SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: October 11, 1995
FEDERATED DEPARTMENT STORES, INC.
151 West 34th Street, New York, NY 10001
(212) 695-4400
-and-
7 West Seventh Street, Cincinnati,Ohio 45202
(513) 579-7000
Delaware 1-13536 13-3324058
-------------------------------------------------------------------------------
(State of Incorporation) (Commission File No.) (IRS Id. No.)
Exhibit Index on Page 16
<PAGE>
Item 2. Acquisition or Disposition of Assets.
------------------------------------
GENERAL
On October 11, 1995, a wholly owned subsidiary ("Newco") of Federated
Department Stores, Inc. ("Federated") merged with and into Broadway Stores, Inc.
("Broadway") pursuant to an Agreement and Plan of Merger, dated as of August 14,
1995 (the "Merger Agreement"), among Broadway, Federated, and Newco. At the
effective time of such merger (the "Merger"), among other things, (i) each then-
outstanding share of common stock of Broadway ("Broadway Common Stock") was
converted into the right to receive 0.27 shares of common stock of Federated
("Federated Common Stock"), (ii) each then-outstanding share of Series A
Preferred Stock of Broadway was converted into the right to receive one one-
thousandth of a share of new Series A Preferred Stock of Broadway (as the
surviving corporation in the Merger), and (iii) each then-outstanding share of
common stock of Newco was converted into 370.44 shares of common stock of
Broadway (as the surviving corporation in the Merger). Immediately following
the Merger, Federated owned all 37,044 outstanding shares of the common stock of
Broadway, which shares, after giving effect to the issuance pursuant to the
Merger of shares of new Series A Preferred Stock of Broadway, represented
approximately 98.0% of the total combined voting power of the outstanding
capital stock of Broadway.
In connection with the Merger, a wholly owned subsidiary of Federated
("FNC II") purchased from The Prudential Insurance Company of America
("Prudential") certain mortgage indebtedness of Broadway (the
"Broadway/Prudential Mortgage Debt") for consideration consisting of a $221.1
million promissory note of FNC II and 6,751,055 shares of Federated Common Stock
(subject to possible adjustment based upon the trading prices for Federated
Common Stock during the period of 10 trading days following the consummation of
the Merger).
Prior to the Merger, Broadway operated department stores that sold a
wide range of merchandise, including women's, men's, and children's apparel,
cosmetics, home furnishings, and other consumer goods. The assets of Broadway
used in such business prior to the Merger included, among others, interests in
real estate and improvements thereon, store fixtures, and equipment. Although
Federated anticipates that a number of Broadway's stores will be disposed of, as
of the date hereof Federated had not entered into any agreements providing for
such dispositions and there can be no assurance that Federated will do so or as
to the timing or terms thereof. Federated anticipates that Broadway's retained
department stores will be converted into Macy's, Bullock's, or Bloomingdale's
stores commencing in 1996.
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<PAGE>
CERTAIN FINANCING TRANSACTIONS
On September 27, 1995, Federated completed a public offering of $350.0
million aggregate principal amount of 5% Convertible Subordinated Notes due 2003
of Federated (the "New Convertible Notes"). On October 6, 1995, Federated
completed a public offering of $400.0 million aggregate principal amount of 8-
1/8% Senior Notes due 2002 of Federated (the "New Senior Notes"). The foregoing
offerings (collectively, the "Offerings") resulted in combined net proceeds to
Federated of approximately $733.9 million, of which (i) approximately $313.4
million was deposited by Federated on October 6, 1995 for application to the
prepayment and redemption of the entire $307.4 million outstanding principal
amount of the Senior Convertible Discount Notes due 2004 of Federated (the
"Federated Convertible Notes") together with accrued and unpaid interest
thereon, (ii) up to approximately $147.6 million is expected to be used to fund
the aggregate purchase price for such of the 6-1/4% Convertible Senior
Subordinated Notes due 2000 of Broadway (the "Broadway Convertible Notes") that
Broadway may be required to purchase pursuant to a mandatory offer to repurchase
all of the Broadway Convertible Notes, and (iii) the remainder, together with
other funds available to Federated, is expected to be used to pay certain costs
and expenses associated with the Merger and the conversion of certain of
Broadway's stores into Macy's, Bullock's, and Bloomingdale's stores (including
costs and expenses associated with the remodelling of such stores in connection
with such conversions). Prior to the full application thereof as described
above, the net proceeds of the Offerings are expected to be used by Federated to
temporarily reduce revolving credit borrowings.
CAPITALIZATION
The following table sets forth (i) the capitalization of each of
Federated and Broadway as of July 29, 1995 and (ii) the pro forma capitalization
of Federated as of that date, giving effect to (a) the consummation of the
Merger, (b) the purchase by FNC II of the Broadway/Prudential Mortgage Debt for
consideration assumed to consist of a $221,149,531 promissory note of FNC II and
7,207,207 shares of Federated Common Stock, and (c) the consummation of the
Offerings and the application of the net proceeds thereof to prepay and redeem
the entire outstanding principal amount of the Federated Convertible Notes, to
repurchase the entire outstanding principal amount of the Broadway Convertible
Notes, and to temporarily reduce revolving credit borrowings (see "Certain
Financing Transactions") as if such transactions had been consummated as of such
date.
The pro forma information set forth below is presented for
illustrative purposes only and is not necessarily indicative
-3-
<PAGE>
of what Federated's actual consolidated capitalization would have been had the
foregoing transactions been consummated on July 29, 1995, nor does it give
effect to (a) any transactions other than the foregoing transactions and those
discussed in the Notes to Unaudited Pro Forma Financial Information contained
herein or (b) Federated's or Broadway's respective results of operations since
July 29, 1995. Accordingly, the pro forma information set forth below does not
purport to be indicative of Federated's consolidated capitalization as of the
date hereof or as of any future date.
The following table should be read in conjunction with the historical
financial statements of Federated and Broadway, the unaudited pro forma
financial information and the related notes, and the other information contained
herein.
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<PAGE>
<TABLE><CAPTION>
PRO FORMA CAPITALIZATION
July 29, 1995
(unaudited)
(in thousands)
Historical
----------------------
Federated Broadway Pro Forma
--------------- --------- ---------
<S> <C> <C> <C>
Short-term debt:
----------------
Bank credit facility . . . . . . . . . . . . . . . . $ 200,000 $ ---- $ ----
------------------------------------------------------- ------------- ---------- --------
Working capital facility . . . . . . . . . . . . . . ---- 51,676 ----
------------------------------------------------------- ----------- ------ ---------
Current portion of long-term debt . . . . . . . . . . 59,988 6,750 66,738
------------------------------------------------------- ---------- --------- ---------
Total short-term debt . . . . . . . . . . . . . . 259,988 58,426 66,738
---------- --------- ---------
Long-term debt:
Bank credit facility . . . . . . . . . . . . . . . . 1,700,000 ---- 1,673,534
Receivables backed certificates . . . . . . . . . . . 1,654,052 ---- 1,654,052
Receivable based financing . . . . . . . . . . . . . ---- 503,584 503,584
Mortgages . . . . . . . . . . . . . . . . . . . . . 416,844 521,384 517,078
FNC note . . . . . . . . . . . . . . . . . . . . . . ---- ---- 221,150
Senior notes . . . . . . . . . . . . . . . . . . . . 450,000 ---- 450,000
Federated Convertible Notes . . . . . . . . . . . . 307,383 ---- ----
Broadway Convertible Notes (a) . . . . . . . . . . . ---- 143,750 ----
New Senior Notes . . . . . . . . . . . . . . . . . . ---- ---- 400,000
New Convertible Notes . . . . . . . . . . . . . . . . ---- ---- 350,000
Tax notes . . . . . . . . . . . . . . . . . . . . . . 174,749 ---- 174,749
Note monetization facility (b) . . . . . . . . . . . 352,000 ---- 352,000
Capitalized leases . . . . . . . . . . . . . . . . . 65,633 39,930 105,563
Other . . . . . . . . . . . . . . . . . . . . . . . 784 ---- 784
-------- --------- ----------
Total long-term debt . . . . . . . . . . . . . . 5,121,445 1,208,648 6,402,494
---------- ---------- ---------
Total debt . . . . . . . . . . . . . . . . . . 5,381,433 1,267,074 6,469,232
---------- ---------- ---------
Shareholders' equity:
Common stock outstanding . . . . . . . . . . . . . . 2,126 470 2,235
Preferred stock outstanding . . . . . . . . . . . . ---- 8 ----
Additional paid-in capital . . . . . . . . . . . . . 3,712,681 502,545 4,264,709
Retained earnings (deficit) . . . . . . . . . . . . 369,948 (197,610) 369,948
Treasury stock . . . . . . . . . . . . . . . . . . . (560,436) --- (560,436)
---------- -------- ----------
Total shareholders' equity . . . . . . . . . . . 3,524,319 305,413 4,076,546
---------- --------- ---------
Total capitalization . . . . . . . . . . . . . $8,905,752 $1,572,487 $10,545,778
========== ========== ===========
Ratio of total debt to total capitalization
(excluding note monetization facility) . . . . . . . 58.80% 80.58% 60.01%
========= ======= =======
</TABLE>
-------------------
(a) Following the consummation of the Merger, Broadway will be required to offer
to purchase all of the outstanding Broadway Convertible Notes at a price equal
to the principal amount thereof plus accrued interest.
(b) The note monetization facility represents debt of a trust of which Federated
is the beneficiary. The repayment of such debt is nonrecourse to Federated and
its assets (other than its interests in such trust).
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<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements of Federated give
effect to (i) the consummation of the Merger, (ii) the purchase by FNC II of the
Broadway/Prudential Mortgage Debt for consideration assumed to consist of a
$221,149,531 promissory note of FNC II and 7,207,207 shares of Federated Common
Stock (the "Debt Purchase"), and (iii) the consummation of the Offerings and the
application of the net proceeds thereof to prepay and redeem the entire
outstanding principal amount of the Federated Convertible Notes, to repurchase
the entire outstanding principal amount of the Broadway Convertible Notes, and
to temporarily reduce revolving credit borrowings (see "Certain Financing
Transactions"), in each case as if the foregoing transactions had been
consummated on July 29, 1995, in the case of the Unaudited Pro Forma Balance
Sheet at July 29, 1995, and on January 30, 1994, in the case of the Unaudited
Pro Forma Statements of Operations for the 26 weeks ended July 29, 1995 and the
52 weeks ended January 28, 1995. Because Federated's acquisition of R.H. Macy &
Co., Inc. ("Macy's") on December 19, 1994 was accounted for under the purchase
method of accounting, Federated's historical statements of operations give
effect to the results of operations of the Macy's business only from and after
such date. The Unaudited Pro Forma Statement of Operations for the 52 weeks
ended January 28, 1995 gives effect to Federated's acquisition of Macy's as if
such acquisition had been consummated on January 30, 1994 rather than on
December 19, 1994.
The following unaudited pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of what Federated's
actual financial position or results of operations would have been had the
foregoing transactions, including the acquisition of Macy's, been consummated on
such dates, nor does it give effect to (a) any transactions other than those
discussed above or in the accompanying Notes to Unaudited Pro Forma Financial
Information, (b) Federated's or Broadway's results of operations since July 29,
1995, (c) the synergies, cost savings, and one-time charges expected to result
from the Merger and from the acquisition of Macy's, or (d) the effects of sales
of stores which may occur subsequent to the Merger. Accordingly, the pro forma
financial information does not purport to be indicative of Federated's financial
position or results of operations as of the date hereof or for any period ended
on the date hereof or as of or for any other future date or period.
The following unaudited pro forma financial information is based in part on
the historical financial statements of Federated and Broadway (and, with respect
to the 52-weeks ended January 28, 1995, certain financial data of Macy's) and
should be read in conjunction with such historical financial
-6-
<PAGE>
statements, the related notes, and the other information contained herein or in
the exhibits hereto. Certain historical financial statements of Broadway and
Macy's are filed as Exhibits 99.1 and 99.2, respectively, hereto and are
incorporated herein by reference. Certain items derived from Broadway's
historical financial statements have been reclassified to conform to the pro
forma presentation.
In the preparation of the following unaudited pro forma financial
information, it has been generally assumed that the historical book value of
Broadway's assets approximates the fair value thereof, as an independent
valuation has not been completed. Federated will be required to determine the
fair value of the assets of Broadway (including intangible assets) as of the
date of the Merger. Although such determination of fair value is not presently
expected to result in values that are materially greater or less than the values
assumed in the preparation of the following unaudited pro forma financial
information, there can be no assurance with respect thereto.
The retail business is seasonal in nature, with a higher proportion of sales
and earnings usually being generated in the months of November and December than
in other periods. Because of this seasonality and other factors, results of
operations for an interim period are not necessarily indicative of results of
operations for an entire fiscal year.
-7-
<PAGE>
<TABLE><CAPTION>
UNAUDITED PRO FORMA BALANCE SHEET
July 29, 1995
(in thousands)
Historical Pro Forma Adjustments
---------- ---------------------
Federated Broadway Debit Credit Pro Forma
--------- -------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current Assets:
Cash . . . . . . . . . . . . . . . $ 238,173 $ 15,901 $ $ 8,000 (b) $ 246,074
Accounts receivable . . . . . . . 2,157,512 559,939 2,717,451
Merchandise inventories . . . . . 2,694,564 390,825 12,313 (b) 3,054,164
18,912 (b)
Supplies and prepaid expenses . . . 107,509 25,418 15,800 (b) 117,127
Deferred income taxes . . . . . . 198,123 198,123
----------- ----------- -----------
Total Current Assets . . . . . 5,395,881 992,083 6,332,939
Property and Equipment - net . . . . 5,261,698 885,002 6,146,700
Intangible Assets - net . . . . . . 1,027,033 ------ 123,831 (b) 1,150,864
Notes Receivable . . . . . . . . . . 407,276 ------ 407,276
Other Assets . . . . . . . . . . . . 365,436 34,521 20,725 (a) 20,757 (b) 399,925
----------- ----------- ----------- ----------- -----------
Total Assets . . . . . . . . . . $12,457,324 $ 1,911,606 $ 144,556 $ 75,782 $14,437,704
=========== =========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current Liabilities:
Short-term debt . . . . . . . . . . $ 259,988 $ 58,426 $ 251,676 (a) $ 66,738
Accounts payable and accrued
liabilities . . . . . . . . . . . . 2,139,335 220,324 2,359,659
Income taxes . . . . . . . . . . . 35,729 824 36,553
----------- ----------- -----------
Total Current Liabilities 2,435,052 279,574 2,462,950
Long-Term Debt . . . . . . . . . . . . . 5,121,445 1,208,648 421,150 (c) 221,150 (c) 6,402,494
477,599 (a) 750,000 (a)
Deferred Income Taxes . . . . . . . . . 873,285 14,850 888,135
Other Liabilities . . . . . . . . . . . 503,223 103,121 4,300 (b) 7,718 (b) 607,579
2,183 (b)
Shareholders' Equity . . . . . . . . . . 3,524,319 305,413 305,413 (b) 352,227 (b) 4,076,546
200,000 (c)
----------- ----------- ----------- ----------- -----------
Total Liabilities and
Shareholders' Equity . . . . . . . $12,457,324 $ 1,911,606 $ 1,462,321 $ 1,531,095 $14,437,704
=========== =========== =========== =========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Information.
-8-
<PAGE>
<TABLE><CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the 26 Weeks Ended July 29, 1995
(in thousands, except for per share data)
Historical Pro Forma Adjustments
---------- ---------------------
Federated Broadway Debit Credit Pro Forma
--------- -------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Net sales, including leased
department sales . . . . . . . . . . . $ 6,035,255 $ 884,550 $ $ $ 6,919,805
----------- ----------- -----------
Cost of sales . . . . . . . . . . . . 3,686,836 676,550 ---- (a) 103,075 (d) 4,276,111
15,800 (b)
Selling, general and administrative
expenses . . . . . . . . . . . . . . 2,137,846 226,247 3,096 (c) 2,470,264
103,075 (d)
Business integration and
consolidation expenses . . . . . . . 172,345 ---- 172,345
Charitable contribution to
Federated Department Stores
Foundation . . . . . . . . . . . . . 25,581 ---- 25,581
----------- ----------- -----------
Operating income (loss) . . . . . . . 12,647 (18,247) (24,496)
Interest expense . . . . . . . . . . (223,558) (62,499) 8,198 (e) 28,486 (f) (261,686)
4,083
(g)
Interest income . . . . . . . . . . . 22,790 ---- 22,790
----------- ----------- -----------
Loss before income taxes . . . . . . . (188,121) (80,746) (263,392)
Federal, state and local income tax
benefit . . . . . . . . . . . . . . 64,196 ---- 29,592 (h) 93,788
----------- ----------- -----------
Net loss . . . . . . . . . . . . . . . $ (123,925) $ (80,746) $ (169,604)
=========== =========== ===========
<CAPTION>
OTHER INCOME STATEMENT DATA
<S> <C> <C> <C>
EBITDA (i) . . . . . . . . . . . . . . $ 441,354 $ 425 $ 425,979
Loss per share of common stock . . . . (0.68) (1.72) (0.84)
Deficiency of earnings to fixed charges 188,807 81,260 264,592
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Information.
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<PAGE>
<TABLE><CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the 52 Weeks Ended January 28, 1995
(in thousands, except for per share data)
Pro Forma Adjustments
for Macy's Acquisition
-------------------------
Historical Historical
Federated Debit Credit Pro Forma Broadway
--------- ----- ------ --------- ----------
<S> <C> <C> <C> <C> <C>
Net sales, including leased department sales . . $8,315,877 $ $5,631,177 (A) $13,947,054 $2,086,804
---------- ----------- ----------
Cost of sales . . . . . . . . . . . . . . . . . 5,131,363 3,405,824 (A) 8,537,187 1,560,035
Selling, general and administrative expenses . . 2,549,122 2,110,615 (A) 22,682 (D) 4,575,351 463,075
22,975 (B) 84,679 (E)
Unusual items . . . . . . . . . . . . . . . . . 85,867 195,719 (A) 281,586 --
---------- ----------- ----------
Operating income . . . . . . . . . . . . . . . . 549,525 552,930 63,694
Interest expense . . . . . . . . . . . . . . . . (262,115) 146,104 (A) (465,217) (100,904)
56,998 (C)
Interest income . . . . . . . . . . . . . . . . 43,874 255 (A) 44,129 --
---------- ----------- ----------
Income (loss) before earthquake loss,
reorganization items and income taxes . . . . 331,284 131,842 (37,210)
Earthquake loss . . . . . . . . . . . . . . . . -- 15,000 (A) (15,000) --
Reorganization items . . . . . . . . . . . . . . --- 50,914 (A) 50,914 --
---------- ----------- ----------
Income (loss) before income taxes . . . . . . . 331,284 167,756 (37,210)
Federal, state and local income tax expense . . (143,668) 31,003 (F) (86,011) (150)
26,654 (A)
---------- ----------- ----------
Income (loss) from continuing operations . . . . $ 187,616 $ 81,745 $ (37,360)
========== =========== ==========
<CAPTION>
OTHER INCOME STATEMENT DATA
<S> <C> <C> <C>
EBITDA (i) . . . . . . . . . . . . . . . . . . . $ 921,253 $ 1,303,359 $ 95,770
Income (loss) from continuing operations
per share of common stock . . . . . . . . . . $ 1.41 $ 0.45 $ (0.80)
Ratio of earnings to fixed charges . . . . . . . 1.99x 1.28x --
Deficiency of earnings to fixed charges . . . . . -- -- 40,022
<PAGE>
<CAPTION>
Pro Forma Adjustments for
the Merger, the Debt
--------------------
Purchase and the Offering
-------------------------
Debit Credit Pro Forma
----- ------ ---------
<S> <C> <C> <C>
Net sales, including leased department sales . . $ $ $16,033,858
-----------
Cost of sales . . . . . . . . . . . . . . . . . 295 (a) 201,242 (d) 9,896,275
-- (b)
Selling, general and administrative expenses . . 6,192 (c) 5,245,860
201,242 (d)
Unusual items . . . . . . . . . . . . . . . . . 281,586
-----------
Operating income . . . . . . . . . . . . . . . . 610,137
Interest expense . . . . . . . . . . . . . . . . 15,626 (e) 54,253 (f) (535,621)
8,127 (g)
Interest income . . . . . . . . . . . . . . . . 44,129
-----------
Income (loss) before earthquake loss,
reorganization items and income taxes . . . . 118,645
Earthquake loss . . . . . . . . . . . . . . . . (15,000)
Reorganization items . . . . . . . . . . . . . . 50,914
-----------
Income (loss) before income taxes . . . . . . . 154,559
Federal, state and local income tax expense . . 2,722 (h) (83,439)
-----------
Income (loss) from continuing operations . . . . $ 71,120
===========
<CAPTION>
OTHER INCOME STATEMENT DATA
<S> <C>
EBITDA (i) . . . . . . . . . . . . . . . . . . . $ 1,398,834
Income (loss) from continuing operations
per share of common stock . . . . . . . . . . $ 0.35
Ratio of earnings to fixed charges . . . . . . . 1.22x
Deficiency of earnings to fixed charges . . . . . --
</TABLE>
See accompanying Notes to Unaudited Pro Forma Financial Information.
