Condensed Consolidating Financial Information

Certain debt obligations of the Company described in Note 6, "Financing," which constitute debt obligations of Parent’s 100%-owned subsidiary, Macy’s Retail Holdings, Inc. (“Subsidiary Issuer”), are fully and unconditionally guaranteed by Parent. In the following condensed consolidating financial statements, “Other Subsidiaries” includes all other direct subsidiaries of Parent, including Bluemercury, Inc., FDS Bank, West 34th Street Insurance Company New York, Macy's Merchandising Corporation, Macy’s Merchandising Group, Inc. and its subsidiaries Macy's Merchandising Group (Hong Kong) Limited, Macy's Merchandising Group Procurement, LLC, Macy’s Merchandising Group International, LLC, Macy's Merchandising Group International (Hong Kong) Limited, and its majority-owned subsidiary Macy's China Limited. “Subsidiary Issuer” includes operating divisions and non-guarantor subsidiaries of the Subsidiary Issuer on an equity basis. The assets and liabilities and results of operations of the non-guarantor subsidiaries of the Subsidiary Issuer are also reflected in “Other Subsidiaries.”

Condensed Consolidating Statements of Comprehensive Income for 2016, 2015 and 2014, Consolidating Balance Sheets as of January 28, 2017 and January 30, 2016, and the related Condensed Consolidating Statements of Cash Flows for 2016, 2015, and 2014 are presented on the following pages.

MACY’S, INC.

Condensed Consolidating Statement of Comprehensive Income

For 2016

(millions)



	Parent			Subsidiary Issuer			Other Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	—		$	10,677		$	23,436		$	(8,335	)	$	25,778
Cost of sales	—			(6,787		)	(17,169		)	8,335			(15,621		)
Gross margin	—			3,890			6,267			—			10,157
Selling, general and administrative expenses	(2		)	(3,739		)	(4,524		)	—			(8,265		)
Impairments, store closing and other costs	—			(295		)	(184		)	—			(479		)
Settlement charges	—			(34		)	(64		)	—			(98		)
Operating income (loss)	(2		)	(178		)	1,495			—			1,315
Interest (expense) income, net:
External	2			(366		)	1			—			(363		)
Intercompany	—			(200		)	200			—			—
Equity in earnings of subsidiaries	619			255			—			(874		)	—
Income (loss) before income taxes	619			(489		)	1,696			(874		)	952
Federal, state and local income tax benefit (expense)	—			281			(622		)	—			(341		)
Net income (loss)	619			(208		)	1,074			(874		)	611
Net loss attributable to noncontrolling interest	—			—			8			—			8
Net income (loss) attributable to Macy's, Inc. shareholders	$	619		$	(208	)	$	1,082		$	(874	)	$	619
Comprehensive income (loss)	$	766		$	(61	)	$	1,153		$	(1,100	)	$	758
Comprehensive loss attributable to noncontrolling interest	—			—			8			—			8
Comprehensive income (loss) attributable to Macy's, Inc. shareholders	$	766		$	(61	)	$	1,161		$	(1,100	)	$	766

MACY’S, INC.

Condensed Consolidating Statement of Comprehensive Income

For 2015

(millions)



	Parent			Subsidiary Issuer			Other Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	—		$	11,959		$	24,037		$	(8,917	)	$	27,079
Cost of sales	—			(7,670		)	(17,743		)	8,917			(16,496		)
Gross margin	—			4,289			6,294			—			10,583
Selling, general and administrative expenses	(2		)	(3,980		)	(4,274		)	—			(8,256		)
Impairments, store closing and other costs	—			(170		)	(118		)	—			(288		)
Operating income (loss)	(2		)	139			1,902			—			2,039
Interest (expense) income, net:
External	1			(361		)	(1		)	—			(361		)
Intercompany	—			(230		)	230			—			—
Equity in earnings of subsidiaries	1,072			421			—			(1,493		)	—
Income (loss) before income taxes	1,071			(31		)	2,131			(1,493		)	1,678
Federal, state and local income tax benefit (expense)	1			120			(729		)	—			(608		)
Net income	1,072			89			1,402			(1,493		)	1,070
Net loss attributable to noncontrolling interest	—			—			2			—			2
Net income attributable to Macy's, Inc. shareholders	$	1,072		$	89		$	1,404		$	(1,493	)	$	1,072
Comprehensive income	$	1,101		$	118		$	1,415		$	(1,535	)	$	1,099
Comprehensive loss attributable to noncontrolling interest	—			—			2			—			2
Comprehensive income attributable to Macy's, Inc. shareholders	$	1,101		$	118		$	1,417		$	(1,535	)	$	1,101

