SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___ to ___
Commission file number: 1-13536
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
Federated Department Stores, Inc. Retirement Income
and Thrift Incentive Plan
B. Name of issuer of the securities held pursuant to the plan
and the address of its principal executive office:
Federated Department Stores, Inc.
151 West 34th Street
New York, New York 10001
and
7 West Seventh Street
Cincinnati, Ohio 45202
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Financial Statements
December 31, 1997 and 1996
With Independent Auditors' Report Thereon
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Index
Independent Auditors' Report
Statements of Net Assets Available for Benefits, with Fund
Information -
December 31, 1997 and 1996
Statements of Changes in Net Assets Available for Benefits,
with Fund Information -
Years Ended December 31, 1997 and 1996
Notes to Financial Statements
Independent Auditors' Report
Pension and Profit Sharing Committee
Federated Department Stores, Inc.
Profit Sharing 401(k) Investment Plan:
We have audited the accompanying statements of net assets
available for benefits of the Federated Department Stores,
Inc. Profit Sharing 401(k) Investment Plan (the "Plan") as
of December 31, 1997 and 1996, and the related statements of
changes in net assets available for benefits for the years
then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the net assets
available for benefits of the Plan as of December 31, 1997
and 1996, and the changes in net assets available for
benefits for the years then ended in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The Fund
Information in the statements of net assets available for
benefits and the statements of changes in net assets
available for benefits is presented for purposes of
additional analysis rather than to present the net assets
available for benefits and changes in net assets available
for benefits of each fund. The Fund Information has been
subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
June 19, 1998
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1997
<CAPTION>
Fund A Fund B Fund C Fund D Fund E Fund F Fund L Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments, at fair
value (Note 3):
Master Trust
investments $434,543,368 $285,786,385 $262,957,586 $56,284,607 $9,147,975 $40,674,761 $ - $1,089,394,682
Participant loans - - - - - - 9,252,876 9,252,876
Total investments 434,543,368 285,786,385 262,957,586 56,284,607 9,147,975 40,674,761 9,252,876 1,098,647,558
Receivables:
Employer
contributions - - - - - 20,548,918 - 20,548,918
Interest receivable - 119,274 - - - - - 119,274
Total receivables - 119,274 - - - 20,548,918 - 20,668,192
Total assets 434,543,368 285,905,659 262,957,586 56,284,607 9,147,975 61,223,679 9,252,876 1,119,315,750
Liabilities:
Trustee and management
fees payable 303,089 406,838 133,754 69,759 4,750 27,586 - 945,776
Total liabilities 303,089 406,838 133,754 69,759 4,750 27,586 - 945,776
Net assets available
for benefits $434,240,279 $285,498,821 $262,823,832 $56,214,848 $9,143,225 $61,196,093 $9,252,876 $1,118,369,974
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
(formerly named Federated Department Stores, Inc. Retirement Income and Thrift
Incentive Plan)
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1996
<CAPTION>
Fund A Fund B Fund C Fund F Total
<S> <C> <C> <C> <C> <C>
Assets:
Investments, at fair value
(Note 3):
Master Trust investments $311,069,047 $205,204,044 $140,550,903 $28,639,172 $685,463,166
Receivables:
Employee contributions 2,075,082 1,828,675 1,565,220 198,098 5,667,075
Interest receivable 17,399 11,696 7,886 1,577 38,558
Due from (to) other funds (1,452,119) 731,904 630,725 89,490 -
Total receivables 640,362 2,572,275 2,203,831 289,165 5,705,633
Total assets 311,709,409 207,776,319 142,754,734 28,928,337 691,168,799
Liabilities:
Trustee and management
fees payable 265,021 317,852 55,979 11,636 650,488
Excess employer contribution (5,466) - - 178,731 173,265
Total liabilities 259,555 317,852 55,979 190,367 823,753
