Macy's, Inc.
Reconciliation of GAAP to non-GAAP Financial Measures
($ in millions)
The following information relates to, and should be read in conjunction with, a conference call hosted by the
management of Macy's, Inc. on August 11, 2010 to discuss the Company's financial condition and results of
operations as of and for the 13 and 26 weeks ended July 31, 2010. An audio archive of the conference call
and the text of the related press release can be accessed at www.macysinc.com/ir/.
The Company reports its financial results in accordance with generally accepted accounting principles (GAAP).
However, management believes that certain non-GAAP performance and condition measures and ratios, used in
managing the Company's business, provide users of the Company's financial information with additional useful
information. See the tables below for supplemental financial data and corresponding reconciliations to GAAP financial
measures. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's
reported results prepared in accordance with GAAP. Certain of the items that may be excluded or included in these
non-GAAP financial measures may constitute significant items that could impact the Company's financial position,
results of operations and cash flows and should therefore be considered in assessing the Company's actual financial
condition and performance. The methods used by the Company to calculate its non-GAAP financial measures may
differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP
financial measures presented herein may not be comparable to similar measures provided by other companies.
|
Ratio of total debt to total capitalization
|
| |
July 31
2010
| |
August 1
2009
|
| Most comparable GAAP ratio: |
| Long-term debt |
|
$7,493 |
|
$8,632 |
| |
| Total Liabilities and Shareholders' Equity |
|
$20,438 |
|
$20,784 |
| |
|
|
36.7% |
|
41.5% |
| |
| Non-GAAP ratio: |
| Short-term debt |
|
$609 |
|
$92 |
| Long-term debt |
|
7,493 |
|
8,632 |
| Total debt |
|
$8,102 |
|
$8,724 |
| |
| Total debt |
|
$8,102 |
|
$8,724 |
| Shareholders' Equity |
|
$4,887 |
|
$4,549 |
| Total capitalization |
|
$12,989 |
|
$13,273 |
| |
| |
|
62.4% |
|
65.7% |
Management believes that total debt to total capitalization is a useful measure to assist the reader in evaluating the capital structure of the Company. Management believes that this measure is useful in evaluating the amount of leverage employed by the Company.
|
Ratio of total net debt to total capitalization
|
| |
July 31
2010
|
|
August 1
2009
|
| Most comparable GAAP ratio: |
| Long-term debt |
|
$7,493 |
|
$8,632 |
| Total Liabilities and Shareholders' Equity |
|
$20,438 |
|
$20,784 |
|
|
36.7% |
|
41.5% |
| |
| Non-GAAP ratio: |
| Short-term debt |
|
$609 |
|
$92
|
| Long-term debt |
|
7,493
|
|
8,632
|
| Cash |
|
(1,208)
|
|
(592)
|
| Total net debt |
|
$6,894
|
|
$8,132
|
| |
| Total net debt |
|
$6,894
|
|
$8,132
|
| Shareholders' Equity |
|
4,887
|
|
4,549
|
| Total capitalization |
|
$11,781
|
|
$12,681
|
| |
| |
|
58.5%
|
|
64.1%
|
Management believes that total net debt to total capitalization is a useful measure to assist the reader in evaluating the capital structure of the Company. As computed above, the ratio of total net debt to total capitalization includes as components of total net debt the Company's long-term debt and short-term debt, as offset by cash recorded on the balance sheet. Management believes that this measure is useful in evaluating the amount of leverage employed by the Company.
