-----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, M+6xlU/8Inyvsbray+dMI+Sk4tRbX51Jf9CZHQtWsq7y6hlWR75fYZkcVk77TwnR pV3c5R5/c3Jw1e7EvGx8gw== /in/edgar/work/20000613/0000794367-00-000008/0000794367-00-000008.txt : 20000919 0000794367-00-000008.hdr.sgml : 20000919 ACCESSION NUMBER: 0000794367-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000429 FILED AS OF DATE: 20000613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED DEPARTMENT STORES INC /DE/ CENTRAL INDEX KEY: 0000794367 STANDARD INDUSTRIAL CLASSIFICATION: [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: 653907 BUSINESS ADDRESS: STREET 1: 7 W SEVENTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 2124941602 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 0001.txt 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 April 29, 2000. 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 (Commission File No.) (I.R.S. Employer Incorporation) 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. 207,936,386 shares of the Registrant's Common Stock, $.01 par value, were outstanding as of May 27, 2000. PART I -- FINANCIAL INFORMATION FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Income (Unaudited) (millions, except per share figures) 13 Weeks Ended 13 Weeks Ended April 29, 2000 May 1, 1999 Net Sales $ 4,032 $ 3,600 Cost of sales 2,395 2,174 Selling, general and administrative expenses 1,384 1,201 Operating Income 253 225 Interest expense (100) (78) Interest income 1 3 Income Before Income Taxes 154 150 Federal, state and local income tax expense (65) (63) Net Income $ 89 $ 87 Basic earnings per share $ .42 $ .42 Diluted earnings per share $ .41 $ .40 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Consolidated Balance Sheets (Unaudited) (millions) April 29, January 29, May 1, 2000 2000 1999 ASSETS: Current Assets: Cash $ 249 $ 218 $ 239 Accounts receivable 4,031 4,313 2,165 Merchandise inventories 3,869 3,589 3,599 Supplies and prepaid expenses 217 230 200 Deferred income tax assets 176 172 142 Total Current Assets 8,542 8,522 6,345 Property and Equipment - net 6,741 6,828 6,624 Intangible Assets - net 1,720 1,735 1,889 Other Assets 652 607 572 Total Assets $ 17,655 $ 17,692 $ 15,430 LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Short-term debt $ 1,352 $ 1,284 $ 1,225 Accounts payable and accrued liabilities 3,006 3,043 2,699 Income taxes 83 225 75 Total Current Liabilities 4,441 4,552 3,999 Long-Term Debt 4,757 4,589 3,806 Deferred Income Taxes 1,448 1,444 1,236 Other Liabilities 548 555 576 Shareholders' Equity 6,461 6,552 5,813 Total Liabilities and Shareholders' Equity $ 17,655 $ 17,692 $ 15,430 The accompanying notes are an integral part of these unaudited Consolidated Financial Statements. FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Cash Flows (Unaudited) (millions) 13 Weeks Ended 13 Weeks Ended April 29, 2000 May 1, 1999 Cash flows from operating activities: Net income $ 89 $ 87 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 161 158 Amortization of intangible assets 21 15 Amortization of financing costs 2 1 Amortization of unearned restricted stock 3 - Changes in assets and liabilities: Decrease in accounts receivable 284 158 Increase in merchandise inventories (277) (175) Decrease in supplies and prepaid expenses 13 2 (Increase) decrease in other assets not separately identified (13) 43 Decrease in accounts payable and accrued liabilities not separately identified (78) (114) Decrease in current income taxes (142) (23) Increase in deferred income taxes 1 1 Decrease in other liabilities not separately identified (6) (7) Net cash provided by operating activities 58 146 Cash flows from investing activities: Purchase of property and equipment (69) (52) Capitalized software (15) (6) Investments in companies (35) (9) Acquisition of Fingerhut Companies, Inc., net of cash acquired - (1,539) Disposition of property and equipment - 3 Net cash used by investing activities (119) (1,603) Cash flows from financing activities: Debt issued 237 1,326 Financing costs - (10) Debt repaid (1) (1) Increase in outstanding checks 36 69 Acquisition of treasury stock (218) - Issuance of common stock 38 5 Net cash provided by financing activities 92 1,389 (Continued) FEDERATED DEPARTMENT STORES, INC. Consolidated Statements of Cash Flows (Unaudited) (millions) 13 Weeks Ended 13 Weeks Ended April 29, 2000 May 1, 1999 Net increase (decrease) in cash 31 (68) Cash at beginning of period 218 307 Cash at end of period $ 249 $ 239 Supplemental cash flow information: Interest paid $ 108 73 Interest received 1 3 Income taxes paid (net of refunds received) 210 84 Schedule of noncash investing and financing activities: Debt assumed in acquisition - 125 Equity issued in acquisition - 12 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 29, 2000 (the "1999 10-K"). The accompanying Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto in the 1999 10-K. Substantially all department store merchandise inventories are valued by the retail method and stated on the LIFO (last-in, first-out) basis, which is generally lower than market. Direct-to-customer merchandise inventories are stated at the lower of FIFO (first-in, first-out) cost or market. Because of the seasonal nature of the retail business, the results of operations for the 13 weeks ended April 29, 2000 and May 1, 1999 (which do not include the Christmas season) are not indicative of such results for the fiscal year. The Consolidated Financial Statements for the 13 weeks ended April 29, 2000 and May 1, 1999, 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. Certain reclassifications were made to prior period amounts to conform with the classifications of such amounts for the most recent period. 