2020, MRH commenced offers to eligible holders to exchange (each, an “Exchange Offer” and, collectively, the “Exchange Offers”) (i) new 6.65% Senior Secured Debentures due 2024 (“New 2024 Notes”) to be issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.65% Senior Debentures due 2024 issued by MRH (“Old 2024 Notes”), (ii) new 6.7% Senior Secured Debentures due 2028 (“New 2028 Notes”) to be issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.7% Senior Debentures due 2028 issued by MRH (“Old 2028 Notes”), (iii) new 8.75% Senior Secured Debentures due 2029 (“New 2029 Notes”) to be issued by MRH for validly tendered (and not validly withdrawn) outstanding 8.75% Senior Debentures due 2029 issued by MRH (“Old 2029 Notes”), (iv) new 7.875% Senior Secured Debentures due 2030 (“New 2030 Notes”) to be issued by MRH for validly tendered (and not validly withdrawn) outstanding 7.875% Senior Debentures due 2030 issued by MRH (“Old 2030 Notes”), (v) new 6.9% Senior Secured Debentures due 2032 (“New 2032 Notes”) to be issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.9% Senior Debentures due 2032 issued by MRH (“Old 2032 Notes”), and (vi) new 6.7% Senior Secured Debentures due 2034 (“New 2034 Notes” and, together with the New 2024 Notes, New 2028 Notes, New 2029 Notes, New 2030 Notes and New 2032 Notes, the “New Notes” and each series, a “series of New Notes”) to be issued by MRH for validly tendered (and not validly withdrawn) outstanding 6.7% Senior Debentures due 2034 issued by MRH (“Old 2034 Notes” and, together with the Old 2024 Notes, Old 2028 Notes, Old

14

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


2029 Notes, Old 2030 Notes and Old 2032 Notes, the “Old Notes” and each series, a “series of Old Notes”). Each New Note issued in the Exchange Offers for a validly tendered Old Note will have an interest rate and maturity date that is identical to the interest rate and maturity date of the tendered Old Note, as well as identical interest payment dates and optional redemption prices. The New Notes will be MRH’s and Macy’s general, senior obligations and will be secured by a second-priority lien on the same collateral securing the Notes.

In addition, MRH is soliciting consents from holders of each series of Old Notes (each, a “Consent Solicitation” and, collectively, the “Consent Solicitations”) pursuant to the separate Consent Solicitation Statement (as defined below) to adopt certain proposed amendments to the indenture governing the Old Notes (the “Existing Indenture”) to conform certain provisions in the negative pledge covenant in the Existing Indenture to the provisions of the negative pledge covenant in MRH’s most recent indenture (the “Proposed Amendments”).

The Exchange Offers are scheduled to expire on July 24, 2020, with an early tender date of July 10, 2020. The Consent Solicitations also expire on July 10, 2020.



8.    Benefit Plans
The Company has defined contribution plans which cover substantially all employees who work 1,000 hours or more in a year. In addition, the Company has a funded defined benefit plan ("Pension Plan") and an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees, in excess of qualified plan limitations. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions, and effective January 2, 2012, the SERP was closed to new participants.
In February 2013, the Company announced changes to the Pension Plan and SERP whereby eligible employees no longer earn future pension service credits after December 31, 2013, with limited exceptions. All retirement benefits attributable to service in subsequent periods are provided through defined contribution plans.
In addition, certain retired employees currently are provided with specified health care and life insurance benefits ("Postretirement Obligations"). Eligibility requirements for such benefits vary, but generally state that benefits are available to eligible employees who were hired prior to a certain date and retire after a certain age with specified years of service. Certain employees are subject to having such benefits modified or terminated.
The defined contribution plan expense and actuarially determined components of the net periodic benefit cost (income) associated with the defined benefit plans are as follows:

15

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


 
13 Weeks Ended
 
May 2, 2020
 
May 4, 2019
 
(millions)
401(k) Qualified Defined Contribution Plan
$
13

 
$
25

 
 
 
 
Non-Qualified Defined Contribution Plan
$

 
$
1

 
 
 
 
Pension Plan
 
 
 
Service cost
$
1

 
$
1

Interest cost
19

 
26

Expected return on assets
(45
)
 
(48
)
Recognition of net actuarial loss
10

 
7

Amortization of prior service credit

 

 
$
(15
)
 
$
(14
)
Supplementary Retirement Plan
 
 
 
Service cost
$

 
$

Interest cost
4

 
6

Recognition of net actuarial loss
3

 
2

Amortization of prior service cost

 

