UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 

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

For the quarterly period ended August 3,November 2, 2013

OR

o
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
 
 

Incorporated in Delaware I.R.S. Employer Identification No.
  13-3324058

7 West Seventh Street
Cincinnati, Ohio 45202
(513) 579-7000
and
151 West 34th Street
New York, New York 10001
(212) 494-1602

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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  ý
 
Accelerated filer  o
 
Non-accelerated filer  o
 
Smaller reporting company  o
  (Do not check if a smaller reporting company)  
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 August 30,November 29, 2013
Common Stock, $0.01 par value per share 376,240,128368,481,994 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 26 Weeks Ended13 Weeks Ended 39 Weeks Ended
August 3, 2013 July 28, 2012 August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012 November 2, 2013 October 27, 2012
Net sales$6,066
 $6,118
 $12,453
 $12,261
$6,276
 $6,075
 $18,729
 $18,336
Cost of sales(3,533) (3,555) (7,444) (7,312)(3,817) (3,672) (11,261) (10,984)
Gross margin2,533
 2,563
 5,009
 4,949
2,459
 2,403
 7,468
 7,352
Selling, general and administrative expenses(1,999) (2,009) (4,040) (4,004)(2,099) (2,078) (6,139) (6,082)
Operating income534
 554
 969
 945
360
 325
 1,329
 1,270
Interest expense(97) (105) (194) (218)(97) (104) (291) (322)
Interest income1
 —
 1
 1
1
 1
 2
 2
Income before income taxes438
 449
 776
 728
264
 222
 1,040
 950
Federal, state and local income tax expense(157) (170) (278) (268)(87) (77) (365) (345)
Net income$281
 $279
 $498
 $460
$177
 $145
 $675
 $605
Basic earnings per share$.73
 $.68
 $1.29
 $1.11
$.47
 $.36
 $1.77
 $1.48
Diluted earnings per share$.72
 $.67
 $1.27
 $1.09
$.47
 $.36
 $1.74
 $1.45

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 26 Weeks Ended13 Weeks Ended 39 Weeks Ended
August 3, 2013 July 28, 2012 August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012 November 2, 2013 October 27, 2012
Net income$281
 $279
 $498
 $460
$177
 $145
 $675
 $605
Other comprehensive income:              
Amortization of net actuarial loss on post employment
and postretirement benefit plans included in net
income, before tax		41
 40
 79
 78
Amortization of net actuarial loss and prior service credit
on post employment and postretirement benefit plans
included in net income, before tax		38
 37
 117
 115
Tax effect related to items of other comprehensive income(17) (16) (31) (31)(14) (13) (45) (44)
Total other comprehensive income, net of tax effect24
 24
 48
 47
24
 24
 72
 71
Comprehensive income$305
 $303
 $546
 $507
$201
 $169
 $747
 $676

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


3

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

(millions)
 
          
August 3, 2013 February 2, 2013 July 28, 2012November 2, 2013 February 2, 2013 October 27, 2012
ASSETS          
Current Assets:          
Cash and cash equivalents$1,424
 $1,836
 $1,604
$1,171
 $1,836
 $1,264
Receivables347
 371
 359
276
 371
 281
Merchandise inventories5,357
 5,308
 5,036
7,716
 5,308
 7,208
Prepaid expenses and other current assets387
 361
 387
397
 361
 410
Total Current Assets7,515
 7,876
 7,386
9,560
 7,876
 9,163
Property and Equipment - net of accumulated depreciation and
amortization of $6,345, $5,947 and $6,368		8,001
 8,196
 8,291
Property and Equipment - net of accumulated depreciation and
amortization of $6,555, $5,947 and $6,584
7,950
 8,196
 8,212
Goodwill3,743
 3,743
 3,743
3,743
 3,743
 3,743
Other Intangible Assets – net543
 561
 580
535
 561
 570
Other Assets629
 615
 565
658
 615
 582
Total Assets$20,431
 $20,991
 $20,565
$22,446
 $20,991
 $22,270
LIABILITIES AND SHAREHOLDERS’ EQUITY          
Current Liabilities:          
Short-term debt$575
 $124
 $313
$465
 $124
 $123
Merchandise accounts payable2,064
 1,579
 1,895
3,897
 1,579
 3,627
Accounts payable and accrued liabilities2,043
 2,610
 2,078
2,323
 2,610
 2,419
Income taxes67
 355
 158
78
 355
 89
Deferred income taxes422
 407
 410
423
 407
 426
Total Current Liabilities5,171
 5,075
 4,854
7,186
 5,075
 6,684
Long-Term Debt6,339
 6,806
 6,637
6,732
 6,806
 6,817
Deferred Income Taxes1,217
 1,238
 1,134
1,225
 1,238
 1,182
Other Liabilities1,849
 1,821
 2,037
1,861
 1,821
 2,024
Shareholders’ Equity5,855
 6,051
 5,903
5,442
 6,051
 5,563
Total Liabilities and Shareholders’ Equity$20,431
 $20,991
 $20,565
$22,446
 $20,991
 $22,270

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


4

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

(millions)
      
26 Weeks Ended39 Weeks Ended
August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012
Cash flows from operating activities:      
Net income$498
 $460
$675
 $605
Adjustments to reconcile net income to net cash
provided by operating activities:		      
Depreciation and amortization504
 513
761
 782
Stock-based compensation expense32
 31
48
 47
Amortization of financing costs and premium on acquired debt(5) (7)(7) (10)
Changes in assets and liabilities:      
Decrease in receivables41
 14
102
 91
(Increase) decrease in merchandise inventories(49) 81
Increase in merchandise inventories(2,408) (2,091)
(Increase) decrease in prepaid expenses and other current assets(21) 60
(25) 58
Decrease in other assets not separately identified1
 22
1
 23
Increase in merchandise accounts payable442
 292
2,155
 1,941
Decrease in accounts payable and accrued
liabilities not separately identified		(560) (591)(320) (323)
Decrease in current income taxes(288) (213)(277) (282)
Decrease in deferred income taxes(37) (35)
Increase (decrease) in deferred income taxes(43) 14
Increase in other liabilities not separately identified106
 11
157
 34
Net cash provided by operating activities664
 638
819
 889
Cash flows from investing activities:      
Purchase of property and equipment(206) (310)(381) (464)
Capitalized software(110) (109)(180) (169)
Disposition of property and equipment5
 23
30
 36
Other, net(5) 3
(10) (18)
Net cash used by investing activities(316) (393)(541) (615)
Cash flows from financing activities:      
Debt issued400
 —
Financing costs(3) 0
(10) —
Debt repaid(7) (797)(121) (803)
Dividends paid(173) (165)(267) (246)
Increase (decrease) in outstanding checks2
 (43)
Increase in outstanding checks73
 38
Acquisition of treasury stock(785) (615)(1,228) (1,018)
Issuance of common stock206
 152
210
 192
Net cash used by financing activities(760) (1,468)(943) (1,837)
Net decrease in cash and cash equivalents(412) (1,223)(665) (1,563)
Cash and cash equivalents beginning of period1,836
 2,827
1,836
 2,827
Cash and cash equivalents end of period$1,424
 $1,604
$1,171
 $1,264
Supplemental cash flow information:      
Interest paid$190
 $238
$268
 $304
Interest received1
 1
1
 2
Income taxes paid (net of refunds received)512
 495
582
 591

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

5

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

1.    Summary of Significant Accounting Policies
Nature of Operations
Macy's, Inc. and subsidiaries (the "Company") is an omnichannel retail organization operating stores and Internet websites under two brands (Macy's and Bloomingdale's) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The Company's operations include approximately 840 stores, including thirteen Bloomingdale's Outlets, in 45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com and bloomingdales.com. In addition, Bloomingdale's in Dubai, United Arab Emirates is 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 2, 2013 (the "2012 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 2012 10-K.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 and 2639 weeks ended August 3,November 2, 2013 and July 28,October 27, 2012, 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 and 2639 weeks ended August 3,November 2, 2013 and July 28,October 27, 2012 (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 component of total comprehensive income for the 13 and 2639 weeks ended August 3,November 2, 2013 and July 28,October 27, 2012 is the amortization of post employment and postretirement plan items. These reclassifications out of accumulated other comprehensive loss are included in the computation of net periodperiodic benefit costs and are included in selling, general and administrative expenses on the Consolidated Statements of Income. See Note 4, "Benefit Plans," for further information.