Net assets available for benefits $311,449,854 $207,458,467 $142,698,755 $28,737,970 $690,345,046
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
(formerly named Federated Department Stores, Inc. Retirement Income and Thrift
Incentive Plan)
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year Ended December 31, 1996
<CAPTION>
Stability
Diversified Income
Fund Fund Fund A Fund B Fund C Fund F Total
<S> <C> <C> <C> <C> <C> <C> <C>
Additions:
Net investment income
(Note 3):
Net appreciation in fair
value of investments $ 5,830,267 $ (158,163) $ (1,501,047) $ 17,746,541 $ 19,653,096 $ 3,862,635 $ 45,433,329
Interest and dividends 4,594,002 557,235 16,884,265 6,631,643 2,765,904 44,852 31,477,901
Total investment income 10,424,269 399,072 15,383,218 24,378,184 22,419,000 3,907,487 76,911,230
Less administrative expenses (330,137) (21,766) (1,013,202) (1,161,639) (232,756) (40,734) (2,800,234)
Net investment income 10,094,132 377,306 14,370,016 23,216,545 22,186,244 3,866,753 74,110,996
Contributions:
Employer 154,891 - 5,704 151 543 4,863,971 5,025,260
Employee - - 13,638,546 11,480,075 9,242,959 910,092 35,271,672
Total contributions 154,891 - 13,644,250 11,480,226 9,243,502 5,774,063 40,296,932
Total additions 10,249,023 377,306 28,014,266 34,696,771 31,429,746 9,640,816 114,407,928
Deductions:
Distributions 8,612,913 1,928,596 37,509,690 14,771,088 7,940,164 1,661,026 72,423,477
Interfund transfers (145,459,057) (11,279,179) 88,994,487 34,683,024 27,664,027 5,396,698 -
Net increase (decrease) (143,822,947) (12,830,469) 79,499,063 54,608,707 51,153,609 13,376,488 41,984,451
Net assets available for
benefits:
Beginning of year 143,822,947 12,830,469 231,950,791 152,849,760 91,545,146 15,361,482 648,360,595
End of year $ - $ - $311,449,854 $207,458,467 $142,698,755 $28,737,970 $690,345,046
The accompanying notes are an integral part of these financial statements.
</TABLE>
(Continued)
<TABLE>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year Ended December 31, 1997
<CAPTION>
Fund A Fund B Fund C Fund D Fund E Fund F Fund L Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total
Additions:
Net investment income
(Note 3):
Net appreciation in
fair value
of investments $ (1,630,626) $ 44,366,981 $ 57,816,689 $10,093,029 $ (467,306) $ 8,500,046 $ - $ 118,678,813
Interest and dividends 28,564,598 11,173,405 4,659,771 314 176,049 43,772 190,058 44,807,967
Total investment
income 26,933,972 55,540,386 62,476,460 10,093,343 (291,257) 8,543,818 190,058 163,486,780
Less administrative
expenses (2,158,679) (1,558,662) (549,231) (246,731) (69,124) (90,056) - (4,672,483)
Net investment income 24,775,293 53,981,724 61,927,229 9,846,612 (360,381) 8,453,762 190,058 158,814,297
Contributions:
Employer 2,959 8,738 6,813 702 375 21,524,022 - 21,543,609
Employee 23,358,243 18,739,392 18,886,779 5,481,542 1,192,349 2,089,458 - 69,747,763
Total contributions 23,361,202 18,748,130 18,893,592 5,482,244 1,192,724 23,613,480 - 91,291,372
Total additions 48,136,495 72,729,854 80,820,821 15,328,856 832,343 32,067,242 190,058 250,105,669
Deductions:
Distributions 71,349,898 26,789,518 21,086,687 2,175,995 176,477 3,620,623 57,127 125,256,325
Interfund transfers (35,877,985) (18,561,884) 12,881,118 24,117,144 8,487,359 (123,793) 9,078,041 -
Transfer of assets from
previously existing
tax-qualified profit
sharing and savings
plans maintained by
the Company (Note 1) 181,881,813 50,661,902 47,509,825 18,944,843 - 4,135,297 41,904 303,175,584
Net increase 122,790,425 78,040,354 120,125,077 56,214,848 9,143,225 32,458,123 9,252,876 428,024,928
Net assets available
for benefits:
Beginning of year 311,449,854 207,458,467 142,698,755 - - 28,737,970 - 690,345,046
End of year $434,240,279 $285,498,821 $262,823,832 $56,214,848 $9,143,225 $61,196,093 $9,252,876 $1,118,369,974
The accompanying notes are an integral part of these financial statements.
</TABLE>
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements
December 31, 1997 and 1996
1. Description of the Plan
The following brief description of the Federated Department
Stores, Inc. Profit Sharing 401 (k) Investment Plan (the
"Plan") is provided for general information purposes only.
