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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 April 30, 2022

 

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

 

 

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)

(212) 494-1621

(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 (§ 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.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

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 28, 2022

Common Stock, $.01 par value per share

 

269,732,810 shares

 

 

 

 


 

 

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MACY’S, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

(millions, except per share figures)

 

 

 

13 Weeks Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

Net sales

 

$

5,348

 

 

$

4,706

 

Credit card revenues, net

 

 

191

 

 

 

159

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

(3,231

)

 

 

(2,889

)

Selling, general and administrative expenses

 

 

(1,879

)

 

 

(1,748

)

Gains on sale of real estate

 

 

42

 

 

 

6

 

Impairment, restructuring and other costs

 

 

(8

)

 

 

(19

)

Operating income

 

 

463

 

 

 

215

 

Benefit plan income, net

 

 

7

 

 

 

15

 

Interest expense

 

 

(48

)

 

 

(79

)

Losses on early retirement of debt

 

 

(31

)

 

 

(11

)

Interest income

 

 

1

 

 

 

 

Income before income taxes

 

 

392

 

 

 

140

 

Federal, state and local income tax expense

 

 

(106

)

 

 

(37

)

Net income

 

$

286

 

 

$

103

 

Basic earnings per share

 

$

1.01

 

 

$

0.33

 

Diluted earnings per share

 

$

0.98

 

 

$

0.32

 

 

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

2


 

MACY’S, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

(millions)

 

 

 

13 Weeks Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

Net income

 

$

286

 

 

$

103

 

Reclassifications to net income:

 

 

 

 

 

 

 

 

Amortization of net actuarial loss and prior service credit on

   post employment and postretirement benefit plans included in

   net income, before tax

 

 

5

 

 

 

10

 

Tax effect related to items of other comprehensive income

 

 

(1

)

 

 

(2

)

Total other comprehensive income, net of tax effect

 

 

4

 

 

 

8

 

Comprehensive income

 

$

290

 

 

$

111

 

 

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

3


 

MACY’S, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(millions)

 

 

 

April 30, 2022

 

 

January 29, 2022

 

 

May 1, 2021

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

672

 

 

$

1,712

 

 

$

1,798

 

Receivables

 

 

233

 

 

 

297

 

 

 

205

 

Merchandise inventories

 

 

4,956

 

 

 

4,383

 

 

 

4,230

 

Prepaid expenses and other current assets

 

 

372

 

 

 

366

 

 

 

1,007

 

Total Current Assets

 

 

6,233

 

 

 

6,758

 

 

 

7,240

 

Property and Equipment - net of accumulated depreciation and

   amortization of $4,671, $4,548 and $4,550

 

 

5,601

 

 

 

5,665

 

 

 

5,798

 

Right of Use Assets

 

 

2,736

 

 

 

2,808

 

 

 

2,853

 

Goodwill

 

 

828

 

 

 

828

 

 

 

828

 

Other Intangible Assets – net

 

 

434

 

 

 

435

 

 

 

436

 

Other Assets

 

 

1,140

 

 

 

1,096

 

 

 

927

 

Total Assets

 

$

16,972

 

 

$

17,590

 

 

$

18,082

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Short-term debt

 

$

 

 

$

 

 

$

294

 

Merchandise accounts payable

 

 

2,865

 

 

 

2,222

 

 

 

2,545

 

Accounts payable and accrued liabilities

 

 

2,456

 

 

 

3,086

 

 

 

2,616

 

Income taxes

 

 

222

 

 

 

108

 

 

 

63

 

Total Current Liabilities

 

 

5,543

 

 

 

5,416

 

 

 

5,518

 

Long-Term Debt

 

 

2,994

 

 

 

3,295

 

 

 

4,558

 

Long-Term Lease Liabilities

 

 

3,030

 

 

 

3,098

 

 

 

3,166

 

Deferred Income Taxes

 

 

968

 

 

 

983

 

 

 

868

 

Other Liabilities

 

 

1,159

 

 

 

1,177

 

 

 

1,297

 

Shareholders' Equity

 

 

3,278

 

 

 

3,621

 

 

 

2,675

 

Total Liabilities and Shareholders’ Equity

 