2. Acquisition On March 18, 1999, the Company purchased Fingerhut for a purchase price of approximately $1,720 million, including the assumption of $125 million of debt. The Fingerhut acquisition is being accounted for under the purchase method of accounting. Accordingly, the Company's results of operations do not include Fingerhut's results of operations for any period prior to March 18, 1999 and the purchase price has been allocated to Fingerhut's assets and liabilities based on the estimated fair value of these assets and liabilities as of March 18, 1999. FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) 3. Segment Data The Company conducts its business through two segments, department stores and direct-to-customer. The department store segment sells a wide range of merchandise, including men's, women's and children's apparel and accessories, cosmetics, home furnishings and other consumer goods. The direct-to-customer segment (Fingerhut, Bloomingdale's By Mail, bloomingdales.com, Macy's By Mail, macys.com and certain other direct marketing activities) sells a broad range of products and services directly to consumers via catalogs, direct marketing and the Internet. "Corporate and other" consists of the income or expense associated with the corporate office and certain items managed on a company-wide basis (e.g., intangibles, financial instruments, investments, retirement benefits and properties held for sale or disposition). The financial information for each segment is reported on the basis used internally by the Company to evaluate performance and allocate resources. 13 Weeks Ended April 29, May 1, 2000 1999 (millions) Net Sales Department Stores $ 3,541 $ 3,437 Direct-to-Customer 491 163 Total $ 4,032 $ 3,600 Operating income Department Stores $ 308 $ 273 Direct-to-Customer (23) (2) Corporate and other (32) (46) Total $ 253 $ 225 Depreciation and amortization expense Department Stores $ 149 $ 153 Direct-to-Customer 12 3 Corporate and other 24 17 Total $ 185 $ 173 FEDERATED DEPARTMENT STORES, INC. Notes to Consolidated Financial Statements (Unaudited) 4. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share: 13 Weeks Ended April 29, 2000 May 1, 1999 (millions, except per share data) Income Shares Income Shares Net income and average number of shares outstanding $ 89 212.3 $ 87 208.6 Shares to be issued under deferred compensation plans - .5 - .4 $ 89 212.8 $ 87 209.0 Basic earnings per share $ .42 $ .42 Effect of dilutive securities: Warrants - 1.9 - 5.7 Stock options - 1.6 - 1.7 $ 89 216.3 $ 87 216.4 Diluted earnings per share $ .41 $ .40 In addition to the warrants and stock options reflected in the foregoing table, warrants and stock options to purchase 9.6 million and 6.6 million shares of common stock at prices ranging from $38.06 to $79.44 per share were outstanding at April 29, 2000 and May 1, 1999, 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. 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 "first quarter of 2000" and "first quarter of 1999" are to the Company's 13-week fiscal periods ended April 29, 2000 and May 1, 1999, respectively. Results of Operations Comparison of the 13 Weeks Ended April 29, 2000 and May 1, 1999 Net sales for the first quarter of 2000 totaled $4,032 million, compared to net sales of $3,600 million for the first quarter of 1999, an increase of 12.0%. Net sales for department stores for the first quarter of 2000 were $3,541 million, compared to net sales of $3,437 million for the first quarter of 1999, an increase of 3.0%. On a comparable store basis (sales from stores in operation throughout the first quarter of 1999 and the first quarter of 2000), net sales for department stores for the first quarter of 2000 increased 2.9% compared to the first quarter of 1999. Net sales for the direct-to-customer segment totaled $491 million for the first quarter of 2000 (which includes Fingerhut for the entire period) compared to $163 million for the first quarter of 1999 (which includes Fingerhut from and after the March 18, 1999 acquisition date). Cost of sales was 59.4% of net sales for the first quarter of 2000, compared to 60.4% for the first quarter of 1999. Cost of sales as a percent of net sales for department stores improved 0.4% in the first quarter of 2000 compared to the same period a year ago, benefiting from lower markdowns. This improvement in the cost of sales rate for department stores, together with a relatively lower cost of sales rate for the direct-to-customer segment, contributed to the overall 1.0% improvement in the cost of sales rate for the first quarter of 2000. The valuation of department store merchandise inventories on the last-in, first-out basis did not impact cost of sales in