Participants should refer to the Plan document for more
complete information.
General
The Plan is sponsored by Federated Department Stores, Inc.
(the "Company"). The Plan, which was amended and renamed on
April 1, 1997, is a defined contribution plan and is subject
to the provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA") and U.S. tax law. Effective April 1,
1997, the Plan amended and replaced all of the prior tax-
qualified profit sharing and savings plans which were
maintained by the Company. Such prior plans include the
Federated Department Stores, Inc. Retirement Income and Thrift
Incentive Plan, the R.H. Macy & Co., Inc. Savings Plan, the
R.H. Macy & Co., Inc. Profit Sharing Plan, the Broadway
Stores, Inc. 401 (k) Savings and Investment Plan, and the
Federated Savings Plan for Employees of Lazarus PA, Inc. The
assets of all such prior plans have been merged to form the
Plan. Prior to April 1, 1997, the Plan was the Federated
Department Stores, Inc. Retirement Income and Thrift Incentive
Plan, exclusively. The Federated Department Stores, Inc.
Retirement Income and Thrift Incentive Plan consisted of two
parts: a retirement income plan and a thrift incentive plan.
Eligibility
Employees are generally eligible for participation in the Plan
after one year of service of at least 1,000 hours and after
reaching a minimum age of 21.
Contributions
Beginning April 1, 1997, participants may elect to contribute
an amount equal to 1% to 15% (subject to certain limitations)
of the participant's eligible compensation. Alternatively, a
participant may elect to make these contributions (subject to
certain limitations) on a pre-tax basis pursuant to Section
401(k) of the Internal Revenue Code. Pre-tax contributions up
to 5% of eligible compensation are considered basic savings
which are eligible for matching Company contributions.
Company contributions are made as soon as administratively
feasible after year end only to persons who are active
participants on the last day of the year and who did not make
a withdrawal of basic savings during the year. The Company's
contribution formula is based on the Company's annual earnings
and the minimum Company contribution is the amount necessary
to produce a company match of 33 1/3% of an employee's basic
savings. The Plan also provides that the matching percentage
for eligible participants with 15 or more years of vesting
service at the start of the applicable Plan year is up to 1-1/2
times the matching percentage of eligible participants with
less than 15 years of service at the start of the applicable
Plan year. For the Plan year ended December 31, 1997, the
Company's matching percentage was 48% of the participants'
basic savings for participants with less than 15 years of
vesting service at January 1, 1997 and 72% of the
participants' basic savings for participants with 15 or more
years of vesting service at January 1, 1997. For the Plan
year ended December 31, 1996, the Company's matching
percentage was 20% of the participants' basic savings.
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1997 and 1996
Forfeited nonvested accounts of participants who terminate
employment are applied to participants' accounts in accordance
with Plan provisions. During the 1996 and 1997 Plan years,
there were no forfeited accounts.
Participant Accounts
Each participant's account is credited with the participant's
contributions and an allocation of each fund's earnings or
losses. Allocations are based on participant account
balances. As soon as administratively feasible after the end
of each year, the Company's applicable matching contributions
are credited to the eligible individual accounts.
Vesting
Participants as of March 31, 1997 are immediately 100% vested
in their own and the Company's contributions. New
participants on or after April 1, 1997 are immediately 100%
vested in their own contributions and become 20% vested in the
Company's contributions after 3 years, with additional vesting
of 20% each year thereafter until fully vested. 100% vesting
is also achieved through normal retirement, death or
disability.
Participant Withdrawals
Effective July 1997, participants may borrow from their
accounts up to a maximum amount equal to the lesser of $50,000
or 50% of their 401(k) vested account balance. All loans
must be repaid within five years and are also subject to
certain other conditions as to security, a reasonable rate of
interest and repayment schedules. Loan transactions are
treated as a transfer to (from) the investment fund from (to)
the Participant Loan Fund (Fund L).
Participants are permitted to make withdrawals of their after-
tax contributions and earnings thereon at any time.
Withdrawals of pre-tax contributions are subject to the
hardship rules of Section 401 of the Internal Revenue Code.
At termination, participants may elect to receive the balance
of their vested account either in the form of a lump sum
payment or in a variety of annuity forms.
2. Summary of Significant Accounting Policies
a) Master Trust
Effective January 1, 1996, the Plan entered into the Federated
Department Stores, Inc. Defined Contribution Plan Master Trust
(the "Master Trust") Agreement with Chase Manhattan Bank (the
"Trustee"). Under the terms of the Master Trust, the Trustee
serves as Trustee custodian for the Master Trust which was
originally established for the investment of assets of the
Federated Department Stores, Inc. Retirement Income and Thrift
Incentive Plan and of the Federated Savings Plan for Employees of
Lazarus PA, Inc., (the "Lazarus PA Plan") also sponsored by the
Company. As of April 1, 1997, the Master Trust holds the assets
of the Plan, exclusively (see Note 1).
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1997 and 1996
The Federated Department Stores, Inc. Pension and Profit
Sharing Committee selects a diversified group of investment
managers who determine purchases and sales of investments for the
respective portions of the assets in the Master Trust managed by
them.
b) Basis of Presentation
The accompanying financial statements of the Plan have been
prepared on the accrual basis of accounting.
c) Investments
The fair value of the Plan's participation in the Master
Trust is based on the beginning of year value of the Plan's
participation in the Master Trust plus allocated investment
income and actual contributions, less actual distributions
and allocated administrative expenses.
Other investments are reported at fair value as determined
by quoted market prices on an active market. Corporate
bonds are valued based on yields currently available on
comparable securities of issuers with similar credit
ratings. Purchases and sales of securities are recorded on
a trade-date basis. Realized gains and losses on the sale
of securities are reported on the average cost method.
Participant loans are valued at cost which approximates fair
value.
Cash equivalents include highly liquid fixed-income
securities with a maturity of one year or less.
Dividend income is recorded on the ex-dividend date. Income
from other investments is recorded as earned on an accrual
basis.
d) Insurance Contracts
Insurance contracts are valued at contract value, which
represents contributions made under the contract, plus
interest earned, less benefits paid and expenses charged.
e) Use of Estimates
The Plan administrator has made a number of estimates and
assumptions relating to the preparation of these financial
statements. Actual results could differ from these
estimates and assumptions.
f) Reclassifications
Certain 1996 amounts have been reclassified to conform with
the 1997 presentation.
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1997 and 1996
3. Investments
All of the Plan's investments are included in the Master Trust
which was originally established for the investment of assets
of the Federated Department Stores, Inc. Retirement Income and
Thrift Incentive Plan and of the Lazarus PA Plan (see Note 1).
The assets of the Master Trust are held by the Trustee. Each
participating plan has an undivided interest in the Master
Trust. At December 31, 1997, the Plan had exclusive interest
in the net assets of the Master Trust (see Note 1). At
December 31, 1996, the Plan's interest in the net assets of
the Master Trust was approximately 99.2%. Prior to April 1,
1997, investment income and administrative expenses relating
to the Master Trust were allocated to the individual plans
based upon monthly balances invested by each plan.
The Trustee under the Master Trust, in accordance with the
trust agreement, invests all contributions to the Plan among
several investment funds. The funds are:
Diversified Fund - This fund is composed of employer
contributions to the Retirement Income portion of the
Federated Department Stores, Inc. Retirement Income and
Thrift Incentive Plan and certain amounts transferred when
certain plans were merged, together with the net earnings
thereon. All amounts in this fund are invested in
corporate equity and fixed-income securities, government
fixed-income securities and common/collective trusts. This
fund was discontinued during 1996 and participants could
elect to redirect their balances to any available funds.
In the event the participants declined this election, their
balances were directed to Fund A.
Stability Income Fund - This fund consists of balances in
the Retirement Income portion of the Federated Department
Stores, Inc. Retirement Income and Thrift Incentive Plan of
participants who were at least 60 years of age prior to
December 31, 1986, or who have attained age 55 and who have
completed at least ten years of service and have elected to
transfer all or part of their balance out of the
Diversified Fund. All amounts in this fund are invested in
short-term, fixed-income corporate and government bonds.
This fund was discontinued during 1996 and the participants
could elect to redirect their balances to any available
funds. In the event the participants declined this
election, their balances were directed to Fund A.
Fund A - Fixed Income Fund - consisting primarily of high
quality fixed-income and stable value products.
Fund B - Balanced Fund - consisting of common/collective
trusts which invest in a varying mixture of equity
securities and fixed income instruments.
