6
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal quarter ended
August 1, 1998.
FEDERATED DEPARTMENT STORES, INC.
151 West 34th Street
New York, New York 10001
(212) 494-1602
and
7 West Seventh St.
Cincinnati, Ohio 45202
(513) 579-7000
Delaware 1-13536 13-3324058
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification Number)
The Registrant has filed all reports required to be filed by
Section 12, 13 or 15 (d) of the Act during the preceding 12
months and has been subject to such filing requirements for the
past 90 days.
204,915,141 shares of the Registrant's Common Stock, $.01 par
value, were outstanding as of August 29, 1998.
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income
(Unaudited)
(millions, except per share figures)
13 Weeks Ended 26 Weeks Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Net Sales $ 3,523 $ 3,453 $ 6,979 $ 6,862
Cost of sales 2,101 2,099 4,207 4,186
Selling, general and
administrative expenses 1,155 1,142 2,324 2,316
Operating Income 267 212 448 360
Interest expense (76) (106) (159) (221)
Interest income 2 7 8 18
Income Before Income Taxes and
Extraordinary Item 193 113 297 157
Federal, state and local income
tax expense (86) (46) (130) (66)
Income Before Extraordinary Item 107 67 167 91
Extraordinary Item - loss on early
extinguishment of debt, net of
tax effect of $25 - (39) - (39)
Net Income $ 107 $ 28 $ 167 $ 52
(Continued)
PART I -- FINANCIAL INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Income
(Unaudited)
(millions, except per share figures)
13 Weeks Ended 26 Weeks Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
Basic Earnings per Share:
Income before extraordinary
item $ .51 $ .32 $ .80 $ .43
Extraordinary item - (.19) - (.18)
Net income $ .51 $ .13 $ .80 $ .25
Diluted Earnings per Share:
Income before extraordinary
item $ .47 $ .31 $ .74 $ .42
Extraordinary item - (.18) - (.18)
Net income $ .47 $ .13 $ .74 $ .24
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Balance Sheets
(Unaudited)
(millions)
August 1, January 31, August 2,
1998 1998 1997
ASSETS:
Current Assets:
Cash $ 281 $ 142 $ 317
Accounts receivable 2,111 2,640 2,498
Merchandise inventories 3,361 3,239 3,372
Supplies and prepaid expenses 118 115 129
Deferred income tax assets 105 58 106
Total Current Assets 5,976 6,194 6,422
Property and Equipment - net 6,381 6,520 6,371
Intangible Assets - net 677 690 704
Other Assets 317 334 377
Total Assets $ 13,351 $ 13,738 $ 13,874
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $ 34 $ 556 $ 1,505
Accounts payable and accrued liabilities 2,517 2,416 2,482
Income taxes 67 88 4
Total Current Liabilities 2,618 3,060 3,991
Long-Term Debt 3,890 3,919 3,732
Deferred Income Taxes 977 939 836
Other Liabilities 557 564 559
Shareholders' Equity 5,309 5,256 4,756
Total Liabilities and Shareholders'
Equity $ 13,351 $ 13,738 $ 13,874
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(millions)
26 Weeks Ended 26 Weeks Ended
August 1, 1998 August 2, 1997
Cash flows from operating activities:
Net income $ 167 $ 52
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and
equipment 298 277
Amortization of intangible assets 13 14
Amortization of financing costs 4 13
Amortization of unearned restricted stock 1 1
Loss on early extinguishment of debt - 39
Changes in assets and liabilities:
Decrease in accounts receivable 331 337
Increase in merchandise inventories (122) (126)
Increase in supplies and prepaid expenses (3) (19)
(Increase) decrease in other assets not
separately identified 4 (5)
Increase (decrease) in accounts payable and
accrued liabilities not separately identified 45 (21)
Increase (decrease) in current income taxes (21) 3
Increase (decrease) in deferred income taxes (9) 4
Decrease in other liabilities not separately
identified (8) (5)
Net cash provided by operating activities 700 564
Cash flows from investing activities:
Purchase of property and equipment (189) (219)
Disposition of property and equipment 22 89
Decrease in notes receivable 200 200
Net cash provided by investing activities 33 70
Cash flows from financing activities:
Debt issued 300 850
Financing costs (7) (5)
Debt repaid (851) (1,356)
Increase in outstanding checks 79 11
Acquisition of treasury stock (154) (2)
Issuance of common stock 39 36
Net cash used by financing activities (594) (466)
(Continued)
FEDERATED DEPARTMENT STORES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(millions)
26 Weeks Ended 26 Weeks Ended
August 1, 1998 August 2, 1997
Net increase in cash $ 139 $ 168
Cash at beginning of period 142 149
Cash at end of period $ 281 $ 317
Supplemental cash flow information:
Interest paid $ 147 $ 212
Interest received 11 20
Income taxes paid (net of refunds received) 150 48
The accompanying notes are an integral part of these unaudited
Consolidated Financial Statements.
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
A description of the Company's significant accounting policies
is included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1998 (the "1997 10-K"). The
accompanying Consolidated Financial Statements should be read
in conjunction with the Consolidated Financial Statements and
notes thereto in the 1997 10-K.
Because of the seasonal nature of the general merchandising
business, the results of operations for the 13 and 26 weeks
ended August 1, 1998 and August 2, 1997 (which do not include
the Christmas season) are not indicative of such results for
the fiscal year.
The Consolidated Financial Statements for the 13 and 26 weeks
ended August 1, 1998 and August 2, 1997, in the opinion of
management, include all adjustments (consisting only of normal
recurring adjustments) considered necessary to present fairly,
in all material respects, the consolidated financial position
and results of operations of the Company and its subsidiaries.
During the first quarter of 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income," which establishes standards
for the reporting and display of comprehensive income and its
components. For all periods presented, comprehensive income
is equivalent to net income.
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity" was issued in June 1998 and is effective for
all quarters of all fiscal years beginning after June 15,
1999. This statement establishes accounting and reporting
standards for derivative instruments and hedging activities
and requires recognition of all derivatives as either assets
or liabilities on the balance sheet using fair value
measurement. The accounting for changes in the fair value of
derivatives depends on the intended use of the derivative and
the resulting hedging designation, if any. The Company is
currently reviewing the impact of this statement; however,
based on the Company's minimal use of derivatives, management
does not anticipate that its adoption will have a material
impact on the Company's consolidated financial position,
results of operations or cash flows.
2. Extraordinary Item
The extraordinary item for the 13 and 26 weeks ended August 2,
1997 represents costs of $39 million, net of income tax
benefit of $25 million, associated with the prepayment of all
amounts outstanding under the Company's mortgage loan
facility, secured promissory note, certain other mortgages and
previous bank credit facility, all of which were retired and
terminated.
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
3. Earnings Per Share
The following tables set forth the computation of basic and
diluted earnings per share based on income before
extraordinary item:
13 Weeks Ended
August 1, 1998 August 2, 1997
(millions, except per share data) Shares Income Shares Income
Income before extraordinary item
and average number of
shares outstanding 210.2 $ 107 209.1 $ 66
Shares to be issued under deferred
compensation plan .3 - .3 -
210.5 $ 107 209.4 $ 66
Basic earnings per share $ .51 $ .32
Effect of dilutive securities:
Warrants 8.9 4.6
Stock options 2.8 1.8
Convertible notes 10.2 2 10.2 3
232.4 $ 109 226.0 $ 69
Diluted earnings per share $ .47 $ .31
26 Weeks Ended
August 1, 1998 August 2, 1997
(millions, except per share data) Shares Income Shares Income
Income before extraordinary item
and average number of
shares outstanding 210.3 $ 167 208.7 $ 91
Shares to be issued under deferred
compensation plan .3 - .3 -
210.6 $ 167 209.0 $ 91
Basic earnings per share $ .80 $ .43
Effect of dilutive securities:
Warrants 8.5 4.0
Stock options 2.7 1.7
Convertible notes 10.2 5 - -
232.0 $ 172 214.7 $ 91
Diluted earnings per share $ .74 $ .42
FEDERATED DEPARTMENT STORES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
In addition to the warrants and stock options reflected in
the foregoing tables, warrants and stock options to purchase
.6 million and .5 million shares of common stock at prices
ranging from $37.85 to $79.44 per share were outstanding at
August 1, 1998 and August 2, 1997, respectively, but were not
included in the computation of diluted earnings per share
because the exercise price thereof exceeded the average
market price and would have been antidilutive. Additionally,
for the 26 weeks ended August 2, 1997, the assumed conversion
of the convertible notes would have an antidilutive effect on
diluted earnings per share and was therefore excluded from
the computation.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations
For purposes of the following discussion, all references to
"second quarter of 1998" and "second quarter of 1997" are to
the Company's 13-week fiscal periods ended August 1, 1998 and
August 2, 1997, respectively, and all references to "1998" and
"1997" are to the Company's 26-week fiscal periods ended
August 1, 1998 and August 2, 1997, respectively.
