Federated 2Q Earnings Exceed Expectations.Business Editors CINCINNATI--(BUSINESS WIRE)--Aug. 13, 2003 Federated Connected and treated as one. See federated database and federated directories. Department Stores This is a list of department stores. In the case of department store groups the location of the flagship store is given. This list does not include large specialist stores, which sometimes resemble department stores. , Inc. (NYSE NYSE See: New York Stock Exchange :FD)(PCX (1) A bitmapped graphics file format that handles monochrome, 2-bit, 4-bit, 8-bit and 24-bit color and uses RLE to achieve compression ratios of approximately 1.1:1 to 1.5:1. Images with large blocks of solid colors compress best under the RLE method. See PC Paintbrush. :FD) today reported diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of 64 cents for the second quarter of 2003, exceeding both the company's original guidance of 50-55 cents a share and its revised guidance of 60-63 cents a share. This compared to diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of 66 cents a share in the same 13-week period last year. For the first half of 2003, Federated reported diluted earnings per share of 88 cents, compared to diluted earnings from continuing operations of $1.09 a share in the same period of 2002. Terry J. Lundgren Terry J. Lundgren (b. 1952) is the CEO, Chairman of the Board, President, and Director at Macy's, Inc., the parent company of Macy*s and Bloomingdale's department stores. Lundgren is also the namesake of the Terry J. , Federated's president and chief executive officer, said the company was pleased with its earnings performance in the quarter, driven by an improving sales trend, strong gross margins and tight expense controls. Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. Federated's operating income totaled $264 million or 7.7 percent of sales for the quarter ended August 2, 2003, compared to operating income of $300 million or 8.6 percent of sales for the same period last year. Operating income in the second quarter this year included $10 million in store closing and consolidation costs. The company's operating income for the first half of 2003 was $410 million or 6.1 percent of sales, including a total of $18 million in store closing and consolidation costs, compared to $521 million or 7.5 percent of sales in the same period of 2002. Sales Sales of $3.434 billion for the second quarter of 2003 were down 1.5 percent from sales of $3.486 billion in the same period last year. On a same-store basis, Federated's second quarter sales were down 1.2 percent. For the year to date, Federated's sales totaled $6.725 billion, a decrease of 3.1 percent from sales of $6.939 billion in the same period last year. On a same-store basis, Federated's first-half sales were down 3.1 percent. New stores opened in the second quarter included a Macy's Macy's formerly R.H. Macy & Co., Inc. Major U.S. department-store chain. Its former flagship, an 11-story store that occupies a city block in New York City's Herald Square, was for many years the largest single store in the country. Rowland H. Staten Island Staten Island (1990 pop. 378,977), 59 sq mi (160 sq km), SE N.Y., in New York Bay, SW of Manhattan, forming Richmond co. of New York state and the borough of Staten Island of New York City. furniture gallery in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of ; a Bon-Macy's department store at Redmond Town Center Redmond Town Center is a mixed-use development located in the heart of Downtown Redmond, Washington. This lifestyle village was completed in August 1997, and is currently owned by Macerich. , Redmond Redmond, city (1990 pop. 35,800), King co., W Wash., a suburb of Seattle, on Lake Sammamish; inc. 1912. Its economy centers around computer software (Microsoft Corp. , WA; a Bon-Macy's furniture gallery in Tacoma Tacoma (təkō`mə), city (1990 pop. 176,664), seat of Pierce co., W Wash., on Commencement Bay and Puget Sound at the mouth of the Puyallup River; inc. 1884. , WA; and two Rich's-Macy's furniture galleries, in the Atlanta Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. Town Center and in Augusta Augusta, city, Italy Augusta (oug  `stä), city (1991 pop. 34,189), E Sicily, Italy, on an island (formerly a peninsula) in the Ionian Sea, connected by bridge with the Sicilian , GA.