Fund C - S&P 500 Stock Index Fund - consisting principally
of shares of companies included in the S&P 500 Composite
Stock Price Index.
Fund D - Small Cap Stock Fund - consisting principally of
small capitalization domestic equity securities.
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1997 and 1996
Fund E - International Stock Fund - consisting of stocks of
companies not based in the United States.
Fund F - Federated Stock Fund - consisting exclusively of
the Company's registered common stock.
Company contributions are directed to Fund F. Participants
may elect to redirect the value of Company contributions to
other investment options permitted pursuant to Plan
provisions. Funds D and E are new fund options for the 1997
Plan year.
The following table presents the fair values or contract values
of investments and total net assets for the Master Trust at
December 31, 1997 and 1996:
1997 1996
Assets:
Investments at fair value:
Cash and cash equivalents $ 7,481,407 $ 39,839,098
U. S. government securities 4,829,500 68,486,345
Corporate debt instruments - 60,779,347
Common stock 38,357,370 28,689,775
Foreign government securities - 2,050,615
Common/collective trusts 539,407,513 339,497,225
Registered investment companies 68,707,604 -
Total investments at fair value 658,783,394 539,342,405
Non interest bearing cash 1,160,337 5,264
Participant loans 9,252,876 -
Insurance contracts at
contract value 429,450,951 163,004,655
Total investments 1,098,647,558 702,352,324
Receivables:
Employer contributions 20,548,918 -
Accrued interest, dividend
and other income 119,274 4,811,746
Other receivables - 37,376
Total receivables 20,668,192 4,849,122
Total assets 1,119,315,750 707,201,446
Accrued liabilities:
Due to broker for
securities purchased - 15,917,026
Accrued administrative expenses 945,776 -
Total accrued liabilities 945,776 15,917,026
Total net assets $1,118,369,974 $691,284,420
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1997 and 1996
Net investment income for the Master Trust for the years ended
December 31, 1997 and 1996 is as follows:
1997 1996
Net appreciation in fair
value of investments:
Cash and cash equivalents $ (33,508) $ (523)
U.S. government securities (29,867) (2,319,416)
Corporate debt instruments (278,870) (864,389)
Preferred stock - (3,450)
Common stock 8,482,993 10,072,511
Foreign government securities - 9,635
Miscellaneous securities (689,445) (472,962)
Common/collective trusts 101,605,295 39,908,759
Registered investment companies 9,628,370 -
Net appreciation in fair
value of investments 118,684,968 46,330,165
Interest and dividends 44,864,596 31,401,563
Total investment income 163,549,564 77,731,728
Administrative expenses (4,675,757) (2,841,013)
Net investment income $ 158,873,807 $ 74,890,715
4. Plan Termination
Although the Company has not expressed any intent to terminate
the Plan, it may do so at any time. In the event the Plan is
terminated, the Company would have no further obligation to
make contributions, and all sums credited to individual
accounts (after expenses) would be distributed to
participants.
5. Federal Income Taxes
The Plan obtained its latest determination letter on June 18,
1996, in which the Internal Revenue Service stated that the
Plan, as then designed, was in compliance with the applicable
requirements of the Internal Revenue Code. While the Plan has
been amended since receiving such determination letter, the
Plan administrator and the Plan's tax counsel believe that the
Plan is currently designed and being operated in compliance
with the applicable requirements of the Internal Revenue Code.
Therefore, no provision for income taxes has been included in
the Plan's financial statements.
The Plan's testings, subject to the provisions of the Internal
Revenue Code, have not been completed for the current year.
However, the Plan's sponsor believes that the Plan is
currently in compliance.
6. Administrative Expenses
The Plan pays reasonable and necessary expenses incurred for
the ongoing administration of the Plan.
Pursuant to the requirements of the Securities Exchange Act of
1934, the members of the Pension and Profit Sharing Committee (which is
the administrative committee for the Federated Department Stores, Inc.
Retirement Income and Thrift Incentive Plan) have duly caused this annual
report to be signed on its behalf by the undersigned hereunto duly
authorized.
FEDERATED DEPARTMENT STORES, INC.
RETIREMENT INCOME AND THRIFT
INCENTIVE PLAN
Dated: June 30, 1998 By: /s/ Karen M. Hoguet
Karen M. Hoguet
Chairman of the Pension and
Profit Sharing Committee