 
$
7

 
$
8

 
 
 
 
Total Retirement Expense
$
5

 
$
20

 
 
 
 
Postretirement Obligations
 
 
 
Service cost
$

 
$

Interest cost
1

 
1

Recognition of net actuarial gain
(1
)
 
(1
)
Amortization of prior service credit

 

 
$

 
$



16

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



9.    Fair Value Measurements

The following table shows the Company's financial assets that are required to be measured at fair value on a recurring basis, by level within the hierarchy as defined by applicable accounting standards:

Level 1: Quoted prices in active markets for identical assets
Level 2: Significant observable inputs for the assets
Level 3: Significant unobservable inputs for the assets

 
May 2, 2020
 
May 4, 2019
 
 
 
Fair Value Measurements
 
 
 
Fair Value Measurements
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
(millions)
Marketable equity and debt securities
$
102

 
$
28

 
$
74

 
$

 
$
110

 
$
31

 
$
79

 
$


Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, certain short-term investments and other assets, short-term debt, merchandise accounts payable, accounts payable and accrued liabilities and long-term debt. With the exception of long-term debt, the carrying amount of these financial instruments approximates fair value because of the short maturity of these instruments. The fair values of long-term debt, excluding capitalized leases, are generally estimated based on quoted market prices for identical or similar instruments, and are classified as Level 2 measurements within the hierarchy as defined by applicable accounting standards.

Goodwill and other indefinite-lived intangible assets, are evaluated for impairment annually or more frequently if events or conditions indicate the carrying value of a reporting unit or an indefinite-lived intangible asset may not be recoverable. Impairment testing compares the carrying amount of the reporting unit or other intangible assets with its fair value. During the 13 weeks ended May 2, 2020, the Company performed an interim impairment test for goodwill. The fair value was calculated using a guideline public company method, discounted cash flow or a combination of both for the reporting units. The fair value of goodwill is a Level 3 valuation based on certain unobservable inputs including projected cash flows and estimated risk-adjusted rates of return that would be utilized by market participants in valuing these assets or prices of similar assets.

During the 13 weeks ended May 2, 2020, long-lived and right of use assets were tested for impairment. The fair values of these assets is a Level 3 valuation based on certain unobservalbe inputs including projected cash flows and an estimated risk-adjusted rate of return that would be utilized by market participants in valuing these assets or prices of similar assets.
The following table shows the estimated fair value of the Company's long-term debt:
 
 
May 2, 2020
 
May 4, 2019
 
Notional
Amount
 
Carrying
Amount
 
Fair
Value
 
Notional
Amount
 
Carrying
Amount
 
Fair
Value
 
(millions)
Long-term debt
$
4,903

 
$
4,918

 
$
3,698

 
$
4,667

 
$
4,680

 
$
4,614



10.    Condensed Consolidating Financial Information
Certain debt obligations of the Company, which constitute debt obligations of Macy's Retail Holdings, Inc. ("Subsidiary Issuer"), a 100%-owned subsidiary of Macy's, Inc. ("Parent"), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, "Other Subsidiaries" includes all other direct subsidiaries of Parent, including Bluemercury, Inc., FDS Bank, West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy's Merchandising Group, Inc. and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy's Merchandising Group International, LLC, Macy's Merchandising Group International (Hong Kong) Limited, and Macy's China Limited. "Subsidiary Issuer" includes operating divisions and non-

17

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


guarantor subsidiaries of the Subsidiary Issuer on an equity basis. The assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in "Other Subsidiaries."
In June 2020, in conjunction with the financing discussed in Note 7, "Financing Activities," Macy's Retail Holdings, Inc. was converted into a limited liability company and in May 2020 direct, wholly-owned subsidiaries of the Parent, Macy’s Inventory Holdings LLC and Macy’s Propco Holdings, LLC, were created.
Condensed Consolidating Statements of Comprehensive Income for the 13 weeks ended May 2, 2020 and May 4, 2019, Condensed Consolidating Balance Sheets as of May 2, 2020, May 4, 2019 and February 1, 2020, and the related Condensed Consolidating Statements of Cash Flows for the 13 weeks ended May 2, 2020 and May 4, 2019 are presented on the following pages.

