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Consolidated Statements of Income - 4Q 2006 (Unaudited) (Note 1)
(All amounts in millions except percentages and per share figures)
| |
14 Weeks Ended |
13 Weeks Ended |
| |
February 3,
2007 |
January 28,
2006 |
| |
$ |
% to
Net Sales |
$ |
% to
Net Sales |
| |
| Net sales |
$9,159 |
|
$9,571 |
|
| |
| Cost of sales – recurring (Note 2) |
5,409 |
59.1% |
5,658 |
59.1% |
| |
| Gross margin - recurring |
3,750 |
40.9% |
3,913 |
40.9% |
| |
Inventory valuation adjustments –
May integration (Note 3) |
(10) |
(0.1%) |
(25) |
(0.3%) |
| |
| Gross margin |
3,740 |
40.8% |
3,888 |
40.6% |
| |
| Selling, general and administrative expenses |
(2,313) |
(25.2%) |
(2,588) |
(27.0%) |
| |
| May integration costs (Note 4) |
(167) |
(1.8%) |
(106) |
(1.1%) |
| |
| Operating income |
1,260 |
13.8% |
1,194 |
12.5% |
| |
| Interest expense - net (Note 5) |
(49) |
|
(127) |
|
| |
| Income from continuing operations before income taxes |
1,211 |
|
1,067 |
|
| |
| Federal, state and local income tax expense (Note 6) |
(451) |
|
(389) |
|
| |
| Income from continuing operations |
760 |
|
678 |
|
| |
| Discontinued operations, net of income taxes (Note 7) |
(27) |
|
21 |
|
| |
| Net income |
$733 |
|
$699 |
|
| |
| Basic earnings (loss) per share: |
| Income from continuing operations |
$1.47 |
|
$1.24 |
|
| Income (loss) from discontinued operations |
(.05) |
|
.04 |
|
| Net income |
$1.42 |
|
$1.28 |
|
| |
| Diluted earnings (loss) per share (Note 8): |
| Income from continuing operations |
$1.45 |
|
$1.22 |
|
| Income (loss) from discontinued operations |
(.05) |
|
.04 |
|
| Net income |
$1.40 |
|
$1.26 |
|
| |
| Average common shares: |
| Basic |
516.0 |
|
545.8 |
|
| Diluted |
523.7 |
|
554.3 |
|
| |
| Depreciation and amortization expense |
$320 |
|
$337 |
|
Notes:
(1) 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 the acquisition. The sale of the Lord & Taylor division was completed in October 2006, and the sale of David's Bridal and Priscilla of Boston was completed in January 2007. Share and per share amounts have been adjusted for the two-for-one stock split effected in the form of a stock dividend distributed on June 9, 2006.
(2) Merchandise inventories are primarily valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of this method did not impact cost of sales for the 14 weeks ended February 3, 2007 or the 13 weeks ended January 28, 2006.
(3) Represents inventory valuation adjustments associated with the combination and integration of Federated and May merchandise assortments.
(4) Represents costs and expenses associated with the integration and consolidation of May's operations into Federated's operations, primarily related to store and distribution center closings, system conversions and other operational consolidations.
(5) Interest expense - net for the 14 weeks ended February 3, 2007 includes a gain of approximately $54 million, or $.06 per diluted share, related to the completion of the debt tender offer. Interest expense - net for the 13 weeks ended January 28, 2006 includes approximately $17 million of interest income related to the settlement of various tax examinations.
(6) Income tax expense for the 13 weeks ended January 28, 2006 includes a $10 million reduction in tax expense related to the settlement of various tax examinations.
(7) 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. For the 14 weeks ended February 3, 2007, discontinued operations includes the loss on disposal of David's Bridal and Priscilla of Boston of $22 million on a pre-tax basis, or $18 million after income taxes, or $.03 per diluted share. The loss on disposal reflects a reduction to the fair value of the assets sold based on the actual purchase agreement.
(8) For the 14 weeks ended February 3, 2007 and the 13 weeks ended January 28, 2006, May integration costs and related inventory valuation adjustments (see Notes 3 and 4) amounted to $.21 and $.15 per diluted share, respectively.