either period. Selling, general and administrative ("SG&A") expenses were 34.3% of net sales for the first quarter of 2000 compared to 33.4% for the first quarter of 1999. Department store SG&A expenses improved 0.4% as a percent of department store net sales, reflecting the impact of lower depreciation expense and higher finance charge income. SG&A expenses for the direct-to- customer segment include increased costs related to recently launched businesses. A relatively higher SG&A expense rate for the direct-to-customer segment, including recently launched businesses, and increased amortization expense resulting from the Fingerhut acquisition combined to offset the improvement in the department store SG&A expense rate and produce a 0.9% increase in the overall SG&A expense rate for the first quarter of 2000. Net interest expense was $99 million for the first quarter of 2000, compared to $75 million for the first quarter of 1999. The higher interest expense for the first quarter of 2000 is due primarily to the increased outstanding debt resulting from the Fingerhut acquisition and the consolidation of the Fingerhut Master Trust for financial reporting purposes. The Company's effective income tax rate of 42.4% for the first quarter of 2000 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. FEDERATED DEPARTMENT STORES, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) 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 the first quarter of 2000 was $58 million, compared to the $146 million provided in the first quarter of 1999. The decrease in net cash provided by operating activities reflects a greater decrease in current income taxes and a greater increase in merchandise inventories partially offset by a greater decrease in accounts receivable and a lesser decrease in accounts payable and accrued liabilities. Net cash used by investing activities was $119 million for the first quarter of 2000. Investing activities for the first quarter of 2000 included purchases of property and equipment totaling $69 million, capitalized software of $15 million and investments in companies engaged in complementary businesses totaling $35 million. The Company plans to open eight new department stores and four new furniture galleries during the remainder of 2000. Net cash provided to the Company by all financing activities was $92 million for the first quarter of 2000. During the first quarter of 2000, the Company issued $237 million of short-term debt to partially fund investing activities and the acquisition of the Company's Common Stock under its stock repurchase program. The Company purchased 5.7 million shares of its Common Stock under the stock repurchase program during the first quarter of 2000 at an approximate cost of $217 million. The Company may from time to time commence, continue or suspend repurchases of shares under the stock repurchase program, depending on prevailing market conditions, alternate uses of capital and other factors. Also during the first quarter of 2000, the Company issued 1.0 million shares of its Common Stock and received $35 million in proceeds from the exercise of the Company's Series B Warrants, which expired on February 15, 2000. On June 6, 2000, the Company issued $350 million of 8.5% Senior Notes due 2010. The proceeds were used to repay certain short-term borrowings and, accordingly, $347 million of short-term borrowings are classified as long-term debt as of April 29, 2000. Management believes the department store business and other retail businesses will continue to consolidate. Accordingly, the Company intends from time to time to consider additional acquisitions of, and investments in, department stores, Internet-related companies, catalog companies and other complementary assets and companies. Management 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 existing indebtedness or for other corporate purposes. PART II -- OTHER INFORMATION FEDERATED DEPARTMENT STORES, INC. Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of the Company's stockholders was held on May 19, 2000. The Company's stockholders voted on the following items at such meeting: i. The stockholders approved the election of three Directors for a three-year term expiring at the 2003 Annual Meeting of the Company's stockholders. The votes for such elections were as follows: Earl G. Graves Sr. - 173,927,840 votes in favor and 37,620,969 votes withheld; Craig E. Weatherup - 173,966,269 votes in favor and 37,582,540 votes withheld; and James M. Zimmerman -173,979,300 votes in favor and 37,569,509 votes withheld. There were no broker non-votes on this item. ii. The stockholders ratified the employment of KPMG LLP as the Company's independent accountants for the fiscal year ending February 3, 2001. The votes for the ratification were 178,294,179, the votes against the ratification were 76,043, the votes abstained were 395,135, and there were no broker non-votes. iii. The stockholders approved a proposal to amend the 1995 Executive Equity Incentive Plan to increase the number of shares of common stock of the Company available for issuance thereunder. The votes for the proposal were 113,964,761, the votes against the proposal were 64,279,491, the votes abstained were 521,105, and there were no broker non-votes. iv. The stockholders approved a proposal to amend the 1992 Incentive Bonus Plan to increase the maximum annual incentive award that may be paid to any participant of the Plan. The votes for the proposal were 164,516,692, the votes against the proposal were 11,850,801, the votes abstained were 2,397,864, and there were no broker non-votes. v. The stockholders approved a stockholder's proposal seeking the adoption of a system for the annual election of directors. The votes for the proposal were 121,569,001, the votes against the proposal were 40,449,963, the votes abstained were 997,697, and there were 15,779,126 broker non-votes. 