Results of Operations
Comparison of the 13 Weeks Ended August 1, 1998 and August 2, 1997
Net sales for the second quarter of 1998 totaled $3,523
million, compared to net sales of $3,453 million for the
second quarter of 1997, an increase of 2.0%. Since February
1, 1997, the Company has opened six new department stores and
two new furniture galleries, changed nameplates on two stores,
closed nineteen stores and eliminated certain consumer
electronics lines of business. On a comparable store basis,
net sales for the second quarter of 1998 increased 3.0% over
the second quarter of 1997.
Cost of sales was 59.6% of net sales for the second quarter of
1998 compared to 60.8% for the second quarter of 1997. The
1.2% improvement in the cost of sales rate, as well as the
comparable-store sales improvement, reflects positive customer
response to the merchandise assortments in the stores,
attributed partially to an improved merchandise receipt flow.
Cost of sales was not impacted by the valuation of merchandise
inventory on the last-in, first-out basis in the second
quarter of 1998 or the second quarter of 1997.
Selling, general and administrative ("SG&A") expenses were
32.8% of net sales for the second quarter of 1998 compared to
33.1% for the second quarter of 1997. The major factor
contributing to the 0.3% improvement in the SG&A expense rate
was lower distribution-related expense resulting from
restructuring and technological enhancements within the
merchandise distribution process.
Net interest expense was $74 million for the second quarter of
1998, compared to $99 million for the second quarter of 1997.
The lower interest expense for the second quarter of 1998 is
principally due to lower levels of borrowings and lower
interest rates resulting from refinancings completed in July
1997.
The Company's effective income tax rate of 44.6% for the
second quarter of 1998 differs from the federal income tax
statutory rate of 35.0% principally because of the effect of
state and local income taxes and permanent differences arising
from the amortization of intangible assets and from other non-
deductible items.
The extraordinary item of $39 million in the second quarter of
1997 represents the after-tax expenses associated with debt
prepayments.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Comparison of the 26 Weeks Ended August 1, 1998 and August 2, 1997
Net sales for 1998 were $6,979 million compared to $6,862
million for 1997, an increase of 1.7%. On a comparable store
basis, net sales for 1998 increased 2.7% over 1997.
Cost of sales was 60.3% of net sales for 1998 compared to
61.0% for 1997. The 0.7% improvement in the cost of sales
rate, as well as the comparable-store sales improvement,
reflects positive customer response to the merchandise
assortments in the stores during the second quarter of 1998,
attributed partially to an improved merchandise receipt flow.
Cost of sales was not impacted by the valuation of merchandise
inventory on the last-in, first-out basis in 1998 or 1997.
SG&A expenses were 33.3% of net sales for 1998 compared to
33.8% for 1997. The major factor contributing to the 0.5%
improvement in the SG&A expense rate was lower distribution-
related expenses resulting from restructuring and
technological enhancements within the merchandise distribution
process.
Net interest expense was $151 million for 1998 compared to
$203 million for 1997. The lower interest expense for 1998
is principally due to lower levels of borrowings and lower
interest rates resulting from refinancings completed in July
1997.
The Company's effective income tax rate of 43.8% for 1998
differs from the federal income tax statutory rate of 35.0%
principally because of the effect of state and local income
taxes and permanent differences arising from the amortization
of intangible assets and from other non-deductible items.
Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from
operations, cash on hand and certain available credit
facilities.
Net cash provided by operating activities in 1998 was $700
million, an increase of $136 million compared to the $564
million provided in 1997. The major factor contributing to
this improvement was stronger operating results.
Net cash provided by investing activities was $33 million in
1998, with the final $200 million installment of a note
receivable held by the Company being received on May 4, 1998,
purchases of property and equipment totaling $189 million and
dispositions of property and equipment totaling $22 million.
The Company opened one new store in August 1998 and intends to
open two additional new stores in Fall 1998. On August 1,
1998, the Company completed the sale of its specialty store
division to the division's management group. The sale did not
have a material impact on the Company's financial position or
results of operations.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Net cash used by the Company for all financing activities was
$594 million in 1998. During the first quarter of 1998, the
Company issued $300 million of 7.0% Senior Debentures due
2028. The proceeds of such issuance, together with other
available funds, were used to repay $669 million of short-term
borrowings and the remaining $176 million of borrowings under
a note monetization facility. Also during the quarter, the
Company renewed a portion of the bank credit agreement which
provides a $500 million unsecured revolving credit facility
with a termination date of July 26, 1999.
During the quarter, the Company repurchased 2.9 million shares
of its common stock at an aggregate cost of approximately $154
million as part of the previously announced $500 million stock
repurchase program. Under the repurchase program announced in
May 1998, the Company intends to continue to repurchase shares
throughout the year, depending on prevailing market
conditions, alternate uses of capital and other factors. Any
such purchases may be discontinued or resumed at any time.
On August 18, 1998, the Company completed a tender offer
pursuant to which it purchased approximately $340 million
aggregate principal amount of its 10% Senior Notes due 2001
(the "10% Notes"), leaving approximately $110 million
aggregate principal amount of such notes outstanding. The
Company's purchases of the 10% Notes pursuant to the tender
offer were financed through a combination of cash on hand and
the issuance of commercial paper. Based on the tender premium
paid to holders of the 10% Notes and the write-off of the
related deferred debt issuance costs, the Company will report
an extraordinary charge of approximately $23 million, net of
the related tax benefit, in the 13-week fiscal period ending
October 31, 1998. On August 26, 1998, in a related
transaction, the Company issued $350 million of 6 1/8% Term
Enhanced ReMarketable Securities. The proceeds from this
offering were used by the Company to repurchase outstanding
commercial paper used to finance the tender offer and for
general corporate purposes.
On August 26, 1998, the Company called for redemption,
effective October 1, 1998, all of its 5.0% Convertible
Subordinated Notes due 2003 (the "5% Notes") at a redemption
price equal to $1,056.25 for each $1,000 principal amount
thereof (inclusive of accrued interest to October 1, 1998).
No interest will accrue on the 5% Notes on or after October 1,
1998. The 5% Notes may be converted into shares of the
Company's common stock at any time prior to the close of
business on September 30, 1998 at the rate of 29.2547 shares
for each $1,000 principal amount represented by the 5% Notes
(equivalent to a conversion price of approximately $34.1825
per share). However, interest for the period from April 1,
1998 to October 1, 1998 will be paid, without being funded by
the holder surrendering a 5% Note for conversion, only with
respect to 5% Notes that are surrendered for conversion after
the opening of business on September 24, 1998 and prior to the
close of business on September 30, 1998.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Management believes the department store business will
continue to consolidate. Accordingly, the Company intends
from time to time to consider additional acquisitions of
department store and other complementary assets and companies.
Management of the Company believes that, with respect to its
current operations, cash on hand and funds from operations,
together with its credit facilities, will be sufficient to
cover its reasonably foreseeable working capital, capital
expenditure and debt service requirements. Acquisition
transactions, if any, are expected to be financed through a
combination of cash on hand and from operations and the
possible issuance from time to time of long-term debt or other
securities. Depending upon conditions in the capital markets
and other factors, the Company will from time to time consider
the issuance of debt or other securities, or other possible
capital markets transactions, the proceeds of which could be
used to refinance current indebtedness or for other corporate
purposes.
Year 2000 Matters
The Year 2000 Issue
Many existing computer programs utilized globally use only two
digits to identify a year in the date field. These programs,
if not corrected, could fail or create erroneous results after
the century date changes on January 1, 2000 or when otherwise
dealing with dates later than December 31, 1999. This "Year
2000" issue is believed to affect virtually all companies and
organizations, including the Company.
The Company relies on computer-based technology and utilizes a
variety of third-party hardware and proprietary and third-
party software. The Company's retail functions, such as
merchandise procurement and distribution, inventory control,
point-of-sale information systems and proprietary credit card
account servicing, generally use proprietary software, with
third-party software being used more extensively for
administrative functions, such as accounting and human
resource management. In addition to such information
technology ("IT") systems, the Company's operations rely on
various non-IT equipment and systems that contain embedded
computer technology, such as elevators, escalators and energy
management systems. Third parties with whom the Company has
commercial relationships, including vendors of merchandise for
resale by the Company and of products and services used by the
Company in its operations (such as banking and financial
services, data processing services, telecommunications
services and utilities), are also highly reliant on computer-
based technology.
In February 1996, the Company commenced an assessment of the
potential effects of the Year 2000 issue on the Company's
business, financial condition and results of operations. In
conjunction with such assessment, the Company developed and
commenced the implementation of the compliance program
described below.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
The Company's Compliance Program
Proprietary IT Systems. Pursuant to the Company's Year 2000
compliance program, the Company has undertaken an examination
of the Company's proprietary IT systems. All such systems
that have been identified as relating to a critical function
and as not being Year 2000 compliant have been or are being
remediated or replaced. The Company believes that the
remediation of its proprietary IT systems is substantially
complete, and nearly all of the proprietary IT systems that
have been remediated have been installed and placed into
production. The Company commenced testing of such remediated
systems for Year 2000 compliance in August 1998 and presently
anticipates completing a comprehensive, integrated test of all
of its main-frame and mid-range IT systems (including third-
party and proprietary hardware, software, network components
and interfaces) by January 31, 1999.
Third-Party IT Systems. The strategy instituted by the
Company to identify and address Year 2000 issues affecting
third-party IT systems used by the Company includes contacting
all third-party providers of computer hardware and software to
secure appropriate representations to the effect that such
hardware or software is or will timely be Year 2000 compliant.
The Company has received Year 2000 compliant versions of
almost all third-party software and is currently engaged in
developing contingency plans as to third-party hardware and
software used by the Company in respect of which the Company
has not received adequate compliance assurances to date.
Non-IT Systems. The Company has undertaken a review of its
non-IT systems and is in the process of implementing a
remediation program in respect of such systems that are within
the control of the Company. The Company expects to complete
this remediation effort by April 30, 1999. In addition, the
Company's centralized real estate department has communicated
to the developers, landlords and property managers of
substantially all of the Company's properties the Company's
expectation that the systems utilized in the management and
operation of such properties which are not within the
Company's control are or will timely be Year 2000 compliant.
Non-IT Vendors and Suppliers. The Company procures its
merchandise for resale and supplies for operational purposes
from a vast network of vendors located both within and outside
the United States, and is not dependent on any one vendor for
more than 5% of its merchandise purchases. With respect to
private label merchandise, which constitutes approximately 15%
of the Company's total sales, procurement is principally from
manufacturers located outside the United States. As a part of
its contingency planning effort, the Company has commenced
making inquiries as to the Year 2000 readiness of selected
vendors and private label manufacturers in order to identify
any significant exposures that may exist and establish
alternate sources or strategies where necessary.
FEDERATED DEPARTMENT STORES, INC.
Management's Discussion and Analysis
of Financial Condition and Results of Operations (Continued)
Costs
The Company has incurred to date approximately $16 million of
costs to implement its Year 2000 compliance program and
presently expects to incur approximately $50 million of costs
in the aggregate, of which approximately 30% represents
capitalized expenditures for hardware purchases. All of the
Company's Year 2000 compliance costs have been or are expected
to be funded from the Company's operating cash flow. The
Company's Year 2000 compliance budget does not include
material amounts for hardware replacement because the Company
has historically employed a strategy to continually upgrade
its main-frame and mid-range computer systems and to install
state of the art point-of-sale systems with respect to both
pre-existing operations and in conjunction with the
acquisitions and mergers effected by the Company in recent
years. Consequently, the Company's Year 2000 budget has not
required the diversion of funds from or the postponement of
the implementation of other planned IT projects.
Risks Associated With Year 2000 Issues
The Company's Year 2000 compliance program is directed
primarily towards ensuring that the Company will be able to
continue to perform three critical functions: (i) effect
sales, (ii) order and receive merchandise, and (iii) pay its
employees and vendors. It is difficult, if not impossible, to
assess with any degree of accuracy the impact on any of these
three areas of the failure of one or more aspects of the
Company's compliance program.
The novelty and complexity of the issues presented and the
proposed solutions therefor and the Company's dependence on
the technical skills of employees and independent contractors
and on the representations and preparedness of third parties
are among the factors that could cause the Company's efforts
to be less than fully effective. Moreover, Year 2000 issues
present a number of risks that are beyond the Company's
reasonable control, such as the failure of utility companies
to deliver electricity, the failure of telecommunications
companies to provide voice and data services, the failure of
financial institutions to process transactions and transfer
funds, the failure of vendors to deliver merchandise or
perform services required by the Company and the collateral
effects on the Company of the effects of Year 2000 issues on
the economy in general or on the Company's business partners
and customers in particular. Although the Company believes
that its Year 2000 compliance program is designed to
appropriately identify and address those Year 2000 issues that
are subject to the Company's reasonable control, there can be
no assurance that the Company's efforts in this regard will be
fully effective or that Year 2000 issues will not have a
material adverse effect on the Company's business, financial
condition or results of operations.
PART II -- OTHER INFORMATION
FEDERATED DEPARTMENT STORES, INC.
Item 5. Other Information
This report and other reports, statements and
information previously or subsequently filed by the
Company with the Securities and Exchange Commission
(the "SEC") contain or may contain forward-looking
statements. Such statements are based upon the beliefs
and assumptions of, and on information available to,
the management of the Company at the time such
statements are made. The following are or may
constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act
of 1995: (i) statements preceded by, followed by or
that include the words "may," "will," "could,"
"should," "believe," "expect," "future," "potential,"
"anticipate," "intend," "plan," "estimate," or
"continue" or the negative or other variations thereof
and (ii) statements regarding matters that are not
historical facts. Such forward-looking statements are
subject to various risks and uncertainties, including
(i) risks and uncertainties relating to the possible
invalidity of the underlying beliefs and assumptions,
(ii) possible changes or developments in social,
economic, business, industry, market, legal and
regulatory circumstances and conditions, and (iii)
actions taken or omitted to be taken by third parties,
including customers, suppliers, business partners,
competitors and legislative, regulatory, judicial and
other governmental authorities and officials. In
addition to any risks and uncertainties specifically
identified in the text surrounding such forward-looking
statements, the statements in the immediately preceding
sentence and the statements under captions such as
"Risk Factors" and "Special Considerations" in reports,
statements and information filed by the Company with
the SEC from time to time constitute cautionary
statements identifying important factors that could
cause actual amounts, results, events and circumstances
to differ materially from those reflected in such
forward-looking statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amended and Restated Credit Agreement, dated as of
June 29, 1998, by and among the Company, the
Initial Lenders named therein, Citibank, N.A., as
Administrative Agent and Paying Agent, The Chase
Manhattan Bank, as Administrative Agent,
BankBoston, N.A., as Syndication Agent, and The
Bank of America, National Trust & Savings
Association, as Documentation Agent.
10.2 Letter Amendment to the Five-Year Credit Agreement,
dated as of June 29, 1998, by and among the Company, the
Initial Lenders named therein, Citibank, N.A., as
Administrative Agent and Paying Agent, The Chase Manhattan
Bank, as Administrative Agent, BankBoston, N.A., as
Syndication Agent, and The Bank of America, National
Trust & Savings Association, as Documentation Agent.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended
August 1, 1998.
FEDERATED DEPARTMENT STORES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunder duly authorized.
FEDERATED DEPARTMENT STORES, INC.
Date September 15, 1998 /s/ Dennis J. Broderick
Dennis J. Broderick
Senior Vice President, General Counsel
and Secretary
/s/ Joel A. Belsky
Joel A. Belsky
Vice President and Controller
(Principal Accounting Officer)
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 29, 1998
FEDERATED DEPARTMENT STORES, INC., a Delaware
corporation (the "Borrower"), the banks, financial institutions
and other institutional lenders (collectively, the "Initial
Lenders") party hereto, CITIBANK, N.A., as an administrative
agent (together with any successor thereto appointed pursuant to
Article VII of the Existing Credit Agreement referred to below,
in such capacity, an "Administrative Agent") for the Lenders (as
defined in the Existing Credit Agreement referred to below) and
as paying agent (in such capacity, the "Paying Agent") for the
Lenders, THE CHASE MANHATTAN BANK, as an administrative agent
(together with any successor thereto appointed pursuant to
Article VII of the Existing Credit Agreement referred to below,
in such capacity, an "Administrative Agent"; the Administrative
Agents and the Paying Agent being, collectively, the "Agents")
for the Lenders, BANKBOSTON, N.A., as syndication agent, and THE
BANK OF AMERICA, NATIONAL TRUST & SAVINGS ASSOCIATION, as
documentation agent, hereby agree as follows:
PRELIMINARY STATEMENTS
(1) The Borrower is party to a 364-Day Credit
Agreement dated as of July 28, 1997 (as amended, supplemented or
otherwise modified from time to time to (but not including) the
date of this Amendment and Restatement, the "Existing Credit
Agreement") with the banks, financial institutions and other
institutional lenders party thereto and Citibank, N.A. and The
Chase Manhattan Bank, as Agents for the Lenders and such other
lenders. Capitalized terms not otherwise defined in this
Amendment and Restatement shall have the same meanings as
specified in the Existing Credit Agreement.
