SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 11-K [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from January 1, 1998 to December 31, 1998 Commission file number: 1-13536 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Federated Department Stores, Inc. 151 West 34th Street New York, New York 10001 and 7 West Seventh Street Cincinnati, Ohio 45202 FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Financial Statements December 31, 1998 and 1997 With Independent Auditors' Report Thereon FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Index Independent Auditors' Report Statements of Net Assets Available for Benefits, with Fund Information - December 31, 1998 and 1997 Statements of Changes in Net Assets Available for Benefits, with Fund Information - Years Ended December 31, 1998 and 1997 Notes to Financial Statements Independent Auditors' Report Pension and Profit Sharing Committee Federated Department Stores, Inc. Profit Sharing 401(k) Investment Plan: We have audited the accompanying statements of net assets available for benefits of the Federated Department Stores, Inc. Profit Sharing 401(k) Investment Plan (the "Plan") as of December 31, 1998 and 1997, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1998 and 1997, and the changes in net assets available for benefits for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Fund Information in the statements of net assets available for benefits and the statements of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The Fund Information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. KPMG LLP Cincinnati, Ohio June 16, 1999 FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Statement of Net Assets Available for Benefits, with Fund Information December 31, 1998
Fund A Fund B Fund C Fund D Fund E Fund F Fund L Total Assets: Investments, at fair value (Note 3): Master Trust investments $424,605,706 $314,086,514 $339,727,811 $52,553,476 $13,875,642 $52,761,975 $ - $1,197,611,124 Participant loans - - - - - - 16,359,823 16,359,823 Total investments 424,605,706 314,086,514 339,727,811 52,553,476 13,875,642 52,761,975 16,359,823 1,213,970,947 Receivables: Employer contributions - - - - - 24,491,672 - 24,491,672 Participant contributions 385,923 263,808 310,195 95,184 23,843 49,268 - 1,128,221 Interest - 145,134 - - - - - 145,134 Forfeitures - - - - - 457,117 - 457,117 Total receivables 385,923 408,942 310,195 95,184 23,843 24,998,057 - 26,222,144 Total assets 424,991,629 314,495,456 340,038,006 52,648,660 13,899,485 77,760,032 16,359,823 1,240,193,091 Liabilities: Trustee and management fees payable 268,480 277,410 176,726 99,437 12,758 29,826 - 864,637 Total liabilities 268,480 277,410 176,726 99,437 12,758 29,826 - 864,637 Net assets available for benefits $424,723,149 $314,218,046 $339,861,280 $52,549,223 $13,886,727 $77,730,206 $16,359,823 $1,239,328,454 The accompanying notes are an integral part of these financial statements.
FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Statement of Net Assets Available for Benefits, with Fund Information December 31, 1997
Fund A Fund B Fund C Fund D Fund E Fund F Fund L Total Assets: Investments, at fair value (Note 3): Master Trust investments $434,543,368 $285,786,385 $262,957,586 $56,284,607 $9,147,975 $40,674,761 $ - $1,089,394,682 Participant loans - - - - - - 9,252,876 9,252,876 Total investments 434,543,368 285,786,385 262,957,586 56,284,607 9,147,975 40,674,761 9,252,876 1,098,647,558 Receivables: Employer contributions - - - - - 20,548,918 - 20,548,918 Interest - 119,274 - - - - - 119,274 Total receivables - 119,274 - - - 20,548,918 - 20,668,192 Total assets 434,543,368 285,905,659 262,957,586 56,284,607 9,147,975 61,223,679 9,252,876 1,119,315,750 Liabilities: Trustee and management fees payable 303,089 406,838 133,754 69,759 4,750 27,586 - 945,776 Total liabilities 303,089 406,838 133,754 69,759 4,750 27,586 - 945,776 Net assets available for benefits $434,240,279 $285,498,821 $262,823,832 $56,214,848 $9,143,225 $61,196,093 $9,252,876 $1,118,369,974 The accompanying notes are an integral part of these financial statements.
FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Statement of Changes in Net Assets Available for Benefits, with Fund Information Year Ended December 31, 1998
Fund A Fund B Fund C Fund D Fund E Fund F Fund L Total Additions: Net investment income (Note 3): Net appreciation in fair value of investmeNts $ - $ 49,808,495 $ 68,685,580 $(1,765,411) $ 984,933 $ (2,952,919) $ - $114,760,678 Interest and dividends 28,440,762 7,644,810 5,406,323 - 623,896 229,086 1,110,778 43,455,655 Total investment income 28,440,762 57,453,305 74,091,903 (1,765,411) 1,608,829 (2,723,833) 1,110,778 158,216,333 Less administrative expenses (2,195,757) (1,610,829) (734,534) (483,488) (170,778) (144,117) - (5,339,503) Net investment income 26,245,005 55,842,476 73,357,369 (2,248,899) 1,438,051 (2,867,950) 1,110,778 152,876,830 Contributions: Employer 2,583 750 727 286 12 24,493,972 - 24,498,330 Participant 24,390,034 20,828,966 25,954,382 8,998,491 2,174,946 3,788,541 - 86,135,360 Total contributions 24,392,617 20,829,716 25,955,109 8,998,777 2,174,958 28,282,513 - 110,633,690 Total additions 50,637,622 76,672,192 99,312,478 6,749,878 3,613,009 25,414,563 1,110,778 263,510,520 Deductions: Distributions 67,842,204 31,989,734 30,196,322 4,747,338 716,583 5,818,358 1,241,501 142,552,040 Interfund transfers 7,687,452 (15,963,233) 7,921,292 (5,668,165) 1,847,076 (3,062,092) 7,237,670 - Net increase (decrease) (9,517,130) 28,719,225 77,037,448 (3,665,625) 4,743,502 16,534,113 7,106,947 120,958,480 Net assets available for benefits: Beginning of year 434,240,279 285,498,821 262,823,832 56,214,848 9,143,225 61,196,093 9,252,876 1,118,369,974 End of year $424,723,149 $314,218,046 $339,861,280 $52,549,223 $13,886,727 $77,730,206 $16,359,823 $1,239,328,454 The accompanying notes are an integral part of these financial statements.
FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Statement of Changes in Net Assets Available for Benefits, with Fund Information Year Ended December 31, 1997
Fund A Fund B Fund C Fund D Fund E Fund F Fund L Total Additions: Net investment income (Note 3): Net appreciation in fair value of investments $ (1,630,626) $44,366,981 $57,816,689 $10,093,029 $ (467,306) $8,500,046 $ - $118,678,813 Interest and dividends 28,564,598 11,173,405 4,659,771 314 176,049 43,772 190,058 44,807,967 Total investment income 26,933,972 55,540,386 62,476,460 10,093,343 (291,257) 8,543,818 190,058 163,486,780 Less administrative expenses (2,158,679) (1,558,662) (549,231) (246,731) (69,124) (90,056) - (4,672,483) Net investment income 24,775,293 53,981,724 61,927,229 9,846,612 (360,381) 8,453,762 190,058 158,814,297 Contributions: Employer 2,959 8,738 6,813 702 375 21,524,022 - 21,543,609 Participant 23,358,243 18,739,392 18,886,779 5,481,542 1,192,349 2,089,458 - 69,747,763 Total contributions 23,361,202 18,748,130 18,893,592 5,482,244 1,192,724 23,613,480 - 91,291,372 Total additions 48,136,495 72,729,854 80,820,821 15,328,856 832,343 32,067,242 190,058 250,105,669 Deductions: Distributions 71,349,898 26,789,518 21,086,687 2,175,995 176,477 3,620,623 57,127 125,256,325 Interfund transfers (35,877,985) (18,561,884) 12,881,118 24,117,144 8,487,359 (123,793) 9,078,041 - Transfer of assets from previously existing tax-qualified profit sharing and savings plans maintained by the Company (Note 1) 181,881,813 50,661,902 47,509,825 18,944,843 - 4,135,297 41,904 303,175,584 Net increase 122,790,425 78,040,354 120,125,077 56,214,848 9,143,225 32,458,123 9,252,876 428,024,928 Net assets available for benefits: Beginning of year 311,449,854 207,458,467 142,698,755 - - 28,737,970 - 690,345,046 End of year $434,240,279 $285,498,821 $262,823,832 $56,214,848 $9,143,225 $61,196,093 $9,252,876 $1,118,369,974 The accompanying notes are an integral part of these financial statements.
