-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Isa1p4lOyWHx+svfD3hk0kHuhPBBX5jv/6+58T+TLNyvmG7atkQYfJeswIiPBcTI oagbR6b5ItY4fyta0rmo7A== 0000794367-98-000017.txt : 19980916 0000794367-98-000017.hdr.sgml : 19980916 ACCESSION NUMBER: 0000794367-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980801 FILED AS OF DATE: 19980915 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED DEPARTMENT STORES INC /DE/ CENTRAL INDEX KEY: 0000794367 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 133324058 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13536 FILM NUMBER: 98709327 BUSINESS ADDRESS: STREET 1: 7 W SEVENTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 2126954400 MAIL ADDRESS: STREET 1: 7 W SEVENTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 FORMER COMPANY: FORMER CONFORMED NAME: R H MACY & CO INC DATE OF NAME CHANGE: 19950307 10-Q 1 SECOND QUARTER 10-Q 6 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal quarter ended August 1, 1998. FEDERATED DEPARTMENT STORES, INC. 151 West 34th Street New York, New York 10001 (212) 494-1602 and 7 West Seventh St. Cincinnati, Ohio 45202 (513) 579-7000 Delaware 1-13536 13-3324058 (State of Incorporation) (Commission File No.) (I.R.S. Employer Identification Number) The Registrant has filed all reports required to be filed by Section 12, 13 or 15 (d) of the Act during the preceding 12 months and has been subject to such filing requirements for the past 90 days. 204,915,141 shares of the Registrant's Common Stock, $.01 par value, were outstanding as of August 29, 1998. PART I -- FINANCIAL INFORMATION FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Income (Unaudited) (millions, except per share figures) 13 Weeks Ended 26 Weeks Ended August 1, August 2, August 1, August 2, 1998 1997 1998 1997 Net Sales $ 3,523 $ 3,453 $ 6,979 $ 6,862 Cost of sales 2,101 2,099 4,207 4,186 Selling, general and administrative expenses 1,155 1,142 2,324 2,316 Operating Income 267 212 448 360 Interest expense (76) (106) (159) (221) Interest income 2 7 8 18 Income Before Income Taxes and Extraordinary Item 193 113 297 157 Federal, state and local income tax expense (86) (46) (130) (66) Income Before Extraordinary Item 107 67 167 91 Extraordinary Item - loss on early extinguishment of debt, net of tax effect of $25 - (39) - (39) Net Income $ 107 $ 28 $ 167 $ 52 (Continued) PART I -- FINANCIAL INFORMATION FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Income (Unaudited) (millions, except per share figures) 13 Weeks Ended 26 Weeks Ended August 1, August 2, August 1, August 2, 1998 1997 1998 1997 Basic Earnings per Share: Income before extraordinary item $ .51 $ .32 $ .80 $ .43 Extraordinary item - (.19) - (.18) Net income $ .51 $ .13 $ .80 $ .25 Diluted Earnings per Share: Income before extraordinary item $ .47 $ .31 $ .74 $ .42 Extraordinary item - (.18) - (.18) Net income $ .47 $ .13 $ .74 $ .24 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Consolidated Balance Sheets (Unaudited) (millions) August 1, January 31, August 2, 1998 1998 1997 ASSETS: Current Assets: Cash $ 281 $ 142 $ 317 Accounts receivable 2,111 2,640 2,498 Merchandise inventories 3,361 3,239 3,372 Supplies and prepaid expenses 118 115 129 Deferred income tax assets 105 58 106 Total Current Assets 5,976 6,194 6,422 Property and Equipment - net 6,381 6,520 6,371 Intangible Assets - net 677 690 704 Other Assets 317 334 377 Total Assets $ 13,351 $ 13,738 $ 13,874 LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Short-term debt $ 34 $ 556 $ 1,505 Accounts payable and accrued liabilities 2,517 2,416 2,482 Income taxes 67 88 4 Total Current Liabilities 2,618 3,060 3,991 Long-Term Debt 3,890 3,919 3,732 Deferred Income Taxes 977 939 836 Other Liabilities 557 564 559 Shareholders' Equity 5,309 5,256 4,756 Total Liabilities and Shareholders' Equity $ 13,351 $ 13,738 $ 13,874 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Cash Flows (Unaudited) (millions) 26 Weeks Ended 26 Weeks Ended August 1, 1998 August 2, 1997 Cash flows from operating activities: Net income $ 167 $ 52 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 298 277 Amortization of intangible assets 13 14 Amortization of financing costs 4 13 Amortization of unearned restricted stock 1 1 Loss on early extinguishment of debt - 39 Changes in assets and liabilities: Decrease in accounts receivable 331 337 Increase in merchandise inventories (122) (126) Increase in supplies and prepaid expenses (3) (19) (Increase) decrease in other assets not separately identified 4 (5) Increase (decrease) in accounts payable and accrued liabilities not separately identified 45 (21) Increase (decrease) in current income taxes (21) 3 Increase (decrease) in deferred income taxes (9) 4 Decrease in other liabilities not separately identified (8) (5) Net cash provided by operating activities 700 564 Cash flows from investing activities: Purchase of property and equipment (189) (219) Disposition of property and equipment 22 89 Decrease in notes receivable 200 200 Net cash provided by investing activities 33 70 Cash flows from financing activities: Debt issued 300 850 Financing costs (7) (5) Debt repaid (851) (1,356) Increase in outstanding checks 79 11 Acquisition of treasury stock (154) (2) Issuance of common stock 39 36 Net cash used by financing activities (594) (466) (Continued) FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Cash Flows (Unaudited) (millions) 26 Weeks Ended 26 Weeks Ended August 1, 1998 August 2, 1997 Net increase in cash $ 139 $ 168 Cash at beginning of period 142 149 Cash at end of period $ 281 $ 317 Supplemental cash flow information: Interest paid $ 147 $ 212 Interest received 11 20 Income taxes paid (net of refunds received) 150 48 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) 1. Summary of Significant Accounting Policies 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 January 31, 1998 (the "1997 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 1997 10-K. Because of the seasonal nature of the general merchandising business, the results of operations for the 13 and 26 weeks ended August 1, 1998 and August 2, 1997 (which do not include the Christmas season) are not indicative of such results for the fiscal year. The Consolidated Financial Statements for the 13 and 26 weeks ended August 1, 1998 and August 2, 1997, 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 and its subsidiaries. During the first quarter of 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," which establishes standards for the reporting and display of comprehensive income and its components. For all periods presented, comprehensive income is equivalent to net income. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activity" was issued in June 1998 and is effective for all quarters of all fiscal years beginning after June 15, 1999. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and requires recognition of all derivatives as either assets or liabilities on the balance sheet using fair value measurement. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting hedging designation, if any. The Company is currently reviewing the impact of this statement; however, based on the Company's minimal use of derivatives, management does not anticipate that its adoption will have a material impact on the Company's consolidated financial position, results of operations or cash flows. 