EXHIBIT 99.1
FEDERATED
DEPARTMENT STORES, INC.
CONTACTS:
News Release MEDIA - CAROL SANGER
513/579-7764
FOR RELEASE: INVESTOR - SUSAN ROBINSON
8 A.M. MARCH 2, 1999 513/579-7780
FEDERATED REPORTS 19% INCREASE IN FISCAL 1998 EPS
CINCINNATI, OHIO, March 2, 1999 - Federated Department Stores, Inc.
today reported fiscal 1998 and fourth quarter results that showed increased
sales and significantly improved operating results for both periods ended
January 30, 1999.
Federated's diluted earnings per share (EPS) of $3.06 were up 19
percent for the year, excluding extraordinary charges. Operating income was up
8.5 percent for the year and annual comparable-store sales were up 2.2 percent.
"This past year was a very good one for Federated," James M.
Zimmerman, chairman and chief executive officer, said of the year's results.
"We were particularly pleased with our very strong performance in the important
fourth quarter, including both sales and gross margin. Improving our fourth
quarter performance was a key priority for us in 1998, and we are gratified by
the results of the intensive efforts that went into achieving this objective."
Zimmerman also credited good inventory management and continued
expense reductions for contributing to fiscal 1998's solid earnings
performance. He also noted that during the course of the year, Federated
repurchased approximately $590 million (12.8 million shares) of common stock.
NET INCOME
For fiscal 1998, Federated posted earnings of $685 million, excluding
an extraordinary charge related to the early retirement of debt. This compares
to earnings of $575 million for the 52 weeks ended January 31, 1998, also
excluding an extraordinary charge related to the early retirement of debt. On
this basis, diluted earnings per share rose to $3.06 for fiscal 1998, compared
to $2.58 for fiscal 1997 - an increase of 19 percent.
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Macy's o Bloomingdale's o The Bon Marche Bloomingdale's By Mail, Ltd.
Burdines o Goldsmith's o Lazarus o Rich's o Stern's Macy's by Mail
-2-
For the fourth quarter, Federated's net income was $408 million,
compared to $379 million for the same period last year. Diluted earnings per
share for the fourth quarter of 1998 amounted to $1.88, compared to $1.66 last
year.
OPERATING INCOME
Operating income for fiscal 1998 was $1.455 billion, an increase of
8.5 percent over operating income of $1.341 billion for the prior fiscal year.
As a percent of sales, operating income increased 60 basis points to 9.2
percent in 1998.
Operating income for the fourth quarter of 1998 was $750 million or
14.4 percent of sales, an increase of 5.2 percent from operating income of $713
million or 14.1 percent of sales for the fourth quarter of 1997.
SALES
For fiscal 1998, sales totaled $15.833 billion, an increase of 1.1
percent over sales of $15.668 billion for the prior year. Excluding sales of
the specialty stores division that was sold in July, sales increased 1.8
percent over last year. On a comparable-store basis, Federated's 52-week sales
increased 2.2 percent.
For the fourth quarter, sales totaled $5.207 billion, an increase of
2.9 percent over sales of $5.060 billion for the same period last year.
Excluding sales of the specialty stores division, sales for the quarter
increased 4.2 percent. On a comparable-store basis, fourth quarter sales were
up 4.1 percent.
RETURN ON INVESTMENT
Return on gross investment increased to 16.6 percent for 1998,
compared to 15.7 percent in 1997.
Federated, with corporate offices in Cincinnati and New York, is one
of the nation's leading department store retailers, with annual sales of more
than $15.8 billion. Federated currently operates more than 400 department
stores in 33 states under the names of Bloomingdale's, The Bon Marche,
Burdines, Goldsmith's Lazarus, Macy's, Rich's and Stern's. Federated also
operated direct mail catalog and electronic commerce subsidiaries under the
names of Bloomingdale's By Mail, Macy's By Mail and Macys.Com.
(more)
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Forward-looking statements contained in this release involve risks and
uncertainties that could cause actual results to differ materially from those
contemplated by those statements. Factors that could cause such differences
include the risks associated with retailing generally, transactional effects
and other investment considerations described from time to time by the company
in its filings with the Securities and Exchange Commission.
# # #
(NOTE: Information on Federated and its operating divisions is available on the
Internet at http://www.federated-fds.com. Copies of past press releases and
corporate background data also are available by calling Fax-On-Demand at
1-800-853-9150.)
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income (Unaudited)
(All amounts in millions except percentages and per share figures)
13 WEEKS ENDED 52 WEEKS ENDED
----------------------------- -----------------------------
JANUARY 30, JANUARY 31, JANUARY 30, JANUARY 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Net Sales .................................................. $ 5,207 $ 5,060 $ 15,833 $ 15,668
------------ ------------ ------------ ------------
Cost of sales (Note 1)...................................... 3,180 3,109 9,616 9,581
Percent to sales................................... 61.1% 61.4% 60.7% 61.1%
Selling, general and administrative expenses (Note 2) 1,277 1,238 4,762 4,746
------------ ------------ ------------ ------------
Percent to sales................................... 24.5% 24.5% 30.1% 30.3%
------------ ------------ ------------ ------------
Operating Income............................................ 750 713 1,455 1,341
Percent to sales................................... 14.4% 14.1% 9.2% 8.6%
Interest expense - net...................................... (69) (88) (292) (383)
------------ ------------ ------------ ------------
Income Before Income Taxes and Extraordinary
Items .................................................... 681 625 1,163 958
Federal, state and local income tax expense ................ (273) (246) (478) (383)
------------ ------------ ------------ ------------
Income Before Extraordinary Items .......................... 408 379 685 575
Extraordinary Items - loss on early extinguishment
of debt, net of tax effect ............................... -- -- (23) (39)
------------ ------------ ------------ ------------
Net Income ................................................. $ 408 $ 379 $ 662 $ 536
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pr 4th qtr 98
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income (Unaudited)
(All amounts in millions except percentages and per share figures)
13 WEEKS ENDED 52 WEEKS ENDED
----------------------- ------------------------
JANUARY 30, JANUARY 31, JANUARY 30, JANUARY 31,
1999 1998 1999 1998
---------- ---------- ---------- ----------
Basic Earnings per Share (Note 3):
Income before extraordinary items ....... $ 1.95 $ 1.80 $ 3.27 $ 2.74
Extraordinary items ..................... -- -- (.11) (.18)
---------- ---------- ---------- ----------
Net income .............................. $ 1.95 $ 1.80 $ 3.16 $ 2.56
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Diluted Earnings per Share (Note 3):
Income before extraordinary items ....... $ 1.88 $ 1.66 $ 3.06 $ 2.58
Extraordinary items ..................... -- -- (.10) (.17)
---------- ---------- ---------- ----------
Net income .............................. $ 1.88 $ 1.66 $ 2.96 $ 2.41
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Notes:
(1) Substantially all merchandise inventories are valued by the retail method
and stated on the LIFO (last-in, first-out) basis, which is generally
lower than market. Application of this method did not impact the 13 and 52
weeks ended January 30, 1999 or January 31, 1998.