MACY’S, INC.

Condensed Consolidating Statement of Comprehensive Income

For 2014

(millions)



	Parent			Subsidiary Issuer			Other Subsidiaries			Consolidating Adjustments			Consolidated
Net sales	$	—		$	13,078		$	23,522		$	(8,495	)	$	28,105
Cost of sales	—			(8,127		)	(17,231		)	8,495			(16,863		)
Gross margin	—			4,951			6,291			—			11,242
Selling, general and administrative expenses	(3		)	(4,351		)	(4,001		)	—			(8,355		)
Impairments, store closing and other costs	—			(45		)	(42		)	—			(87		)
Operating income (loss)	(3		)	555			2,248			—			2,800
Interest (expense) income, net:
External	1			(394		)	—			—			(393		)
Intercompany	—			(230		)	230			—			—
Premium on early retirement of debt	—			(17		)	—			—			(17		)
Equity in earnings of subsidiaries	1,528			624			—			(2,152		)	—
Income before income taxes	1,526			538			2,478			(2,152		)	2,390
Federal, state and local income tax benefit (expense)	—			25			(889		)	—			(864		)
Net income	1,526			563			1,589			(2,152		)	1,526
Net loss attributable to noncontrolling interest	—			—			—			—			—
Net income attributable to Macy's, Inc. shareholders	$	1,526		$	563		$	1,589		$	(2,152	)	$	1,526
Comprehensive income	$	1,119		$	156		$	1,338		$	(1,494	)	$	1,119
Comprehensive loss attributable to noncontrolling interest	—			—			—			—			—
Comprehensive income attributable to Macy's, Inc. shareholders	$	1,119		$	156		$	1,338		$	(1,494	)	$	1,119

MACY’S, INC.

Condensed Consolidating Balance Sheet

As of January 28, 2017

(millions)



	Parent		Subsidiary Issuer		Other Subsidiaries			Consolidating Adjustments			Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents	$	938	$	81	$	278		$	—		$	1,297
Receivables	—		169		353			—			522
Merchandise inventories	—		2,565		2,834			—			5,399
Prepaid expenses and other current assets	—		84		324			—			408
Total Current Assets	938		2,899		3,789			—			7,626
Property and Equipment – net	—		3,397		3,620			—			7,017
Goodwill	—		3,315		582			—			3,897
Other Intangible Assets – net	—		51		447			—			498
Other Assets	—		47		766			—			813
Deferred Income Taxes	26		—		—			(26		)	—
Intercompany Receivable	375		—		2,428			(2,803		)	—
Investment in Subsidiaries	3,137		3,540		—			(6,677		)	—
Total Assets	$	4,476	$	13,249	$	11,632		$	(9,506	)	$	19,851
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt	$	—	$	306	$	3		$	—		$	309
Merchandise accounts payable	—		590		833			—			1,423
Accounts payable and accrued liabilities	15		1,064		2,484			—			3,563
Income taxes	71		16		265			—			352
Total Current Liabilities	86		1,976		3,585			—			5,647
Long-Term Debt	—		6,544		18			—			6,562
Intercompany Payable	—		2,803		—			(2,803		)	—
Deferred Income Taxes	—		688		781			(26		)	1,443
Other Liabilities	66		500		1,311			—			1,877
Shareholders’ Equity:
Macy's, Inc.	4,323		738		5,939			(6,677		)	4,323
Noncontrolling Interest	—		—		(1		)	—			(1		)
Total Shareholders’ Equity	4,323		738		5,938			(6,677		)	4,322
Total Liabilities and Shareholders’ Equity	$	4,475	$	13,249	$	11,633		$	(9,506	)	$	19,851

MACY’S, INC.