|
Impact of accounting policy change
|
| |
13 Weeks
Ended
July 31
2010
|
|
13 Weeks
Ended
August 1
2009
|
|
| Reported results: |
| Net sales |
$5,537 |
|
$5,164 |
|
| |
| Gross margin |
$2,323 |
|
$2,143 |
|
| |
| Gross margin as percent to net sales |
41.9% |
|
41.5% |
| |
| Selling, general and administrative expenses |
$1,953 |
|
$1,861 |
| |
Selling, general and administrative expenses as
a percent of net sales
|
35.2% |
|
36.0% |
| |
|
Operating Income
|
$370 |
|
$248 |
| |
Operating Income as a percent
to net sales
|
6.7% |
|
4.8% |
| |
| Results adjusted for accounting policy change: |
| Net sales |
$5,537 |
|
$5,164 |
| |
| Add sales relating to accounting policy change |
- |
|
121 |
| |
| Net sales, adjusted for accounting policy change |
$5,537 |
|
$5,285 |
| |
|
|
|
| Gross margin |
$2,323 |
|
$2,143 |
|
| |
|
|
|
| Add gross margin relating to accounting policy change |
- |
|
25 |
|
| |
|
|
|
|
|
| Gross margin, adjusted for accounting policy change |
$2,323 |
|
$2,168 |
|
|
| |
|
|
|
|
|
Gross margin as a percent to net sales, adjusted
for accounting policy change
|
41.9% |
|
41.0% |
| |
|
|
|
|
|
| Selling, general and administrative expenses |
$1,953 |
|
$1,861 |
|
|
| |
|
|
|
|
|
| Adjustment relating to accounting policy change |
- |
|
25 |
| |
|
|
|
|
|
Selling, general and administrative expenses, adjusted
for accounting policy change
|
$1,953 |
|
$1,886 |
| |
|
|
|
|
|
Selling, general and administrative expenses as a
percent to net sales, adjusted for accounting
policy change
|
35.2% |
|
35.7% |
| |
|
|
|
|
|
|
Operating Income
|
$370 |
|
$248 |
| |
|
Add back division consolidation costs
|
- |
|
34 |
| |
Operating income, excluding impact
of division consolidation costs
|
$370 |
|
$282 |
| |
|
|
|
|
|
Operating income, excluding impact
of division consolidation costs, as a
percent to net sales, adjusted for
accounting policy change
|
6.7% |
|
5.3% |
Beginning with the first quarter of 2010, the Company changed its method of accounting for certain items, primarily sales of private brand goods to outside retailers and sales of excess inventory to third parties at the end of a season. This table illustrates the impact that such change would have had on the Company's net sales, gross margin, selling, general and administrative expenses and operating income as a percent to net sales for the 13 weeks ended August 1, 2009 if such changes had been in effect throughout that period.
|
Operating income and operating income as a percent to net sales, excluding certain items
|
| |
13 Weeks
Ended
July 31
2010
|
|
13 Weeks
Ended
August 1
2009
|
|
Dollar and
Basis Point
Increase
|
|
Percentage
Increase
|
| Most comparable GAAP measure: |
| Net sales |
|
$5,537 |
|
|
$5,164 |
|
|
|
|
|
|
|
|
| |
| Operating income |
|
$370 |
|
|
$248 |
|
|
|
|
|
|
|
|
| |
|
|
6.7% |
|
|
4.8% |
|
|
|
|
|
|
|
|
| |
| Non-GAAP measure: |
| Net sales |
|
$5,537 |
|
|
$5,164 |
|
|
|
|
|
|
|
|
| Operating income |
|
$370 |
|
|
$248 |
|
|
|
|
|
|
|
|
| Add back division consolidation costs |
|
- |
|
|
34 |
|
|
|
|
|
|
|
|
Operating income, excluding impact
of division consolidation costs
|
|
$370 |
|
|
$282 |
|
|
|
$88 |
|
|
|
31% |
|
|
6.7% |
|
|
5.5% |
|
|
|
120 |
|
|
|
|
Management believes that operating income and operating income as a percent to net sales, excluding division consolidation costs are useful measures in evaluating the Company's ability to leverage sales. Management believes that excluding the division consolidation costs from the calculation of these measures is particularly useful where the amounts of such items are not consistent in the periods presented.