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 Employment Agreement, dated as of April 1, 2000, between Terry J. Lundgren and the Company.* 10.2 1992 Incentive Bonus Plan as amended and restated as of May 19, 2000 (incorporated by reference to Appendix B of the Company's Proxy Statement filed April 19, 2000).* 10.3 1995 Executive Equity Incentive Plan as amended and restated as of May 19, 2000 (incorporated by reference to Appendix A of the Company's Proxy Statement filed April 19, 2000).* 27.1 Financial Data Schedule 27.2 Restated Financial Data Schedule 27.3 Restated Financial Data Schedule _________________ * Constitutes a compensatory plan or arrangement. (b) Reports on Form 8-K No reports were filed on Form 8-K during the quarter ended April 29, 2000. 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 June 13, 2000 /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 0002.txt EMPLOYMENT AGREEMENT dated as of April 1, 2000 between FEDERATED CORPORATE SERVICES, INC. and TERRY J. LUNDGREN EMPLOYMENT AGREEMENT THIS AGREEMENT, made in the City of Cincinnati and State of Ohio, as of the 1st day of April, 2000, between FEDERATED CORPORATE SERVICES, a Delaware corporation (hereinafter called the "Employer"), and TERRY J. LUNDGREN (hereinafter called the "Employee"). In consideration of the premises, it is agreed by and between the parties hereto as follows: ARTICLE I EMPLOYMENT 1.1 Term and Duties. The Employer shall employ the Employee, and the Employee shall serve the Employer, as an executive for the period (the "Term") beginning on the date of this Agreement and ending on the later of (a) the date set forth on Exhibit A hereto and (b) any later date to which the Term may have been extended by agreement of the parties. During the Term the Employee shall faithfully and in conformity with the directions of the Board of Directors of the Employer (the "Board") or its delegate perform the duties of his employment and shall devote to the performance of such duties his full time and attention. During the Term the Employee shall serve in the office or offices of the Employer to which the Board may from time to time elect or appoint him. The Employee shall be excused from performing any services hereunder during periods of temporary incapacity and during vacations in accordance with the Employer's disability and vacation policies. 1.2 Compensation. In consideration of his services during the Term, the Employer shall pay the Employee cash compensation at an annual rate not less than the greater of his current base salary as set forth on Exhibit A hereto or the base salary of the Employee most recently approved by the Board or its delegate ("Base Compensation"). Employee's Base Compensation shall be subject to such increases as may be approved by the Board or its delegate. 1.3 Payment Schedule. The Base Compensation specified in Section 1.2(a) hereof shall be payable as current salary, in installments not less frequently than monthly, and at the same rate for any fraction of a month unexpired at the end of the Term. 1.4 Expenses. During the Term the Employee shall be allowed reasonable traveling expenses and shall be furnished office space, assistance and accommodations suitable to the character of his position with the Employer and adequate for the performance of his duties hereunder. 1.5 Termination in Case of Disability. The Employee shall not be in breach of this Agreement if he shall fail to perform his duties hereunder because of physical or mental disability. If for a continuous period of 12 months during the Term the Employee fails to render services to the Employer because of the Employee's physical or mental disability, the Board or its delegate may end the Term prior to its stated termination date. If there should be any dispute between the parties as to the Employee's physical or mental disability at any time, such question shall be settled by the opinion of an impartial reputable physician agreed upon for the purpose by the parties or their representatives, or failing agreement within 10 days of a written request therefor by either party to the other, then one designated by the then president of the local Academy of Medicine. The written opinion of such physician as to the matter in dispute shall be final and binding on the parties. 