Cash Flow Cash flow from continuing operating activities was $719 million in the first half of 2003, compared to $556 million in the same period last year. After first-half continuing investing activities of $181 million this year and $281 million last year, cash flow from continuing operations before financing activities was $538 million compared to $275 million in the same period last year. The company used $450 million to repay its 8.5 percent Senior Notes and approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $107 million to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 3 million shares of Federated common stock in the second quarter. Second Half Expectations Federated reaffirmed its earnings expectations for the remainder of fiscal 2003 at $2.40-$2.50 a share. By quarter, the company's guidance is for earnings per share of 25-30 cents in the third quarter and $2.15 - $2.20 for the fourth quarter. Federated anticipates same-store sales Same-store sales is a business term which refers to the revenue generated by one of a retail chain's specific outlets during a certain period of time (often a fiscal quarter or a particular shopping season), compared to an identical period in the past, usually in the previous year. for both the third and fourth quarters to be down 1 percent to up 1 percent. Capital expenditures for 2003 now are anticipated to be $600-$625 million, a reduction from original estimates of $650 million for the year. Federated, with corporate offices in Cincinnati Cincinnati (sĭnsənăt`ē, –năt`ə), city (1990 pop. 364,040), seat of Hamilton co., extreme SW Ohio, on the Ohio River opposite Newport and Covington, Ky.; inc. as a city 1819. and New York, is one of the nation's leading department store retailers, with annual sales of more than $15.4 billion. Federated operates more than 450 stores in 34 states, Guam Guam (gwäm), Chamorro Guåhan, the largest, most populous, and southernmost of the Mariana Islands (see also Northern Mariana Islands, an unincorporated territory of the United States (2005 est. pop. and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. under the names of Macy's, Bloomingdale's This article or section needs sources or references that appear in reliable, third-party publications. Alone, primary sources and sources affiliated with the subject of this article are not sufficient for an accurate encyclopedia article. , The Bon-Macy's, Burdines The references in this article would be clearer with a different and/or consistent style of citation, footnoting or external linking. Burdines was a leading department store chain in the state of Florida that was part of Federated Department Stores, Inc. , Goldsmith's-Macy's, Lazarus-Macy's and Rich's-Macy's. The company also operates macys.com and Bloomingdale's By Mail. This release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that reflect current views of the financial performance and future events of Federated. The words "expect," "plan," "think," "believe" and other similar expressions identify forward-looking statements. Any such forward-looking statements are subject to risks and uncertainties. Future results of the operations of Federated could differ materially from historical results or current expectations because of a variety of factors that affect the company, including transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). associated with the renovation, conversion and transitioning of company retail stores in regional markets; the outcome and timing of sales and leasing in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the disposition Act of disposing; transferring to the care or possession of another. The parting with, alienation of, or giving up of property. The final settlement of a matter and, with reference to decisions announced by a court, a judge's ruling is commonly referred to as disposition, regardless of of company retail store properties; the retention, reintegration reintegration /re·in·te·gra·tion/ (-in-te-gra´shun) 1. biological integration after a state of disruption. 2. restoration of harmonious mental function after disintegration of the personality in mental illness. and transitioning of displaced displaced see displacement. company employees; competitive pressures from department and specialty stores Noun 1. specialty store - a store that sells only one kind of merchandise shop, store - a mercantile establishment for the retail sale of goods or services; "he bought it at a shop on Cape Cod" , general merchandise MERCHANDISE. By this term is understood all those things which merchants sell either wholesale or retail, as dry goods, hardware, groceries, drugs, &c. It is usually applied to personal chattels only, and to those which are not required for food or immediate support, but such as remain stores, manufacturers' outlets, off-price off-price adj. 1. Of, relating to, or being a retail store that sells merchandise at prices lower than usual. 2. For sale at prices lower than usual: off-price assortments of women's clothing. and discount stores, and all other retail channels; and general consumer-spending levels, including the impact of the availability and level of consumer debt, and the effects of weather. (NOTE: Additional information on Federated is available on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.fds.com. A live webcast of the second quarter earnings call with analysts can be accessed through the Federated website, beginning at 10:30 a.m. ET. Pre-registration is requested. The webcast will be archived for replay beginning approximately two hours after the conclusion of the live call.)
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income (Unaudited) (Note 1)
------------------------------------------------------
(All amounts in millions except percentages and per share figures)
13 Weeks Ended 26 Weeks Ended
------------------ -------------------
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
---- ---- ---- ----
Net sales $3,434 $3,486 $6,725 $6,939
Cost of sales (Note 2) 2,025 2,051 4,027 4,129
Percent to sales 59.0% 58.8% 59.9% 59.5%
-------- ------- ------- -------
Gross margin 1,409 1,435 2,698 2,810
Percent to sales 41.0% 41.2% 40.1% 40.5%
Selling, general and
administrative expenses
(Note 3) 1,145 1,135 2,288 2,289
Percent to sales 33.3% 32.6% 34.0% 33.0%
-------- ------- ------- -------
Operating income 264 300 410 521
Percent to sales 7.7% 8.6% 6.1% 7.5%
Interest expense - net (65) (78) (135) (152)
-------- ------- ------- -------
Income from continuing
operations
before income taxes 199 222 275 369
Federal, state and local
income tax expense (79) (89) (109) (147)
-------- ------- ------- -------
Income from continuing
operations 120 133 166 222
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income (Unaudited) (Note 1)
------------------------------------------------------
(All amounts in millions except percentages and per share figures)
13 Weeks Ended 26 Weeks Ended
------------------ -------------------
August 2, August 3, August 2, August 3,
2003 2002 2003 2002
---- ---- ---- ----
Income on disposal of
discontinued operations,
net of tax effect (Note 4) - 149 - 149
-------- ------- ------- -------
Net Income $120 $ 282 $166 $ 371
======== ======= ======= =======
Basic Earnings per Share:
Income from continuing
operations $.65 $ .66 $.89 $1.10
Income from discontinued
operations - .74 - .74
-------- ------- ------- -------
Net income $.65 $1.40 $.89 $1.84
======== ======= ======= =======
Diluted Earnings per Share:
Income from continuing
operations $.64 $.66 $.88 $1.09
Income from discontinued
operations - .73 - .73
-------- ------- ------- -------
Net income $.64 $1.39 $.88 $1.82
======== ======= ======= =======
Average common shares:
Basic 185.6 201.5 187.4 201.6
Diluted 187.2 203.5 188.3 203.7
Depreciation and amortization
expense $173 $168 $353 $333
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income (Unaudited) (Note 1)
------------------------------------------------------
Notes:
(1) Because of the seasonal nature of the retail business, the results
of operations for the 13 and 26 weeks ended August 2, 2003 and
August 3, 2002 (which do not include the Christmas season) are not
necessarily indicative of such results for the fiscal year.