6
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


2.    Earnings Per Share
The following tables set forth the computation of basic and diluted earnings per share:
13 Weeks Ended13 Weeks Ended
August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012
Net
Income
   Shares 
Net
Income
   Shares
Net
Income
   Shares 
Net
Income
   Shares
(millions, except per share data)(millions, except per share data)
Net income and average number of shares outstanding$281
   381.6
 $279
   410.2
$177
   373.9
 $145
   400.3
Shares to be issued under deferred
compensation and other plans		    0.9
     1.0
    0.9
     1.0
$281
   382.5
 $279
   411.2
$177
   374.8
 $145
   401.3
Basic earnings per share  $0.73
     $0.68
    $0.47
     $0.36
  
Effect of dilutive securities:                      
Stock options, restricted stock and restricted stock units    6.8
     5.9
    5.4
     6.6
$281
   389.3
 $279
   417.1
$177
   380.2
 $145
   407.9
Diluted earnings per share  $0.72
     $0.67
    $0.47
     $0.36
  
 
26 Weeks Ended39 Weeks Ended
August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012
Net
Income
   Shares 
Net
Income
   Shares
Net
Income
   Shares 
Net
Income
   Shares
(millions, except per share data)(millions, except per share data)
Net income and average number of shares outstanding$498
   384.3
 $460
   412.8
$675
   380.8
 $605
   408.7
Shares to be issued under deferred
compensation and other plans		    1.0
     1.3
    1.0
     1.2
$498
   385.3
 $460
   414.1
$675
   381.8
 $605
   409.9
Basic earnings per share  $1.29
     $1.11
    $1.77
     $1.48
  
Effect of dilutive securities:                      
Stock options, restricted stock and restricted stock units    6.6
     6.6
    6.2
     6.6
$498
   391.9
 $460
   420.7
$675
   388.0
 $605
   416.5
Diluted earnings per share  $1.27
     $1.09
    $1.74
     $1.45
  

In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 3.66.6 million shares of common stock and restricted stock units relating to 1.8 million shares of common stock were outstanding at August 3,November 2, 2013, but were not included in the computation of diluted earnings per share for the 13 or 2639 weeks ended August 3,November 2, 2013 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.
In addition to the stock options, restricted stock and restricted stock units reflected in the foregoing tables, stock options to purchase 9.07.6 million shares of common stock and restricted stock units relating to 2.5 million shares of common stock were outstanding at July 28,October 27, 2012, but were not included in the computation of diluted earnings per share for the 13 or 2639 weeks ended July 28,October 27, 2012 because their inclusion would have been antidilutive or they were subject to performance conditions that had not been met.


7
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


3.    Financing Activities
The following table shows the detail of debt repayments:
 
26 Weeks Ended39 Weeks Ended
August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012
(millions)(millions)
7.625% Senior debentures due 2013$109
 $—
5.35% Senior notes due 2012$—
 $616
—
 616
8.0% Senior debentures due 2012—
 173
—
 173
9.5% amortizing debentures due 20212
 2
4
 4
9.75% amortizing debentures due 20211
 1
2
 2
Capital leases and other obligations4
 5
6
 8
$7
 $797
$121
 $803
During the 39 weeks ended November 2, 2013, the Company repaid $109 million of indebtedness at maturity.
On March 29, 2012, the Company redeemed the $173 million of 8.0% senior debentures due July 15, 2012, as allowed under the terms of the indenture. The price for the redemption was calculated pursuant to the indenture and resulted in the recognition of additional interest expense of $4 million. In addition, the Company repaid $616 million of 5.35% senior notes due March 15, 2012 at maturity.
On September 6, 2013, the Company issued $400 million aggregate principal amount of 4.375% senior notes due 2023. The proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, retirement of indebtedness and repurchasing outstanding common stock.
During the 2639 weeks ended August 3,November 2, 2013, the Company repurchased approximately 17.527.6 million shares of its common stock pursuant to existing stock purchase authorizations for a total of approximately $8061,254 million. As of August 3,November 2, 2013, the Company had $2,1961,748 million 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.

On August 15, 2013, the Company repaid $109 million of 7.625% senior debentures at maturity. On September 3, 2013, the Company announced the pricing of a public offering of $400 million aggregate principal amount of senior notes due 2023 by its wholly owned subsidiary, Macy's Retail Holdings, Inc. The notes are to be issued at a price of 99.314% of par and will bear interest at a rate of 4.375% per annum. The notes are to be fully and unconditionally guaranteed on a senior unsecured basis by Macy's, Inc. The transaction is expected to close on or about September 6, 2013. The proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, retirement of indebtedness and repurchasing outstanding common stock.

The Company entered into a credit agreement with certain financial institutions on May 10, 2013 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which may be increased to $1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time. This agreement is set to expire May 10, 2018 and replaces the previous facility which was set to expire June 20, 2015. As of and during the 2639 weeks ended August 3,November 2, 2013, the Company had no borrowings outstanding under its then existing credit agreements, and as of the date of this report, the Company does not expect to borrow under its new credit agreement during fiscal 2013.

4.    Benefit Plans
The Company has a funded defined benefit plan ("Pension Plan") and a defined contribution plan, which cover substantially all employees who work 1,000 hours or more in a year. Effective January 1, 2012, the Pension Plan was closed to new participants, with limited exceptions. The Company also has an unfunded defined benefit supplementary retirement plan ("SERP"), which provides benefits, for certain employees, in excess of qualified plan limitations. Effective January 2, 2012, the SERP was closed to new participants. After December 31, 2013, with limited exceptions, employees will no longer earn future pension service credits under the Pension Plan and SERP, and retirement benefits attributable to service after that date will be provided solely 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.

8
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 


In March 2010, President Obama signed into law the "Patient Protection and Affordable Care Act" and the "Health Care and Education Affordability Reconciliation Act of 2010" (the "2010 Acts"). The 2010 Acts contain provisions which impact the accounting for postretirement obligations. Based on the analysis to date, the impact of the provisions in the 2010 Acts on the Company's postretirement obligations has not and is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. The Company continues to evaluate the impact of the 2010 Acts on the active and retiree benefit plans offered by the Company.

The actuarially determined components of the net periodic benefit cost are as follows:
 
13 Weeks Ended 26 Weeks Ended13 Weeks Ended 39 Weeks Ended
August 3, 2013 July 28, 2012 August 3, 2013 July 28, 2012November 2, 2013 October 27, 2012 November 2, 2013 October 27, 2012
(millions)(millions)
Pension Plan              
Service cost$28
 $30
 $56
 $58
$28
 $30
 $84
 $88
Interest cost35
 39
 71
 78
36
 40
 107
 118
Expected return on assets(61) (63) (121) (126)(60) (64) (181) (190)
Recognition of net actuarial loss36
 36
 71
 71
34
 35
 105
 106
Amortization of prior service credit—
 —
 —
 —
—
 (1) —
 (1)
$38
 $42
 $77
 $81
$38
 $40
 $115
 $121
Supplementary Retirement Plan              
Service cost$1
 $1
 $3
 $3
$2
 $1
 $5
 $4
Interest cost8
 9
 16
 17
8
 9
 24
 26
Recognition of net actuarial loss6
 5
 10
 9
4
 4
 14
 13
Amortization of prior service credit—
 —
 —
 —
—
 —
 —
 —
$15
 $15
 $29
 $29
$14
 $14
 $43
 $43
Postretirement Obligations              
Service cost$—
 $—
 $—
 $—
$—
 $—
 $—
 $—
Interest cost2
 3
 5
 6
2
 3
 7
 9
Recognition of net actuarial gain(1) (1) (2) (2)—
 (1) (2) (3)
Amortization of prior service cost—
 —
 —
 —
���
 —
 —
 —
$1
 $2
 $3
 $4
$2
 $2
 $5
 $6

5.    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:
 
 August 3, 2013 July 28, 2012
   Fair Value Measurements   Fair Value Measurements
 Total 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 (millions)
Marketable equity and debt securities$74
 $—
 $74
 $—
 $62
 $—
 $62
 $—
 November 2, 2013 October 27, 2012
   Fair Value Measurements   Fair Value Measurements
 Total 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 Total 
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
 
Significant
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 (millions)
Marketable equity and debt securities$78
 $—
 $78
 $—
 $83
 $—
 $83
 $—


9
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


Other financial instruments not measured at fair value on a recurring basis include cash and cash equivalents, receivables, 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 approximates fair value because of the short maturity of these instruments. The fair values

9
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)


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.
The following table shows the estimated fair value of the Company's long-term debt:
 