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Consolidated Statements of Income - 4Q 2006 (Unaudited) (Note 1)
(All amounts in millions except percentages and per share figures)
| |
53 Weeks Ended |
52 Weeks Ended |
| |
February 3,
2007 |
January 28,
2006 |
| |
$ |
% to
Net Sales |
$ |
% to
Net Sales |
| |
| Net sales |
$26,970 |
|
$22,390 |
|
| |
| Cost of sales – recurring (Note 2) |
16,019 |
59.4% |
13,272 |
59.3% |
| |
| Gross margin - recurring |
10,951 |
40.6% |
9,118 |
40.7% |
| |
Inventory valuation adjustments –
May integration (Note 3) |
(178) |
(0.7%) |
(25) |
(0.1%) |
| |
| Gross margin |
10,773 |
39.9% |
9,093 |
40.6% |
| |
| Selling, general and administrative expenses |
(8,678) |
(32.2%) |
(6,980) |
(31.2%) |
| |
| May integration costs (Note 4) |
(450) |
(1.6%) |
(169) |
(0.7%) |
| |
| Gain on the sale of accounts receivable (Note 5) |
191 |
0.7% |
480 |
2.1% |
| |
| Operating income |
1,836 |
6.8% |
2,424 |
10.8% |
| |
| Interest expense - net (Note 6) |
(390) |
|
(380) |
|
| |
| Income from continuing operations before income taxes |
1,446 |
|
2,044 |
|
| |
| Federal, state and local income tax expense (Note 7) |
(458) |
|
(671) |
|
| |
| Income from continuing operations |
988 |
|
1,373 |
|
| |
| Discontinued operations, net of income taxes (Note 8) |
7 |
|
33 |
|
| |
| Net Income |
$995 |
|
$1,406 |
|
| |
| Basic earnings per share: |
| Income from continuing operations |
$1.83 |
|
$3.22 |
|
| Income from discontinued operations |
.01 |
|
.08 |
|
| Net income |
$1.84 |
|
$3.30 |
|
| |
| Diluted earnings per share (Note 9): |
| Income from continuing operations |
$1.80 |
|
$3.16 |
|
| Income from discontinued operations |
.01 |
|
.08 |
|
| Net income |
$1.81 |
|
$3.24 |
|
| |
| Average common shares: |
| Basic |
540.0 |
|
426.1 |
|
| Diluted |
547.7 |
|
434.5 |
|
| |
| Depreciation and amortization expense |
$1,265 |
|
$976 |
|
Notes:
(1) 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. The sale of the Lord & Taylor division was completed in October 2006, and the sale of David's Bridal and Priscilla of Boston was completed in January 2007. Share and per share amounts have been adjusted for the two-for-one stock split effected in the form of a stock dividend distributed on June 9, 2006.
(2) Merchandise inventories are primarily valued at the lower of cost or market using the last-in, first-out (LIFO) retail inventory method. Application of this method did not impact cost of sales for the 53 weeks ended February 3, 2007 or the 52 weeks ended January 28, 2006.
(3) Represents inventory valuation adjustments associated with the combination and integration of Federated and May merchandise assortments.
(4) Represents costs and expenses associated with the integration and consolidation of May's operations into Federated's operations, primarily related to store and distribution center closings, system conversions and other operational consolidations. The May integration costs for the 53 weeks ended February 3, 2007 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 53 weeks ended February 3, 2007, the after-tax net gain amounted to $.22 per diluted share. For the 52 weeks ended January 28, 2006, the after-tax net gain amounted to $.89 per diluted share.
(6) Interest expense - net for the 53 weeks ended February 3, 2007 includes a gain of approximately $54 million, or $.06 per diluted share, related to the completion of the debt tender offer and approximately $17 million of interest income related to the settlement of various tax examinations. Interest expense - net for the 52 weeks ended January 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 53 weeks ended February 3, 2007 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. Income tax expense for the 52 weeks ended January 28, 2006 was reduced by approximately $85 million to recognize capital loss carryforwards realized as a result of the sale of certain credit card accounts receivable and $10 million related to the settlement of various tax examinations.
(8) Represents the acquired operations of Lord & Taylor and the Bridal Group, including David's Bridal, After Hours Formalwear and Priscilla of Boston. For the 53 weeks ended February 3, 2007, discontinued operations 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 and the loss on disposal of David's Bridal and Priscilla of Boston of $22 million on a pre-tax basis, or $18 million after income taxes, or $.03 per diluted share. The losses on disposal reflect reductions to the fair value of the assets sold based on the actual purchase agreements.
(9) For the 53 weeks ended February 3, 2007 and 52 weeks ended January 28, 2006, May integration costs and related inventory valuation adjustments (see Notes 3 and 4) amounted to $.72 and $.28 per diluted share, respectively.
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Consolidated Financial Statements:
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