$

16,972

 

 

$

17,590

 

 

$

18,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4


 

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 January 29, 2022

$

3

 

 

$

517

 

 

$

5,268

 

 

$

(1,545

)

 

$

(622

)

 

$

3,621

 

Net income

 

 

 

 

 

 

 

 

 

286

 

 

 

 

 

 

 

 

 

 

 

286

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

4

 

Common stock dividends

   ($0.1575 per share)

 

 

 

 

 

 

 

 

 

(45

)

 

 

 

 

 

 

 

 

 

 

(45

)

Stock repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

(600

)

 

 

 

 

 

 

(600

)

Stock-based compensation expense

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

Stock issued under stock plans

 

 

 

 

 

(54

)

 

 

 

 

 

 

53

 

 

 

 

 

 

 

(1

)

Balance at April 30, 2022

$

3

 

 

$

476

 

 

$

5,509

 

 

$

(2,092

)

 

$

(618

)

 

$

3,278

 

 

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

 

5


 

 

MACY’S, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - (Continued)

(Unaudited)

 

(millions)

 

 

Common

Stock

 

 

Additional

Paid-In

Capital

 

 

Accumulated

Equity

 

 

Treasury

Stock

 

 

Accumulated

Other

Comprehensive

Income (Loss)

 

 

Total

Shareholders'

Equity

 

Balance at January 30, 2021

$

3

 

 

$

571

 

 

$

3,928

 

 

$

(1,161

)

 

$

(788

)

 

$

2,553

 

Net income

 

 

 

 

 

 

 

 

 

103

 

 

 

 

 

 

 

 

 

 

 

103

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

8

 

Stock-based compensation expense

 

 

 

 

 

11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11

 

Stock issued under stock plans

 

 

 

 

 

(24

)

 

 

 

 

 

 

24

 

 

 

 

 

 

 

 

Balance at May 1, 2021

$

3

 

 

$

558

 

 

$

4,031

 

 

$

(1,137

)

 

$

(780

)

 

$

2,675

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

April 30, 2022

 

 

May 1, 2021

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

286

 

 

$

103

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

Impairment, restructuring and other costs

 

 

8

 

 

 

19

 

Depreciation and amortization

 

 

206

 

 

 

224

 

Stock-based compensation expense

 

 

13

 

 

 

11

 

Gains on sale of real estate

 

 

(42

)

 

 

(6

)

Benefit plans

 

 

5

 

 

 

10

 

Amortization of financing costs and premium on acquired debt

 

 

2

 

 

 

8

 

Deferred income taxes

 

 

(17

)

 

 

(43

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Decrease in receivables

 

 

65

 

 

 

71

 

Increase in merchandise inventories

 

 

(573

)

 

 

(457

)

Increase in prepaid expenses and other current assets

 

 

(13

)

 

 

(56

)

Increase in merchandise accounts payable

 

 

639

 

 

 

674

 

Decrease in accounts payable and accrued liabilities

 

 

(424

)

 

 

(114

)

Increase in current income taxes

 

 

122

 

 

 

75

 

Change in other assets and liabilities

 

 

(29

)

 

 

(25

)

Net cash provided by operating activities

 

 

248

 

 

 

494

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(171

)

 

 

(61

)

Capitalized software

 

 

(90

)

 

 

(38

)

Disposition of property and equipment

 

 

73

 

 

 

8

 

Other, net

 

 

(6

)

 

 

17

 

Net cash used by investing activities

 

 

(194

)

 

 

(74

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Debt issued

 

 

850

 

 

 

500

 

Debt issuance costs

 

 

(21

)

 

 

(9

)

Debt repaid

 

 

(1,139

)

 

 

(503

)

Debt repurchase premium and expenses

 

 

(29

)

 

 

(12

)

Dividends paid

 

 

(45

)

 

 

 

Decrease in outstanding checks

 

 

(126

)

 

 

(276

)

Acquisition of treasury stock

 

 

(584

)

 

 

 

Net cash used by financing activities

 

 

(1,094

)

 

 

(300

)

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

 

 

(1,040

)

 

 

120

 