(2) Includes depreciation and amortization expense of $156 million and $151
million for the 13 weeks ended January 30, 1999 and January 31, 1998,
respectively, and $624 million and $590 million for the 52 weeks ended
January 30, 1999 and January 31, 1998, respectively.
(3) Common shares outstanding used in computing basic earnings per share were
209.5 million and 210.1 million for the 13 weeks ended January 30, 1999
and January 31, 1998, respectively, and 209.5 million and 209.5 million
for the 52 weeks ended January 30, 1999 and January 31, 1998,
respectively. Potential common shares used in computing diluted earnings
per share were 217.1 million and 229.7 million for the 13 weeks ended
January 30, 1999 and January 31, 1998, respectively, and 225.9 million and
227.1 million for the 52 weeks ended January 30, 1999 and January 31,
1998, respectively.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets (Unaudited)
(All amounts in millions except percentages)
January 30, 1999 January 31, 1998
---------------- ----------------
ASSETS:
Current Assets:
Cash ....................................................... $ 307 $ 142
Accounts receivable ........................................ 2,209 2,640
Merchandise inventories .................................... 3,259 3,239
Supplies and prepaid expenses .............................. 117 115
Deferred income tax assets ................................. 80 58
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Total Current Assets ............................... 5,972 6,194
Property and Equipment - net .................................... 6,572 6,520
Intangible Assets - net ......................................... 631 690
Other Assets .................................................... 289 334
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Total Assets ....................................... $ 13,464 $ 13,738
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LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt ........................................... $ 524 $ 556
Accounts payable and accrued liabilities .................. 2,446 2,416
Income taxes ............................................. 98 88
Total Current Liabilities ........................ 3,068 3,060
Long-Term Debt .................................................. 3,057 3,919
Deferred Income Taxes ........................................... 1,060 939
Other Liabilities ............................................... 570 564
Shareholders' Equity ............................................ 5,709 5,256
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Total Liabilities and Shareholders' Equity ....... $ 13,464 $ 13,738
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Ratio of debt to total capitalization (Note 1) ....................... 38.5% 45.0%
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Return on gross investment (Note 2) .................................. 16.6% 15.7%
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Notes:
1. Excluding the Note Monetization Facility at January 31, 1998.
2. Operating income, excluding depreciation, amortization and gross rent
expense divided by gross investment. Gross investment is defined as
average gross fixed assets, including capitalization of operating
leases, and the average balances of all other assets and liabilities
excluding debt, the note receivable related to the Note Monetization
Facility, intangible assets and income taxes.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows (Unaudited)
(millions)
52 Weeks Ended 52 Weeks Ended
January 30, 1999 January 31, 1998
---------------- ----------------
Cash flows from operating activities:
Net income ......................................................... $ 662 $ 536
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of property and
equipment ............................................... 596 563
Amortization of intangible assets ........................... 27 27
Amortization of financing costs ............................. 7 20
Amortization of unearned restricted stock ................... 1 --
Loss on early extinguishment of debt ........................ 23 39
Changes in assets and liabilities:
Decrease in accounts receivable ........................ 235 194
(Increase) decrease in merchandise inventories ......... (20) 7
Increase in supplies and prepaid expenses .............. (2) (5)
(Increase) decrease in other assets not separately ..... 31 (7)
identified
(Increase) decrease in accounts payable and ............ 6 (36)
accrued liabilities not separately identified
Increase in current income taxes ....................... 25 103
Increase in deferred income taxes ...................... 103 138
Decrease in other liabilities not separately
identified ........................................ (4) (6)
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Net cash provided by operating activities ... 1,690 1,573
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Cash flows from investing activities:
Purchase of property and equipment ................................. (695) (696)
Disposition of property and equipment .............................. 50 178
Decrease in notes receivable ....................................... 200 200
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Net cash used by investing activities ....... (445) (318)
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Cash flows from financing activities:
Debt issued ........................................................ 650 763
Financing costs .................................................... -- (7)
Debt repaid ........................................................ (1,229) (2,027)
Increase (decrease) in outstanding checks .......................... 47 (45)
Acquisition of treasury stock ...................................... (594) (2)
Issuance of common stock ........................................... 46 56
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Net cash used by financing activities ....... (1,080) (1,262)
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Net increase (decrease) in cash ...................................... 165 (7)
Cash beginning of period ............................................. 142 149
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Cash end of period ................................................... $ 307 $ 142
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