(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 13 and 26 weeks ended August 2, 2003 or August 3, 2002.
(3) Includes costs and expenses related to the Rich's-Macy's
consolidation and other announced store closings of $10 million,
or $.03 per diluted share, for the 13 weeks ended August 2, 2003
and $18 million, or $.06 per diluted share, for the 26 weeks ended
August 2, 2003.
(4) During July 2002, Federated completed the sale of Fingerhut's core
catalog accounts receivable portfolio, with the buyer assuming
$450 million of receivables-backed debt and the sale of various
Fingerhut assets, including two distribution centers, the
corporate headquarters, a data center, existing inventory, the
Fingerhut name, customer lists and other miscellaneous property
and equipment. Proceeds from these sales and collections on
customer accounts receivable prior to the sale, net of operating
expenses, exceeded the amount estimated to be received through
wind-down of the portfolio and liquidation of the assets,
resulting in an adjustment to the loss on disposal of discontinued
operations totaling $236 million of income before income taxes.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets (Unaudited)
--------------------------------------
(millions)
August 2, February 1, August 3,
2003 2003 2002
------- ------- -------
ASSETS:
Current Assets:
Cash $ 564 $ 716 $ 1,398
Accounts receivable 2,836 2,945 2,676
Merchandise inventories 3,439 3,359 3,657
Supplies and prepaid expenses 115 124 135
Deferred income tax assets 13 10 16
Assets of discontinued operations - - 593
------- ------- -------
Total Current Assets 6,967 7,154 8,475
Property and Equipment - net 6,200 6,379 6,389
Goodwill 262 262 305
Other Intangible Assets - net 378 378 378
Other Assets 269 268 544
------- ------- -------
Total Assets $14,076 $14,441 $16,091
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 749 $ 946 $ 1,919
Accounts payable and accrued
liabilities 2,678 2,584 2,731
Income taxes 121 71 42
Liabilities of discontinued
operations - - 322
------- ------- -------
Total current liabilities 3,548 3,601 5,014
Long-Term Debt 3,154 3,408 3,402
Deferred Income Taxes 1,026 998 1,299
Other Liabilities 641 672 551
Shareholders' Equity 5,707 5,762 5,825
------- ------- -------
Total Liabilities and
Shareholders' Equity $14,076 $14,441 $16,091
======= ======= =======
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows (Unaudited)
-------------------------------------------------
(millions)
26 Weeks Ended 26 Weeks Ended
August 2, 2003 August 3, 2002
--------------- ---------------
Cash flows from continuing operating
activities:
Net income $ 166 $ 371
Adjustments to reconcile net income
to net cash
provided by continuing operating
activities:
Income from discontinued
operations - (149)
Depreciation and amortization 351 331
Amortization of financing costs 1 4
Amortization of unearned
restricted stock 2 2
Changes in assets and
liabilities:
Decrease in accounts receivable 113 308
Increase in merchandise
inventories (80) (281)
(Increase) decrease in supplies
and prepaid expenses 9 (11)
Increase in other assets not
separately identified (1) (27)
Increase in accounts payable and
accrued liabilities not
separately identified 110 75
Increase (decrease) in current
income taxes 50 (15)
Increase (decrease) in deferred
income taxes 25 (41)
Decrease in other liabilities
not separately identified (27) (11)
----- ------
Net cash provided by
continuing operating
activities 719 556
----- ------
Cash flows from continuing investing
activities:
Purchase of property and equipment (156) (219)
Capitalized software (27) (23)
Increase in note receivable - (39)
Disposition of property and equipment 2 -
----- ------
Net cash used by continuing
investing activities (181) (281)
----- ------
Cash flows from continuing financing
activities:
Debt issued 6 -
Debt repaid (454) (35)
Dividends paid (23) -
Increase (decrease) in outstanding
checks (18) 13
Acquisition of treasury stock (227) (139)
Issuance of common stock 26 26
----- ------
Net cash used by continuing
financing activities (690) (135)
----- ------
Net cash provided (used) by continuing
operations (152) 140
Net cash provided by discontinued
operations - 622
----- ------
Net increase (decrease) in cash (152) 762
Cash at beginning of period 716 636
----- ------
Cash at end of period $ 564 $1,398
===== ======
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