(Continued) FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Notes to Financial Statements December 31, 1998 and 1997 1. Description of the Plan The following brief description of the Federated Department Stores, Inc. Profit Sharing 401 (k) Investment Plan (the "Plan") is provided for general information purposes only. Participants should refer to the Plan document for more complete information. General The Plan is sponsored by Federated Department Stores, Inc. (the "Company"). The Plan, which was amended and renamed on April 1, 1997, is a defined contribution plan and is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA") and U.S. tax law. Effective April 1, 1997, the Plan amended and replaced all of the prior tax- qualified profit sharing and savings plans which were maintained by the Company. Such prior plans include the Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan, the R.H. Macy & Co., Inc. Savings Plan, the R.H. Macy & Co., Inc. Profit Sharing Plan, the Broadway Stores, Inc. 401 (k) Savings and Investment Plan, and the Federated Savings Plan for Employees of Lazarus PA, Inc., (the "Lazarus PA Plan"). The assets of all such prior plans have been merged to form the Plan. Prior to April 1, 1997, the Plan was the Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan, exclusively. The Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan consisted of two parts: a retirement income plan and a thrift incentive plan. Eligibility Employees are generally eligible for participation in the Plan after one year of service of at least 1,000 hours and after reaching a minimum age of 21. Contributions Beginning April 1, 1997, participants may elect to contribute an amount equal to 1% to 15% (subject to certain limitations) of the participant's eligible compensation. Alternatively, a participant may elect to make these contributions (subject to certain limitations) on a pre-tax basis pursuant to Section 401(k) of the Internal Revenue Code. Pre-tax contributions up to 5% of eligible compensation are considered basic savings which are eligible for matching Company contributions. Company contributions are made as soon as administratively feasible after year end only to persons who are active participants on the last day of the year and who did not make a withdrawal of basic savings during the year. The Company's contribution formula is based on the Company's annual earnings and the minimum Company contribution is the amount necessary to produce a company match of 33 1/3% of an employee's basic savings. The Plan also provides that the matching percentage for eligible participants with 15 or more years of vesting service at the start of the applicable Plan year is up to 1 1/2 times the matching percentage of eligible participants with less than 15 years of service at the start of the applicable Plan year. For the Plan year ended December 31, 1998, the Company's matching percentage, including the allocation of all forfeited nonvested amounts, was 48.4% of the participants' (Continued) FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Notes to Financial Statements - Continued December 31, 1998 and 1997 basic savings for participants with less than 15 years of vesting service at January 1, 1998 and 72.6% of the participants' basic savings for participants with 15 or more years of vesting service at January 1, 1998. For the Plan year ended December 31, 1997, the Company's matching percentage was 48.0% of the participants' basic savings for participants with less than 15 years of vesting service at January 1, 1997 and 72.0% of the participants' basic savings for participants with 15 or more years of vesting service at January 1, 1997. Forfeited nonvested accounts of participants who terminate employment are applied to participants' accounts in accordance with Plan provisions. During the 1998 Plan year, forfeited nonvested accounts totaled $457,117. During 1997 there were no forfeited accounts. Participant Accounts Each participant's account is credited with the participant's contributions and an allocation of each fund's earnings or losses. Allocations are based on participant account balances. As soon as administratively feasible after the end of each year, the Company's applicable matching contributions are credited to the eligible individual accounts. Vesting Participants as of March 31, 1997 are immediately 100% vested in their own and the Company's contributions. New participants on or after April 1, 1997 are immediately 100% vested in their own contributions and become 20% vested in the Company's contributions after 3 years, with additional vesting of 20% each year thereafter until fully vested. 100% vesting is also achieved through normal retirement, death or disability. Participant Withdrawals Effective July 1997, participants may borrow from their accounts up to a maximum amount equal to the lesser of $50,000 or 50% of their 401(k) vested account balance. All loans must be repaid within five years and are also subject to certain other conditions as to security, a reasonable rate of interest and repayment schedules. Loan transactions are treated as a transfer to (from) the investment fund from (to) the Participant Loan Fund (Fund L). Participants are permitted to make withdrawals of their after- tax contributions and earnings thereon at any time. Withdrawals of pre-tax contributions are subject to the hardship rules of Section 401 of the Internal Revenue Code. At termination, participants may elect to receive the balance of their vested account either in the form of a lump sum payment or in a variety of annuity forms. (Continued) FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Notes to Financial Statements - Continued December 31, 1998 and 1997 2. Summary of Significant Accounting Policies a) Master Trust Effective January 1, 1996, the Plan entered into the Federated Department Stores, Inc. Defined Contribution Plan Master Trust (the "Master Trust") Agreement with Chase Manhattan Bank (the "Trustee"). Under the terms of the Master Trust, the Trustee serves as Trustee custodian for the Master Trust. As of April 1, 1997, the Master Trust holds the assets of the Plan, exclusively (see Note 1). The Federated Department Stores, Inc. Pension and Profit Sharing Committee selects a diversified group of investment managers who determine purchases and sales of investments for the respective portions of the assets in the Master Trust managed by them. b) Basis of Presentation The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting. c) Investments The fair value of the Plan's participation in the