|
Operating income and operating income as a percent to net sales, excluding certain items
|
| |
26 Weeks
Ended
July 31
2010
|
|
26 Weeks
Ended
August 1
2009
|
| Most comparable GAAP measure: |
| Net sales |
|
$11,111 |
|
$10,363 |
| |
| Operating income |
|
$573 |
|
$134 |
| |
|
|
5.2% |
|
1.3% |
| |
| Non-GAAP measure: |
| Net sales |
|
$11,111 |
|
$10,363 |
| Operating income |
|
$573 |
|
$134 |
| Add back division consolidation costs |
|
- |
|
172 |
Operating income, excluding impact
of division consolidation costs
|
|
$573 |
|
$306 |
|
|
5.2% |
|
3.0% |
Management believes that operating income and operating income as a percent to net sales, excluding division consolidation costs are useful measures in evaluating the Company's ability to leverage sales. Management believes that excluding the division consolidation costs from the calculation of these measures is particularly useful where the amounts of such items are not consistent in the periods presented.
|
Diluted earnings per share, excluding certain items
|
| |
13 Weeks
Ended
July 31
2010
|
|
13 Weeks
Ended
August 1
2009
|
|
Percentage
Increase
|
| Most comparable GAAP measure: |
| Diluted earnings per share |
|
$0.35 |
|
$0.02 |
|
|
| |
| Non-GAAP measure: |
| Diluted earnings per share |
|
$0.35 |
|
$0.02 |
|
|
| |
| |
| Add back the impact of division consolidation costs |
|
- |
|
0.18 |
|
|
| |
Diluted earnings per share, excluding the
impact of division consolidation costs
|
|
$0.35 |
|
$0.20 |
|
75% |
Management believes that providing a measure of diluted earnings per share excluding the effect of the division consolidation costs is a useful measure to assist the reader in evaluating the Company's ability to generate earnings and that providing such a measure will allow investors to more readily compare the earnings referred to in the press release to the earnings reported by the Company in past and future periods. Management believes that excluding the impact of division consolidation costs from the calculation of this measure is particularly useful where the amounts of such items are not consistent in the periods presented.
|
Diluted earnings per share, excluding certain items
|
| |
26 Weeks
Ended
July 1
2010
|
|
26 Weeks
Ended
August 1
2009
|
| Most comparable GAAP measure: |
| Diluted earnings per share |
|
$0.40 |
|
$(0.19) |
| |
| Non-GAAP measure: |
| Diluted earnings per share |
|
$0.40 |
|
$(0.19) |
| |
|
Add back the impact of division consolidation costs |
|
- |
|
0.23 |
| |
Diluted earnings per share, excluding the
impact of division consolidation costs
|
|
$0.40 |
|
$0.04 |
Management believes that providing a measure of diluted earnings per share excluding the effect of the division consolidation costs is a useful measure to assist the reader in evaluating the Company's ability to generate earnings and that providing such a measure will allow investors to more readily compare the earnings referred to in the press release to the earnings reported by the Company in past and future periods. Management believes that excluding the impact of division consolidation costs from the calculation of this measure is particularly useful where the amounts of such items are not consistent in the periods presented.
|
Cash flow, excluding certain items
|
| |
26 Weeks
Ended
July 31
2010
|
|
26 Weeks
Ended
August 1
2009
|
|
Increase
|
| Most comparable GAAP measure: |
| Net cash provided by operating activities |
|
$288 |
|
$420 |
|
|
| |
| Non-GAAP measure: |
| Net cash provided by operating activities |
|
$288 |
|
$420 |
|
|
| |
| |
| Net cash used by investing activities |
|
(124) |
|
(168) |
|
|
| |
| Cash flow before financing activities
|
|
$164 |
|
$252 |
|
|
| |
| Add back impact of pension contributions
|
|
325 |
|
60 |
|
|
| |
Cash flow before financing activities, excluding
the impact of pension contributions
|
|
$489 |
|
$312 |
|
$177 |
Management believes cash flow before financing activities, defined as cash provided by operating and investing activities, and cash flow before financing activities excluding the impact of pension contributions are useful measures in evaluating the Company's ability to generate cash from operations after giving effect to cash used by investing activities. Management believes that excluding cash flows from financing activities and the impact of pension contributions from the calculation of these mesaures is particularly useful where the amounts of such items are not consistent in the periods presented.
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Historical Data:
Consolidated Financial Statements: