Macy's 2008 Annual Report Download - page 69

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of Boston businesses represented approximately $751 million of net assets, before income taxes. After
adjustment for a liability for a working capital adjustment to the purchase price and other items totaling
approximately $11 million, the Company recorded the loss on disposal of the David’s Bridal and Priscilla of
Boston businesses of $22 million on a pre-tax basis, or $18 million after income taxes, or $.03 per diluted share.
In April 2007, the Company completed the sale of its After Hours Formalwear business for approximately
$66 million in cash, net of $1 million of transaction costs. The After Hours Formalwear business represented
approximately $73 million of net assets. The Company recorded the loss on disposal of the After Hours
Formalwear business of $7 million on a pre-tax and after-tax basis, or $.01 per diluted share.
In connection with the sale of the David’s Bridal and Priscilla of Boston businesses, the Company agreed to
indemnify the buyer and related parties of the buyer for certain losses or liabilities incurred by the buyer or such
related parties with respect to (1) certain representations and warranties made to the buyer by the Company in
connection with the sale, (2) liabilities relating to the After Hours Formalwear business under certain
circumstances, and (3) certain pre-closing tax obligations. The representations and warranties in respect of which
the Company is subject to indemnification are generally limited to representations and warranties relating to the
capitalization of the entities that were sold, the Company’s ownership of the equity interests that were sold, the
enforceability of the agreement and certain employee benefits and tax matters. The indemnity for breaches of
most of these representations expired on March 31, 2008, with the exception of certain representations relating to
capitalization and the Company’s ownership interest, in respect of which the indemnity does not expire.
Indemnity obligations created in connection with the sales of businesses generally do not represent added
liabilities for the Company, but simply serve to protect the buyer from potential liabilities associated with
particular conditions. The Company records accruals for those pre-closing obligations that are considered
probable and estimable. Under FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” the Company is required
to record a liability for the fair value of the guarantees that are entered into subsequent to December 15, 2002.
The Company has not accrued any additional amounts as a result of the indemnity arrangements summarized
above as the Company believes the fair value of these arrangements is not material.
Discontinued operations included net sales of approximately $27 million for 2007 and approximately $1,741
million for 2006. No consolidated interest expense had been allocated to discontinued operations. For 2007, the
loss from discontinued operations, including the loss on disposal of the Company’s After Hours Formalwear
business, totaled $22 million before income taxes, with a related income tax benefit of $6 million. For 2006,
income from discontinued operations, net of the losses on disposal of the Lord & Taylor division and the David’s
Bridal and Priscilla of Boston businesses, totaled $17 million before income taxes, with a related income tax
expense of $10 million.
7. Receivables
Receivables were $439 million at January 31, 2009, compared to $463 million at February 2, 2008, and
consist primarily of receivables from third-party credit card companies, including amounts due under the
Program Agreement.
In connection with the sales of credit card accounts and related receivable balances, including the
transactions discussed below, the Company and Citibank entered into a long-term marketing and servicing
alliance pursuant to the terms of a Credit Card Program Agreement (the “Program Agreement”) with an initial
term of 10 years expiring on July 17, 2016 and, unless terminated by either party as of the expiration of the initial
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