2. Extraordinary Item The extraordinary item for the 13 and 26 weeks ended August 2, 1997 represents costs of $39 million, net of income tax benefit of $25 million, associated with the prepayment of all amounts outstanding under the Company's mortgage loan facility, secured promissory note, certain other mortgages and previous bank credit facility, all of which were retired and terminated. FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) 3. Earnings Per Share The following tables set forth the computation of basic and diluted earnings per share based on income before extraordinary item: 13 Weeks Ended August 1, 1998 August 2, 1997 (millions, except per share data) Shares Income Shares Income Income before extraordinary item and average number of shares outstanding 210.2 $ 107 209.1 $ 66 Shares to be issued under deferred compensation plan .3 - .3 - 210.5 $ 107 209.4 $ 66 Basic earnings per share $ .51 $ .32 Effect of dilutive securities: Warrants 8.9 4.6 Stock options 2.8 1.8 Convertible notes 10.2 2 10.2 3 232.4 $ 109 226.0 $ 69 Diluted earnings per share $ .47 $ .31 26 Weeks Ended August 1, 1998 August 2, 1997 (millions, except per share data) Shares Income Shares Income Income before extraordinary item and average number of shares outstanding 210.3 $ 167 208.7 $ 91 Shares to be issued under deferred compensation plan .3 - .3 - 210.6 $ 167 209.0 $ 91 Basic earnings per share $ .80 $ .43 Effect of dilutive securities: Warrants 8.5 4.0 Stock options 2.7 1.7 Convertible notes 10.2 5 - - 232.0 $ 172 214.7 $ 91 Diluted earnings per share $ .74 $ .42 FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) In addition to the warrants and stock options reflected in the foregoing tables, warrants and stock options to purchase .6 million and .5 million shares of common stock at prices ranging from $37.85 to $79.44 per share were outstanding at August 1, 1998 and August 2, 1997, respectively, but were not included in the computation of diluted earnings per share because the exercise price thereof exceeded the average market price and would have been antidilutive. Additionally, for the 26 weeks ended August 2, 1997, the assumed conversion of the convertible notes would have an antidilutive effect on diluted earnings per share and was therefore excluded from the computation. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations For purposes of the following discussion, all references to "second quarter of 1998" and "second quarter of 1997" are to the Company's 13-week fiscal periods ended August 1, 1998 and August 2, 1997, respectively, and all references to "1998" and "1997" are to the Company's 26-week fiscal periods ended August 1, 1998 and August 2, 1997, respectively. Results of Operations Comparison of the 13 Weeks Ended August 1, 1998 and August 2, 1997 Net sales for the second quarter of 1998 totaled $3,523 million, compared to net sales of $3,453 million for the second quarter of 1997, an increase of 2.0%. Since February 1, 1997, the Company has opened six new department stores and two new furniture galleries, changed nameplates on two stores, closed nineteen stores and eliminated certain consumer electronics lines of business. On a comparable store basis, net sales for the second quarter of 1998 increased 3.0% over the second quarter of 1997. Cost of sales was 59.6% of net sales for the second quarter of 1998 compared to 60.8% for the second quarter of 1997. The 1.2% improvement in the cost of sales rate, as well as the comparable-store sales improvement, reflects positive customer response to the merchandise assortments in the stores, attributed partially to an improved merchandise receipt flow. Cost of sales was not impacted by the valuation of merchandise inventory on the last-in, first-out basis in the second quarter of 1998 or the second quarter of 1997. Selling, general and administrative ("SG&A") expenses were 32.8% of net sales for the second quarter of 1998 compared to 33.1% for the second quarter of 1997. The major factor contributing to the 0.3% improvement in the SG&A expense rate was lower distribution-related expense resulting from restructuring and technological enhancements within the merchandise distribution process. Net interest expense was $74 million for the second quarter of 1998, compared to $99 million for the second quarter of 1997. The lower interest expense for the second quarter of 1998 is principally due to lower levels of borrowings and lower interest rates resulting from refinancings completed in July 1997. The Company's effective income tax rate of 44.6% for the second quarter of 1998 differs from the federal income tax statutory rate of 35.0% principally because of the effect of state and local income taxes and permanent differences arising from the amortization of intangible assets and from other non- deductible items. The extraordinary item of $39 million in the second quarter of 1997 represents the after-tax expenses associated with debt prepayments. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Comparison of the 26 Weeks Ended August 1, 1998 and August 2, 1997 Net sales for 1998 were $6,979 million compared to $6,862 million for 1997, an increase of 1.7%. On a comparable store basis, net sales for 1998 increased 2.7% over 1997. Cost of sales was 60.3% of net sales for 1998 compared to 61.0% for 1997. The 0.7% improvement in the cost of sales rate, as well as the comparable-store sales improvement, reflects positive customer response to the merchandise assortments in the stores during the second quarter of 1998, attributed partially to an improved merchandise receipt flow. Cost of sales was not impacted by the valuation of merchandise inventory on the last-in, first-out basis in 1998 or 1997. SG&A expenses were 33.3% of net sales for 1998 compared to 33.8% for 1997. The major factor contributing to the 0.5% improvement in the SG&A expense rate was lower distribution- related expenses resulting from restructuring and technological enhancements within the merchandise distribution process. Net interest expense was $151 million for 1998 compared to $203 million for 1997. The lower interest expense for 1998 is principally due to lower levels of borrowings and lower interest rates resulting from refinancings completed in July 1997. The Company's effective income tax rate of 43.8% for 1998 differs from the federal income tax statutory rate of 35.0% principally because of the effect of state and local income taxes and permanent differences arising from the amortization of intangible assets and from other non-deductible items. Liquidity and Capital Resources The Company's principal sources of liquidity are cash from operations, cash on hand and certain available credit facilities. Net cash provided by operating activities in 1998 was $700 million, an increase of $136 million compared to the $564 million provided in 1997. The major factor contributing to this improvement was stronger operating results. Net cash provided by investing activities was $33 million in 1998, with the final $200 million installment of a note receivable held by the Company being received on May 4, 1998, purchases of property and equipment totaling $189 million and dispositions of property and equipment totaling $22 million. The Company opened one new store in August 1998 and intends to open two additional new stores in Fall 1998. On August 1, 1998, the Company completed the sale of its specialty store division to the division's management group. The sale did not have a material impact on the Company's financial position or results of operations. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Net cash used by the Company for all financing activities was $594 million in 1998. During the first quarter of 1998, the Company issued $300 million of 7.0% Senior Debentures due 2028. The proceeds of such issuance, together with other available funds, were used to repay $669 million of short-term borrowings and the remaining $176 million of borrowings under a note monetization facility. Also during the quarter, the Company renewed a portion of the bank credit agreement which provides a $500 million unsecured revolving credit facility with a termination date of July 26, 1999. During the quarter, the Company repurchased 2.9 million shares of its common stock at an aggregate cost of approximately $154 million as part of the previously announced $500 million stock repurchase program. Under the repurchase program announced in May 1998, the Company intends to continue to repurchase shares throughout the year, depending on prevailing market conditions, alternate uses of capital and other factors. Any such purchases may be discontinued or resumed at any time. On August 18, 1998, the Company completed a tender offer pursuant to which it purchased approximately $340 million aggregate principal amount of its 10% Senior Notes due 2001 (the "10% Notes"), leaving approximately $110 million aggregate principal amount of such notes outstanding. The Company's purchases of the 10% Notes pursuant to the tender offer were financed through a combination of cash on hand and the issuance of commercial paper. Based on the tender premium paid to holders of the 10% Notes and the write-off of the related deferred debt issuance costs, the Company will report an extraordinary charge of approximately $23 million, net of the related tax benefit, in the 13-week fiscal period ending October 31, 1998. On August 26, 1998, in a related transaction, the Company issued $350 million of 6 1/8% Term Enhanced ReMarketable Securities. The proceeds from this offering were used by the Company to repurchase outstanding commercial paper used to finance the tender offer and for general corporate purposes. On August 26, 1998, the Company called for redemption, effective October 1, 1998, all of its 5.0% Convertible Subordinated Notes due 2003 (the "5% Notes") at a redemption price equal to $1,056.25 for each $1,000 principal amount thereof (inclusive of accrued interest to October 1, 1998). No interest will accrue on the 5% Notes on or after October 1, 1998. The 5% Notes may be converted into shares of the Company's common stock at any time prior to the close of business on September 30, 1998 at the rate of 29.2547 shares for each $1,000 principal amount represented by the 5% Notes (equivalent to a conversion price of approximately $34.1825 per share). However, interest for the period from April 1, 1998 to October 1, 1998 will be paid, without being funded by the holder surrendering a 5% Note for conversion, only with respect to 5% Notes that are surrendered for conversion after the opening of business on September 24, 1998 and prior to the close of business on September 30, 1998. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Management believes the department store business will continue to consolidate. Accordingly, the Company intends from time to time to consider additional acquisitions of department store and other complementary assets and companies. Management of the Company believes that, with respect to its current operations, cash on hand and funds from operations, together with its credit facilities, will be sufficient to cover its reasonably foreseeable working capital, capital expenditure and debt service requirements. Acquisition transactions, if any, are expected to be financed through a combination of cash on hand and from operations and the possible issuance from time to time of long-term debt or other securities. Depending upon 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, the proceeds of which could be used to refinance current indebtedness or for other corporate purposes. Year 2000 Matters The Year 2000 Issue Many existing computer programs utilized globally use only two digits to identify a year in the date field. These programs, if not corrected, could fail or create erroneous results after the century date changes on January 1, 2000 or when otherwise dealing with dates later than December 31, 1999. This "Year 2000" issue is believed to affect virtually all companies and organizations, including the Company. The Company relies on computer-based technology and utilizes a variety of third-party hardware and proprietary and third- party software. The Company's retail functions, such as merchandise procurement and distribution, inventory control, point-of-sale information systems and proprietary credit card account servicing, generally use proprietary software, with third-party software being used more extensively for administrative functions, such as accounting and human resource management. In addition to such information technology ("IT") systems, the Company's operations rely on various non-IT equipment and systems that contain embedded computer technology, such as elevators, escalators and energy management systems. Third parties with whom the Company has commercial relationships, including vendors of merchandise for resale by the Company and of products and services used by the Company in its operations (such as banking and financial services, data processing services, telecommunications services and utilities), are also highly reliant on computer- based technology. In February 1996, the Company commenced an assessment of the potential effects of the Year 2000 issue on the Company's business, financial condition and results of operations. In conjunction with such assessment, the Company developed and commenced the implementation of the compliance program described below. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The Company's Compliance Program Proprietary IT Systems. Pursuant to the Company's Year 2000 compliance program, the Company has undertaken an examination of the Company's proprietary IT systems. All such systems that have been identified as relating to a critical function and as not being Year 2000 compliant have been or are being remediated or replaced. The Company believes that the remediation of its proprietary IT systems is substantially complete, and nearly all of the proprietary IT systems that have been remediated have been installed and placed into production. The Company commenced testing of such remediated systems for Year 2000 compliance in August 1998 and presently anticipates completing a comprehensive, integrated test of all of its main-frame and mid-range IT systems (including third- party and proprietary hardware, software, network components and interfaces) by January 31, 1999. Third-Party IT Systems. The strategy instituted by the Company to identify and address Year 2000 issues affecting third-party IT systems used by the Company includes contacting all third-party providers of computer hardware and software to secure appropriate representations to the effect that such hardware or software is or will timely be Year 2000 compliant. The Company has received Year 2000 compliant versions of almost all third-party software and is currently engaged in developing contingency plans as to third-party hardware and software used by the Company in respect of which the Company has not received adequate compliance assurances to date. Non-IT Systems. The Company has undertaken a review of its non-IT systems and is in the process of implementing a remediation program in respect of such systems that are within the control of the Company. The Company expects to complete this remediation effort by April 30, 1999. In addition, the Company's centralized real estate department has communicated to the developers, landlords and property managers of substantially all of the Company's properties the Company's expectation that the systems utilized in the management and operation of such properties which are not within the Company's control are or will timely be Year 2000 compliant. Non-IT Vendors and Suppliers. The Company procures its merchandise for resale and supplies for operational purposes from a vast network of vendors located both within and outside the United States, and is not dependent on any one vendor for more than 5% of its merchandise purchases. With respect to private label merchandise, which constitutes approximately 15% of the Company's total sales, procurement is principally from manufacturers located outside the United States. As a part of its contingency planning effort, the Company has commenced making inquiries as to the Year 2000 readiness of selected vendors and private label manufacturers in order to identify any significant exposures that may exist and establish alternate sources or strategies where necessary. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Costs The Company has incurred to date approximately $16 million of costs to implement its Year 2000 compliance program and presently expects to incur approximately $50 million of costs in the aggregate, of which approximately 30% represents capitalized expenditures for hardware purchases. All of the Company's Year 2000 compliance costs have been or are expected to be funded from the Company's operating cash flow. The Company's Year 2000 compliance budget does not include material amounts for hardware replacement because the Company has historically employed a strategy to continually upgrade its main-frame and mid-range computer systems and to install state of the art point-of-sale systems with respect to both pre-existing operations and in conjunction with the acquisitions and mergers effected by the Company in recent years. Consequently, the Company's Year 2000 budget has not required the diversion of funds from or the postponement of the implementation of other planned IT projects. Risks Associated With Year 2000 Issues The Company's Year 2000 compliance program is directed primarily towards ensuring that the Company will be able to continue to perform three critical functions: (i) effect sales, (ii) order and receive merchandise, and (iii) pay its employees and vendors. It is difficult, if not impossible, to assess with any degree of accuracy the impact on any of these three areas of the failure of one or more aspects of the Company's compliance program. The novelty and complexity of the issues presented and the proposed solutions therefor and the Company's dependence on the technical skills of employees and independent contractors and on the representations and preparedness of third parties are among the factors that could cause the Company's efforts to be less than fully effective. Moreover, Year 2000 issues present a number of risks that are beyond the Company's reasonable control, such as the failure of utility companies to deliver electricity, the failure of telecommunications companies to provide voice and data services, the failure of financial institutions to process transactions and transfer funds, the failure of vendors to deliver merchandise or perform services required by the Company and the collateral effects on the Company of the effects of Year 2000 issues on the economy in general or on the Company's business partners and customers in particular. Although the Company believes that its Year 2000 compliance program is designed to appropriately identify and address those Year 2000 issues that are subject to the Company's reasonable control, there can be no assurance that the Company's efforts in this regard will be fully effective or that Year 2000 issues will not have a material adverse effect on the Company's business, financial condition or results of operations. PART II -- OTHER INFORMATION FEDERATED DEPARTMENT STORES, INC. Item 5. Other Information 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," "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 (i) risks and uncertainties relating to the possible invalidity of the underlying beliefs and assumptions, (ii) possible changes or developments in social, economic, business, industry, market, legal and regulatory circumstances and conditions, and (iii) 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. 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 reflected in such forward-looking statements. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Amended and Restated Credit Agreement, dated as of June 29, 1998, by and among the Company, the Initial Lenders named therein, Citibank, N.A., as Administrative Agent and Paying Agent, The Chase Manhattan Bank, as Administrative Agent, BankBoston, N.A., as Syndication Agent, and The Bank of America, National Trust & Savings Association, as Documentation Agent. 10.2 Letter Amendment to the Five-Year Credit Agreement, dated as of June 29, 1998, by and among the Company, the Initial Lenders named therein, Citibank, N.A., as Administrative Agent and Paying Agent, The Chase Manhattan Bank, as Administrative Agent, BankBoston, N.A., as Syndication Agent, and The Bank of America, National Trust & Savings Association, as Documentation Agent. 27 Financial Data Schedule (b) Reports on Form 8-K No reports were filed on Form 8-K during the quarter ended August 1, 1998. FEDERATED DEPARTMENT STORES, INC. 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 thereunder duly authorized. FEDERATED DEPARTMENT STORES, INC. Date September 15, 1998 /s/ Dennis J. Broderick Dennis J. Broderick Senior Vice President, General Counsel and Secretary /s/ Joel A. Belsky Joel A. Belsky Vice President and Controller (Principal Accounting Officer) EX-10.1 2 EXECUTION COPY AMENDED AND RESTATED CREDIT AGREEMENT Dated as of June 29, 1998 FEDERATED DEPARTMENT STORES, INC., a Delaware corporation (the "Borrower"), the banks, financial institutions and other institutional lenders (collectively, the "Initial Lenders") party hereto, CITIBANK, N.A., as an administrative agent (together with any successor thereto appointed pursuant to Article VII of the Existing Credit Agreement referred to below, in such capacity, an "Administrative Agent") for the Lenders (as defined in the Existing Credit Agreement referred to below) and as paying agent (in such capacity, the "Paying Agent") for the Lenders, THE CHASE MANHATTAN BANK, as an administrative agent (together with any successor thereto appointed pursuant to Article VII of the Existing Credit Agreement referred to below, in such capacity, an "Administrative Agent"; the Administrative Agents and the Paying Agent being, collectively, the "Agents") for the Lenders, BANKBOSTON, N.A., as syndication agent, and THE BANK OF AMERICA, NATIONAL TRUST & SAVINGS ASSOCIATION, as documentation agent, hereby agree as follows: PRELIMINARY STATEMENTS (1) The Borrower is party to a 364-Day Credit Agreement dated as of July 28, 1997 (as amended, supplemented or otherwise modified from time to time to (but not including) the date of this Amendment and Restatement, the "Existing Credit Agreement") with the banks, financial institutions and other institutional lenders party thereto and Citibank, N.A. and The Chase Manhattan Bank, as Agents for the Lenders and such other lenders. Capitalized terms not otherwise defined in this Amendment and Restatement shall have the same meanings as specified in the Existing Credit Agreement. (2) The parties to this Amendment and Restatement desire to amend the Existing Credit Agreement as set forth herein and to restate the Existing Credit Agreement in its entirety to read as set forth in the Existing Credit Agreement with the following amendments. (3) The Borrower has requested that the Lenders agree to extend credit to it from time to time in an aggregate principal amount of up to $500,000,000 for general corporate purposes of the Borrower and its Subsidiaries not otherwise prohibited under the terms of this Amendment and Restatement. The Lenders have indicated their willingness to agree to extend credit to the Borrower from time to time in such amount on the terms and conditions of this Amendment and Restatement. SECTION 1. Amendments to the Existing Credit Agreement. (a) Section 1.01 of the Existing Credit Agreement is, effective as of July 27, 1998 and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended by deleting the definitions of "Lenders" and "Revolver Termination Date" set forth therein and replacing them, respectively, with the following new definitions thereof: "Lenders" means the Initial Lenders, each Assuming Lender that shall become a party hereto pursuant to Section 2.15 and each other Person that shall become a party hereto pursuant to Section 8.07. "Revolver Termination Date" means the earlier of (a) July 26, 1999 (subject to the extension thereof pursuant to Section 2.15) and (b) the date of termination in whole of the Revolving Credit Commitments pursuant to Section 2.04 or 6.01; provided, however, that the Revolver Termination Date of any Lender that is a Non-Consenting Lender to any requested extension pursuant to Section 2.15 shall be the Revolver Termination Date in effect immediately prior to the applicable Extension Date for all purposes of this Agreement and any Notes. (b) Section 1.01 of the Existing Credit Agreement is, effective as of the date of this Amendment and Restatement and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended by adding the following definition of "Investment Grade Date": "Investment Grade Date" means the first date on which the Paying Agent shall have received evidence satisfactory to it that the Borrower has a Public Debt Rating then in effect of at least BBB from S&P and at least Baa2 from Moody's, provided that the Borrower is not on "negative credit watch" (or any like designation by S&P or Moody's from time to time) at such time as determined by S&P and Moody's. (c) The recital of parties to the Existing Credit Agreement is, effective as of July 27, 1998 and subject to the satisfaction of the conditions precedent set forth in Section 2, amended by replacing the words "the signature pages hereof" contained in the second line thereof with the words "Schedule I hereto". (d) Section 3.02(a)(i) of the Existing Credit Agreement is, effective as of the date of this Amendment and Restatement and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended in full to read as follows: "(i) the representations and warranties contained in Section 4.01 (except, from and after the Investment Grade Date, the representations set forth in the last sentence of subsection (e) thereof) are correct on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing, in which case as of such specific date; and" (e) Section 4.01(g) of the Existing Credit Agreement is, effective as of the date of this Amendment and Restatement and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended in full to read as follows: "(g) The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System); no proceeds of any Advance will be used to purchase or carry any margin stock other than the Voting Stock of the Borrower to the extent otherwise permitted under the Loan Documents; no proceeds of any Advance will be used to extend credit to others for the purpose of purchasing or carrying any margin stock; and following application of the proceeds of each Advance, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or 5.02(e) or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender Party or any Affiliate of any Lender Party relating to Debt within the scope of Section 6.01(d) will be margin stock. For purposes of this Section 4.01(g), "assets" of the Borrower or any of its Subsidiaries includes, without limitation, treasury stock of the Borrower that has not been retired." (f) Section 4.01 of the Existing Credit Agreement is, effective as of the date of this Amendment and Restatement and subject to the satisfaction of the conditions precedent set forth in Section 2, hereby amended by adding a new subsection (n) to be read as follows: "(n) As of the date hereof, the Borrower has (i) initiated a review and assessment of all areas within its and each of its Subsidiaries' business and operations (including those affected by suppliers, vendors and customers) that are material and that could be materially adversely affected by the risk that computer applications owned by the Borrower or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan substantially in accordance with that timetable. Based on the foregoing, the Borrower believes that substantially all computer applications owned by the Borrower that are material to its or any or its Subsidiaries' business and operations are reasonably expected barring unforeseen circumstances on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 ("Year 2000 Compliant")." (g) Schedule I to the Existing Credit Agreement is, effective as of July 27, 1998 and subject to the satisfaction of the conditions precedent set forth in Section 2, deleted in its entirety and replaced with Schedule I to this Amendment and Restatement. SECTION 2. Conditions of Effectiveness of this Amendment and Restatement. This Amendment and Restatement shall become effective as of the date first above written (the "Amendment Effective Date") (except, with respect to Sections 1(a), (c) and (g) and 3(d), such later date as set forth in subsection (a) below) when and only if: (a) With respect to Sections 1(a), (c) and (g) and 3(d), the Paying Agent shall have received counterparts of this Amendment and Restatement executed by the Borrower, the Agents and all of the Initial Lenders or, as to any of the Initial Lenders, advice satisfactory to the Paying Agent that such Initial Lender has executed this Amendment and Restatement. (b) Other than with respect to Sections 1(a), (c) and (g) and 3(d), the Paying Agent shall have received counterparts of this Amendment and Restatement executed by the Borrower, the Agents and the Required Lenders or, as to any of the Required Lenders, advice satisfactory to the Paying Agent that such Required Lender has executed this Amendment and Restatement. (c) The Paying Agent shall have received on or before July 27, 1998 the following, each dated such date and (unless otherwise specified below) in form and substance satisfactory to the Paying Agent and in sufficient copies for each Initial Lender: the Revolving Credit Notes payable to the order of each of the Lenders that have requested Revolving Credit Notes prior to July 27, 1998. (d) The representations and warranties contained in Section 4.01 of the Existing Credit Agreement shall be correct on and as of the Amendment Effective Date, before and after giving effect to the Amendment Effective Date, as though made on and as of such date. (e) No event shall have occurred and be continuing, or shall occur as a result of the occurrence of the Amendment Effective Date, that constitutes a Default. SECTION 3. Reference to and Effect on the Existing Credit Agreement and the Notes. (a) On and after the effectiveness of this Amendment and Restatement, each reference in the Existing Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Existing Credit Agreement, and each reference in the Notes to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Existing Credit Agreement, shall mean and be a reference to the Existing Credit Agreement, as amended by this Amendment and Restatement. (b) The Existing Credit Agreement and the Notes, as specifically amended by this Amendment and Restatement, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) Without limiting any of the other provisions of the Existing Credit Agreement, as amended by this Amendment and Restatement, any references in the Existing Credit Agreement to the phrases "on the date hereof", "on the date of this Agreement" or words of similar import shall mean and be a reference to the date of the Existing Credit Agreement (which is July 28, 1997). (d) Upon the effectiveness of this Amendment and Restatement pursuant to Section 2(a), the Commitments under the Existing Credit Agreement are automatically terminated and the Commitments under this Amendment and Restatement are automatically effective. SECTION 4. Costs and Expenses. The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Agents in connection with the preparation, execution, delivery and administration, modification and amendment of this Amendment and Restatement, the Notes and the other documents to be delivered hereunder (including, without limitation, the reasonable and documented fees and expenses of counsel for the Agents with respect hereto and thereto) in accordance with the terms of Section 8.04 of the Existing Credit Agreement. SECTION 5. Execution in Counterparts. This Amendment and Restatement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment and Restatement by telecopier shall be effective as delivery of a manually executed counterpart of this Amendment and Restatement. SECTION 6. Governing Law. This Amendment and Restatement shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Restatement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BORROWER FEDERATED DEPARTMENT STORES, INC., By: /s/ Karen M. Hoguet Name: Karen M. Hoguet Title: Senior VP, CFO and Treasurer THE AGENTS CITIBANK, N.A., as an Administrative Agent and as Paying Agent By: /s/ Allen Fisher Name: Allen Fisher Title: Vice President THE CHASE MANHATTAN BANK, as an Administrative Agent By: /s/ Barry K. Bergman Name: Barry K. Bergman Title: Vice President BANKBOSTON, N.A., as Syndication Agent By: /s/ Bethann R. Halligan Name: Bethann R. Halligan Title: Division Executive THE BANK OF AMERICA, NT & SA, as Documentation Agent By: /s/ Sandra S. Ober Name: Sandra S. Ober Title: Managing Director THE INITIAL LENDERS CITIBANK, N.A. By: /s/ Allen Fisher Name: Allen Fisher Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Barry K. Bergman Name: Barry K. Bergman Title: Vice President: BANKBOSTON, N.A. By: /s/ Bethann R. Halligan Name: Bethann R. Halligan Title Division Executive: THE BANK OF AMERICA, NT & SA By: /s/ Jody A. Pritchard Name: Jody A. Pritchard Title: Vice President ARAB BANK PLC, GRAND CAYMAN By: /s/ Backer Ali Name: Backer Ali Title: Vice President / Controller THE BANK OF NEW YORK By: /s/ Paula Regan Name: Paula