Cash, cash equivalents and restricted cash beginning of period

 

 

1,715

 

 

 

1,754

 

Cash, cash equivalents and restricted cash end of period

 

$

675

 

 

$

1,874

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

86

 

 

$

52

 

Interest received

 

 

1

 

 

 

 

Income taxes paid, net of refunds received

 

 

1

 

 

 

5

 

 

Note: Restricted cash of $3 million and $76 million have been included with cash and cash equivalents for the 39 weeks ended April 30, 2022 and May 1, 2021, 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., together with its 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, Puerto Rico and Guam. As of April 30, 2022, the Company's operations and operating segments were conducted through Macy's, Market by Macy’s, Macy’s Backstage, Bloomingdale's, Bloomingdale's The Outlet, Bloomie’s, 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 January 29, 2022 (the "2021 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2021 10-K.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("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. 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 April 30, 2022 and May 1, 2021, 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 April 30, 2022 and May 1, 2021 (which do not include the Christmas season) are not necessarily indicative of such results for the full fiscal year.

Comprehensive Income

Total comprehensive income represents the change in equity during a period from sources other than transactions with shareholders and, as such, includes net income.  For the Company, the only other components of total comprehensive income for the 13 weeks ended April 30, 2022 and May 1, 2021 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 Income. 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 Income.  See Note 5, "Retirement Plans," for further information.

 

8

 


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

 

2.

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

 

 

 

13 Weeks Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

 

 

Net Income

 

 

 

 

 

 

Shares

 

 

Net Income

 

 

 

 

 

 

Shares

 

 

 

(millions, except per share data)

 

 

 

Net income and average number of

   shares outstanding

 

$

286

 

 

 

 

 

 

 

282.6

 

 

$

103

 

 

 

 

 

 

 

310.7

 

Shares to be issued under deferred

   compensation and other plans

 

 

 

 

 

 

 

 

 

 

1.0

 

 

 

 

 

 

 

 

 

 

0.9

 

 

 

$

286

 

 

 

 

 

 

 

283.6

 

 

$

103

 

 

 

 

 

 

 

311.6

 

Basic earnings per share

 

 

 

 

 

$

1.01

 

 

 

 

 

 

 

 

 

 

$

0.33

 

 

 

 

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and restricted

   stock units

 

 

 

 

 

 

 

 

 

 

7.3

 

 

 

 

 

 

 

 

 

 

 

7.0

 

 

 

$

286

 

 

 

 

 

 

 

290.9

 

 

$

103

 

 

 

 

 

 

 

318.6

 

Diluted earnings per share

 

 

 

 

 

$

0.98

 

 

 

 

 

 

 

 

 

 

$

0.32

 

 

 

 

 

 

In addition to the stock options and restricted stock units reflected in the foregoing table, stock options to purchase 12.3 and 14.7 million shares of common stock and restricted stock units relating to 0.4 and 1.1 million shares of common stock were outstanding at April 30, 2022 and May 1, 2021, respectively, 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.

3.

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 point of sale for in-store purchases or the time of shipment to the customer for digital purchases 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.

Macy’s accounted for 86% and 87% of the Company’s net sales for the 13 weeks ended April 30, 2022 and May 1, 2021, respectively. In addition, digital sales accounted for approximately 33% and 37% of the Company’s net sales for the 13 weeks ended April 30, 2022 and May 1, 2021, respectively.

9


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

Disaggregation of the Company's net sales by family of business for the 13 weeks ended April 30, 2022 and May 1, 2021 were as follows:

 

 

 

13 Weeks Ended

 

Net sales by family of business

 

April 30, 2022

 

 

May 1, 2021

 

 

 

(millions)

 

Women's Accessories, Intimate Apparel, Shoes, Cosmetics

   and Fragrances

 

$

2,237

 

 

$

2,023

 

Women's Apparel

 

 

1,135

 

 

 

913

 

Men's and Kids'

 

 

1,086

 

 

 

932

 

Home/Other (a)

 

 

890

 

 

 

838

 

Total

 

$

5,348

 

 

$

4,706

 

 

(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 $245 million, $198 million and $225 million as of April 30, 2022, January 29, 2022 and May 1, 2021, respectively. Included in prepaid expenses and other current assets is an asset totaling $144 million, $120 million and $136 million as of April 30, 2022, January 29, 2022 and May 1, 2021, 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 Star Rewards loyalty program, points are earned based on customers’ spending on Macy’s private label and co-branded credit cards as well as non-proprietary cards and other forms of tender. The Company’s Bloomingdale’s Loyallist and bluemercury BlueRewards programs provide tender neutral points-based programs to their customers. 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 $428 million, $481 million and $580 million as of April 30, 2022, January 29, 2022 and May 1, 2021, respectively.