1.6 Termination of Services. If the Employer notifies the Employee that his services will no longer be required during the Term, the Employee shall be entitled (except as otherwise provided in Section 1.5 or Section 1.7 hereof) to continue to receive his Base Compensation for the remainder of the Term. 1.7 Mitigation. If the Employee receives notice from the Employer pursuant to Section 1.6 hereof, the Employee (subject to Section 2.4 hereof) shall be free to become actively engaged with another business and shall use his best efforts to find other comparable employment. Upon the payment to the Employee of compensation for employment or other services by any unaffiliated third party, the Employee shall automatically cease to be an employee of the Employer. The Employee shall promptly notify the Employer of any such employment or other services and of the compensation received, to be received or receivable from his subsequent employer or such other party attributable to the Term. All Base Compensation otherwise payable to the Employee by the Employer under this Agreement during the remainder of the Term shall be reduced to the extent of his similar compensation received, to be received or receivable from such other employment or other services. 1.8 Termination for Cause. The Employer may terminate the employment of the Employee and this Agreement and all of its obligations hereunder, except for obligations accrued but unpaid to the effective date of termination, for Cause upon notice given pursuant to this Section. As used in this Agreement, the term "Cause" shall mean: (a) an intentional act of fraud, embezzlement, theft or any other material violation of law in connection with the Employee's duties or in the course of his employment with the Employer; (b) intentional wrongful damage to material assets of the Employer; (c) intentional wrongful disclosure of material confidential information of the Employer; (d) intentional wrongful engagement in any competitive activity which would constitute a material breach of the duty of loyalty; or (e) intentional breach of any stated material employment policy of the Employer. No act, or failure to act, on the part of an Employee shall be deemed "intentional" if it was due primarily to an error in judgment or negligence, but shall be deemed "intentional" only if done, or omitted to be done, by the Employee not in good faith and without reasonable belief that his action or omission was in or not opposed to the best interest of the Employer. Failure to meet performance standards or objectives of the Employer shall not constitute Cause for purposes hereof. 1.9 Election of Benefits. If the Employee receives notice from the Employer pursuant to Section 1.6 hereof, the Employee shall have the right to elect to receive (in lieu of the payments hereunder specified in such Section 1.6) any benefits that may be payable to him pursuant to any severance plan of the Employer applicable to him. If no such election is made, the amounts specified in such Section 1.6 shall be payable as specified therein, no benefit shall be payable to the Employee under such severance plan, and the Employee hereby expressly waives any benefits that might otherwise be due him under such severance plan. ARTICLE II CERTAIN OBLIGATIONS OF THE EMPLOYEE 2.1 No Participation in Other Businesses. During the Term (except as otherwise expressly provided in Section 1.7 hereof) the Employee shall not, without the consent of the Board or its delegate, become actively associated with or engaged in any business other than that of the Employer or a division or affiliate of the Employer, and he shall do nothing inconsistent with his duties to the Employer. If the Employee shall breach his obligations under this Section, he shall promptly reimburse the Employer for any monies paid by the Employer in connection with his relocation during the Term or in contemplation of the signing of this Agreement, including, without limitation, any bonus or relocation expenses paid for or incurred by the Employer, including, without limitation, carrying costs for property purchased from or on behalf of the Employee. Any such reimbursement shall be in addition to any other remedy for breach of this Agreement that the Employer may be entitled to at law or in equity. 2.2 Trade Secrets and Confidential Information. Employee shall not (either during the Term or thereafter) without the consent of the Employer disclose to anyone outside of the Employer, or use in other than the Employer's business, trade secrets or confidential information relating to the Employer's business in any way obtained by him while employed by the Employer. 2.3 Noncompetition. It is recognized by the Employee and the Employer that Employee's duties hereunder will entail the receipt of trade secrets and confidential information, which include not only information concerning the Employer's current operations, procedures, suppliers and other contacts, but also its short-range and long-range plans, and that such trade secrets and confidential information have been developed by the Employer and its affiliates at substantial cost and constitute valuable and unique property of the Employer. Accordingly, the Employee acknowledges that the foregoing makes it reasonably necessary for the protection of the Employer's business interests that the Employee not compete with the Employer or any of its affiliates during the Term and for a reasonable and