Regan Title: Vice President BANK ONE, N.A. By: /s/ Braden T. Krebs Name: Braden T. Krebs Title: Officer NATIONSBANK By: /s/ Bill Manley Name: Bill Manely Title: Sr. Vice President CREDIT AGRICOLE INDOSUEZ By: /s/ Dean Balice Name: Dean Balice Title: Senior Vice President, Branch Manager By: /s/ David Bouhl Name: David Bouhl, FVP Title: Head of Corporate Banking, Chicago COMERICA BANK By: /s/ Hugh G. Porter Name: Hugh G. Porter Title: Vice President CREDIT SUISSE FIRST BOSTON By: /s/ Chris T. Horgan Name: Chris T. Horgan Title: Vice President By: /s/ Robert Hetu Name: Robert Hetu Title: Associate THE FIFTH THIRD BANK By: /s/ A. K. Havcn Name: A. K. Havcn Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Dianne M. Stark Name: Dianne M. Stark Title: Vice President THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Jerome A. Ratliffe Name: Jerome A. Ratliffe Title: Vice President FLEET NATIONAL BANK By: /s/ Richard M. Seufert Name: Richard M. Seufert Title: Vice President MELLON BANK, N.A. By: /s/ Richard J. Schaich Name: Richard J. Schaich Title: Assistant Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ John M. Mikolay Name: John M. Mikolay Title: Vice President NATIONAL BANK OF KUWAIT By: /s/ Muhannad Kamal Name: Muhannad Kamal Title: Assistant General Manager By: /s/ Robert J. McNeill Name: Robert J. McNeill Title: Executive Manager PNC BANK, OHIO, NATIONAL ASSOCIATION By: /s/ C. Joseph Richardson Name: C. Joseph Richardson Title: Senior Vice President THE SANWA BANK, LIMITED NEW YORK BRANCH By: /s/ Jean-Michel Fatovic Name: Jean-Michel Fatovic Title: Vice President STANDARD CHARTERED BANK, N.A. By: /s/ David D. Cutting Name: David D. Cutting Title: Senior Vice President By: /s/ Natalie S. Yang Name: Natalie S. Yang Title: Senior Relationship Manager STAR BANK, N.A. By: /s/ Derek S. Roudebush Name: Derek S. Roudebush Title: Vice President THE SUMITOMO BANK LTD., NEW YORK BRANCH By: /s/ John C. Kissinger Name: John C. Kissinger Title: General Manager SUNTRUST BANK CENTRAL FLORIDA, N.A. By: /s/ C. Scott Harrison Name: C. Scott Harrison Title: Corporate Banking Officer UNION BANK OF CALIFORNIA, N.A. By: /s/ Susan D. Biba Name: Susan D. Biba Title: Vice President WACHOVIA BANK, N.A. By: /s/ Bradford L. Watkins Name: Bradford L. Watkins Title: Vice President SCHEDULE I TO THE AMENDMENT AND RESTATEMENT COMMITMENTS AND APPLICABLE LENDING OFFICES Name of Initial Revolving Domestic Lending Eurodollar Lending Lender Credit Office Office Commitment Citibank, N.A. $55,000,000 Credit: Credit: 399 Park Avenue, 399 Park Avenue, 12th Floor 12th Floor New York, NY 10043 New York, NY 10043 Attn: Marc Merlino Attn: Marc Merlino Phone: (212) 559- Phone: (212) 559- 1875 1875 Fax: (212) 793-7585 Fax: (212) 793-7585 Administrative: Administrative: 2 Penns Plaza 2 Penns Plaza Suite 200 Suite 200 New Castle, DE New Castle, DE 19720 19720 Attn: Leonard Attn: Leonard Sarcona Sarcona Phone: (718) 248- Phone: (718) 248- 4536 4536 Fax: (718) 248-4844 Fax: (718)248-4844 The Chase Manhattan $55,000,000 Credit: Credit: Bank, N.A. 270 Park Avenue, 270 Park Avenue, 48th Fl. 48th Fl. New York, NY 10017 New York, NY 10017 Attn: Barry Bergman Attn: Barry Bergman Phone: (212) 270- Phone: (212) 270- 0203 0203 Fax: (212) 270-5646 Fax: (212) 270-5646 Administrative: Administrative: 1 Chase Manhattan 1 Chase Manhattan Plaza Plaza 8th Floor 8th Floor New York, NY 10081 New York, NY 10081 Attn: Amy Labinger Attn: Amy Labinger Phone: (212) 552- Phone: (212) 552- 4025 4025 Fax:(212)552-7500 Fax:(212)552-7500 BankBoston, N.A. $42,000,000 Credit: Credit: 100 Federal Street 100 Federal Street Mail Stop 01-09-05 Mail Stop 01-09-05 Boston, MA 02106 Boston, MA 02106 Attn: Judy Kelly Attn: Judy Kelly Phone: (617) 434- Phone: (617) 434- 5280 5280 Fax: (617) 434-6685 Fax: (617) 434-6685 Administrative: Administrative: 100 Federal Street 100 Federal Street Mail Stop 01-21-01 Mail Stop 01-21-01 Boston, MA 02110 Boston, MA 02110 Attn: Michelle Attn: Michelle Taglione Taglione Phone: (617) 434- Phone: (617) 434- 4039 4039 Fax:(617)434-6685 Fax:(617)434-6685 The Bank of America, $42,000,000 Credit: Credit: NT & SA 231 South LaSalle 231 South LaSalle Street Street Chicago, IL 60697 Chicago, IL 60697 Attn: Sandy Ober Attn: Sandy Ober Phone: (312) 828- Phone: (312) 828- 1307 1307 Fax: (312) 987-0303 Fax: (312) 987-0303 Administrative: Administrative: 231 South LaSalle 231 So. LaSalle Street Street Chicago, IL Chicago, IL 60697 60697 Attn: Sandra Attn: Sandra Kramer Kramer Phone: (312) 828- Phone: (312) 828- 6645 6645 Fax:(312)987-5833 Fax: (312)987-5833 The Bank of New York $24,000,000 Credit: Credit: One Wall Street, One Wall Street, 22nd Floor 22nd Floor New York, NY 10286 New York, NY 10286 Attn: Paula Regan Attn: Paula Regan Phone: (212) 635- Phone: (212) 635- 7867 7867 Fax: (212) 635-1483 Fax: (212) 635-1483 Administrative: Administrative: One Wall Street, One Wall Street, 22nd Floor 22nd Floor New York, NY New York, NY 10286 10286 Attn: Susan Attn: Susan Baratta Baratta Phone: (212) 635- Phone: (212) 635- 6761 6761 Fax:(212)635-6397 Fax:(212)635-6397 Credit Suisse First $24,000,000 Credit: Credit: Boston 11 Madison Ave., 11 Madison Ave., 19th Fl. 19th Fl. New York, NY 10010 New York, NY 10010 Attn: Chris Hogan Attn: Chris Hogan Phone: (212) 325- Phone: (212) 325- 9157 9157 Fax: (212) 325-8309 Fax: (212) 325-8309 Administrative: Administrative: 11 Madison Ave. 11 Madison Ave. New York, NY 10010 New York, NY 10010 Attn: Gina Attn: Gina Manginello Manginello Phone: (212) 325- Phone: (212) 325- 9149 9149 Fax: (212) 325- Fax: (212) 325- 8319 8319 Fleet National Bank $24,000,000 Credit: Credit: One Federal Street One Federal Street MA OF 0320 MA OF 0320 Boston, MA 02110 Boston, MA 02110 Attn: Richard Attn: Richard Seufert Seufert Phone: (617) 346- Phone: (617) 346- 0611 0611 Fax: (617) 346-0689 Fax: (617) 346-0689 Administrative: Administrative: One Federal Street One Federal Street MA OF 0308 MA OF 0308 Boston, MA 02110 Boston, MA 02110 Attn: Michael Attn: Michael Araujo Araujo Phone: (617) 346- Phone: (617) 346- 0601 0601 Fax: (617) 346-0595 Fax: (617) 346-0595 PNC Bank, Ohio, $24,000,000 Credit: Credit: National Association 201 East 5th Street 201 East 5th Street Cincinnati, OH Cincinnati, OH 45202 45202 Attn: Joe Attn: Joe Richardson Richardson Phone: (513) 651- Phone: (513) 651- 8688 8688 Fax: (513) 651-8951 Fax: (513) 651-8951 Administrative: Administrative: 201 E. 5th Street 201 E. 5th Street Cincinnati, OH Cincinnati, OH 45202 45202 Attn: Sandy Wilson Attn: Sandy Wilson Phone:(513) 651- Phone: (513) 651- 8984 8984 Fax: (513) 651-8951 Fax: (513)651-8951 The Sumitomo Bank, $20,000,000 Credit: Credit: Ltd. U.S. Corporate U.S. Corporate Dept. Dept. 277 Park Avenue, 277 Park Avenue, 6th Floor 6th Floor New York, NY 10172 New York, NY 10172 Attn: Bruce Gregory Attn: Bruce Gregory Phone: (212) 224- Phone: (212) 224- 4143 4143 Fax (212) 418-4848 Fax (212) 418-4848 Administrative: Administrative: International International Finance Dept. Finance Dept. 277 Park Avenue, 277 Park Avenue, 6th Floor 6th Floor New York, NY 10172 New York, NY 10172 Attn: Daria Soriano Attn: Daria Soriano Phone: (212) 224- Phone: (212) 224- 4061 4061 Fax (212) 224-5192 Fax (212) 224-5192 Union Bank of $23,750,000 Credit: Credit: California, N.A. 350 California St., 350 California St., 11th Fl. 11th Fl. San Francisco, CA San Francisco, CA 94104 94104 Attn: Timothy P. Attn: Timothy P. Streb, VP Streb, VP Phone: (415) 705- Phone: (415) 705- 7021 7021 Fax: (415) 705-7085 Fax: (415) 705-7085 Administrative: Administrative: 350 California St., 350 California St., 11th Fl. 11th Fl. San Francisco, CA San Francisco, CA 94104 94104 Attn: Richard A. Attn: Richard A. Sutter, VP Sutter, VP Phone: (415) 705- Phone: (415) 705- 7090 7090 Fax: (415) 705-7085 Fax: (415) 705-7085 Mellon Bank, N.A. $19,000,000 Credit: Credit: One Mellon Bank One Mellon Bank Center, Room 4535 Center, Room 4535 Pittsburgh, PA Pittsburgh, PA 15258-0001 15258-0001 Attn: Rich Schaich Attn: Rich Schaich Phone: (412) 234- Phone: (412) 234- 4420 4420 Fax: (412) 236-1914 Fax: (412) 236-1914 Administrative: Administrative: Three Mellon Bank Three Mellon Bank Center Center, Room 2305 Room 2305 Pittsburgh, PA Pittsburgh, PA 15259-0003 15259-0003 Attn: Greg Klino Attn: Greg Klino Phone: (412) 234- Phone: (412) 234- 1867 1867 Fax: (412) 234-5049 Fax: (412) 234-5049 Sanwa Bank Ltd., $16,250,000 Credit: Credit: New York Branch 55 East 52nd Street 55 East 52nd Street New York, NY 10055 New York, NY 10055 Attn: Jean-Michel Attn: Jean-Michel Fatovic Fatovic Phone: (212) 339- Phone: (212) 339- 6397 6397 Fax: (212) 754-1304 Fax: (212) 754-1304 Administrative: Administrative: 55 East 52nd Street 55 East 52nd Street New York, NY 10055 New York, NY 10055 Attn: Marlin Chin Attn: Marlin Chin Phone:(212)339-6592 Phone:(212)339-6592 Fax:(212)754-2368 Fax:(212)754-2368 Credit Agricole $12,500,000 Credit: Credit: Indosuez 55 E. Monroe 55 E. Monroe Street Street Suite 4700 Suite 4700 Chicago, IL Chicago, IL 60603 60603 Attn: Ray Attn: Ray Falkenberg Falkenberg Phone:(312) 917 - Phone:(312) 917- 7426 7426 Fax: (312) 372- Fax: (312) 372- 3724 3724 Administrative: Administrative: 55 E. Monroe 55 E. Monroe Street Street Suite 4700 Suite 4700 Chicago, IL Chicago, IL 60603 60603 Attn: James Attn: James Barrett Barrett Phone: (312) 917- Phone: (312) 917- 7429 7429 Fax: (312) 372- Fax: (312) 372- 4421 4421 First National Bank of $15,000,000 Credit: Credit: Chicago One First National One First National Plaza Plaza Chicago, IL 60670 Chicago, IL 60670 Attn: Diane Stare Attn: Diane Stare Phone: (312) 732- Phone: (312) 732- 8251 8251 Fax: (312) 336-4380 Fax: (312) 336-4380 Administrative: Administrative: One First National One First National Plaza Plaza Chicago, IL 60670 Chicago, IL 60670 Attn: Mary Hart Attn: Mary Hart Phone: (312) 732- Phone: (312) 732- 6137 6137 Fax: (312) 732-2715 Fax: (312) 732-2715 Morgan Guaranty Trust $15,000,000 Credit: Credit: Company of New York 60 Wall Street 60 Wall Street New York, NY 10260- New York, NY 10260- 0060 0060 Attn: Deborah Attn: Deborah Boodheim Boodheim Phone: (212) 648- Phone: (212) 648- 8063 8063 Fax: (212) 648-5018 Fax: (212) 648-5018 Administrative: Administrative: 500 Stanton 500 Stanton Christiana Ctr. Christiana Ctr. Newark, DE 19713- Newark, DE 19713- 2107 2107 Attn: Vickie Fedele Attn: Vickie Fedele Phone: (302) 634- Phone: (302) 634- 4225 4225 Fax: (302) 634-1852 Fax: (302) 634-1852 Standard Chartered $15,000,000 Credit: Credit: Bank 7 World Trade 7 World Trade Center Center 27th Floor 27th Floor New York, NY 10048 New York, NY 10048 Attn: David Cutting Attn: David Cutting Phone: (212) 667- Phone: (212) 667- 0469 0469 Fax: (212) 667-0225 Fax: (212) 667-0225 Administrative: Administrative: 707 Wilshire Blvd., 707 Wilshire Blvd., W-8-33 W-8-33 Los Angeles, CA Los Angeles, CA 90017 90017 Attn: Qustanti Attn: Qustanti Shiber Shiber Phone: (213) 614- Phone: (213) 614- 5037 5037 Fax: (213) 614-4270 Fax: (213) 614-4270 Wachovia Bank of $10,000,000 Credit: Credit: Georgia, N.A. 191 Peachtree 191 Peachtree Street, N.E. Street, N.E. 28th Floor, GA-370 28th Floor, GA-370 Atlanta, GA 30303 Atlanta, GA 30303 Attn: Brad Watkins Attn: Brad Watkins Phone:(404) 332-7093 Phone:(404)332-7093 Fax: (404) 332-6898 Fax: (404)332-6898 Administrative: Administrative: 191 Peachtree 191 Peachtree Street, N.E. Street, N.E 28th Floor, GA-370 28th Floor, GA-370 Atlanta, GA 30303 Atlanta, GA 30303 Attn: Christy N. Attn: Christy N. Howard Howard Phone:(404)332-6261 Phone:(404)332-6261 Fax:(404) 332-6898 Fax: (404)332-6898 Comerica Bank $7,500,000 Credit: Credit: 500 Woodward Ave. 500 Woodward Ave. MC 3268 MC 3268 Detroit, MI 48226 Detroit, MI 48226 Attn: Hugh Porter Attn: Hugh Porter Phone (313) 222- Phone (313) 222- 6192 6192 Fax: (312) 222-9514 Fax: (312) 222-9514 Administrative: Administrative: 500 Woodward Ave. 500 Woodward Ave. MC 3268 MC 3268 Detroit, MI 48226 Detroit, MI 48226 Attn: Beverly Jones Attn: Beverly Jones Phone (313) 222- Phone (313) 222- 3805 3805 Fax: (312) 222-3351 Fax: (312) 222-3351 National Bank of $7,500,000 Credit: Credit: Kuwait 299 Park Avenue 299 Park Avenue New York, NY 10171- New York, NY 10171- 0023 0023 Attn: Jeff Ganter Attn: Jeff Ganter Phone: (212) 303- Phone: (212) 303- 9828 9828 Fax: (212) 319-8269 Fax: (212) 319-8269 Administrative: Administrative: 299 Park Avenue 299 Park Avenue New York, NY 10171- New York, NY 10171- 0023 0023 Attn: Jeff Ganter Attn: Jeff Ganter (212) 303-9868 (212) 303-9868 (212) 319-8269 (212) 319-8269 Arab Bank PLC, Grand $6,250,000 Credit: Credit: Cayman 520 Madison Ave. 520 Madison Ave. New York, NY 10022 New York, NY 10022 Attn: Samer Tamimi Attn: Samar Tamimi Phone: (212) 715- Phone: (212) 715- 9712 9712 Fax: (212) 593-4632 Fax: (212) 593-4632 Administrative: Administrative: 520 Madison Ave. 520 Madison Ave. New York, NY 10022 New York, NY 10022 Attn: Justo Huapaya Attn: Justo Huapaya Phone: (212) 715- Phone: (212) 715- 9713 9713 Fax: (212) 593-4632 Fax: (212) 593-4632 Bank One, Columbus, $6,250,000 Credit: Credit: N.A. 40 North Maine, 3rd 40 North Maine, 3rd Floor Floor Dayton, OH 45402 Dayton, OH 45402 Attn: Joey Williams Attn: Joey Williams Phone: (937) 449- Phone: (937) 449- 8671 8671 Fax: (937) 449-4885 Fax: (937) 449-4885 Administrative: Administrative P.O. Box 710209 P.O. Box 710209 Columbus, OH 43271- Columbus, OH 43271 0209 0209 Attn: Jim Zook Attn: Jim Zook Phone: (614) 248- Phone: (614) 248- 6187 6187 Fax: (614) 248-5518 Fax:(614) 248-5518 NationsBank, N.A. $8,500,000 Credit: Credit: 100 North Tryon 100 North Tryon Street, Street, 8th Floor 8th Floor NationsBank Corp. NationsBank Corp. Center, NC1-007-08- Center, NC1-007-08- 04 04 Charlotte, NC 28255 Charlotte, NC 28255 Attn: Tim Spanos Attn: Tim Spanos Phone: (704) 386- Phone: (704) 386- 4507 4507 Fax: (704) 388-0906 Fax: (704) 388-0906 Administrative: Administrative: 100 North Tryon 100 North Tryon Street, Street, 8th Floor 8th Floor NationsBank Corp. NationsBank Corp. Center, NC1-007-08- Center, NC1-007-08- 04 04 Charlotte, NC 28255 Charlotte, NC 28255 Attn: Tim Spanos Attn: Tim Spanos Phone: (704) 386- Phone: (704) 386- 4507 4507 Fax: (704) 388-0906 Fax: (704) 388-0906 The Fifth-Third Bank $6,250,000 Credit: Credit: 38 Fountain 38 Fountain Square Plaza Square Plaza Cincinnati, OH Cincinnati, OH 45263 45263 Attn: Andy Hauck Attn: Andy Hauck Phone: (513) 579- Phone: (513) 579- 4178 4178 Fax: (513) 579- Fax: (513) 579- 5226 5226 Administrative: Administrative: 38 Fountain 38 Fountain Square Plaza Square Plaza Cincinnati, OH Cincinnati, OH 45263 45263 Attn: Daniel Attn: Daniel Mullen Mullen Phone: (513) 579- Phone: (513) 579- 4104 4104 Fax: (513) 579- Fax: (513) 579- 4226 4226 First National Bank of $7,500,000 Credit: Credit: Maryland 25 S. Charles 25 S. Charles Street Street Baltimore, MD Baltimore, MD 21201 21201 Attn: Jerome Attn: Jerome Ratliffe Ratliffe Phone: (410) 244- Phone: (410) 244- 4852 4852 Fax: (410) 545- Fax: (410) 244- 2047 2047 Administrative: Administrative: 25 S. Charles 25 S. Charles Street Street Baltimore, MD Baltimore, MD 21201 21201 Attn: Emilia Attn: Emilia Schwartz Schwartz Phone: (410) 244- Phone: (410) 244- 4201 4201 Fax: (410) 244- Fax: (410) 244- 4294 4294 Star Bank, N.A. $7,500,000 Credit: Credit: 425 Walnut Street 425 Walnut Street Cincinnati, OH Cincinnati, OH 45202 45202 Attn: Bill Goodwin Attn: Bill Goodwin Phone: (513) 762- Phone: (513) 762- 8973 8973 Fax: (513) 762-2068 Fax: (513) 762-2068 Administrative: Administrative: 425 Walnut Street 425 Walnut Street Cincinnati, OH Cincinnati, OH 45202 45202 Attn: Tracy Attn: Tracy Briede Briede Phone: (513) 632- Phone: (513) 632- 4034 4034 Fax: (513) 632- Fax: (513) 632- 3099 3099 SunTrust Bank, N.A. $6,250,000 Credit: Credit: 200 S. Orange Ave. 200 S. Orange Ave. MC 0-1043 MC 0-1043 Orlando, FL 32801 Orlando, FL 32801 Attn: Stephen L. Attn: Stephen L. Leister Leister Phone: (407) 237- Phone: (407) 237- 4705 4705 Fax: (407) 237-6894 Fax: (407) 237-6894 Administrative: Administrative: 200 S. Orange Ave. 200 S. Orange Ave. MC 0-1043 MC 0-1043 Orlando, FL 32801 Orlando, FL 32801 Attn: Lois Keezel Attn: Lois Keezel Phone: (407) 237- Phone: (407) 237- 4855 4855 Fax: (407) 237-6894 Fax: (407) 237-6894 TOTAL OF COMMITMENTS: $500,000,000 EX-10.2 3 EXECUTION COPY LETTER AMENDMENT Dated as of June 29, 1998 To the banks, financial institutions and other institutional lenders (collectively, the "Lenders") parties to the Credit Agreement referred to below, Citibank, N.A., as an administrative