Master Trust is based on the beginning of year value of the Plan's participation in the Master Trust plus allocated investment income and actual contributions, less actual distributions and allocated administrative expenses. Other investments are reported at fair value as determined by quoted market prices on an active market. Corporate bonds are valued based on yields currently available on comparable securities of issuers with similar credit ratings. Purchases and sales of securities are recorded on a trade-date basis. Realized gains and losses on the sale of securities are reported on the average cost method. Participant loans are valued at cost which approximates fair value. Cash equivalents include highly liquid fixed-income securities with a maturity of one year or less. Dividend income is recorded on the ex-dividend date. Income from other investments is recorded as earned on an accrual basis. d) Insurance Contracts Insurance contracts are valued at contract value, which represents contributions made under the contract, plus interest earned, less benefits paid and expenses charged. (Continued) FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Notes to Financial Statements - Continued December 31, 1998 and 1997 e) Use of Estimates The Plan administrator has made a number of estimates and assumptions relating to the preparation of these financial statements. Actual results could differ from these estimates and assumptions. 3. Investments All of the Plan's investments are included in the Master Trust which was originally established for the investment of assets of the Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan and of the Lazarus PA Plan (see Note 1). The assets of the Master Trust are held by the Trustee. Each participating plan has an undivided interest in the Master Trust. At December 31, 1998 and December 31, 1997, the Plan had exclusive interest in the net assets of the Master Trust (see Note 1). Prior to April 1, 1997, investment income and administrative expenses relating to the Master Trust were allocated to the individual plans based upon monthly balances invested by each plan. The Trustee under the Master Trust, in accordance with the trust agreement, invests all contributions to the Plan among several investment funds. The funds are: Fund A - Fixed Income Fund - consisting primarily of high quality fixed-income and stable value products. Fund B - Balanced Fund - consisting of common/collective trusts which invest in a varying mixture of equity securities and fixed income instruments. Fund C - S&P 500 Stock Index Fund - consisting principally of shares of companies included in the S&P 500 Composite Stock Price Index. Fund D - Small Cap Stock Fund - consisting principally of small capitalization domestic equity securities. Fund E - International Stock Fund - consisting of stocks of companies not based in the United States. Fund F - Federated Stock Fund - consisting principally of the Company's registered common stock. Company contributions are directed to Fund F. Participants may elect to redirect the value of Company contributions to other investment options permitted pursuant to Plan provisions. (Continued) FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Notes to Financial Statements - Continued December 31, 1998 and 1997 The following table presents the fair values or contract values of investments and total net assets for the Master Trust at December 31, 1998 and 1997: 1998 1997 Assets: Investments at fair value: Cash and cash equivalents $ 7,730,273 $ 7,481,407 U.S. government securities 6,985,355 4,829,500 Common stock 52,744,728 38,357,370 Common/collective trusts 576,358,520 539,407,513 Registered investment companies 136,535,734 68,707,604 Total investments at fair value 780,354,610 658,783,394 Non interest bearing cash 8,113 1,160,337 Participant loans 16,359,823 9,252,876 Insurance contracts at contract value 417,248,401 429,450,951 Total investments 1,213,970,947 1,098,647,558 Receivables: Employer contributions 24,491,672 20,548,918 Participant contributions 1,128,221 - Forfeitures 457,117 - Interest 145,134 119,274 Total receivables 26,222,144 20,668,192 Total assets 1,240,193,091 1,119,315,750 Liabilities: Accrued administrative expenses 864,637 945,776 Total accrued liabilities 864,637 945,776 Total net assets $1,239,328,454 $1,118,369,974 (Continued) FEDERATED DEPARTMENT STORES, INC. PROFIT SHARING 401 (k) INVESTMENT PLAN Notes to Financial Statements - Continued December 31, 1998 and 1997 Net investment income for the Master Trust for the years ended December 31, 1998 and 1997 is as follows: 1998 1997 Net appreciation in fair value of investments: Cash and cash equivalents $ 26 $ (33,508) U.S. government securities 739,987 (29,867) Corporate debt instruments - (278,870) Common stock (2,952,919) 8,482,993 Miscellaneous securities - (689,445) Common/collective trusts 115,542,656 101,605,295 Registered investment companies 1,430,928 9,628,370 Net appreciation in fair value of investments 114,760,678 118,684,968 Interest and dividends 43,455,655 44,864,596 Total investment income 158,216,333 163,549,564 Administrative expenses (5,339,503) (4,675,757) Net investment income $ 152,876,830 $ 158,873,807 4. Plan Termination Although the Company has not expressed any intent to terminate the Plan, it may do so at any time. In the event the Plan is terminated, the Company would have no further obligation to make contributions, and all sums credited to individual accounts (after expenses) would be distributed to participants. 5. Federal Income Taxes The Plan obtained its latest determination letter on June 18, 1996, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. While the Plan has been amended since receiving such determination letter, the Plan administrator and the Plan's tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan's financial statements. The Plan's testings, subject to the provisions of the Internal Revenue Code, have not been completed for the current year. However, the Plan's sponsor believes that the Plan is currently in compliance. 6. Administrative Expenses The Plan pays reasonable and necessary expenses incurred for the ongoing administration of the Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the members fo the Pension and Profit Sharing Committee (which is the administrative committee for the Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Federated Department Stores, Inc. Retirement Income and Thrift Incentive Plan Dated: June 29, 1999 By: /s/ Karen M. Hoguet Karen M. Hoguet Chairman of the Pension and Profit Sharing Committee