limited period thereafter. Therefore, during the Term and for a period of one year thereafter, the Employee shall not have an investment of $100,000 or more in a Competing Business (as hereinafter defined) and shall not render personal services to any such Competing Business in any manner, including, without limitation, as owner, partner, director, trustee, officer, employee, consultant or advisor thereof. The noncompete provisions of this section shall not be applicable to Employee if he has been notified pursuant to Section 1.6 hereof that his services will no longer be required during the Term or if Employee has been advised that his services will no longer be required after the expiration of the Term. If the Employee shall breach the covenants contained in this Section 2.3 or in Section 2.2 hereof, the Employer shall have no further obligation to make any payment to the Employee pursuant to this Agreement and may recover from the Employee all such damages as it may be entitled to at law or in equity. In addition, the Employee acknowledges that any such breach is likely to result in immediate and irreparable harm to the Employer for which money damages are likely to be inadequate. Accordingly, the Employee consents to injunctive and other appropriate equitable relief upon the institution of proceedings therefor by the Employer in order to protect the Employer's rights hereunder. Such relief may include, without limitation, an injunction to prevent the Employee from disclosing any trade secrets or confidential information concerning the Employer to any Competing Business, to prevent any Competing Business from receiving from the Employee or using any such trade secrets or confidential information and/or to prevent any such Competing Business from retaining or seeking to retain any other employees of the Employer. Employer agrees, however, that it will not seek injunctive relief for the purposes of preventing Employee from competing with Employer after the expiration of the Term. The provisions of the foregoing sentence shall not apply, however, to injunctions of the type described in the preceding sentence. (a) As used in this Agreement, the term "affiliate" shall mean, with respect to a particular person, a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such person. (b) As used in this Agreement, the term "Competing Business" shall mean any business which: (i) at the time of determination, is substantially similar to the whole or a substantial part of the business conducted by the Employer or any of its divisions or affiliates; (ii) at the time of determination, is operating a store or stores which, during its or their fiscal year preceding the determination, had aggregate net sales, including sales in leased and licensed departments, in excess of $10,000,000, if such store or any of such stores is or are located in a city or within a radius of 25 miles from the outer limits of a city where the Employer, or any of its division's or affiliates, is operating a store or stores which, during its or their fiscal year preceding the determination, had aggregate net sales, including sales in leased and licensed departments, in excess of $10,000,000; and (iii) had aggregate net sales at all its locations, including sales in leased and licensed departments and sales by its divisions and affiliates, during its fiscal year preceding that in which the Employee made such an investment therein, or first rendered personal services thereto, in excess of $25,000,000. 2.4 Conflicts of Interest. The Employee shall not engage in any activity that would violate the Conflict of Interest or Business Ethics Statement signed from time to time by the Employee. ARTICLE III MISCELLANEOUS 3.1 Assignment. This Agreement may be assigned by the Employer to any of its affiliates. This Agreement shall not otherwise be assignable by the Employer without the consent of the Employee, except that, if the Employer shall merge or consolidate with, or transfer all or any substantial portion of its assets, including goodwill, to another corporation or other form of business organization, this Agreement shall (or, in the case of any such transfer, may) be assigned to and shall bind and run to the benefit of the successor of the Employer resulting from such merger, consolidation or transfer. The Employee may not assign, pledge or encumber his interest in this Agreement or any part hereof. 3.2 Governing Law. This Agreement has been executed on behalf of the Employer by an officer of the Employer located in the City of Cincinnati, Ohio. This Agreement and all questions arising in connection herewith shall be governed by the internal substantive laws of the State of Ohio. The Employer and the Employee each consent to the jurisdiction of, and agree that any controversy between them arising out of this Agreement shall be brought in, the United States District Court for the Southern District of Ohio, Western Division; the Court of Common Pleas for Hamilton County, Ohio; or such other court venued within Hamilton County, Ohio as may have subject matter jurisdiction over the controversy. 3.3 Severability. If any portion of this Agreement is held to be invalid or unenforceable, such holding shall not affect any other portion of this Agreement. 