Condensed Consolidating Balance Sheet

As of January 30, 2016

(millions)



	Parent		Subsidiary Issuer		Other Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS:
Current Assets:
Cash and cash equivalents	$	741	$	91	$	277	$	—		$	1,109
Receivables	—		217		341		—			558
Merchandise inventories	—		2,702		2,804		—			5,506
Prepaid expenses and other current assets	—		135		344		—			479
Income taxes	44		—		—		(44		)	—
Total Current Assets	785		3,145		3,766		(44		)	7,652
Property and Equipment – net	—		3,925		3,691		—			7,616
Goodwill	—		3,315		582		—			3,897
Other Intangible Assets – net	—		52		462		—			514
Other Assets	—		154		743		—			897
Deferred Income Taxes	14		—		—		(14		)	—
Intercompany Receivable	—		—		3,800		(3,800		)	—
Investment in Subsidiaries	4,725		3,804		—		(8,529		)	—
Total Assets	$	5,524	$	14,395	$	13,044	$	(12,387	)	$	20,576
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Current Liabilities:
Short-term debt	$	—	$	641	$	1	$	—		$	642
Merchandise accounts payable	—		667		859		—			1,526
Accounts payable and accrued liabilities	35		1,439		1,859		—			3,333
Income taxes	—		41		230		(44		)	227
Total Current Liabilities	35		2,788		2,949		(44		)	5,728
Long-Term Debt	—		6,976		19		—			6,995
Intercompany Payable	1,218		2,582		—		(3,800		)	—
Deferred Income Taxes	—		693		798		(14		)	1,477
Other Liabilities	21		558		1,544		—			2,123
Shareholders’ Equity:
Macy's, Inc.	4,250		798		7,731		(8,529		)	4,250
Noncontrolling Interest	—		—		3		—			3
Total Shareholders’ Equity	4,250		798		7,734		(8,529		)	4,253
Total Liabilities and Shareholders’ Equity	$	5,524	$	14,395	$	13,044	$	(12,387	)	$	20,576

MACY’S, INC.

Condensed Consolidating Statement of Cash Flows

For 2016

(millions)



	Parent			Subsidiary Issuer			Other Subsidiaries			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net income (loss)	$	619		$	(208	)	$	1,074		$	(874	)	$	611
Impairments, store closing and other costs	—			295			184			—			479
Settlement charges	—			34			64			—			98
Equity in earnings of subsidiaries	(619		)	(255		)	—			874			—
Dividends received from subsidiaries	957			575			—			(1,532		)	—
Depreciation and amortization	—			407			651			—			1,058
(Increase) decrease in working capital	110			(482		)	92			—			(280		)
Other, net	28			51			(244		)	—			(165		)
Net cash provided by operating activities	1,095			417			1,821			(1,532		)	1,801
Cash flows from investing activities:
Purchase of property and equipment and capitalized software, net	—			12			(251		)	—			(239		)
Other, net	—			32			20			—			52
Net cash provided (used) by investing activities	—			44			(231		)	—			(187		)
Cash flows from financing activities:
Debt repaid, net of debt issued	—			(750		)	1			—			(749		)
Dividends paid	(459		)	—			(1,532		)	1,532			(459		)
Common stock acquired, net of issuance of common stock	(280		)	—			—			—			(280		)
Proceeds from noncontrolling interest	—			—			4			—			4
Intercompany activity, net	(144		)	255			(111		)	—			—
Other, net	(15		)	24			49			—			58
Net cash used by financing activities	(898		)	(471		)	(1,589		)	1,532			(1,426		)
Net increase (decrease) in cash and cash equivalents	197			(10		)	1			—			188
Cash and cash equivalents at beginning of period	741			91			277			—			1,109
Cash and cash equivalents at end of period	$	938		$	81		$	278		$	—		$	1,297

MACY’S, INC.

Condensed Consolidating Statement of Cash Flows

For 2015

(millions)



	Parent			Subsidiary Issuer			Other Subsidiaries			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	1,072		$	89		$	1,402		$	(1,493	)	$	1,070
Impairments, store closing and other costs	—			170			118			—			288
Equity in earnings of subsidiaries	(1,072		)	(421		)	—			1,493			—
Dividends received from subsidiaries	1,086			—			—			(1,086		)	—
Depreciation and amortization	—			440			621			—			1,061
(Increase) decrease in working capital	25			(340		)	(81		)	—			(396		)
Other, net	(8		)	(78		)	47			—			(39		)
Net cash provided (used) by operating activities	1,103			(140		)	2,107			(1,086		)	1,984
Cash flows from investing activities:
Purchase of property and equipment and capitalized software, net	—			(88		)	(821		)	—			(909		)
Other, net	—			83			(266		)	—			(183		)
Net cash used by investing activities	—			(5		)	(1,087		)	—			(1,092		)
Cash flows from financing activities:
Debt issued, net of debt repaid	—			348			(1		)	—			347
Dividends paid	(456		)	—			(1,086		)	1,086			(456		)
Common stock acquired, net of issuance of common stock	(1,838		)	—			—			—			(1,838		)
Proceeds from noncontrolling interest	—			—			5			—			5
Intercompany activity, net	12			(243		)	231			—			—
Other, net	12			37			(136		)	—			(87		)
Net cash provided (used) by financing activities	(2,270		)	142			(987		)	1,086			(2,029		)
Net increase (decrease) in cash and cash equivalents	(1,167		)	(3		)	33			—			(1,137		)
Cash and cash equivalents at beginning of period	1,908			94			244			—			2,246
Cash and cash equivalents at end of period	$	741		$	91		$	277		$	—		$	1,109

MACY’S, INC.

Condensed Consolidating Statement of Cash Flows

For 2014

(millions)



	Parent			Subsidiary Issuer			Other Subsidiaries			Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	1,526		$	563		$	1,589		$	(2,152	)	$	1,526
Impairments, store closing and other costs	—			45			42			—			87
Equity in earnings of subsidiaries	(1,528		)	(624		)	—			2,152			—
Dividends received from subsidiaries	1,088			1			—			(1,089		)	—
Depreciation and amortization	—			454			582			—			1,036
Increase (decrease) in working capital	9			74			(69		)	—			14
Other, net	(20		)	(177		)	243			—			46
Net cash provided by operating activities	1,075			336			2,387			(1,089		)	2,709
Cash flows from investing activities:
Purchase (disposition) of property and equipment and capitalized software, net	—			(260		)	(636		)	—			(896		)
Other, net	—			(12		)	(62		)	—			(74		)
Net cash used by investing activities	—			(272		)	(698		)	—			(970		)
Cash flows from financing activities:
Debt repaid, net of debt issued	—			177			(3		)	—			174
Dividends paid	(421		)	—			(1,089		)	1,089			(421		)
Common stock acquired, net of issuance of common stock	(1,643		)	—			—			—			(1,643		)
Proceeds from noncontrolling interest	—			—			—			—			—
Intercompany activity, net	927			(283		)	(644		)	—			—
Other, net	15			52			57			—			124
Net cash used by financing activities	(1,122		)	(54		)	(1,679		)	1,089			(1,766		)
Net increase (decrease) in cash and cash equivalents	(47		)	10			10			—			(27		)
Cash and cash equivalents at beginning of period	1,955			84			234			—			2,273
Cash and cash equivalents at end of period	$	1,908		$	94		$	244		$	—		$	2,246