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<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
Note 1. Unaudited Pro Forma Balance Sheet Adjustments
(a) To record the receipt of net proceeds of the Offerings in the amount of
$733.9 million and the application of $307.4 million of such proceeds to
prepay and redeem the entire outstanding principal amount of the Federated
Convertible Notes and the application of $143.8 million of such proceeds to
repurchase the entire outstanding principal amount of the Broadway
Convertible Notes.
(b) To record: (i) the Merger, which will be accounted for under the purchase
method of accounting, and the assumed issuance of 12,692,852 shares of
Common Stock at an assumed per share price of $27.75 (which was the closing
price of such shares on the NYSE on October 10, 1995); (ii) adjustments to
reflect the net assets acquired at fair value; and (iii) the excess of cost
over net assets acquired, all as set forth below:
<TABLE>
Debit Credit Description
----- ------ -----------
(in thousands)
<S> <C> <C> <C>
Cash . . . . . . . . . . $ $ 8,000 Payment of transaction costs
Merchandise inventories . 12,313 Elimination of Broadway's last-in,
first-out ("LIFO") adjustment
18,912 Elimination of indirect costs
capitalized in Broadway's inventory
Supplies and prepaid
expenses . . . . . . . 15,800 Elimination of deferred expenses of
Broadway
Intangible assets - net . 123,831 To record excess of cost over net
assets
Other assets . . . . . . 20,757 Elimination of deferred financing
costs of Broadway
Other liabilities . . . . 7,718 Adjustment to fair value of
Broadway's pension liability
4,300 Adjustment to fair value of
Broadway's other postretirement
benefits liabilities
2,183 Elimination of Broadway's rent
abatement reserve
Shareholders' equity . . 305,413 Elimination of Broadway's
shareholders' equity
352,227 Issuance of equity pursuant to the
-------- --------
Merger
$435,727 $435,727
======== ========
</TABLE>
(c) To record the purchase by FNC II of the Broadway/Prudential Mortgage Debt
for consideration assumed to consist of a $221,149,531 promissory note of
FNC II and 7,207,207 shares of Federated Common Stock. The actual aggregate
number of shares of Federated Common Stock issuable to Prudential will be
determined with reference to actual market prices for shares of Federated
Common Stock (which market prices may be higher or lower than the $27.75 per
share price assumed for purposes of the pro forma information) during the
period of 10 trading days following the consummation of the Merger.
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<PAGE>
Note 2. Unaudited Pro Forma Statements of Operations for the 26 Weeks Ended
July 29, 1995 and the 52 Weeks Ended January 28, 1995--Adjustments for
the Merger, the Debt Purchase, and the Offerings.
(a) To adjust Broadway's cost of sales to eliminate the effects of the
capitalization of inventory costs which will be expensed subsequent to the
Merger.
(b) To adjust Broadway's cost of sales to eliminate the effects of deferred
expenses written off in connection with the Merger.
(c) To record amortization of estimated excess of cost over net assets acquired
over an assumed 20-year period.
(d) To reclassify buying and occupancy costs as selling, general, and
administrative expenses consistent with Federated's accounting policies.