3.4 Entire Agreement. This Agreement comprises the entire agreement between the parties hereto and as of the date hereof, supersedes, cancels and annuls any and all prior agreements between the parties hereto. This Agreement may not be modified, renewed or extended orally, but only by a written instrument referring to this Agreement and executed by the parties hereto. 3.5 Gender and Number. Words in the masculine herein may be interpreted as feminine or neuter, and words in the singular as plural, and vice versa, where the sense requires. 3.6 Notices. Any notice or consent required or permitted to be given under this Agreement shall be in writing and shall be effective when given by personal delivery or five business days after being sent by certified U.S. mail, return receipt requested, to the Secretary of Federated Department Stores, Inc. at its principal place of business in the City of Cincinnati or to the Employee at his last known address as shown on the records of the Employer. 3.7 Withholding Taxes. The Employer may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 3.8 Waiver and Release. In consideration of the Employer's entering into this Agreement, and the receipt of other good and valuable consideration, the sufficiency of which is expressly acknowledged, the Employee, for himself and his successors, assigns, heirs, executors and administrators, hereby waives and releases and forever discharges the Employer and its affiliates and their officers, directors, agents, employees, shareholders, successors and assigns from all claims, demands, damages, actions and causes of action whatsoever which he now has on account of any matter, whether known or unknown to him and whether or not previously disclosed to the Employee or the Employer, that relates to or arises out of (a) any existing or former employment agreement (written or oral) entered into between the Employee and the Employer or any of its affiliates (or any amendment or supplement to any such agreement), (b) any agreement providing for a payment or payments or extension of the employment relationship triggered by a merger or sale or other disposition of the stock or assets or restructuring of the Employer or any affiliate of the Employer, or (c) any applicable severance plan. IN WITNESS WHEREOF, the parties hereto have hereunto and to a duplicate hereof set their signatures as of the day and year first above written. FEDERATED CORPORATE SERVICES, INC. By: \s\ Dennis J. Broderick Dennis J. Broderick Title: Senior Vice President, General Counsel and Secretary \s\ Terry J. Lundgren TERRY J. LUNDGREN EXHIBIT A to EMPLOYMENT AGREEMENT Dated as of April 1, 2000 Name: Terry J. Lundgren End of Term: May 1, 2003 Base Compensation: $1.1 million Special Provisions: Notwithstanding any of the provisions in the Agreement to the contrary, if upon, or at any time prior to, the retirement of James Zimmerman ("Zimmerman") as Chairman and Chief Executive Officer of the Company, Employee is advised that he will not be appointed Chairman and Chief Executive Officer of the Company effective immediately following Zimmerman's retirement (the date on which any such advice is received is called the "Advice Date"), Employee may, within ninety days of the Advice Date, elect, by written notice to the Office of the General Counsel, to terminate providing services to the Employer and in such event (i) such termination will be effective on a date to be mutually agreed to between Employee and the Employer but in any event no later than ninety (90) days following the Advice Date (the effective date of the termination is called the "Service Effective Date"); (ii) Employee shall be entitled to receive the Base Compensation, payable on the same periodic basis upon which such Compensation is paid immediately prior to the Advice Date, for a period of up to twenty-seven (27) months following the Advice Date; (iii) Employee shall, during such twenty- seven (27) month period, so long as he shall remain in the employ of the Company, be eligible to participate in, and receive all benefits under, (a) retirement and welfare benefit plans provided by the Employer (including, without limitation, 401k, pension, medical, prescription, dental, salary continuance, individual life, group life, dependent life and accidental and travel accident insurance plans) and as from time to time in effect and applicable to senior executives at the level of President of the Employer and (b) the Employer's executive discount program as from time to time in effect and applicable to senior executives of the Employer at the level of President; (iv) during the twenty four (24) month period following the Service Effective Date Employee shall have no duty to seek to find other employment with, or render services to, a third party but all Base Compensation otherwise payable to the Employee by the Employer during the last twelve (12) months of such twenty four (24) month period shall be reduced to the extent of compensation received, to be received or receivable by Employee in respect of that twelve (12) month period from any such employment with or the rendering of such services to a third party; (v) upon Employee's earning or receipt of payment for employment with or rendering of services to a third party at any time after the Service Effective Date, Employee shall automatically cease to be an employee of the Company and Employee's eligibility to participate in, and receive benefits under, the retirement and welfare benefit plans as set out in (iii), above, shall cease effective upon Employee's earning or receipt of such payment; and (vi) the non- compete provision of the Agreement shall apply during the first twelve (12) month period following the Service Effective Date and shall apply only in respect of Dillards, Inc., Saks Incorporated (except its Saks Fifth Avenue division), The May Department Stores Company, J.C. Penney, Inc., and Sears, Roebuck & Co. EX-27.1 3 0003.txt