 August 3, 2013 July 28, 2012
 
Notional
Amount
 
Carrying
Amount
 
Fair
Value
 
Notional
Amount
 
Carrying
Amount
 
Fair
Value
 (millions)
Long-term debt$6,125
 $6,308
 $6,650
 $6,398
 $6,603
 $7,404
The Company reviews the carrying value of its goodwill and other intangible assets with indefinite lives at least annually for possible impairment in accordance with ASC Topic 350, “Intangibles - Goodwill and Other.” Goodwill and other intangible assets with indefinite lives have been assigned to reporting units for purposes of impairment testing. The reporting units are the Company's retail operations. Goodwill and other intangible assets with indefinite lives are tested for impairment annually at the end of the fiscal month of May. The Macy's retail operation is the only reporting unit with goodwill and indefinite lived intangible assets.
During the second quarter of fiscal 2013, the Company completed its annual impairment test of goodwill and indefinite lived intangible assets and determined that goodwill and indefinite lived intangible assets were not impaired as of June 1, 2013.
The use of different assumptions, estimates or judgments in the testing process, including with respect to the analysis of macroeconomic conditions, industry, market and other economic considerations and actual and expected financial performance, the estimated future cash flows and the discount rates used to discount such estimated cash flows to their net present values, could materially increase or decrease the estimated fair values and, accordingly, could impact the results of the annual impairment tests.
 November 2, 2013 October 27, 2012
 
Notional
Amount
 
Carrying
Amount
 
Fair
Value
 
Notional
Amount
 
Carrying
Amount
 
Fair
Value
 (millions)
Long-term debt$6,522
 $6,701
 $7,002
 $6,583
 $6,784
 $7,736

6.    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 FDS Bank, West 34th Street Insurance Company (prior to a merger, known separately as Leadville Insurance Company and Snowdin Insurance Company) and its subsidiary 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, and Macy's Merchandising Group International (Hong Kong) Limited. "Subsidiary Issuer" includes operating divisions and non-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."
Condensed Consolidating Balance Sheets as of August 3,November 2, 2013, July 28,October 27, 2012 and February 2, 2013, the related Condensed Consolidating Statements of Comprehensive Income for the 13 and 2639 weeks ended August 3,November 2, 2013 and July 28,October 27, 2012, and the related Condensed Consolidating Statements of Cash Flows for the 2639 weeks ended August 3,November 2, 2013 and July 28,October 27, 2012 are presented on the following pages.

10
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Balance Sheet
As of August 3,November 2, 2013
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
ASSETS:                  
Current Assets:                  
Cash and cash equivalents$1,104
 $35
 $285
 $—
 $1,424
$807
 $21
 $343
 $—
 $1,171
Receivables—
 86
 261
 —
 347
—
 44
 232
 —
 276
Merchandise inventories—
 2,759
 2,598
 —
 5,357
—
 3,946
 3,770
 —
 7,716
Prepaid expenses and other current assets—
 94
 293
 —
 387
—
 99
 298
 —
 397
Income taxes69
 —
 —
 (69) —
38
 —
 —
 (38) —
Total Current Assets1,173
 2,974
 3,437
 (69) 7,515
845
 4,110
 4,643
 (38) 9,560
Property and Equipment – net—
 4,562
 3,439
 —
 8,001
—
 4,531
 3,419
 —
 7,950
Goodwill—
 3,315
 428
 —
 3,743
—
 3,315
 428
 —
 3,743
Other Intangible Assets – net—
 109
 434
 —
 543
—
 103
 432
 —
 535
Other Assets4
 69
 556
 —
 629
4
 73
 581
 —
 658
Deferred income taxes3
 —
 —
 (3) —
Intercompany Receivable527
 —
 3,135
 (3,662) —
464
 —
 3,218
 (3,682) —
Investment in Subsidiaries4,273
 2,757
 —
 (7,030) —
4,320
 2,753
 —
 (7,073) —
Total Assets$5,977
 $13,786
 $11,429
 $(10,761) $20,431
$5,636
 $14,885
 $12,721
 $(10,796) $22,446
LIABILITIES AND SHAREHOLDERS’ EQUITY:                  
Current Liabilities:                  
Short-term debt$—
 $573
 $2
 $—
 $575
$—
 $463
 $2
 $—
 $465
Merchandise accounts payable—
 966
 1,098
 —
 2,064
—
 1,812
 2,085
 —
 3,897
Accounts payable and accrued liabilities36
 887
 1,120
 —
 2,043
107
 965
 1,251
 —
 2,323
Income taxes—
 16
 120
 (69) 67
—
 6
 110
 (38) 78
Deferred income taxes—
 315
 107
 —
 422
—
 322
 101
 —
 423
Total Current Liabilities36
 2,757
 2,447
 (69) 5,171
107
 3,568
 3,549
 (38) 7,186
Long-Term Debt—
 6,317
 22
 —
 6,339
—
 6,711
 21
 —
 6,732
Intercompany Payable—
 3,662
 —
 (3,662) —
—
 3,682
 —
 (3,682) —
Deferred Income Taxes8
 441
 768
 —
 1,217
—
 450
 778
 (3) 1,225
Other Liabilities78
 620
 1,151
 —
 1,849
87
 619
 1,155
 —
 1,861
Shareholders' Equity (Deficit)5,855
 (11) 7,041
 (7,030) 5,855
5,442
 (145) 7,218
 (7,073) 5,442
Total Liabilities and Shareholders' Equity$5,977
 $13,786
 $11,429
 $(10,761) $20,431
$5,636
 $14,885
 $12,721
 $(10,796) $22,446

11
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended August 3,November 2, 2013
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
Net sales$—
 $2,898
 $4,831
 $(1,663) $6,066
$—
 $2,979
 $6,337
 $(3,040) $6,276
Cost of sales—
 (1,763) (3,420) 1,650
 (3,533)—
 (1,930) (4,913) 3,026
 (3,817)
Gross margin—
 1,135
 1,411
 (13) 2,533
—
 1,049
 1,424
 (14) 2,459
Selling, general and administrative expenses(2) (1,054) (956) 13
 (1,999)(2) (1,113) (998) 14
 (2,099)
Operating income (loss)(2) 81
 455
 —
 534
(2) (64) 426
 —
 360
Interest (expense) income, net:                  
External—
 (96) —
 —
 (96)1
 (96) (1) —
 (96)
Intercompany—
 (39) 39
 —
 —
(1) (39) 40
 —
 —
Equity in earnings of subsidiaries282
 89
 —
 (371) —
178
 (15) —
 (163) —
Income before income taxes280
 35
 494
 (371) 438
Income (loss) before income taxes176
 (214) 465
 (163) 264
Federal, state and local income
tax benefit (expense)		1
 10
 (168) —
 (157)1
 56
 (144) —
 (87)
Net income$281
 $45
 $326
 $(371) $281
Comprehensive income$305
 $69
 $336
 $(405) $305
Net income (loss)$177
 $(158) $321
 $(163) $177
Comprehensive income (loss)$201
 $(134) $331
 $(197) $201



12
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Statement of Comprehensive Income
For the 2639 Weeks Ended August 3,November 2, 2013
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
Net sales$—
 $5,932
 $10,379
 $(3,858) $12,453
$—
 $8,911
 $16,716
 $(6,898) $18,729
Cost of sales—
 (3,660) (7,616) 3,832
 (7,444)—
 (5,590) (12,529) 6,858
 (11,261)
Gross margin—
 2,272
 2,763
 (26) 5,009
—
 3,321
 4,187
 (40) 7,468
Selling, general and administrative expenses(5) (2,104) (1,957) 26
 (4,040)(7) (3,217) (2,955) 40
 (6,139)
Operating income (loss)(5) 168
 806
 —
 969
(7) 104
 1,232
 —
 1,329
Interest (expense) income, net:                  
External—
 (193) —
 —
 (193)1
 (289) (1) —
 (289)
Intercompany—
 (79) 79
 —
 —
(1) (118) 119
 —
 —
Equity in earnings of subsidiaries501
 144
 —
 (645) —
679
 129
 —
 (808) —
Income before income taxes496
 40
 885
 (645) 776
Income (loss) before income taxes672
 (174) 1,350
 (808) 1,040
Federal, state and local income
tax benefit (expense)		2
 37
 (317) —
 (278)3
 93
 (461) —
 (365)
Net income$498
 $77
 $568
 $(645) $498
Comprehensive income$546
 $125
 $588
 $(713) $546
Net income (loss)$675
 $(81) $889
 $(808) $675
Comprehensive income (loss)$747
 $(9) $919
 $(910) $747