(2) The parties to this Amendment and Restatement
desire to amend the Existing Credit Agreement as set forth herein
and to restate the Existing Credit Agreement in its entirety to
read as set forth in the Existing Credit Agreement with the
following amendments.
(3) The Borrower has requested that the Lenders agree
to extend credit to it from time to time in an aggregate
principal amount of up to $500,000,000 for general corporate
purposes of the Borrower and its Subsidiaries not otherwise
prohibited under the terms of this Amendment and Restatement.
The Lenders have indicated their willingness to agree to extend
credit to the Borrower from time to time in such amount on the
terms and conditions of this Amendment and Restatement.
SECTION 1. Amendments to the Existing Credit
Agreement. (a) Section 1.01 of the Existing Credit Agreement
is, effective as of July 27, 1998 and subject to the satisfaction
of the conditions precedent set forth in Section 2, hereby
amended by deleting the definitions of "Lenders" and "Revolver
Termination Date" set forth therein and replacing them,
respectively, with the following new definitions thereof:
"Lenders" means the Initial Lenders, each Assuming
Lender that shall become a party hereto pursuant to
Section 2.15 and each other Person that shall become a party
hereto pursuant to Section 8.07.
"Revolver Termination Date" means the earlier of
(a) July 26, 1999 (subject to the extension thereof pursuant
to Section 2.15) and (b) the date of termination in whole of
the Revolving Credit Commitments pursuant to Section 2.04 or
6.01; provided, however, that the Revolver Termination Date
of any Lender that is a Non-Consenting Lender to any
requested extension pursuant to Section 2.15 shall be the
Revolver Termination Date in effect immediately prior to the
applicable Extension Date for all purposes of this Agreement
and any Notes.
(b) Section 1.01 of the Existing Credit Agreement is,
effective as of the date of this Amendment and Restatement
and subject to the satisfaction of the conditions precedent
set forth in Section 2, hereby amended by adding the
following definition of "Investment Grade Date":
"Investment Grade Date" means the first date on which
the Paying Agent shall have received evidence satisfactory
to it that the Borrower has a Public Debt Rating then in
effect of at least BBB from S&P and at least Baa2 from
Moody's, provided that the Borrower is not on "negative
credit watch" (or any like designation by S&P or Moody's
from time to time) at such time as determined by S&P and
Moody's.
(c) The recital of parties to the Existing Credit
Agreement is, effective as of July 27, 1998 and subject to the
satisfaction of the conditions precedent set forth in Section 2,
amended by replacing the words "the signature pages hereof"
contained in the second line thereof with the words "Schedule I
hereto".
(d) Section 3.02(a)(i) of the Existing Credit
Agreement is, effective as of the date of this Amendment and
Restatement and subject to the satisfaction of the conditions
precedent set forth in Section 2, hereby amended in full to read
as follows:
"(i) the representations and warranties contained
in Section 4.01 (except, from and after the Investment
Grade Date, the representations set forth in the last
sentence of subsection (e) thereof) are correct on and
as of the date of such Borrowing, before and after
giving effect to such Borrowing and to the application
of the proceeds therefrom, as though made on and as of
such date other than any such representations or
warranties that, by their terms, refer to a specific
date other than the date of such Borrowing, in which
case as of such specific date; and"
(e) Section 4.01(g) of the Existing Credit Agreement
is, effective as of the date of this Amendment and Restatement
and subject to the satisfaction of the conditions precedent set
forth in Section 2, hereby amended in full to read as follows:
"(g) The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation
U issued by the Board of Governors of the Federal
Reserve System); no proceeds of any Advance will be
used to purchase or carry any margin stock other than
the Voting Stock of the Borrower to the extent
otherwise permitted under the Loan Documents; no
proceeds of any Advance will be used to extend credit
to others for the purpose of purchasing or carrying any
margin stock; and following application of the proceeds
of each Advance, not more than 25% of the value of the
assets (either of the Borrower only or of the Borrower
and its Subsidiaries on a Consolidated basis) subject
to the provisions of Section 5.02(a) or 5.02(e) or
subject to any restriction contained in any agreement
or instrument between the Borrower and any Lender Party
or any Affiliate of any Lender Party relating to Debt
within the scope of Section 6.01(d) will be margin
stock. For purposes of this Section 4.01(g), "assets"
of the Borrower or any of its Subsidiaries includes,
without limitation, treasury stock of the Borrower that
has not been retired."
(f) Section 4.01 of the Existing Credit Agreement is,
effective as of the date of this Amendment and Restatement and
subject to the satisfaction of the conditions precedent set forth
in Section 2, hereby amended by adding a new subsection (n) to be
read as follows:
"(n) As of the date hereof, the Borrower has (i)
initiated a review and assessment of all areas within
its and each of its Subsidiaries' business and
operations (including those affected by suppliers,
vendors and customers) that are material and that could
be materially adversely affected by the risk that
computer applications owned by the Borrower or any of
its Subsidiaries may be unable to recognize and perform
properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999
(the "Year 2000 Problem"), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a
timely basis, and (iii) to date, implemented that plan
substantially in accordance with that timetable. Based
on the foregoing, the Borrower believes that
substantially all computer applications owned by the
Borrower that are material to its or any or its
Subsidiaries' business and operations are reasonably
expected barring unforeseen circumstances on a timely
basis to be able to perform properly date-sensitive
functions for all dates before and after January 1,
2000 ("Year 2000 Compliant")."
(g) Schedule I to the Existing Credit Agreement is,
effective as of July 27, 1998 and subject to the satisfaction of
the conditions precedent set forth in Section 2, deleted in its
entirety and replaced with Schedule I to this Amendment and
Restatement.
SECTION 2. Conditions of Effectiveness of this
Amendment and Restatement. This Amendment and Restatement shall
become effective as of the date first above written (the
"Amendment Effective Date") (except, with respect to Sections
1(a), (c) and (g) and 3(d), such later date as set forth in
subsection (a) below) when and only if:
(a) With respect to Sections 1(a), (c) and (g) and
3(d), the Paying Agent shall have received counterparts of
this Amendment and Restatement executed by the Borrower, the
Agents and all of the Initial Lenders or, as to any of the
Initial Lenders, advice satisfactory to the Paying Agent
that such Initial Lender has executed this Amendment and
Restatement.
(b) Other than with respect to Sections 1(a), (c) and
(g) and 3(d), the Paying Agent shall have received
counterparts of this Amendment and Restatement executed by
the Borrower, the Agents and the Required Lenders or, as to
any of the Required Lenders, advice satisfactory to the
Paying Agent that such Required Lender has executed this
Amendment and Restatement.
(c) The Paying Agent shall have received on or before
July 27, 1998 the following, each dated such date and
(unless otherwise specified below) in form and substance
satisfactory to the Paying Agent and in sufficient copies
for each Initial Lender: the Revolving Credit Notes payable
to the order of each of the Lenders that have requested
Revolving Credit Notes prior to July 27, 1998.
(d) The representations and warranties contained in
Section 4.01 of the Existing Credit Agreement shall be
correct on and as of the Amendment Effective Date, before
and after giving effect to the Amendment Effective Date, as
though made on and as of such date.
(e) No event shall have occurred and be continuing, or
shall occur as a result of the occurrence of the Amendment
Effective Date, that constitutes a Default.
SECTION 3. Reference to and Effect on the Existing
Credit Agreement and the Notes. (a) On and after the
effectiveness of this Amendment and Restatement, each reference
in the Existing Credit Agreement to "this Agreement",
"hereunder", "hereof" or words of like import referring to the
Existing Credit Agreement, and each reference in the Notes to
"the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Existing Credit Agreement, shall mean and
be a reference to the Existing Credit Agreement, as amended by
this Amendment and Restatement.
(b) The Existing Credit Agreement and the Notes, as
specifically amended by this Amendment and Restatement, are and
shall continue to be in full force and effect and are hereby in
all respects ratified and confirmed.
(c) Without limiting any of the other provisions of
the Existing Credit Agreement, as amended by this Amendment and
Restatement, any references in the Existing Credit Agreement to
the phrases "on the date hereof", "on the date of this Agreement"
or words of similar import shall mean and be a reference to the
date of the Existing Credit Agreement (which is July 28, 1997).
(d) Upon the effectiveness of this Amendment and
Restatement pursuant to Section 2(a), the Commitments under the
Existing Credit Agreement are automatically terminated and the
Commitments under this Amendment and Restatement are
automatically effective.
SECTION 4. Costs and Expenses. The Borrower agrees to
pay on demand all reasonable out-of-pocket costs and expenses of
the Agents in connection with the preparation, execution,
delivery and administration, modification and amendment of this
Amendment and Restatement, the Notes and the other documents to
be delivered hereunder (including, without limitation, the
reasonable and documented fees and expenses of counsel for the
Agents with respect hereto and thereto) in accordance with the
terms of Section 8.04 of the Existing Credit Agreement.
SECTION 5. Execution in Counterparts. This Amendment
and Restatement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all
of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
page to this Amendment and Restatement by telecopier shall be
effective as delivery of a manually executed counterpart of this
Amendment and Restatement.
SECTION 6. Governing Law. This Amendment and
Restatement shall be governed by, and construed in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Restatement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
THE BORROWER
FEDERATED DEPARTMENT STORES, INC.,
By: /s/ Karen M. Hoguet
Name: Karen M. Hoguet
Title: Senior VP, CFO and Treasurer
THE AGENTS
CITIBANK, N.A.,
as an Administrative Agent and as
Paying Agent
By: /s/ Allen Fisher
Name: Allen Fisher
Title: Vice President
THE CHASE MANHATTAN BANK,
as an Administrative Agent
By: /s/ Barry K. Bergman
Name: Barry K. Bergman
Title: Vice President
BANKBOSTON, N.A.,
as Syndication Agent
By: /s/ Bethann R. Halligan
Name: Bethann R. Halligan
Title: Division Executive
THE BANK OF AMERICA, NT & SA,
as Documentation Agent
By: /s/ Sandra S. Ober
Name: Sandra S. Ober
Title: Managing Director
THE INITIAL LENDERS
CITIBANK, N.A.
By: /s/ Allen Fisher
Name: Allen Fisher
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Barry K. Bergman
Name: Barry K. Bergman
Title: Vice President:
BANKBOSTON, N.A.
By: /s/ Bethann R. Halligan
Name: Bethann R. Halligan
Title Division Executive:
THE BANK OF AMERICA, NT & SA
By: /s/ Jody A. Pritchard
Name: Jody A. Pritchard
Title: Vice President
ARAB BANK PLC, GRAND CAYMAN
By: /s/ Backer Ali
Name: Backer Ali
Title: Vice President / Controller
THE BANK OF NEW YORK
By: /s/ Paula Regan
Name: Paula Regan
Title: Vice President
BANK ONE, N.A.
By: /s/ Braden T. Krebs
Name: Braden T. Krebs
Title: Officer
NATIONSBANK
By: /s/ Bill Manley
Name: Bill Manely
Title: Sr. Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Dean Balice
Name: Dean Balice
Title: Senior Vice President,
Branch Manager
By: /s/ David Bouhl
Name: David Bouhl, FVP
Title: Head of Corporate Banking, Chicago
COMERICA BANK
By: /s/ Hugh G. Porter
Name: Hugh G. Porter
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Chris T. Horgan
Name: Chris T. Horgan
Title: Vice President
By: /s/ Robert Hetu
Name: Robert Hetu
Title: Associate
THE FIFTH THIRD BANK
By: /s/ A. K. Havcn
Name: A. K. Havcn
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Dianne M. Stark
Name: Dianne M. Stark
Title: Vice President
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Jerome A. Ratliffe
Name: Jerome A. Ratliffe
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Richard M. Seufert
Name: Richard M. Seufert
Title: Vice President
MELLON BANK, N.A.
By: /s/ Richard J. Schaich
Name: Richard J. Schaich
Title: Assistant Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ John M. Mikolay
Name: John M. Mikolay
Title: Vice President
NATIONAL BANK OF KUWAIT
By: /s/ Muhannad Kamal
Name: Muhannad Kamal
Title: Assistant General Manager
By: /s/ Robert J. McNeill
Name: Robert J. McNeill
Title: Executive Manager
PNC BANK, OHIO, NATIONAL ASSOCIATION
By: /s/ C. Joseph Richardson
Name: C. Joseph Richardson
Title: Senior Vice President
THE SANWA BANK, LIMITED
NEW YORK BRANCH
By: /s/ Jean-Michel Fatovic
Name: Jean-Michel Fatovic
Title: Vice President
STANDARD CHARTERED BANK, N.A.
By: /s/ David D. Cutting
Name: David D. Cutting
Title: Senior Vice President
By: /s/ Natalie S. Yang
Name: Natalie S. Yang
Title: Senior Relationship Manager
STAR BANK, N.A.
By: /s/ Derek S. Roudebush
Name: Derek S. Roudebush
Title: Vice President
THE SUMITOMO BANK LTD.,
NEW YORK BRANCH
By: /s/ John C. Kissinger
Name: John C. Kissinger
Title: General Manager
SUNTRUST BANK CENTRAL FLORIDA, N.A.
By: /s/ C. Scott Harrison
Name: C. Scott Harrison
Title: Corporate Banking Officer
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Susan D. Biba
Name: Susan D. Biba
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Bradford L. Watkins
Name: Bradford L. Watkins
Title: Vice President
SCHEDULE I TO THE AMENDMENT AND RESTATEMENT
COMMITMENTS AND APPLICABLE LENDING OFFICES
Name of Initial Revolving Domestic Lending Eurodollar Lending
Lender Credit Office Office
Commitment
Citibank, N.A. $55,000,000 Credit: Credit:
399 Park Avenue, 399 Park Avenue,
12th Floor 12th Floor
New York, NY 10043 New York, NY 10043
Attn: Marc Merlino Attn: Marc Merlino
Phone: (212) 559- Phone: (212) 559-
1875 1875
Fax: (212) 793-7585 Fax: (212) 793-7585
Administrative: Administrative:
2 Penns Plaza 2 Penns Plaza
Suite 200 Suite 200
New Castle, DE New Castle, DE
19720 19720
Attn: Leonard Attn: Leonard
Sarcona Sarcona
Phone: (718) 248- Phone: (718) 248-
4536 4536
Fax: (718) 248-4844 Fax: (718)248-4844
The Chase Manhattan $55,000,000 Credit: Credit:
Bank, N.A. 270 Park Avenue, 270 Park Avenue,
48th Fl. 48th Fl.
New York, NY 10017 New York, NY 10017
Attn: Barry Bergman Attn: Barry Bergman
Phone: (212) 270- Phone: (212) 270-
0203 0203
Fax: (212) 270-5646 Fax: (212) 270-5646
Administrative: Administrative:
1 Chase Manhattan 1 Chase Manhattan
Plaza Plaza
8th Floor 8th Floor
New York, NY 10081 New York, NY 10081
Attn: Amy Labinger Attn: Amy Labinger
Phone: (212) 552- Phone: (212) 552-
4025 4025
Fax:(212)552-7500 Fax:(212)552-7500
BankBoston, N.A. $42,000,000 Credit: Credit:
100 Federal Street 100 Federal Street
Mail Stop 01-09-05 Mail Stop 01-09-05
Boston, MA 02106 Boston, MA 02106
Attn: Judy Kelly Attn: Judy Kelly
Phone: (617) 434- Phone: (617) 434-
5280 5280
Fax: (617) 434-6685 Fax: (617) 434-6685
Administrative: Administrative:
100 Federal Street 100 Federal Street
Mail Stop 01-21-01 Mail Stop 01-21-01
Boston, MA 02110 Boston, MA 02110
Attn: Michelle Attn: Michelle
Taglione Taglione
Phone: (617) 434- Phone: (617) 434-
4039 4039
Fax:(617)434-6685 Fax:(617)434-6685
The Bank of America, $42,000,000 Credit: Credit:
NT & SA 231 South LaSalle 231 South LaSalle
Street Street
Chicago, IL 60697 Chicago, IL 60697
Attn: Sandy Ober Attn: Sandy Ober
Phone: (312) 828- Phone: (312) 828-
1307 1307
Fax: (312) 987-0303 Fax: (312) 987-0303
Administrative: Administrative:
231 South LaSalle 231 So. LaSalle
Street Street
Chicago, IL Chicago, IL
60697 60697
Attn: Sandra Attn: Sandra
Kramer Kramer
Phone: (312) 828- Phone: (312) 828-
6645 6645
Fax:(312)987-5833 Fax: (312)987-5833
The Bank of New York $24,000,000 Credit: Credit:
One Wall Street, One Wall Street,
22nd Floor 22nd Floor
New York, NY 10286 New York, NY 10286
Attn: Paula Regan Attn: Paula Regan
Phone: (212) 635- Phone: (212) 635-
7867 7867
Fax: (212) 635-1483 Fax: (212) 635-1483
Administrative: Administrative:
One Wall Street, One Wall Street,
22nd Floor 22nd Floor
New York, NY New York, NY
10286 10286
Attn: Susan Attn: Susan
Baratta Baratta
Phone: (212) 635- Phone: (212) 635-
6761 6761
Fax:(212)635-6397 Fax:(212)635-6397
Credit Suisse First $24,000,000 Credit: Credit:
Boston 11 Madison Ave., 11 Madison Ave.,
19th Fl. 19th Fl.
New York, NY 10010 New York, NY 10010
Attn: Chris Hogan Attn: Chris Hogan
Phone: (212) 325- Phone: (212) 325-
9157 9157
Fax: (212) 325-8309 Fax: (212) 325-8309
Administrative: Administrative:
11 Madison Ave. 11 Madison Ave.
New York, NY 10010 New York, NY 10010
Attn: Gina Attn: Gina
Manginello Manginello
Phone: (212) 325- Phone: (212) 325-
9149 9149
Fax: (212) 325- Fax: (212) 325-
8319 8319
Fleet National Bank $24,000,000 Credit: Credit:
One Federal Street One Federal Street
MA OF 0320 MA OF 0320
Boston, MA 02110 Boston, MA 02110
Attn: Richard Attn: Richard
Seufert Seufert
Phone: (617) 346- Phone: (617) 346-
0611 0611
Fax: (617) 346-0689 Fax: (617) 346-0689
Administrative: Administrative:
One Federal Street One Federal Street
MA OF 0308 MA OF 0308
Boston, MA 02110 Boston, MA 02110
Attn: Michael Attn: Michael
Araujo Araujo
Phone: (617) 346- Phone: (617) 346-
0601 0601
Fax: (617) 346-0595 Fax: (617) 346-0595
PNC Bank, Ohio, $24,000,000 Credit: Credit:
National Association 201 East 5th Street 201 East 5th Street
Cincinnati, OH Cincinnati, OH
45202 45202
Attn: Joe Attn: Joe
Richardson Richardson
Phone: (513) 651- Phone: (513) 651-
8688 8688
Fax: (513) 651-8951 Fax: (513) 651-8951
Administrative: Administrative:
201 E. 5th Street 201 E. 5th Street
Cincinnati, OH Cincinnati, OH
45202 45202
Attn: Sandy Wilson Attn: Sandy Wilson
Phone:(513) 651- Phone: (513) 651-
8984 8984
Fax: (513) 651-8951 Fax: (513)651-8951
The Sumitomo Bank, $20,000,000 Credit: Credit:
Ltd. U.S. Corporate U.S. Corporate
Dept. Dept.
277 Park Avenue, 277 Park Avenue,
6th Floor 6th Floor
New York, NY 10172 New York, NY 10172
Attn: Bruce Gregory Attn: Bruce Gregory
Phone: (212) 224- Phone: (212) 224-
4143 4143
Fax (212) 418-4848 Fax (212) 418-4848
Administrative: Administrative:
International International
Finance Dept. Finance Dept.
277 Park Avenue, 277 Park Avenue,
6th Floor 6th Floor
New York, NY 10172 New York, NY 10172
Attn: Daria Soriano Attn: Daria Soriano
Phone: (212) 224- Phone: (212) 224-
4061 4061
Fax (212) 224-5192 Fax (212) 224-5192
Union Bank of $23,750,000 Credit: Credit:
California, N.A. 350 California St., 350 California St.,
11th Fl. 11th Fl.
San Francisco, CA San Francisco, CA
94104 94104
Attn: Timothy P. Attn: Timothy P.
Streb, VP Streb, VP
Phone: (415) 705- Phone: (415) 705-
7021 7021
Fax: (415) 705-7085 Fax: (415) 705-7085
Administrative: Administrative:
350 California St., 350 California St.,
11th Fl. 11th Fl.
San Francisco, CA San Francisco, CA
94104 94104
Attn: Richard A. Attn: Richard A.
Sutter, VP Sutter, VP
Phone: (415) 705- Phone: (415) 705-
7090 7090
Fax: (415) 705-7085 Fax: (415) 705-7085
Mellon Bank, N.A. $19,000,000 Credit: Credit:
One Mellon Bank One Mellon Bank
Center, Room 4535 Center, Room 4535
Pittsburgh, PA Pittsburgh, PA
15258-0001 15258-0001
Attn: Rich Schaich Attn: Rich Schaich
Phone: (412) 234- Phone: (412) 234-
4420 4420
Fax: (412) 236-1914 Fax: (412) 236-1914
Administrative: Administrative:
Three Mellon Bank Three Mellon Bank
Center Center,
Room 2305 Room 2305
Pittsburgh, PA Pittsburgh, PA
15259-0003 15259-0003
Attn: Greg Klino Attn: Greg Klino
Phone: (412) 234- Phone: (412) 234-
1867 1867
Fax: (412) 234-5049 Fax: (412) 234-5049
Sanwa Bank Ltd., $16,250,000 Credit: Credit:
New York Branch 55 East 52nd Street 55 East 52nd Street
New York, NY 10055 New York, NY 10055
Attn: Jean-Michel Attn: Jean-Michel
Fatovic Fatovic
Phone: (212) 339- Phone: (212) 339-
6397 6397
Fax: (212) 754-1304 Fax: (212) 754-1304
Administrative: Administrative:
55 East 52nd Street 55 East 52nd Street
New York, NY 10055 New York, NY 10055
Attn: Marlin Chin Attn: Marlin Chin
Phone:(212)339-6592 Phone:(212)339-6592
Fax:(212)754-2368 Fax:(212)754-2368
Credit Agricole $12,500,000 Credit: Credit:
Indosuez 55 E. Monroe 55 E. Monroe
Street Street
Suite 4700 Suite 4700
Chicago, IL Chicago, IL
60603 60603
Attn: Ray Attn: Ray
Falkenberg Falkenberg
Phone:(312) 917 - Phone:(312) 917-
7426 7426
Fax: (312) 372- Fax: (312) 372-
3724 3724
Administrative: Administrative:
55 E. Monroe 55 E. Monroe
Street Street
Suite 4700 Suite 4700
Chicago, IL Chicago, IL
60603 60603
Attn: James Attn: James
Barrett Barrett
Phone: (312) 917- Phone: (312) 917-
7429 7429
Fax: (312) 372- Fax: (312) 372-
4421 4421
First National Bank of $15,000,000 Credit: Credit:
Chicago One First National One First National
Plaza Plaza
Chicago, IL 60670 Chicago, IL 60670
Attn: Diane Stare Attn: Diane Stare
Phone: (312) 732- Phone: (312) 732-
8251 8251
Fax: (312) 336-4380 Fax: (312) 336-4380
Administrative: Administrative:
One First National One First National
Plaza Plaza
Chicago, IL 60670 Chicago, IL 60670
Attn: Mary Hart Attn: Mary Hart
Phone: (312) 732- Phone: (312) 732-
6137 6137
Fax: (312) 732-2715 Fax: (312) 732-2715
Morgan Guaranty Trust $15,000,000 Credit: Credit:
Company of New York 60 Wall Street 60 Wall Street
New York, NY 10260- New York, NY 10260-
0060 0060
Attn: Deborah Attn: Deborah
Boodheim Boodheim
Phone: (212) 648- Phone: (212) 648-
8063 8063
Fax: (212) 648-5018 Fax: (212) 648-5018
Administrative: Administrative:
500 Stanton 500 Stanton
Christiana Ctr. Christiana Ctr.
Newark, DE 19713- Newark, DE 19713-
2107 2107
Attn: Vickie Fedele Attn: Vickie Fedele
Phone: (302) 634- Phone: (302) 634-
4225 4225
Fax: (302) 634-1852 Fax: (302) 634-1852
Standard Chartered $15,000,000 Credit: Credit:
Bank 7 World Trade 7 World Trade
Center Center
27th Floor 27th Floor
New York, NY 10048 New York, NY 10048
Attn: David Cutting Attn: David Cutting
Phone: (212) 667- Phone: (212) 667-
0469 0469
Fax: (212) 667-0225 Fax: (212) 667-0225
Administrative: Administrative:
707 Wilshire Blvd., 707 Wilshire Blvd.,
W-8-33 W-8-33
Los Angeles, CA Los Angeles, CA
90017 90017
Attn: Qustanti Attn: Qustanti
Shiber Shiber
Phone: (213) 614- Phone: (213) 614-
5037 5037
Fax: (213) 614-4270 Fax: (213) 614-4270
Wachovia Bank of $10,000,000 Credit: Credit:
Georgia, N.A. 191 Peachtree 191 Peachtree
Street, N.E. Street, N.E.
28th Floor, GA-370 28th Floor, GA-370
Atlanta, GA 30303 Atlanta, GA 30303
Attn: Brad Watkins Attn: Brad Watkins
Phone:(404) 332-7093 Phone:(404)332-7093
Fax: (404) 332-6898 Fax: (404)332-6898
Administrative: Administrative:
191 Peachtree 191 Peachtree
Street, N.E. Street, N.E
28th Floor, GA-370 28th Floor, GA-370
Atlanta, GA 30303 Atlanta, GA 30303
Attn: Christy N. Attn: Christy N.
Howard Howard
Phone:(404)332-6261 Phone:(404)332-6261
Fax:(404) 332-6898 Fax: (404)332-6898
Comerica Bank $7,500,000 Credit: Credit:
500 Woodward Ave. 500 Woodward Ave.
MC 3268 MC 3268
Detroit, MI 48226 Detroit, MI 48226
Attn: Hugh Porter Attn: Hugh Porter
Phone (313) 222- Phone (313) 222-
6192 6192
Fax: (312) 222-9514 Fax: (312) 222-9514
Administrative: Administrative:
500 Woodward Ave. 500 Woodward Ave.
MC 3268 MC 3268
Detroit, MI 48226 Detroit, MI 48226
Attn: Beverly Jones Attn: Beverly Jones
Phone (313) 222- Phone (313) 222-
3805 3805
Fax: (312) 222-3351 Fax: (312) 222-3351
National Bank of $7,500,000 Credit: Credit:
Kuwait 299 Park Avenue 299 Park Avenue
New York, NY 10171- New York, NY 10171-
0023 0023
Attn: Jeff Ganter Attn: Jeff Ganter
Phone: (212) 303- Phone: (212) 303-
9828 9828
Fax: (212) 319-8269 Fax: (212) 319-8269
Administrative: Administrative:
299 Park Avenue 299 Park Avenue
New York, NY 10171- New York, NY 10171-
0023 0023
Attn: Jeff Ganter Attn: Jeff Ganter
(212) 303-9868 (212) 303-9868
(212) 319-8269 (212) 319-8269
Arab Bank PLC, Grand $6,250,000 Credit: Credit:
Cayman 520 Madison Ave. 520 Madison Ave.
New York, NY 10022 New York, NY 10022
Attn: Samer Tamimi Attn: Samar Tamimi
Phone: (212) 715- Phone: (212) 715-
9712 9712
Fax: (212) 593-4632 Fax: (212) 593-4632
Administrative: Administrative:
520 Madison Ave. 520 Madison Ave.
New York, NY 10022 New York, NY 10022
Attn: Justo Huapaya Attn: Justo Huapaya
Phone: (212) 715- Phone: (212) 715-
9713 9713
Fax: (212) 593-4632 Fax: (212) 593-4632
Bank One, Columbus, $6,250,000 Credit: Credit:
N.A. 40 North Maine, 3rd 40 North Maine, 3rd
Floor Floor
Dayton, OH 45402 Dayton, OH 45402
Attn: Joey Williams Attn: Joey Williams
Phone: (937) 449- Phone: (937) 449-
8671 8671
Fax: (937) 449-4885 Fax: (937) 449-4885
Administrative: Administrative
P.O. Box 710209 P.O. Box 710209
Columbus, OH 43271- Columbus, OH 43271
0209 0209
Attn: Jim Zook Attn: Jim Zook
Phone: (614) 248- Phone: (614) 248-
6187 6187
Fax: (614) 248-5518 Fax:(614) 248-5518
NationsBank, N.A. $8,500,000 Credit: Credit:
100 North Tryon 100 North Tryon
Street, Street,
8th Floor 8th Floor
NationsBank Corp. NationsBank Corp.
Center, NC1-007-08- Center, NC1-007-08-
04 04
Charlotte, NC 28255 Charlotte, NC 28255
Attn: Tim Spanos Attn: Tim Spanos
Phone: (704) 386- Phone: (704) 386-
4507 4507
Fax: (704) 388-0906 Fax: (704) 388-0906
Administrative: Administrative:
100 North Tryon 100 North Tryon
Street, Street,
8th Floor 8th Floor
NationsBank Corp. NationsBank Corp.
Center, NC1-007-08- Center, NC1-007-08-
04 04
Charlotte, NC 28255 Charlotte, NC 28255
Attn: Tim Spanos Attn: Tim Spanos
Phone: (704) 386- Phone: (704) 386-
4507 4507
Fax: (704) 388-0906 Fax: (704) 388-0906
The Fifth-Third Bank $6,250,000 Credit: Credit:
38 Fountain 38 Fountain
Square Plaza Square Plaza
Cincinnati, OH Cincinnati, OH
45263 45263
Attn: Andy Hauck Attn: Andy Hauck
Phone: (513) 579- Phone: (513) 579-
4178 4178
Fax: (513) 579- Fax: (513) 579-
5226 5226
Administrative: Administrative:
38 Fountain 38 Fountain
Square Plaza Square Plaza
Cincinnati, OH Cincinnati, OH
45263 45263
Attn: Daniel Attn: Daniel
Mullen Mullen
Phone: (513) 579- Phone: (513) 579-
4104 4104
Fax: (513) 579- Fax: (513) 579-
4226 4226
First National Bank of $7,500,000 Credit: Credit:
Maryland 25 S. Charles 25 S. Charles
Street Street
Baltimore, MD Baltimore, MD
21201 21201
Attn: Jerome Attn: Jerome
Ratliffe Ratliffe
Phone: (410) 244- Phone: (410) 244-
4852 4852
Fax: (410) 545- Fax: (410) 244-
2047 2047
Administrative: Administrative:
25 S. Charles 25 S. Charles
Street Street
Baltimore, MD Baltimore, MD
21201 21201
Attn: Emilia Attn: Emilia
Schwartz Schwartz
Phone: (410) 244- Phone: (410) 244-
4201 4201
Fax: (410) 244- Fax: (410) 244-
4294 4294
Star Bank, N.A. $7,500,000 Credit: Credit:
425 Walnut Street 425 Walnut Street
Cincinnati, OH Cincinnati, OH
45202 45202
Attn: Bill Goodwin Attn: Bill Goodwin
Phone: (513) 762- Phone: (513) 762-
8973 8973
Fax: (513) 762-2068 Fax: (513) 762-2068
Administrative: Administrative:
425 Walnut Street 425 Walnut Street
Cincinnati, OH Cincinnati, OH
45202 45202
Attn: Tracy Attn: Tracy
Briede Briede
Phone: (513) 632- Phone: (513) 632-
4034 4034
Fax: (513) 632- Fax: (513) 632-
3099 3099
SunTrust Bank, N.A. $6,250,000 Credit: Credit:
200 S. Orange Ave. 200 S. Orange Ave.
MC 0-1043 MC 0-1043
Orlando, FL 32801 Orlando, FL 32801
Attn: Stephen L. Attn: Stephen L.
Leister Leister
Phone: (407) 237- Phone: (407) 237-
4705 4705
Fax: (407) 237-6894 Fax: (407) 237-6894
Administrative: Administrative:
200 S. Orange Ave. 200 S. Orange Ave.
MC 0-1043 MC 0-1043
Orlando, FL 32801 Orlando, FL 32801
Attn: Lois Keezel Attn: Lois Keezel
Phone: (407) 237- Phone: (407) 237-
4855 4855
Fax: (407) 237-6894 Fax: (407) 237-6894
TOTAL OF COMMITMENTS: $500,000,000
EXECUTION COPY
LETTER AMENDMENT
Dated as of June 29, 1998
To the banks, financial institutions
and other institutional lenders
(collectively, the "Lenders") parties
to the Credit Agreement referred to below,
Citibank, N.A., as an administrative agent
and as paying agent (the "Paying Agent") for
the Lenders, The Chase Manhattan Bank, as
an administrative agent, BankBoston, N.A., as
syndication agent, and The Bank of America
National Trust & Savings Association, as
documentation agent
Ladies and Gentlemen:
We refer to the Five-Year Credit Agreement dated as of
July 28, 1997 (as amended, supplemented or otherwise modified
through the date hereof, the "Credit Agreement") among the
undersigned and you. Capitalized terms not otherwise defined in
this Letter Amendment have the same meanings as specified in the
Credit Agreement.