18

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


Condensed Consolidating Statement of Comprehensive Income (Loss)
For the 13 Weeks Ended May 2, 2020
(millions)
 
 
Parent
 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Net sales
$

 
$
867

 
$
2,955

 
$
(805
)
 
$
3,017

Credit card revenues (expense), net

 
(5
)
 
136

 

 
131

 
 
 
 
 
 
 
 
 
 
Cost of sales

 
(796
)
 
(2,510
)
 
805

 
(2,501
)
Selling, general and administrative expenses

 
(562
)
 
(1,036
)
 

 
(1,598
)
Gains on sale of real estate

 

 
16

 

 
16

Impairment, restructuring and other costs

 
(2,722
)
 
(462
)
 

 
(3,184
)
Operating loss

 
(3,218
)
 
(901
)
 

 
(4,119
)
Benefit plan income, net

 
3

 
6

 

 
9

Interest (expense) income, net:
 
 
 
 
 
 
 
 
 
External
1

 
(49
)
 
1

 

 
(47
)
Intercompany

 
(18
)
 
18

 

 

Equity in loss of subsidiaries
(3,582
)
 
(795
)
 

 
4,377

 

Loss before income taxes
(3,581
)
 
(4,077
)
 
(876
)
 
4,377

 
(4,157
)
Federal, state and local income
tax benefit

 
427

 
149

 

 
576

Net loss
$
(3,581
)
 
$
(3,650
)
 
$
(727
)
 
$
4,377

 
$
(3,581
)
 
 
 
 
 
 
 
 
 
 
Comprehensive loss
$
(3,572
)
 
$
(3,641
)
 
$
(721
)
 
$
4,362

 
$
(3,572
)

19

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended May 4, 2019
(millions)
 
 
Parent
 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
Net sales
$

 
$
2,154

 
$
4,768

 
$
(1,418
)
 
$
5,504

Credit card revenues, net

 
(2
)
 
174

 

 
172

 
 
 
 
 
 
 
 
 
 
Cost of sales

 
(1,341
)
 
(3,480
)
 
1,418

 
(3,403
)
Selling, general and administrative expenses

 
(803
)
 
(1,309
)
 

 
(2,112
)
Gains on sale of real estate

 
24

 
19

 

 
43

Impairment and other costs

 

 
(1
)
 

 
(1
)
Operating income

 
32

 
171

 

 
203

Benefit plan income, net

 
3

 
4

 

 
7

Interest (expense) income, net:
 
 
 
 
 
 
 
 


External
5

 
(53
)
 
1

 

 
(47
)
Intercompany

 
(19
)
 
19

 

 

Equity in earnings (loss) of subsidiaries
132

 
(30
)
 

 
(102
)
 

Income (loss) before income taxes
137

 
(67
)
 
195

 
(102
)
 
163

Federal, state and local income
tax benefit (expense)
(1
)
 
24

 
(50
)
 

 
(27
)
Net income (loss)
$
136

 
$
(43
)
 
$
145

 
$
(102
)
 
$
136

 
 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
$
142

 
$
(38
)
 
$
149

 
$
(111
)
 
$
142














20

MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Balance Sheet
As of May 2, 2020
(millions)
 
 
Parent
 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 
Consolidated
ASSETS:
 
 
 
 
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,160

 
$
25

 
$
338

 
$

 
$
1,523

Receivables

 
23

 
147

 

 
170

Merchandise inventories

 
2,072

 
2,851

 

 
4,923

Income taxes

 

 
3

 
(3
)
 

Prepaid expenses and other current assets

 
102

 
417

 

 
519

Total Current Assets
1,160

 
2,222

 
3,756

 
(3
)
 
7,135

Property and Equipment – net

 
2,978

 
3,447

 

 
6,425

Right of Use Assets

 
600

 
2,072

 

 
2,672

Goodwill

 
670

 
168

 

 
838

Other Intangible Assets – net

 
4

 
435

 

 
439

Other Assets
418

 
46

 
608

 

 
1,072

Deferred Income Taxes
11

 

 

 
(11
)
 

Intercompany Receivable
1,598

 

 
677

 
(2,275
)
 

Investment in Subsidiaries

 
2,010

 

 
(2,010
)
 

Total Assets
$
3,187

 
$
8,530

 
$
11,163

 
$
(4,299
)
 
$
18,581

LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
 
 
Short-term debt
$

 
$
739

 
$

 
$

 
$
739

Merchandise accounts payable

 
928

 
1,268

 

 
2,196

Accounts payable and accrued liabilities
14

 
719

 
2,024

 

 
2,757

Income taxes
65

 
18

 

 
(3
)
 
80

Total Current Liabilities
79

 
2,404

 
3,292

 
(3
)
 
5,772

Long-Term Debt

 
4,918

 

 

 
4,918

Long-Term Lease Liabilities

 
548

 
2,375

 

 
2,923

Intercompany Payable