13
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Statement of Cash Flows
For the 2639 Weeks Ended August 3,November 2, 2013
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
Cash flows from operating activities:                  
Net income$498
 $77
 $568
 $(645) $498
Net income (loss)$675
 $(81) $889
 $(808) $675
Equity in earnings of subsidiaries(501) (144) —
 645
 —
(679) (129) —
 808
 —
Dividends received from subsidiaries303
 —
 —
 (303) —
458
 —
 —
 (458) —
Depreciation and amortization—
 235
 269
 —
 504
—
 349
 412
 —
 761
(Increase) decrease in working capital(62) 43
 (416) —
 (435)
Increase in working capital(34) (185) (554) —
 (773)
Other, net18
 76
 3
 —
 97
16
 107
 33
 —
 156
Net cash provided by operating activities256
 287
 424
 (303) 664
436
 61
 780
 (458) 819
Cash flows from investing activities:                  
Purchase of property and equipment and capitalized software, net—
 (135) (176) —
 (311)—
 (206) (325) —
 (531)
Other, net—
 —
 (5) —
 (5)—
 —
 (10) —
 (10)
Net cash used by investing activities—
 (135) (181) —
 (316)—
 (206) (335) —
 (541)
Cash flows from financing activities:                  
Debt repaid—
 (6) (1) —
 (7)
Debt issued, net of debt repaid—
 281
 (2) —
 279
Dividends paid(173) —
 (303) 303
 (173)(267) —
 (458) 458
 (267)
Common stock acquired, net of
issuance of common stock		(579) —
 —
 —
 (579)(1,018) —
 —
 —
 (1,018)
Intercompany activity, net145
 (175) 30
 —
 —
224
 (159) (65) —
 —
Other, net(83) 23
 59
 —
 (1)(106) 3
 166
 —
 63
Net cash used by
financing activities		(690) (158) (215) 303
 (760)
Net cash provided (used) by
financing activities		(1,167) 125
 (359) 458
 (943)
Net increase (decrease) in cash
and cash equivalents		(434) (6) 28
 —
 (412)(731) (20) 86
 —
 (665)
Cash and cash equivalents at beginning of period1,538
 41
 257
 —
 1,836
1,538
 41
 257
 —
 1,836
Cash and cash equivalents at end of period$1,104
 $35
 $285
 $—
 $1,424
$807
 $21
 $343
 $—
 $1,171

14
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Balance Sheet
As of July 28,October 27, 2012
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
ASSETS:                  
Current Assets:                  
Cash and cash equivalents$1,303
 $32
 $269
 $—
 $1,604
$938
 $36
 $290
 $—
 $1,264
Receivables—
 76
 283
 —
 359
—
 31
 250
 —
 281
Merchandise inventories—
 2,607
 2,429
 —
 5,036
—
 3,712
 3,496
 —
 7,208
Prepaid expenses and other current assets—
 96
 291
 —
 387
—
 103
 307
 —
 410
Income taxes20
 —
 —
 (20) —
127
 —
 —
 (127) —
Total Current Assets1,323
 2,811
 3,272
 (20) 7,386
1,065
 3,882
 4,343
 (127) 9,163
Property and Equipment – net—
 4,716
 3,575
 —
 8,291
—
 4,696
 3,516
 —
 8,212
Goodwill—
 3,315
 428
 —
 3,743
—
 3,315
 428
 —
 3,743
Other Intangible Assets – net—
 138
 442
 —
 580
—
 131
 439
 —
 570
Other Assets3
 67
 495
 —
 565
4
 65
 513
 —
 582
Deferred Income Taxes11
 —
 —
 (11) —
11
 —
 —
 (11) —
Intercompany Receivable1,281
 —
 2,847
 (4,128) —
1,260
 —
 3,114
 (4,374) —
Investment in Subsidiaries3,430
 2,636
 —
 (6,066) —
3,467
 2,675
 —
 (6,142) —
Total Assets$6,048
 $13,683
 $11,059
 $(10,225) $20,565
$5,807
 $14,764
 $12,353
 $(10,654) $22,270
LIABILITIES AND SHAREHOLDERS’ EQUITY:                  
Current Liabilities:                  
Short-term debt$—
 $310
 $3
 $—
 $313
$—
 $121
 $2
 $—
 $123
Merchandise accounts payable—
 890
 1,005
 —
 1,895
—
 1,730
 1,897
 —
 3,627
Accounts payable and accrued liabilities113
 825
 1,140
 —
 2,078
212
 919
 1,288
 —
 2,419
Income taxes—
 63
 115
 (20) 158
—
 54
 162
 (127) 89
Deferred income taxes—
 317
 93
 —
 410
—
 322
 104
 —
 426
Total Current Liabilities113
 2,405
 2,356
 (20) 4,854
212
 3,146
 3,453
 (127) 6,684
Long-Term Debt—
 6,613
 24
 —
 6,637
—
 6,793
 24
 —
 6,817
Intercompany Payable—
 4,128
 —
 (4,128) —
—
 4,374
 —
 (4,374) —
Deferred Income Taxes—
 373
 772
 (11) 1,134
—
 389
 804
 (11) 1,182
Other Liabilities32
 757
 1,248
 —
 2,037
32
 746
 1,246
 —
 2,024
Shareholders' Equity (Deficit)5,903
 (593) 6,659
 (6,066) 5,903
5,563
 (684) 6,826
 (6,142) 5,563
Total Liabilities and Shareholders' Equity$6,048
 $13,683
 $11,059
 $(10,225) $20,565
$5,807
 $14,764
 $12,353
 $(10,654) $22,270

15
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Statement of Comprehensive Income
For the 13 Weeks Ended July 28,October 27, 2012
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
Net sales$—
 $3,004
 $4,708
 $(1,594) $6,118
$—
 $2,979
 $5,820
 $(2,724) $6,075
Cost of sales—
 (1,783) (3,352) 1,580
 (3,555)—
 (1,901) (4,480) 2,709
 (3,672)
Gross margin—
 1,221
 1,356
 (14) 2,563
—
 1,078
 1,340
 (15) 2,403
Selling, general and administrative expenses(2) (1,090) (931) 14
 (2,009)(2) (1,132) (959) 15
 (2,078)
Operating income (loss)(2) 131
 425
 —
 554
(2) (54) 381
 —
 325
Interest (expense) income, net:                  
External—
 (104) (1) —
 (105)—
 (103) —
 —
 (103)
Intercompany—
 (36) 36
 —
 —
—
 (35) 35
 —
 —
Equity in earnings of subsidiaries279
 130
 —
 (409) —
147
 29
 —
 (176) —
Income before income taxes277
 121
 460
 (409) 449
Income (loss) before income taxes145
 (163) 416
 (176) 222
Federal, state and local income
tax benefit (expense)		2
 2
 (174) —
 (170)—
 50
 (127) —
 (77)
Net income$279
 $123
 $286
 $(409) $279
Comprehensive income$303
 $147
 $296
 $(443) $303
Net income (loss)$145
 $(113) $289
 $(176) $145
Comprehensive income (loss)$169
 $(89) $299
 $(210) $169



16
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Statement of Comprehensive Income
For the 2639 Weeks Ended July 28,October 27, 2012
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
Net sales$—
 $6,045
 $9,852
 $(3,636) $12,261
$—
 $9,024
 $15,672
 $(6,360) $18,336
Cost of sales—
 (3,739) (7,181) 3,608
 (7,312)—
 (5,640) (11,661) 6,317
 (10,984)
Gross margin—
 2,306
 2,671
 (28) 4,949
—
 3,384
 4,011
 (43) 7,352
Selling, general and administrative expenses(4) (2,150) (1,878) 28
 (4,004)(6) (3,282) (2,837) 43
 (6,082)
Operating income (loss)(4) 156
 793
 —
 945
(6) 102
 1,174
 —
 1,270
Interest (expense) income, net:                  
External1
 (217) (1) —
 (217)1
 (320) (1) —
 (320)
Intercompany(1) (71) 72
 —
 —
(1) (106) 107
 —
 —
Equity in earnings of subsidiaries462
 193
 —
 (655) —
609
 222
 —
 (831) —
Income before income taxes458
 61
 864
 (655) 728
Income (loss) before income taxes603
 (102) 1,280
 (831) 950
Federal, state and local income
tax benefit (expense)		2
 37
 (307) —
 (268)2
 87
 (434) —
 (345)
Net income$460
 $98
 $557
 $(655) $460
Net income (loss)$605
 $(15) $846
 $(831) $605
Comprehensive income$507
 $145
 $577
 $(722) $507
$676
 $56
 $876
 $(932) $676


17
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Statement of Cash Flows
For the 2639 Weeks Ended July 28,October 27, 2012
(millions)
 
Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 ConsolidatedParent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
Cash flows from operating activities:                  
Net income$460
 $98
 $557
 $(655) $460
Net income (loss)$605
 $(15) $846
 $(831) $605
Equity in earnings of subsidiaries(462) (193) —
 655
 —
(609) (222) —
 831
 —
Dividends received from subsidiaries323
 —
 —
 (323) —
455
 —
 —
 (455) —
Depreciation and amortization—
 235
 278
 —
 513
—
 356
 426
 —
 782
(Increase) decrease in working capital(87) 75
 (345) —
 (357)
Increase in working capital(173) (66) (367) —
 (606)
Other, net(17) 41
 (2) —
 22
(17) 64
 61
 —
 108
Net cash provided by operating activities217
 256
 488
 (323) 638
261
 117
 966
 (455) 889
Cash flows from investing activities:                  
Purchase of property and equipment and capitalized software, net—
 (116) (280) —
 (396)—
 (210) (387) —
 (597)
Other, net—
 —
 3
 —
 3
—
 —
 (18) —
 (18)
Net cash used by investing activities—
 (116) (277) —
 (393)—
 (210) (405) —
 (615)
Cash flows from financing activities:                  
Debt repaid—
 (795) (2) —
 (797)—
 (800) (3) —
 (803)
Dividends paid(165) —
 (323) 323
 (165)(246) —
 (455) 455
 (246)
Common stock acquired, net of
issuance of common stock		(463) —
 —
 —
 (463)(826) —
 —
 —
 (826)
Intercompany activity, net(767) 649
 118
 —
 —
(733) 892
 (159) —
 —
Other, net(52) —
 9
 —
 (43)(51) (1) 90
 —
 38
Net cash used by financing activities(1,447) (146) (198) 323
 (1,468)
Net cash provided (used) by
financing activities		(1,856) 91
 (527) 455
 (1,837)
Net increase (decrease) in cash and
cash equivalents		(1,230) (6) 13
 —
 (1,223)(1,595) (2) 34
 —
 (1,563)
Cash and cash equivalents at beginning of period2,533
 38
 256
 —
 2,827
2,533
 38
 256
 —
 2,827
Cash and cash equivalents at end of period$1,303
 $32
 $269
 $—
 $1,604
$938
 $36
 $290
 $—
 $1,264

18
MACY'S, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Unaudited)
 



Condensed Consolidating Balance Sheet
As of February 2, 2013
(millions)
 
 Parent 
Subsidiary
Issuer
 
Other
Subsidiaries
 
Consolidating
Adjustments
 Consolidated
ASSETS:         
Current Assets:         
Cash and cash equivalents$1,538
 $41
 $257
 $—
 $1,836
Receivables—
 58
 313
 —
 371
Merchandise inventories—
 2,804
 2,504
 —
 5,308
Prepaid expenses and other current assets—
 97
 264
 —
 361
Income taxes30
 —
 —
 (30) —
Total Current Assets1,568
 3,000
 3,338
 (30) 7,876
Property and Equipment – net—
 4,649
 3,547
 —
 8,196
Goodwill—
 3,315
 428
 —
 3,743
Other Intangible Assets – net—
 124
 437
 —
 561
Other Assets3
 71
 541
 —
 615
Intercompany Receivable641
 —
 3,190
 (3,831) —
Investment in Subsidiaries4,027
 2,595
 —
 (6,622) —
Total Assets$6,239
 $13,754
 $11,481
 $(10,483) $20,991
LIABILITIES AND SHAREHOLDERS’ EQUITY:         
Current Liabilities:         
Short-term debt$—
 $121
 $3
 $—
 $124
Merchandise accounts payable—
 733
 846
 —
 1,579
Accounts payable and accrued liabilities119
 1,023
 1,468
 —
 2,610
Income taxes—
 69
 316
 (30) 355
Deferred income taxes—
 323
 84
 —
 407
Total Current Liabilities119
 2,269
 2,717
 (30) 5,075
Long-Term Debt—
 6,783
 23
 —
 6,806
Intercompany Payable—
 3,831
 —
 (3,831) —
Deferred Income Taxes11
 410
 817
 —
 1,238
Other Liabilities58
 596
 1,167
 —
 1,821
Shareholders' Equity (Deficit)6,051
 (135) 6,757
 (6,622) 6,051
Total Liabilities and Shareholders' Equity$6,239
 $13,754
 $11,481
 $(10,483) $20,991




19

MACY'S, INC.

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

For purposes of the following discussion, all references to "secondthird quarter of 2013" and "secondthird quarter of 2012" are to the Company's 13-week fiscal periods ended August 3,November 2, 2013 and July 28,October 27, 2012, respectively, and all references to "2013" and "2012" are to the Company's 26-week39-week fiscal periods ended August 3,November 2, 2013 and July 28,October 27, 2012, respectively.
The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes included elsewhere in this report, as well as the financial and other information included in the 2012 10-K. The following discussion contains forward-looking statements that reflect the Company's plans, estimates and beliefs. The Company's actual results could materially differ from those discussed in these forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those discussed below and elsewhere in this report (particularly in "Forward-Looking Statements") and in the 2012 10-K (particularly in "Risk Factors").
Overview
The Company is an omnichannel retail organization operating stores and websites under two brands (Macy's and Bloomingdale's) that sell a wide range of merchandise, including apparel and accessories (men's, women's and children's), cosmetics, home furnishings and other consumer goods. The Company's operations include approximately 840 stores, including thirteen Bloomingdale's Outlets, in 45 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com and bloomingdales.com. In addition, Bloomingdale's in Dubai, United Arab Emirates is operated under a license agreement with Al Tayer Insignia, a company of Al Tayer Group, LLC.
The Company is focused on three key strategies for continued growth in sales, earnings and cash flow in the years ahead: (i) maximizing the My Macy's localization initiative; (ii) driving the omnichannel business; and (iii) embracing customer centricity, including engaging customers on the selling floor through the MAGIC Selling program.
Through the My Macy's localization initiative, the Company has invested in talent, technology and marketing which ensures that core customers surrounding each Macy's store find merchandise assortments, size ranges, marketing programs and shopping experiences that are custom-tailored to their needs. My Macy's has provided for more local decision-making in every Macy's community, and involves tailoring merchandise assortments, space allocations, service levels, visual merchandising and special events on a store-by-store basis.
The Company's omnichannel strategy allows customers to shop seamlessly in stores, online and via mobile devices. A pivotal part of the omnichannel strategy is the Company's ability to allow associates in any store to sell a product that may be unavailable locally by selecting merchandise from other stores or online fulfillment centers for shipment to the customer's door. Likewise, the Company's online fulfillment centers can draw on store inventories nationwide to fill orders that originate on the Internet or via mobile devices. As of August 3,November 2, 2013, approximately 500 Macy's stores are fulfilling orders from other stores, the Internet and mobile devices, compared to 292 stores as of February 2, 2013.
Macy's MAGIC Selling program is an approach to customer engagement that helps Macy's to better understand the needs of customers, as well as to provide options and advice. This comprehensive ongoing training and coaching program is designed to improve the in-store shopping experience.
During 2012, the Company opened new Macy's stores in Milwaukee, Wisconsin and Salt Lake City, Utah and new Bloomingdale's Outlet stores in Dallas, Texas and Merrimack, New Hampshire. During 2013, the Company opened new Macy's stores in Gurnee, Illinois and Victorville, California, expanded into an additional Macy's location in an existing mall in Las Vegas, Nevada, opened a Macy's replacement store in Bay Shore, New York and opened a new Bloomingdale's Outlet store in Rosemont, Illinois. In addition, a new Bloomingdale's store in Glendale, California opened in early November 2013. A Macy's store was closed in St. Louis, Missouri during 2013. The Company intends to open aand the Macy's replacementmen's and furniture store in Bay Shore, New YorkSacramento, California was consolidated into a nearby full-line store during 2013.
During 2012 and aincluding November 2012, the Company opened new Macy's stores in Milwaukee, Wisconsin and Salt Lake City, Utah and new Bloomingdale's storeOutlet stores in Glendale, California during the remainder of fiscal 2013.Dallas, Texas; Garden City, New York; Grand Prairie, Texas; Livermore, California; and Merrimack, New Hampshire.

20

MACY'S, INC.

The Company's operations are impacted by competitive pressures from department stores, specialty stores, mass merchandisers, Internet websites and all other retail channels. The Company's operations are also impacted by general consumer spending levels, including the impact of general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, the costs of basic necessities and other goods and the effects of weather or natural disasters and other factors over which the Company has little or no control.
In recent years, consumer spending levels have been affected to varying degrees by a number of factors, including modest economic growth, a slowly improving housing market, a rising stock market, uncertainty regarding governmental spending and tax policies, high unemployment levels and tightened consumer credit. These factors have affected to varying degrees

20

MACY'S, INC.

the amount of funds that consumers are willing and able to spend for discretionary purchases, including purchases of some of the merchandise offered by the Company.
The effects of economic conditions have been, and may continue to be, experienced differently, or at different times, in the various geographic regions in which the Company operates, in relation to the different types of merchandise that the Company offers for sale, or in relation to the Company's Macy's-branded and Bloomingdale's-branded operations. All economic conditions, however, ultimately affect the Company's overall operations.
Based on its assessment of current and anticipated market conditions and its recent performance, the Company is assuming that its comparable sales in fiscal 2013 will increase in the range of 2.0% to 2.9% from 2012 levels and that its diluted earnings per share in fiscal 2013 will be in the range of $3.80 to $3.90.