5 1,000,000 3-MOS FEB-03-2001 JAN-30-2000 APR-29-2000 249 0 4,031 0 3,869 8,542 6,741 0 17,655 4,441 4,757 0 0 0 0 17,655 4,032 0 0 2,395 1,384 0 100 154 65 0 0 0 0 89 0.42 0.41 Includes the following: Supplies and prepaid expenses 217 Deferred income tax assets 176 Includes the following: Intangible assets - net 1,720 Other assets 652 Includes the following: Deferred income taxes 1,448 Other liabilities 548 Shareholders' Equity 6,461 Includes the following: Interest Income 1
EX-27.2 4 0004.txt
5 1,000,000 3-MOS 3-MOS 3-MOS YEAR JAN-29-2000 JAN-29-2000 JAN-29-2000 JAN-30-1999 JAN-31-1999 MAY-02-1999 AUG-01-1999 FEB-01-1998 MAY-01-1999 JUL-31-1999 OCT-30-1999 JAN-30-1999 239 357 595 307 0 0 0 0 2,165 3,512 3,731 2,209 0 0 0 0 3,599 3,635 4,741 3,259 6,345 7,867 9,498 5,972 6,624 6,689 6,739 6,572 0 0 0 0 15,430 16,879 18,559 13,464 3,999 4,353 5,850 3,068 3,806 4,704 4,658 3,057 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15,430 16,879 18,559 13,464 3,600 4,006 4,137 15,365 0 0 0 0 0 0 0 0 2,174 2,319 2,454 9,218 1,201 1,369 1,381 4,692 0 0 0 0 78 87 95 304 150 233 211 1,163 63 96 88 478 0 0 0 0 0 0 0 0 0 0 0 (23) 0 0 0 0 87 137 123 662 0.42 0.65 0.59 3.16 0.40 0.61 0.56 2.96 Includes the following: Supplies and prepaid expenses 200 Deferred income tax assets 142 Includes the following: Intangible assets - net 1,889 Other assets 572 Includes the following: Deferred income taxes 1,236 Other liabilities 576 Shareholders' Equity 5,813 Restated for leased department accounting. Includes the following: Interest income 3 Includes the following: Supplies and prepaid expenses 221 Deferred income tax assets 142 Includes the following: Intangible assets - net 1,807 Other assets 516 Includes the following: Deferred income taxes 1,240 Other liabilities 586 Shareholders' Equity 5,996 Includes the following: Interest income 2 Includes the following: Supplies and prepaid expenses 269 Deferred income tax asset 162 Includes the following: Intangible assets - net 1,771 Other assets 551 Includes the following: Deferred income taxes 1,345 Other liabilities 582 Shareholders' Equity 6,124 Includes the following: Interest Income 4 Includes the following: Supplies and prepaid expenses 117 Deferred income tax assets 80 Includes the following: Intangible assets - net 631 Other assets 289 Includes the following: Deferred income taxes 1,060 Other liabilities 570 Shareholders' Equity 5,709 Includes the following: Interest Income 12
EX-27.3 5 0005.txt
5 1,000,000 3-MOS 3-MOS 3-MOS YEAR JAN-30-1999 JAN-30-1999 JAN-30-1999 JAN-31-1998 FEB-01-1998 MAY-03-1998 AUG-02-1998 FEB-02-1997 MAY-02-1998 AUG-01-1998 OCT-31-1998 JAN-31-1998 179 281 164 142 0 0 0 0 2,446 2,111 2,107 2,640 0 0 0 0 3,336 3,361 4,322 3,239 6,128 5,976 6,818 6,194 6,422 6,381 6,406 6,520 0 0 0 0 13,553 13,351 14,217 13,738 2,756 2,618 3,719 3,060 3,920 3,890 3,549 3,919 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 13,553 13,351 14,217 13,738 3,357 3,426 3,548 15,220 0 0 0 0 0 0 0 0 2,022 2,017 2,145 9,200 1,154 1,142 1,146 4,679 0 0 0 0 83 76 74 418 104 193 185 958 44 86 75 383 0 0 0 0 0 0 0 0 0 0 (23) (39) 0 0 0 0 60 107 87 536 0.29 0.51 0.42 2.56 0.27 0.47 0.40 2.41 Includes the following: Supplies and prepaid expenses 105 Deferred income tax assets 62 Includes the following: Intangible assets - net 684 Other assets 319 Includes the following: Deferred income taxes 975 Other liabilities 557 Shareholders' Equity 5,345 Restated for leased department accounting. Includes the following: Interest income 6 Includes the following: Supplies and prepaid expenses 118 Deferred income tax assets 105 Includes the following: Intangible assets - net 677 Other assets 317 Includes the following: Deferred income taxes 977 Other liabilities 557 Shareholders' Equity 5,309 Includes the following: Interest income 2 Includes the following: Supplies and prepaid expenses 120 Deferred income tax assets 105 Includes the following: Intangible assets - net 670 Other assets 323 Includes the following: Deferred income taxes 1,024 Other liabilities 557 Shareholders' Equity 5,368 Includes the following: Interest Income 2 Includes the following: Supplies and prepaid expenses 115 Deferred income tax assets 58 Includes the following: Intangible assets - net 690 Other assets 334 Includes the following: Deferred income taxes 939 Other liabilities 564 Shareholders' Equity 5,256 Includes the following: Interest Income 35
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