agent and as paying agent (the "Paying Agent") for the Lenders, The Chase Manhattan Bank, as an administrative agent, BankBoston, N.A., as syndication agent, and The Bank of America National Trust & Savings Association, as documentation agent Ladies and Gentlemen: We refer to the Five-Year Credit Agreement dated as of July 28, 1997 (as amended, supplemented or otherwise modified through the date hereof, the "Credit Agreement") among the undersigned and you. Capitalized terms not otherwise defined in this Letter Amendment have the same meanings as specified in the Credit Agreement. It is hereby agreed by you and us as follows: The Credit Agreement is, effective as of the date of this Letter Amendment, hereby amended as follows: (a) Section 1.01 of the Credit Agreement is amended by adding a new definition of "Investment Grade Date" to read as follows: "`Investment Grade Date'" means the first date on which the Paying Agent shall have received evidence satisfactory to it that the Borrower has a Public Debt Rating then in effect of at least BBB from S&P and at least Baa2 from Moody's, provided that the Borrower is not on "negative credit watch" (or any like designation by S&P or Moody's from time to time) at such time as determined by S&P and Moody's." (b) Section 3.02(a)(i) is amended in full to read as follows: "(i)the representations and warranties contained in Section 4.01 (except, from and after the Investment Grade Date, the representations set forth in the last sentence of subsection (e) thereof) are correct on and as of the date of such Borrowing, before and after giving effect to such Borrowing and to the application of the proceeds therefrom, as though made on and as of such date other than any such representations or warranties that, by their terms, refer to a specific date other than the date of such Borrowing, in which case as of such specific date; and" (c) Section 4.01(g) is amended in full to read as follows: "(g)The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System); no proceeds of any Advance or drawings under any Letter of Credit will be used to purchase or carry any margin stock other than the Voting Stock of the Borrower to the extent otherwise permitted under the Loan Documents; no proceeds of any Advance or drawings under any Letter of Credit will be used to extend credit to others for the purpose of purchasing or carrying any margin stock; and following application of the proceeds of each Advance or drawing under each Letter of Credit, not more than 25% of the value of the assets (either of the Borrower only or of the Borrower and its Subsidiaries on a Consolidated basis) subject to the provisions of Section 5.02(a) or 5.02(e) or subject to any restriction contained in any agreement or instrument between the Borrower and any Lender Party or any Affiliate of any Lender Party relating to Debt within the scope of Section 6.01(d) will be margin stock. For purposes of this Section 4.01(g), "assets" of the Borrower or any of its Subsidiaries includes, without limitation, treasury stock of the Borrower that has not been retired." This Letter Amendment shall become effective as of the date first above written when, and only when, the Paying Agent shall have received counterparts of this Letter Amendment executed by the undersigned and the Required Lenders or, as to any of the Required Lenders, advice satisfactory to the Paying Agent that such Required Lender has executed this Letter Amendment. This Letter Amendment is subject to the provisions of Section 8.01 of the Credit Agreement. On and after the effectiveness of this Letter Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Letter Amendment. The Credit Agreement and the Notes, as specifically amended by this Letter Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Paying Agent under the Credit Agreement, nor constitute a waiver of any provision of the Credit Agreement. If you agree to the terms and provisions hereof, please evidence such agreement by executing and returning at least three counterparts of this Letter Amendment to Ms. Anna Rodriguez, Citicorp Securities, Inc., 399 Park Avenue, 11th Floor, Zone 20, New York, NY 10043, no later than 5:00 p.m. EDST on June 29, 1998. This Letter Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Letter Amendment by telecopier shall be effective as delivery of a manually executed counterpart of this Letter Amendment. This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. Very truly yours, FEDERATED DEPARTMENT STORES, INC. By: /s/ Karen M. Hoguet Name: Karen M. Hoguet Title: Senior VP, CFO and Treasurer Agreed as of the date first above written: CITIBANK, N.A., as an Administrative Agent and as Paying Agent By: /s/ Allen Fisher Name: Allen Fisher Title: Vice President THE CHASE MANHATTAN BANK, as an Administrative Agent By: /s/ Barry K. Bergman Name: Barry K. Bergman Title: Vice President BANKBOSTON, N.A., as Syndication Agent By: /s/ Bethann R. Halligan Name: Bethann R. Halligan Title: Division Executive THE BANK OF AMERICA, NT & SA, as Documentation Agent By: /s/ Sandra S. Ober Name: Sandra S. Ober Title: Managing Director THE INITIAL LENDERS CITIBANK, N.A. By: /s/ Allen Fisher Name: Allen Fisher Title: Vice President THE CHASE MANHATTAN BANK By: /s/ Barry K. Bergman Name: Barry K. Bergman Title: Vice President BANKBOSTON, N.A. By: /s/ Bethann R. Halligan Name: Bethann R. Halligan Title: Division Executive THE BANK OF AMERICA, NT & SA By: /s/ Jody A. Pritchard Name: Jody A. Pritchard Title: Vice President BANK OF SCOTLAND By: /s/ Annie Chin Tat Name: Annie Chin Tat Title: Senior Vice President BANK ONE, N.A. By: /s/ Braden T. Krebs Name: Braden T. Krebs Title: Officer BANQUE PARIBAS By: /s/ Karen E. Coons Name: Karen E. Coons Title: Vice President By: /s/ Ann B. McAloon Name: Ann B. McAloon Title: Vice President CREDIT AGRICOLE INDOSUEZ By: /s/ Dean Balice Name: Dean Balice Title: Senior Vice President, Branch Manager By: /s/ David Bouhl Name: David Bouhl Title: Head of Corporate Banking, Chicago COMERICA BANK By: /s/ Hugh G. Porter Name: Hugh G. Porter Title: Vice President CREDIT SUISSE FIRST BOSTON By: /s/ Chris T. Horgan Name: Chris T. Horgan Title: Vice President By: /s/ Robert Hetu Name: Robert Hetu Title: Associate THE FIFTH THIRD BANK By: /s/ A. K. Havcn Name: A. K. Havcn Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Dianne M. Stark Name: Dianne M. Stark Title: Vice President THE FIRST NATIONAL BANK OF MARYLAND By: /s/ Jerome A. Ratliffe Name: Jerome A/ Ratliffe Title: Vice President FLEET NATIONAL BANK By: /s/ Richard M. Seufert Name: Richard M. Seufert Title: Vice President THE MITSUI TRUST & BANKING COMPANY, LTD. By: /s/ Eiilhi Akama Name: Eiilhi Akama Title: Vice President NATIONAL BANK OF KUWAIT By: /s/ Muhannad Kamai Name: Muhannad Kamai Title: Assistant General Manager By: /s/ Robert J. McNeill Name: Robert J. McNeill Title: Executive Manager PNC BANK, OHIO, NATIONAL ASSOCIATION By: /s/ Bruce A. Kintner Name: Bruce A. Kintner Title: Vice President THE SANWA BANK, LIMITED NEW YORK BRANCH By: /s/ Jean-Michel Fatovie Name: Jean-Michel Fatovie Title: Vice President STANDARD CHARTERED BANK, N.A. By: /s/ David D. Cutting Name: David D. Cutting Title: Senior Vice President By: /s/ Natalie S. Yang Name: Natalie S. Yang Title: Senior Relationship Manager STAR BANK, N.A. By: /s/ Derek S. Roudebush Name: Derek S. Roudebush Title: Vice President SUNTRUST BANK CENTRAL FLORIDA, N.A. By: /s/ C. Scott Harrison Name: C. Scott Harrison Title: Corporate Banking Officer UNION BANK OF CALIFORNIA, N.A. By: /s/ Susan D. Biba Name: Susan D. Biba Title: Vice President WACHOVIA BANK, N.A. By: /s/ Bradford L. Watkins Name: Bradford L. Watkins Title: Vice President EX-27 4
5 1,000,000 3-MOS JAN-30-1999 MAY-03-1998 AUG-01-1998 281 0 2,111 0 3,361 5,976 6,381 0 13,351 2,618 3,890 0 0 0 0 13,351 3,523 0 0 2,101 1,155 0 76 193 86 0 0 0 0 107 .51 .47 Includes the following: (1) Supplies and prepaid expenses 118 Deferred income tax assets 105 Includes the following: (2) Intangible assets - net 677 Other assets 317 Includes the following: (3) Deferred income taxes 977 Other liabilities 557 Shareholders' Equity 5,309 Includes the following: (4) Interest Income 2
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