Results of Operations
Comparison of the SecondThird Quarter of 2013 and the SecondThird Quarter of 2012
 Second Quarter of 2013 Second Quarter of 2012  Third Quarter of 2013 Third Quarter of 2012 
 Amount % to Sales Amount % to Sales  Amount % to Sales Amount % to Sales 
 (dollars in millions, except per share figures) (dollars in millions, except per share figures)
Net sales $6,066
   $6,118
    $6,276
   $6,075
   
Increase (decrease) in sales (0.8)% 3.0
% 
Increase (decrease) in comparable sales (0.8)% 3.0
% 
Increase in sales 3.3
% 3.8
% 
Increase in comparable sales 3.5
% 3.7
% 
Cost of sales (3,533) (58.2)%(3,555) (58.1)% (3,817) (60.8)%(3,672) (60.4)%
Gross margin 2,533
 41.8
%2,563
 41.9
% 2,459
 39.2
%2,403
 39.6
%
Selling, general and administrative expenses (1,999) (33.0)%(2,009) (32.8)% (2,099) (33.5)%(2,078) (34.2)%
Operating income 534
 8.8
%554
 9.1
% 360
 5.7
%325
 5.4
%
Interest expense - net (96)   (105)    (96)   (103)   
Income before income taxes 438
   449
    264
   222
   
Federal, state and local income tax expense (157)   (170)    (87)   (77)   
Net income $281
 4.6
%$279
 4.5
% $177
 2.8
%$145
 2.4
%
                  
Diluted earnings per share $0.72
   $0.67
    $0.47
   $0.36
   
Net Income
Net income for the secondthird quarter of 2013 increased $2$32 million or 22.1% compared to the secondthird quarter of 2012, reflecting lower salesthe benefits of the key strategies at Macy's and gross margin, offset by lower selling, general and administrative expenses, net interest expense and income tax expense.
Net Sales
Net sales for the secondthird quarter of 2013 decreasedincreased $52201 million or 0.8%3.3% compared to the secondthird quarter of 2012. The Company benefited from the successful execution of the My Macy's localization, Omnichannel and MAGIC selling strategies. Geographically, sales in the third quarter of 2013 were strongest in the southern regions and the northeast. Bloomingdale's also had strong sales during the third quarter of 2013. By family of business, sales in the third quarter of 2013 were stronger in women's apparel and center core, including handbags, cosmetics, fine jewelry, intimate apparel and boots. Men's active, tailored clothing and cold weather merchandise also had strong sales in the third quarter of 2013, as did furniture, mattresses, textiles and housewares. Sales in the third quarter of 2013 were less strong in juniors, watches and luggage.

21

MACY'S, INC.

On a comparable basis, net sales for the secondthird quarter of 2013 were down 0.8%up 3.5% compared to the secondthird quarter of 2012. ComparableTogether with sales for the secondfrom departments licensed to third parties, third quarter of 2013 sales on a comparable basis were negatively impacted byup 4.6%. (See page 24 for a calendar shift in a promotional event, the conversionreconciliation of certain businesses to licensed departments and the introduction of new licensed brands. Sales in the second quarter of 2013 at Macy's were weaker across the country, although less so in the southern regions and Hawaii. Bloomingdale's had stronger sales during the second quarter of 2013 and sales from the Company's Internet businesses were strong relativethis non-GAAP measure to the second quarter of 2012. By family of business, sales in the second quarter of 2013 were stronger in handbags, active apparelmost comparable GAAP measure and furniture and mattresses. Sales in the second quarter of 2013 were less strong in juniors and shoes.other important information.) The Company calculates comparable sales as sales from stores in operation throughout 2012 and 2013 and all Internet sales. Comparable sales excludeThe Company licenses third parties to operate certain departments in its stores and receives commissions from these third parties based on a percentage of their net sales. Neither the licensed department income, shipping and handling fees, sales nor the commissions received are included in the calculation of private brand goods directly to third party retailers and sales of excess inventory to third parties.comparable sales. Stores undergoing remodeling, expansion or relocation remain in the comparable sales calculation unless the store is closed for a significant period of time. Definitions and calculations of comparable sales figures differ among companies in the retail industry.



21

MACY'S, INC.

Cost of Sales
Cost of sales for the secondthird quarter of 2013 decreasedincreased $22145 million from the secondthird quarter of 2012. The cost of sales rate as a percent to net sales was 1040 basis points higher, compared to the secondthird quarter of 2012, reflecting additionalhigher markdowns as a percent to clear seasonal merchandise,net sales, as well as the growth in the omnichannel business and the resulting impact of free shipping. The application of the last-in, first-out (LIFO) retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales in either period.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the secondthird quarter of 2013 decreasedincreased $1021 million or 0.5%1.0% from the secondthird quarter of 2012. The SG&A rate as a percent to net sales was 2070 basis points higherlower in the secondthird quarter of 2013, as compared to the secondthird quarter of 2012, reflecting the decrease inincreased net sales. SG&A expenses in the secondthird quarter of 2013 were impacted by continued investments in the Company's omnichannel operations and additional marketing expense, partially offset by lower depreciation and amortization expense and higher income from credit operations. Income from credit operations was $177$170 million in the secondthird quarter of 2013, compared to $146$162 million in the secondthird quarter of 2012, reflecting continued improvement in collection rates. The Company expects to continue to experience higher income from credit operations in the near term,term; however, the increase over last yearfor the fourth quarter of 2013 compared to the fourth quarter of 2012 is expected to be significantly lower inmore comparable to the period-over-period increase experienced for the third and fourth quartersquarter of 2013, as comparedopposed to the greater period-over-period increases experienced for the first and second quarters of 2013.
Net Interest Expense
Net interest expense for the secondthird quarter of 2013 decreased $97 million from the secondthird quarter of 2012. Net interest expense for the secondthird quarter of 2013 benefited from lower levels of borrowings and lower rates on outstanding borrowings as compared to the secondthird quarter of 2012.
 Effective Tax Rate
The Company's effective tax rate of 35.9%33.0% for the secondthird quarter of 2013 and 38.1%34.5% for the secondthird quarter of 2012 differ from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income taxes, including the settlement of various tax issues and tax examinations.examinations, and also from the benefit of tax credits.

22

MACY'S, INC.

Comparison of the 2639 Weeks Ended August 3,November 2, 2013 and July 28,October 27, 2012
 2013 2012  2013 2012 
 Amount % to Sales Amount % to Sales  Amount % to Sales Amount % to Sales 
 (dollars in millions, except per share figures) (dollars in millions, except per share figures)
Net sales $12,453
   $12,261
    $18,729
   $18,336
   
Increase in sales 1.6
% 3.7
%  2.1
% 3.7
% 
Increase in comparable sales 1.5
% 3.7
%  2.2
% 3.7
% 
Cost of sales (7,444) (59.8)%(7,312) (59.6)% (11,261) (60.1)%(10,984) (59.9)%
Gross margin 5,009
 40.2
%4,949
 40.4
% 7,468
 39.9
%7,352
 40.1
%
Selling, general and administrative expenses (4,040) (32.4)%(4,004) (32.7)% (6,139) (32.8)%(6,082) (33.2)%
Operating income 969
 7.8
%945
 7.7
% 1,329
 7.1
%1,270
 6.9
%
Interest expense - net (193)   (217)    (289)   (320)   
Income before income taxes 776
   728
    1,040
   950
   
Federal, state and local income tax expense (278)   (268)    (365)   (345)   
Net income $498
 4.0
%$460
 3.7
% $675
 3.6
%$605
 3.3
%
                  
Diluted earnings per share $1.27
   $1.09
    $1.74
   $1.45
   
Net Income
Net income for 2013 increased 8.3%$70 million or 11.6% compared to net income for 2012, reflecting the benefits of the key strategies at Macy's and lower net interest expense.



22

MACY'S, INC.

Net Sales
Net sales for 2013 increased $192393 million or 1.6%2.1% compared to 2012. On a comparable basis, net sales for 2013 were up 1.5% compared to 2012. Comparable sales for 2013 were negatively impacted by the conversion of certain businesses to licensed departments and the introduction of new licensed brands. The Company benefited from the successful execution of the My Macy's localization, Omnichannel and MAGIC selling strategies. Geographically, sales in 2013 were strongest in the southern regions. By family of business, sales in 2013 were strongest in handbags, active apparel, men's, home textiles, luggage, furniture and mattresses. Sales in 2013 were less strong in juniors.
On a comparable basis, net sales for 2013 were up 2.2% compared to 2012. Together with sales from departments licensed to third parties, 2013 sales on a comparable basis were up 3.1%. (See page 24 for a reconciliation of this non-GAAP measure to the most comparable GAAP measure and other important information.) The Company calculates comparable sales as sales from stores in operation throughout 2012 and 2013 and all Internet sales. Comparable sales excludeThe Company licenses third parties to operate certain departments in its stores and receives commissions from these third parties based on a percentage of their net sales. Neither the licensed department income, shipping and handling fees, sales nor the commissions received are included in the calculation of private brand goods directly to third party retailers and sales of excess inventory to third parties.comparable sales. Stores undergoing remodeling, expansion or relocation remain in the comparable sales calculation unless the store is closed for a significant period of time. Definitions and calculations of comparable sales figures differ among companies in the retail industry.
Cost of Sales
Cost of sales for 2013 increased $132277 million from 2012. The cost of sales rate as a percent to net sales was 20 basis points higher, compared to 2012, reflecting the growth in the omnichannel business and the resulting impact of free shipping. The application of the last-in, first-out (LIFO) retail inventory method did not result in the recognition of any LIFO charges or credits affecting cost of sales in either period.

