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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from January 1, 1998 to
December 31, 1998
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, 1998 and 1997
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, 1998 and 1997
Statements of Changes in Net Assets Available for Benefits, with
Fund Information -
Years Ended December 31, 1998 and 1997
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, 1998 and 1997, 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, 1998 and
1997, 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.
KPMG LLP
Cincinnati, Ohio
June 16, 1999
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
<TABLE>
Statement of Net Assets Available for Benefits, with Fund Information
December 31, 1998
<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 $424,605,706 $314,086,514 $339,727,811 $52,553,476 $13,875,642 $52,761,975 $ - $1,197,611,124
Participant loans - - - - - - 16,359,823 16,359,823
Total investments 424,605,706 314,086,514 339,727,811 52,553,476 13,875,642 52,761,975 16,359,823 1,213,970,947
Receivables:
Employer contributions - - - - - 24,491,672 - 24,491,672
Participant
contributions 385,923 263,808 310,195 95,184 23,843 49,268 - 1,128,221
Interest - 145,134 - - - - - 145,134
Forfeitures - - - - - 457,117 - 457,117
Total receivables 385,923 408,942 310,195 95,184 23,843 24,998,057 - 26,222,144
Total assets 424,991,629 314,495,456 340,038,006 52,648,660 13,899,485 77,760,032 16,359,823 1,240,193,091
Liabilities:
Trustee and management
fees payable 268,480 277,410 176,726 99,437 12,758 29,826 - 864,637
Total liabilities 268,480 277,410 176,726 99,437 12,758 29,826 - 864,637
Net assets available
for benefits $424,723,149 $314,218,046 $339,861,280 $52,549,223 $13,886,727 $77,730,206 $16,359,823 $1,239,328,454
The accompanying notes are an integral part of these financial statements.
</TABLE>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
<TABLE>
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 - 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>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
<TABLE>
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year Ended December 31, 1998
<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>
Additions:
Net investment income
(Note 3):
Net appreciation in
fair value of
investmeNts $ - $ 49,808,495 $ 68,685,580 $(1,765,411) $ 984,933 $ (2,952,919) $ - $114,760,678
Interest and
dividends 28,440,762 7,644,810 5,406,323 - 623,896 229,086 1,110,778 43,455,655
Total investment
income 28,440,762 57,453,305 74,091,903 (1,765,411) 1,608,829 (2,723,833) 1,110,778 158,216,333
Less administrative
expenses (2,195,757) (1,610,829) (734,534) (483,488) (170,778) (144,117) - (5,339,503)
Net investment income 26,245,005 55,842,476 73,357,369 (2,248,899) 1,438,051 (2,867,950) 1,110,778 152,876,830
Contributions:
Employer 2,583 750 727 286 12 24,493,972 - 24,498,330
Participant 24,390,034 20,828,966 25,954,382 8,998,491 2,174,946 3,788,541 - 86,135,360
Total contributions 24,392,617 20,829,716 25,955,109 8,998,777 2,174,958 28,282,513 - 110,633,690
Total additions 50,637,622 76,672,192 99,312,478 6,749,878 3,613,009 25,414,563 1,110,778 263,510,520
Deductions:
Distributions 67,842,204 31,989,734 30,196,322 4,747,338 716,583 5,818,358 1,241,501 142,552,040
Interfund transfers 7,687,452 (15,963,233) 7,921,292 (5,668,165) 1,847,076 (3,062,092) 7,237,670 -
Net increase
(decrease) (9,517,130) 28,719,225 77,037,448 (3,665,625) 4,743,502 16,534,113 7,106,947 120,958,480
Net assets available
for benefits:
Beginning 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
End of year $424,723,149 $314,218,046 $339,861,280 $52,549,223 $13,886,727 $77,730,206 $16,359,823 $1,239,328,454
The accompanying notes are an integral part of these financial statements.
</TABLE>
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
<TABLE>
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>
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
Participant 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, 1998 and 1997
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
"Lazarus PA Plan"). 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, 1998, the
Company's matching percentage, including the allocation
of all forfeited nonvested amounts, was 48.4% of the
participants'
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1998 and 1997
basic savings for participants with less than 15 years of
vesting service at January 1, 1998 and 72.6% of the
participants' basic savings for participants with 15 or more
years of vesting service at January 1, 1998. For the Plan
year ended December 31, 1997, the Company's matching
percentage was 48.0% of the participants' basic savings for
participants with less than 15 years of vesting service at
January 1, 1997 and 72.0% of the participants' basic savings
for participants with 15 or more years of vesting service at
January 1, 1997.
Forfeited nonvested accounts of participants who terminate
employment are applied to participants' accounts in accordance
with Plan provisions. During the 1998 Plan year, forfeited
nonvested accounts totaled $457,117. During 1997 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.
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1998 and 1997
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. As of April
1, 1997, the Master Trust holds the assets of the Plan,
exclusively (see Note 1).
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.
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1998 and 1997
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.
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, 1998 and December 31, 1997, the Plan
had exclusive interest in the net assets of the Master Trust
(see Note 1). 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:
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.
Fund E - International Stock Fund - consisting of stocks of
companies not based in the United States.
Fund F - Federated Stock Fund - consisting principally 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.
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1998 and 1997
The following table presents the fair values or contract values
of investments and total net assets for the Master Trust at
December 31, 1998 and 1997:
1998 1997
Assets:
Investments at fair value:
Cash and cash equivalents $ 7,730,273 $ 7,481,407
U.S. government securities 6,985,355 4,829,500
Common stock 52,744,728 38,357,370
Common/collective trusts 576,358,520 539,407,513
Registered investment companies 136,535,734 68,707,604
Total investments at fair value 780,354,610 658,783,394
Non interest bearing cash 8,113 1,160,337
Participant loans 16,359,823 9,252,876
Insurance contracts at contract
value 417,248,401 429,450,951
Total investments 1,213,970,947 1,098,647,558
Receivables:
Employer contributions 24,491,672 20,548,918
Participant contributions 1,128,221 -
Forfeitures 457,117 -
Interest 145,134 119,274
Total receivables 26,222,144 20,668,192
Total assets 1,240,193,091 1,119,315,750
Liabilities:
Accrued administrative expenses 864,637 945,776
Total accrued liabilities 864,637 945,776
Total net assets $1,239,328,454 $1,118,369,974
(Continued)
FEDERATED DEPARTMENT STORES, INC.
PROFIT SHARING 401 (k) INVESTMENT PLAN
Notes to Financial Statements - Continued
December 31, 1998 and 1997
Net investment income for the Master Trust for the years ended
December 31, 1998 and 1997 is as follows:
1998 1997
Net appreciation in fair value
of investments:
Cash and cash equivalents $ 26 $ (33,508)
U.S. government securities 739,987 (29,867)
Corporate debt instruments - (278,870)
Common stock (2,952,919) 8,482,993
Miscellaneous securities - (689,445)
Common/collective trusts 115,542,656 101,605,295
Registered investment companies 1,430,928 9,628,370
Net appreciation in fair
value of investments 114,760,678 118,684,968
Interest and dividends 43,455,655 44,864,596
Total investment income 158,216,333 163,549,564
Administrative expenses (5,339,503) (4,675,757)
Net investment income $ 152,876,830 $ 158,873,807
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 fo 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 29, 1999 By: /s/ Karen M. Hoguet
Karen M. Hoguet
Chairman of the Pension and
Profit Sharing Committee