(e) To record interest expense on the promissory note issued by FNC II in
connection with the purchase of the Broadway/Prudential Mortgage Debt at
assumed rates per annum of 7.41% for the 26 weeks ended July 29, 1995 and
7.07% for the 52 weeks ended January 28, 1995.
(f) To reverse historical interest expense on the Broadway/Prudential Mortgage
Debt purchased by FNC II and to reverse amortization of deferred financing
costs.
(g) To record interest expense on the New Convertible Notes and the New Senior
Notes at interest rates per annum of 5.000% and 8.125% respectively, to
reverse historical expense interest at the blended rate of 9.35% per annum
for the 26 weeks ended July 29, 1995 and 6.00% per annum for the 52 weeks
ended January 28, 1995 on the Federated Convertible Notes, to reverse
historical interest expense at the rate of 6.25% per annum on the Broadway
Convertible Notes, and reduce interest expense on revolving credit
borrowings.
(h) To adjust income tax expense (benefit) based upon an assumed composite
(federal, state, and local) income tax rate of 41%.
(i) EBITDA is defined for purposes of the pro forma information as earnings
before interest, taxes, depreciation, amortization, and unusual items.
EBITDA does not represent and should not be considered as an alternative to
net income or cash flow as determined by generally accepted accounting
principles.
Note 3. Unaudited Pro Forma Statement of Operations for the 52 Weeks Ended
January 28, 1995-- Adjustments for the Macy's Acquisition
(A) To record historical results of Macy's prior to December 19, 1994.
(B) To record amortization of excess of cost over net assets acquired over a 20-
year period and the fair value of Macy's trade names over a 40-year period.
(C) To record interest expense on the indebtedness incurred in connection with
the acquisition of Macy's and to reverse historical interest expense on
certain indebtedness of Macy's and Federated.
(D) To reverse amortization of deferred expense items eliminated in connection
with the acquisition of Macy's.
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<PAGE>
(E) To adjust depreciation of Macy's property and equipment to amounts based on
fair market value.
(F) To adjust income tax expense (benefit) based upon an assumed composite
(federal, state, and local) income tax rate of 40%.
(G) Although no adjustments have been recorded in the Unaudited Pro Forma
Statements of Operations, it is estimated that Federated will have incurred
expenses in connection with the consolidation of Federated's and Macy's
operations of approximately $270.0 million in the 52 weeks subsequent to the
acquisition of Macy's (of which approximately $190.0 million had been
expensed through July 29, 1995).
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<PAGE>
Item 7. Financial Statements, Pro Forma Financial
-----------------------------------------
Information and Exhibits.
-------------------------
(a) The historical financial statements of Broadway filed as Exhibit 99.1
hereto are incorporated herein by this reference.
(b) The pro forma financial information required by Item 7(b) of Form 8-K is
set in Item 2 of this report under the caption "Unaudited Pro Forma
Financial Information."
(c) The following exhibits are filed herewith:
2.1 Agreement and Plan of Merger, dated August 14, 1995, among
Broadway, Federated, and Newco (incorporated by reference to
Exhibit 2.1 to the Proxy Statement/Prospectus included in
Federated's Registration Statement on Form S-4 (Registration No.
33-62077))
10.1 Purchase Agreement, dated August 14, 1995, among Federated,
Prudential, and FNC II (incorporated by reference to Exhibit 10.3
to Federated's Quarterly Report on Form 10-Q for the quarter
ended July 29, 1995)
12 Statement re Computation of Ratios
99.1 (i) Consolidated financial statements of Broadway as of January
28, 1995 and January 29, 1994 and for each of the two fiscal
years ended January 28, 1995, the 17-weeks ended January 30,
1993, and the 35-weeks ended October 3, 1992 and (ii) the
unaudited consolidated financial statements of Broadway as of
July 29, 1995 and for the 26 weeks ended July 29, 1995
(incorporated by reference to Exhibit 99.1 to Federated's Current
Report on Form 8-K dated September 21, 1995)
99.2 (i) Consolidated financial statements of Macy's as of July 30,
1994 and July 31, 1993 and for each of the fiscal years ended
July 30, 1994, July 31, 1993, and August 1, 1992 and (ii) the
unaudited consolidated financial statements of Macy's as of
October 29, 1994 and for the 13 weeks ended October 29, 1994
(incorporated by reference to Exhibit 99.2 to Federated's Current
Report on Form 8-K dated September 21, 1995)
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<PAGE>
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 thereunto duly authorized.