23

MACY'S, INC.

Selling, General and Administrative Expenses
SG&A expenses for 2013 increased $3657 million or .9%0.9% from 2012. The SG&A rate as a percent to net sales was 3040 basis points lower in 2013, as compared to 2012, reflecting increased net sales. SG&A expenses in 2013 were impacted by higher selling costs as a result of higher sales and continued investments in the Company's omnichannel operations, partially offset by higher income from credit operations. Income from credit operations was $343$513 million in 2013, compared to $289$451 million in 2012, reflecting continued improvement in collection rates. The Company expects to continue to experience higher income from credit operations in the near term,term; however, the increase over last yearfor the fourth quarter of 2013 compared to the fourth quarter of 2012 is expected to be significantly lower inmore comparable to the period-over-period increase experienced for the third and fourth quartersquarter of 2013, as comparedopposed to the greater period-over-period increases experienced for the first and second quarters of 2013.
Net Interest Expense
Net interest expense for 2013 decreased $2431 million from 2012. Net interest expense for 2013 benefited from lower levels of borrowings and lower rates on outstanding borrowings as compared to 2012.
 Effective Tax Rate
The Company's effective tax rate of 35.9%35.1% for 2013 and 36.9%36.3% for 2012 differ from the federal income tax statutory rate of 35%, and on a comparative basis, principally because of the effect of state and local income taxes, including the settlement of various tax issues and tax examinations.examinations, and also from the benefit of tax credits.

Important Information Regarding Non-GAAP Financial Measures
The Company reports its financial results in accordance with generally accepted accounting principles (GAAP). However, management believes that certain non-GAAP financial measures provide users of the Company's financial information with additional useful information. See the table below for supplemental financial data and a corresponding reconciliation to the most directly comparable GAAP financial measure. The Company's non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, the Company's financial results prepared in accordance with GAAP. Certain of the items that may be excluded or included in these non-GAAP financial measures may be 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.
The Company believes that providing comparable sales growth including the impact of growth in comparable sales of departments licensed to third parties supplementally to its results of operations calculated in accordance with generally accepted accounting principles provides useful information to investors. In particular, the Company believes that this supplemental information assists in evaluating the Company's ability to generate sales growth, whether through owned businesses or departments licensed to third parties, on a comparable basis, and in evaluating the impact of changes in the manner in which certain departments are operated (e.g. the conversion in 2013 of most of the Company's previously owned athletic footwear business to licensed Finish Line shops).
  Third Quarter of 2013 2013
       
Increase in comparable sales (Note 1)  3.5%  2.2%
Impact of growth in comparable sales of departments licensed to third parties (Note 2)  1.1
  0.9
Comparable sales growth including impact of growth in comparable sales of departments
licensed to third parties		  4.6%  3.1%
Notes:
(1)Represents the period-to-period change in net sales from stores in operation throughout 2013 and 2012 and all net Internet sales, excluding commissions from departments licensed to third parties.
(2)Represents the impact on comparable sales of including the sales of departments licensed to third parties occurring in stores in operation throughout 2013 and 2012 and via the Internet in the calculation. The Company licenses third parties to operate certain departments in its stores and online and receives commissions from these third parties based on a percentage of their net sales. In its financial statements prepared in conformity with GAAP, the Company includes these commissions (rather than sales of the departments licensed to third parties) in its net sales. The Company does not, however, include any amounts in respect of licensed department sales in its comparable sales in accordance with GAAP.


24

MACY'S, INC.

Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the credit facility described below.
Operating Activities
Net cash provided by operating activities in 2013 was $664819 million, compared to $638889 million provided in 2012, reflecting a higher increase in merchandise inventories, partially offset by a higher increase in merchandise accounts payable and higher net income in 2013. The increase in inventory, net of payables, was caused by a calendar shift resulting from the 53rd week in fiscal 2012. The Company aims to have inventory in the stores on the same calendar date regardless of when it falls in the fiscal calendar to coincide with when customers shop.
Investing Activities
Net cash used by investing activities was $316541 million for 2013, compared to net cash used by investing activities of $393615 million for 2012. Investing activities for 2013 include purchases of property and equipment totaling $206381 million and capitalized software of $110180 million, compared to purchases of property and equipment totaling $310464 million and capitalized software of $109169 million for 2012. Purchases of property and equipment during 2012 included the purchase of two parcels of the Macy's flagship Union Square location in San Francisco.
Financing Activities
Net cash used by the Company for financing activities was $760943 million for 2013, including $7851,228 million for the acquisition of the Company's common stock, primarily under its share repurchase program, the payment of $173267 million of cash dividends and the repayment of $7121 million of debt, partially offset by the issuance of $400 million of debt, $206210 million from the issuance of common stock, primarily related to the exercise of stock options, and an increase in outstanding checks of $273 million. The debt repaid during 2013 included $109 million of 7.625% senior debentures due August 15, 2013 paid at maturity.

23On September 6, 2013, the Company issued $400 million aggregate principal amount of 4.375% senior notes due 2023. The proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, retirement of indebtedness and repurchasing outstanding common stock.

MACY'S, INC.

During 2013, the Company repurchased approximately 17.527.6 million shares of its common stock pursuant to existing stock purchase authorizations for a total of approximately $8061,254 million. As of August 3,November 2, 2013, the Company had $2,1961,748 million 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.

On August 15, 2013, the Company repaid $109 million of 7.625% senior debentures at maturity. On September 3, 2013, the Company announced the pricing of a public offering of $400 million aggregate principal amount of senior notes due 2023 by its wholly owned subsidiary, Macy's Retail Holdings, Inc. The notes are to be issued at a price of 99.314% of par and will bear interest at a rate of 4.375% per annum. The notes are to be fully and unconditionally guaranteed on a senior unsecured basis by Macy's, Inc. The transaction is expected to close on or about September 6, 2013. The proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, retirement of indebtedness and repurchasing outstanding common stock.
Net cash used by the Company for financing activities was $1,4681,837 million for 2012, and included the repayment of $797803 million of debt, $6151,018 million for the acquisition of the Company's common stock under its share repurchase program and to cover employee tax liabilities related to stock plan activity and the payment of $165246 million of cash dividends, and a decrease in outstanding checks of $43 million, partially offset by the issuance of $152192 million of common stock, primarily related to the exercise of stock options.options, and an increase in outstanding checks of $38 million. The debt repaid during 2012 included $616 million of 5.35% senior notes due March 15, 2012 paid at maturity and the early redemption on March 29, 2012 of $173 million of 8.0% senior debentures due July 15, 2012.
The Company entered into a new credit agreement with certain financial institutions on May 10, 2013 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which may be increased to $1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for such additional financing) outstanding at any particular time. This agreement is set to expire May 10, 2018 and replaces the prior agreement which was set to expire June 20, 2015. As of August 3,November 2, 2013 and throughout all of 2013, the Company had no borrowings outstanding under its then existing credit agreements, and as of the date of this report, the Company does not expect to borrow under its new credit agreement during fiscal 2013.
The credit agreement requires the Company to maintain a specified interest coverage ratio for the latest four quarters of no less than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75. The Company's interest coverage ratio for the secondthird quarter of 2013 was 8.899.13 and its leverage ratio at August 3,November 2, 2013 was 1.80,1.87, in each case as calculated in accordance with the credit agreement.
On August 23,October 25, 2013, the Company's board of directors declared a quarterly dividend of 25 cents per share on its common stock, payable October 1, 2013January 2, 2014 to Macy's shareholders of record at the close of business on SeptemberDecember 13, 2013.

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MACY'S, INC.