It is hereby agreed by you and us as follows:
The Credit Agreement is, effective as of the date of
this Letter Amendment, hereby amended as follows:
(a) Section 1.01 of the Credit Agreement is amended by
adding a new definition of "Investment Grade Date" to read
as follows:
"`Investment Grade Date'" means the first date on
which the Paying Agent shall have received evidence
satisfactory to it that the Borrower has a Public Debt
Rating then in effect of at least BBB from S&P and at
least Baa2 from Moody's, provided that the Borrower is
not on "negative credit watch" (or any like
designation by S&P or Moody's from time to time) at
such time as determined by S&P and Moody's."
(b) Section 3.02(a)(i) is amended in full to read as
follows:
"(i)the representations and warranties contained
in Section 4.01 (except, from and after the Investment
Grade Date, the representations set forth in the last
sentence of subsection (e) thereof) are correct on and
as of the date of such Borrowing, before and after
giving effect to such Borrowing and to the application
of the proceeds therefrom, as though made on and as of
such date other than any such representations or
warranties that, by their terms, refer to a specific
date other than the date of such Borrowing, in which
case as of such specific date; and"
(c) Section 4.01(g) is amended in full to read as
follows:
"(g)The Borrower is not engaged in the business
of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the
Federal Reserve System); no proceeds of any Advance or
drawings under any Letter of Credit will be used to
purchase or carry any margin stock other than the
Voting Stock of the Borrower to the extent otherwise
permitted under the Loan Documents; no proceeds of any
Advance or drawings under any Letter of Credit will be
used to extend credit to others for the purpose of
purchasing or carrying any margin stock; and following
application of the proceeds of each Advance or drawing
under each Letter of Credit, not more than 25% of the
value of the assets (either of the Borrower only or of
the Borrower and its Subsidiaries on a Consolidated
basis) subject to the provisions of Section 5.02(a) or
5.02(e) or subject to any restriction contained in any
agreement or instrument between the Borrower and any
Lender Party or any Affiliate of any Lender Party
relating to Debt within the scope of Section 6.01(d)
will be margin stock. For purposes of this
Section 4.01(g), "assets" of the Borrower or any of
its Subsidiaries includes, without limitation,
treasury stock of the Borrower that has not been
retired."
This Letter Amendment shall become effective as of the
date first above written when, and only when, the Paying Agent
shall have received counterparts of this Letter Amendment
executed by the undersigned and the Required Lenders or, as to
any of the Required Lenders, advice satisfactory to the Paying
Agent that such Required Lender has executed this Letter
Amendment. This Letter Amendment is subject to the provisions of
Section 8.01 of the Credit Agreement.
On and after the effectiveness of this Letter
Amendment, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement, and each reference in the
Notes and each of the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement, as amended by this Letter Amendment.
The Credit Agreement and the Notes, as specifically
amended by this Letter Amendment, are and shall continue to be in
full force and effect and are hereby in all respects ratified and
confirmed. The execution, delivery and effectiveness of this
Letter Amendment shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Lender
or the Paying Agent under the Credit Agreement, nor constitute a
waiver of any provision of the Credit Agreement.
If you agree to the terms and provisions hereof,
please evidence such agreement by executing and returning at
least three counterparts of this Letter Amendment to Ms. Anna
Rodriguez, Citicorp Securities, Inc., 399 Park Avenue, 11th
Floor, Zone 20, New York, NY 10043, no later than 5:00 p.m. EDST
on June 29, 1998.
This Letter Amendment may be executed in any number of
counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement. Delivery of an executed counterpart
of a signature page to this Letter Amendment by telecopier shall
be effective as delivery of a manually executed counterpart of
this Letter Amendment.
This Letter Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
Very truly yours,
FEDERATED DEPARTMENT STORES, INC.
By: /s/ Karen M. Hoguet
Name: Karen M. Hoguet
Title: Senior VP, CFO and Treasurer
Agreed as of the date first above written:
CITIBANK, N.A.,
as an Administrative Agent and as Paying Agent
By: /s/ Allen Fisher
Name: Allen Fisher
Title: Vice President
THE CHASE MANHATTAN BANK,
as an Administrative Agent
By: /s/ Barry K. Bergman
Name: Barry K. Bergman
Title: Vice President
BANKBOSTON, N.A.,
as Syndication Agent
By: /s/ Bethann R. Halligan
Name: Bethann R. Halligan
Title: Division Executive
THE BANK OF AMERICA, NT & SA,
as Documentation Agent
By: /s/ Sandra S. Ober
Name: Sandra S. Ober
Title: Managing Director
THE INITIAL LENDERS
CITIBANK, N.A.
By: /s/ Allen Fisher
Name: Allen Fisher
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Barry K. Bergman
Name: Barry K. Bergman
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Bethann R. Halligan
Name: Bethann R. Halligan
Title: Division Executive
THE BANK OF AMERICA, NT & SA
By: /s/ Jody A. Pritchard
Name: Jody A. Pritchard
Title: Vice President
BANK OF SCOTLAND
By: /s/ Annie Chin Tat
Name: Annie Chin Tat
Title: Senior Vice President
BANK ONE, N.A.
By: /s/ Braden T. Krebs
Name: Braden T. Krebs
Title: Officer
BANQUE PARIBAS
By: /s/ Karen E. Coons
Name: Karen E. Coons
Title: Vice President
By: /s/ Ann B. McAloon
Name: Ann B. McAloon
Title: Vice President
CREDIT AGRICOLE INDOSUEZ
By: /s/ Dean Balice
Name: Dean Balice
Title: Senior Vice President, Branch Manager
By: /s/ David Bouhl
Name: David Bouhl
Title: Head of Corporate Banking, Chicago
COMERICA BANK
By: /s/ Hugh G. Porter
Name: Hugh G. Porter
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By: /s/ Chris T. Horgan
Name: Chris T. Horgan
Title: Vice President
By: /s/ Robert Hetu
Name: Robert Hetu
Title: Associate
THE FIFTH THIRD BANK
By: /s/ A. K. Havcn
Name: A. K. Havcn
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Dianne M. Stark
Name: Dianne M. Stark
Title: Vice President
THE FIRST NATIONAL BANK OF MARYLAND
By: /s/ Jerome A. Ratliffe
Name: Jerome A/ Ratliffe
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Richard M. Seufert
Name: Richard M. Seufert
Title: Vice President
THE MITSUI TRUST & BANKING
COMPANY, LTD.
By: /s/ Eiilhi Akama
Name: Eiilhi Akama
Title: Vice President
NATIONAL BANK OF KUWAIT
By: /s/ Muhannad Kamai
Name: Muhannad Kamai
Title: Assistant General Manager
By: /s/ Robert J. McNeill
Name: Robert J. McNeill
Title: Executive Manager
PNC BANK, OHIO, NATIONAL ASSOCIATION
By: /s/ Bruce A. Kintner
Name: Bruce A. Kintner
Title: Vice President
THE SANWA BANK, LIMITED
NEW YORK BRANCH
By: /s/ Jean-Michel Fatovie
Name: Jean-Michel Fatovie
Title: Vice President
STANDARD CHARTERED BANK, N.A.
By: /s/ David D. Cutting
Name: David D. Cutting
Title: Senior Vice President
By: /s/ Natalie S. Yang
Name: Natalie S. Yang
Title: Senior Relationship Manager
STAR BANK, N.A.
By: /s/ Derek S. Roudebush
Name: Derek S. Roudebush
Title: Vice President
SUNTRUST BANK CENTRAL FLORIDA, N.A.
By: /s/ C. Scott Harrison
Name: C. Scott Harrison
Title: Corporate Banking Officer
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Susan D. Biba
Name: Susan D. Biba
Title: Vice President
WACHOVIA BANK, N.A.
By: /s/ Bradford L. Watkins
Name: Bradford L. Watkins
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-START> MAY-03-1998
<PERIOD-END> AUG-01-1998
<CASH> 281
<SECURITIES> 0
<RECEIVABLES> 2,111
<ALLOWANCES> 0
<INVENTORY> 3,361
<CURRENT-ASSETS> 5,976<F1>
<PP&E> 6,381
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,351<F2>
<CURRENT-LIABILITIES> 2,618
<BONDS> 3,890
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,351<F3>
<SALES> 3,523
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,101
<OTHER-EXPENSES> 1,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 193<F4>
<INCOME-TAX> 86
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107
<EPS-PRIMARY> .51
<EPS-DILUTED> .47
<FN>
<F1>Includes the following:
(1) Supplies and prepaid expenses 118
Deferred income tax assets 105
<F2>Includes the following:
(2) Intangible assets - net 677
Other assets 317
<F3>Includes the following:
(3) Deferred income taxes 977
Other liabilities 557
Shareholders' Equity 5,309
<F4>Includes the following:
(4) Interest Income 2
</FN>
</TABLE>