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 2021, the Company entered into the sixth amendment to the amended and restated Credit Card Program Agreement (the "Program Agreement") with Citibank. The changes to the Credit Card Program’s financial structure are not materially different from its previous terms.  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.

The Program Agreement expires March 31, 2030, subject to an additional renewal term of three years.  The Program Agreement provides for, among other things, (i) the ownership by Citibank of the accounts purchased by Citibank, (ii) the ownership by Citibank of new accounts opened by the Company’s customers, (iii) the provision of credit by Citibank to the holders of the credit cards associated with the foregoing accounts, (iv) the servicing of the foregoing accounts, and (v) the allocation between Citibank and the Company of the economic benefits and burdens associated with the foregoing and other aspects of the alliance.  Pursuant to the Program Agreement, the Company continues to provide certain servicing functions related to the accounts and related receivables owned by Citibank and receives compensation from Citibank for these services. The amounts earned under the Program Agreement related to the servicing functions are deemed adequate compensation and, accordingly, no servicing asset or liability has been recorded on the Consolidated Balance Sheets.

10


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

4.

Financing Activities

The following table shows the detail of debt repayments:

 

 

 

13 Weeks Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

 

 

(millions)

 

2.875% Senior notes due 2023

 

$

504

 

 

$

136

 

3.625% Senior notes due 2024

 

 

350

 

 

 

150

 

4.375% Senior notes due 2023

 

 

161

 

 

 

49

 

6.65% Senior debentures due 2024

 

 

117

 

 

 

5

 

6.9% Senior debentures due 2032

 

 

4

 

 

 

 

6.7% Senior debentures due 2034

 

 

2

 

 

 

 

6.7% Senior debentures due 2028

 

 

1

 

 

 

 

3.875% Senior notes due 2022

 

 

 

 

 

156

 

7.6% Senior debentures due 2025

 

 

 

 

 

4

 

9.5% Amortizing debentures due 2021

 

 

 

 

 

2

 

9.75% Amortizing debentures due 2021

 

 

 

 

 

1

 

 

 

$

1,139

 

 

$

503

 

 

 

 

 

 

 

 

 

 

On March 3, 2022, Macy’s Inventory Funding LLC (the “ABL Borrower”), an indirect subsidiary of the Company, and Macy’s Inventory Holdings LLC (the “ABL Parent”), a direct subsidiary of Macy’s and the direct parent of the ABL Borrower, entered into an amendment (“the Amendment”) to the credit agreement governing the existing $2,941 million asset-based credit facility (the “Existing ABL Credit Facility”), which was set to expire in May 2024. The Amendment provides for a new revolving credit facility of $3.0 billion, including a swingline sub-facility and a letter of credit sub-facility (the “New ABL Credit Facility”). The ABL Borrower may request increases in the size of the New ABL Credit Facility up to an additional aggregate principal amount of $750 million. The New ABL Credit Facility replaces the Existing ABL Credit Facility, with similar collateral support, but reduced interest and unused facility fees. The New ABL Credit Facility matures in March 2027.                                                     

The New 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 guarantees the ABL Borrower’s obligations under the New ABL Credit Facility.