Liquidity and Capital Resources Outlook
Management believes that, with respect to the Company's current operations, cash on hand and funds from operations, together with its credit facility and other capital resources, will be sufficient to cover the Company's reasonably foreseeable working capital, capital expenditure and debt service requirements and other cash requirements in both the near term and over the longer term. The Company's ability to generate funds from operations may be affected by numerous factors, including general economic conditions and levels of consumer confidence and demand; however, the Company expects to be able to manage its working capital levels and capital expenditure amounts so as to maintain sufficient levels of liquidity. To the extent that the Company's cash balances from time to time exceed amounts that are needed to fund its immediate liquidity requirements, the Company will consider alternative uses of some or all of such excess cash. Such alternative uses may include, among others, the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations. Depending upon its actual and anticipated sources and uses of liquidity, conditions in the capital markets and other factors, the Company will from time to time consider the issuance of debt or other securities, or other possible capital markets transactions, for the purpose of raising capital which could be used to refinance current indebtedness or for other corporate purposes including the redemption or repurchase of debt, equity or other securities through open market purchases, privately negotiated transactions or otherwise, and the funding of pension related obligations.
The Company intends from time to time to consider additional acquisitions of, and investments in, retail businesses and other complementary assets and companies. Acquisition transactions, if any, are expected to be financed from one or more of the following sources: cash on hand, cash from operations, borrowings under existing or new credit facilities and the issuance of long-term debt or other securities, including common stock.


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MACY'S, INC.

Item 4.Controls and Procedures.
The Company's Chief Executive Officer and Chief Financial Officer have carried out, as of August 3,November 2, 2013, with the participation of the Company's management, an evaluation of the effectiveness of the Company's disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in reports the Company files under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms, and that information required to be disclosed by the Company in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company's internal controls over financial reporting that occurred during the Company's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.


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MACY'S, INC.

PART II - OTHER INFORMATION
 
Item 1.Legal Proceedings.
On October 3, 2007, Ebrahim Shanehchian, an alleged participant in the Macy's, Inc. Profit Sharing 401(k) Investment Plan (now known as the Macy's, Inc. 401(k) Retirement Investment Plan) (the "401(k) Plan"), filed a lawsuit in the United States District Court for the Southern District of Ohio on behalf of persons who participated in the 401(k) Plan and The May Department Stores Company Profit Sharing Plan (the "May Plan") between February 27, 2005 and the present. The lawsuit has been conditionally certified as a class action. The complaint alleges that the Company, as well as members of the Company's board of directors and certain members of senior management, breached various fiduciary duties owed under the Employee Retirement Income Security Act ("ERISA") to participants in the 401(k) Plan and the May Plan, by making false and misleading statements regarding the Company's business, operations and prospects in relation to the integration of the acquired May operations, resulting in supposed "artificial inflation" of the Company's stock price and "imprudent investment" by the 401(k) Plan and the May Plan in Macy's stock. The plaintiff seeks an unspecified amount of compensatory damages and costs. The parties have reached an agreement to settle the matter. On May 8, 2013, the court granted final approval of the settlement terms and entered a judgment terminating the litigation. No appeal of the court's order was taken, and the judgment is now final.
The Company and its subsidiaries are also involved in various proceedings that are incidental to the normal course of their businesses. As of the date of this report, the Company does not expect that any of such proceedings will have a material adverse effect on the Company’s financial position or results of operations.

Item 1A.Risk Factors.
There have been no material changes to the Risk Factors described in Part I, "Item 1A. Risk Factors" in the Company's Annual Report of Form 10-K for the fiscal year ended February 2, 2013 as filed with the SEC.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.
The following table provides information regarding the Company's purchases of Common Stock during the secondthird quarter of 2013.
 
Total
Number
of Shares
Purchased
 
Average
Price per
Share ($)
 
Number of Shares
Purchased under
Program (1)
 
Open
Authorization
Remaining (1)($)
 (thousands)   (thousands) (millions)
May 5, 2013 – June 1, 20131,752
 49.04
 1,752
 2,556
June 2, 2013 – July 6, 20134,086
 48.21
 4,086
 2,359
July 7, 2013 – August 3, 20133,330
 49.18
 3,330
 2,196
 9,168
 48.72
 9,168
  
 
Total
Number
of Shares
Purchased
 
Average
Price per
Share ($)
 
Number of Shares
Purchased under
Program (1)
 
Open
Authorization
Remaining (1)($)
 (thousands)   (thousands) (millions)
August 4, 2013 – August 31, 20131,770
 44.75
 1,770
 2,116
September 1, 2013 – October 5, 20134,210
 44.32
 4,210
 1,930
October 6, 2013 – November 2, 20134,117
 44.12
 4,117
 1,748
 10,097
 44.32
 10,097
  
 ___________________
(1)
During the period from January 2000 through August 3,November 2, 2013, the Company's board of directors has from time to time approved authorizations to purchase, in the aggregate, up to $13,500 million of Common Stock. All authorizations are cumulative and do not have an expiration date. As of August 3,November 2, 2013, $2,1961,748 million of authorization remained unused. The Company may continue, discontinue or resume purchases of Common Stock under these or possible future authorizations in the open market, in privately negotiated transactions or otherwise at any time and from time to time without prior notice.

Item 4.Mine Safety Disclosures.
Not Applicable.

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MACY'S, INC.

Item 5.Other Information.
Forward-Looking Statements
This report and other reports, statements and information previously or subsequently filed by the Company with the Securities and Exchange Commission (the "SEC") contain or may contain forward-looking statements. Such statements are based upon the beliefs and assumptions of, and on information available to, the management of the Company at the time such statements are made. The following are or may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995: (i) statements preceded by, followed by or that include the words "may," "will," "could," "should," "believe," "expect," "future," "potential," "anticipate," "intend," "plan," "think," "estimate" or "continue" or the negative or other variations thereof, and (ii) statements regarding matters that are not historical facts. Such forward-looking statements are subject to various risks and uncertainties, including risks and uncertainties relating to:
the possible invalidity of the underlying beliefs and assumptions;
competitive pressures from department and specialty stores, general merchandise stores, manufacturers' outlets, off-price and discount stores, and all other retail channels, including the Internet, mail-order catalogs and television;
general consumer-spending levels, including the impact of general economic conditions, consumer disposable income levels, consumer confidence levels, the availability, cost and level of consumer debt, the costs of basic necessities and other goods and the effects of the weather or natural disasters;
conditions to, or changes in the timing of, proposed transactions and changes in expected synergies, cost savings and non-recurring charges;
possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions;
possible actions taken or omitted to be taken by third parties, including customers, suppliers, business partners, competitors and legislative, regulatory, judicial and other governmental authorities and officials;
changes in relationships with vendors and other product and service providers;
currency, interest and exchange rates and other capital market, economic and geo-political conditions;
severe or unseasonable weather, possible outbreaks of epidemic or pandemic diseases and natural disasters;
unstable political conditions, civil unrest, terrorist activities and armed conflicts;
the possible inability of the Company's manufacturers to deliver products in a timely manner or meet the Company's quality standards;
the Company's reliance on foreign sources of production, including risks related to the disruption of imports by labor disputes, regional health pandemics, and regional political and economic conditions;
duties, taxes, other charges and quotas on imports; and
possible systems failures and/or security breaches, including, any security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or company information, or the failure to comply with various laws applicable to the Company in the event of such a breach.
In addition to any risks and uncertainties specifically identified in the text surrounding such forward-looking statements, the statements in the immediately preceding sentence and the statements under captions such as "Risk Factors" and "Special Considerations" in reports, statements and information filed by the Company with the SEC from time to time constitute cautionary statements identifying important factors that could cause actual amounts, results, events and circumstances to differ materially from those expressed in or implied by such forward-looking statements.


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MACY'S, INC.

Item 6.Exhibits.

4.1Fifth Supplemental Trust Indenture, dated as of September 6, 2013, among Macy's Retail Holdings, Inc., as issuer, Macy's, Inc., as guarantor, and The Bank of New York Mellon Trust Company, N.A., as trustee (incorporated herein by reference to Exhibit 4.2 to Macy's, Inc. Current Report on Form 8-K (File No. 001-13536) filed on September 6, 2013)
10.1+Letter Agreement, dated October 30, 2013, by and among Macy's, Inc., FDS Bank, Macy's Credit and Customer Services, Inc., Macy's West Stores, Inc., Bloomingdales, Inc., and Department Stores National Bank, a national banking association (as assignee of Citibank, N.A.)
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
   
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
   
32.1 Certification by Chief Executive Officer under Section 906 of the Sarbanes-Oxley Act
   
32.2 Certification by Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act
   
101** The following financial statements from Macy's, Inc.'s Quarterly Report on Form 10-Q for the quarter ended August 3,November 2, 2013, filed on September 5,December 9, 2013, formatted in XBRL: (i) Consolidated Statements of Income, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Financial Statements, tagged as blocks of text and in detail.
___________________
+Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The confidential portions have been provided to the SEC.
**As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 MACY’S, INC.
   
 By:
/s/    DENNIS J. BRODERICK        
  
Dennis J. Broderick
Executive Vice President, General Counsel and
Secretary
   
 By:
/s/    JOEL A. BELSKY
  
Joel A. Belsky
Executive Vice President and Controller
(Principal Accounting Officer)
Date: September 5,December 9, 2013

 


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