FEDERATED DEPARTMENT STORES, INC.
Date: October 16, 1995 By: /s/ Dennis J. Broderick
---------------------------
Dennis J. Broderick
Senior Vice President
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<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description Page
------ ----------- ----
2.1 Agreement and Plan of Merger, dated
August 14, 1995, among Broadway, Federated,
and Newco (incorporated by reference to Exhibit
2.1 to the Proxy Statement/Prospectus
included in Federated's Registration Statement
on Form S-4 (Registration No. 33-62077))
10.1 Purchase Agreement, dated August 14, 1995,
among Federated, Prudential, and FNC II
(incorporated by reference to Exhibit 10.3 to
Federated's Quarterly Report on Form 10-Q for
the quarter ended July 29, 1995)
12 Statement re Computation of Ratios 18
99.1 (i) Consolidated financial statements of
Broadway as of January 28, 1995 and January 29, 1994 and for
each of the two fiscal years ended January 28, 1995, the 17-
weeks ended January 30, 1993, and the 35-weeks ended
October 3, 1992 and (ii) the unaudited consolidated
financial statements of Broadway as of July 29, 1995 and for
the 26 weeks ended July 29, 1995 (incorporated by reference
to Exhibit 99.1 to Federated's Current Report on Form 8-K
dated September 21, 1995) --
99.2 (i) Consolidated financial statements of
Macy's as of July 30, 1994 and July 31, 1993 and for each of
the fiscal years ended July 30, 1994, July 31, 1993, and
August 1, 1992 and (ii) the unaudited consolidated financial
statements of Macy's as of October 29, 1994 and for the 13
weeks ended October 29, 1994 (incorporated by reference to
Exhibit 99.2 to Federated's Current Report on Form 8-K dated
September 21, 1995) --
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<TABLE><CAPTION>
Exhibit 12
----------
FEDERATED DEPARTMENT STORES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(in thousands, except ratio data)
For the 26 Weeks Ended July 29, 1995 For the 52 Weeks Ended January 28, 1995
--------------------------------------- -----------------------------------------------
Historical
---------------------------
Historical Proforma Historical
Federated Broadway Pro Forma Federated Federated Broadway Pro Forma
---------- -------- --------- ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $ (188,121) $ (80,746) $ (263,392) $ 331,284 $ 167,756 $ (37,210) $ 154,559
Add: Portion of rents
representative of
the interest factor 64,169 8,950 73,119 71,109 128,338 18,850 147,188
Interest expense 223,558 62,499 261,686 262,115 465,217 100,904 535,621
------- ------ -------- ------- ------- ------- -------
Adjusted income (loss) $ 99,606 $ (9,297) $ 71,413 $ 664,508 $ 761,311 $ 82,544 $ 837,368
========== ========== =========== ========== ========== ========= =========
Fixed Charges:
Interest expense $ 223,558 $ 62,499 $ 261,686 $ 262,115 $ 465,217 $ 100,904 $ 535,621
Capitalized interest 686 514 1,200 447 447 2,812 3,259
Portion of rents
representative of the
interest factor 64,169 8,950 73,119 71,109 128,338 18,850 147,188
------ ----- ------ ------ ------- ------ -------
Total fixed charges $ 288,413 $ 71,963 $ 336,005 $ 333,671 $ 594,002 $ 122,566 $ 686,068
========== ========= ========== ========== ========== ========= =========
Ratio of earnings to fixed charges - - - 1.99x 1.28x - 1.22x
Deficiency of earnings to fixed charges $ 188,807 $ 81,260 $ 264,592 - - $ 40,022 -
</TABLE>
- --------------------------------
(a) For the purposes of determining the ratio or deficiency of earnings to
fixed charges, earnings consist of income before income taxes plus
fixed charges (excluding interest capitalized). Fixed charges
represent interest incurred, amortization of debt expense, and that
portion of rental expense on operating leases deemed to be equivalent
of interest.