The New ABL Credit Facility contains customary borrowing conditions including a borrowing base equal to the sum of (i) 90% of the net orderly liquidation percentage of eligible inventory, minus (ii) customary reserves. Amounts borrowed under the New ABL Credit Facility are subject to interest at a rate per annum equal to, at the ABL Borrower’s option, either (i) adjusted SOFR (calculated to include a 0.10% credit adjustment spread) plus a margin of 1.25% to 1.50% or (ii) a base rate plus a margin of 0.25% to 0.50%, in each case depending on revolving line utilization. The New 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 New ABL Credit Facility also requires 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 if (i) certain events of default have occurred and are continuing or (ii) Availability plus Suppressed Availability (each as defined in the New ABL Credit Facility) is less than the greater of (a) 10% of the Loan Cap (as defined in the New ABL Credit Facility) and (b) $250 million, in each case, as of the end of such fiscal quarter.

11


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

As of April 30, 2022, the Company had $65 million of standby letters of credit outstanding under the ABL Credit Facility, which reduced the available borrowing capacity to $2,935 million. The Company had no outstanding borrowings under the ABL Credit Facility as of April 30, 2022 and May 1, 2021.

On March 8, 2022, Macy’s Retail Holdings, LLC (“MRH”), a direct, wholly owned subsidiary of Macy’s, Inc., completed a tender offer and purchased approximately $8 million in aggregate principal amount of certain senior secured debentures (collectively, the “Second Lien Notes”). The purchased Second Lien Notes included $2 million of 6.65% Senior Secured Debentures due 2024, $1 million of 6.7% Senior Secured Debentures due 2028, $10,000 of 7.875% Senior Secured Debentures due 2030, $4 million of 6.9% Senior Secured Debentures due 2032, and $2 million of 6.7% Senior Secured Debentures due 2034. The total cash cost for the tender offer was approximately $8 million. Pursuant to the indenture governing the Second Lien Notes, the liens upon the collateral securing the Second Lien Notes that remained outstanding after the tender offer were automatically released on March 8, 2022. As of such date, such collateral no longer secures such Second Lien Notes or any obligations under the indenture with respect to such Second Lien Notes, and the right of the holders of the Second Lien Notes and such obligations to the benefits and proceeds of any such liens on the collateral terminated and were discharged automatically and unconditionally with respect to such Second Lien Notes.            

On March 10, 2022, MRH issued $850 million in aggregate principal amount of senior notes in two separate tranches, one representing $425 million in aggregate principal amount of 5.875% senior notes due March 15, 2030 (the “2030 Notes”) and the other representing $425 million in aggregate principal amount of 6.125% senior notes due March 15, 2032 (the “2032 Notes”), in a private offering. Each of the 2030 Notes and 2032 Notes are senior unsecured obligations of MRH and are unconditionally guaranteed on an unsecured basis by Macy’s, Inc. Proceeds from the issuance, together with cash on hand, were used to redeem certain of MRH’s outstanding senior notes and pay fees and expenses therewith and in connection with the offering.  The Company recognized $31 million of losses related to the early retirement of debt on the Consolidated Statements of Income during the first quarter of 2022.

During the 13 weeks ended April 30, 2022, the Company repurchased approximately 24 million shares of its common stock pursuant to existing stock purchase authorizations for a total of approximately $600 million. As of April 30, 2022, the Company had $1.4 billion of authorization remaining under its share repurchase program. The Company may continue or, from time to time, suspend repurchases of shares under its share repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors.

5.

Retirement Plans

The Company has defined contribution plans that cover substantially all colleagues 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 colleagues, 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 colleagues 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 colleagues 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 colleagues who were hired prior to a certain date and retire after a certain age with specified years of service. Certain colleagues are subject to having such benefits modified or terminated.

12


MACY'S, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

 

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:

 

 

 

13 Weeks Ended

 

 

 

April 30, 2022

 

 

May 1, 2021

 

 

 

(millions)

 

401(k) Qualified Defined Contribution Plan

 

$

22

 

 

$

22

 

Pension Plan

 

 

 

 

 

 

 

 

Service cost

 

$

 

 

$

 

Interest cost

 

 

14

 

 

 

12

 

Expected return on assets

 

 

(31

)

 

 

(40

)

Recognition of net actuarial loss

 

 

4

 

 

 

8

 

 

 

$

(13

)

 

$

(20

)

Supplementary Retirement Plan

 

 

 

 

 

 

 

 

Interest cost

 

 

4

 

 

 

3

 

Recognition of net actuarial loss

 

 

3