Macy's 2009 Annual Report Download - page 14

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extreme weather conditions over a prolonged period could make it difficult for the Company’s customers to
travel to its stores and thereby reduce the Company’s sales and profitability. The Company’s business is also
susceptible to unseasonable weather conditions. For example, extended periods of unseasonably warm
temperatures during the winter season or cool weather during the summer season could render a portion of the
Company’s inventory incompatible with those unseasonable conditions. Reduced sales from extreme or
prolonged unseasonable weather conditions could adversely affect the Company’s business.
In addition, natural disasters such as hurricanes, tornadoes and earthquakes, or a combination of these or
other factors, could severely damage or destroy one or more of the Company’s stores or warehouses located in
the affected areas, thereby disrupting the Company’s business operations.
The Company’s pension costs could increase at a higher than anticipated rate.
Significant changes in interest rates, decreases in the fair value of plan assets and investment losses on plan
assets could affect the funded status of the Company’s plans and could increase future funding requirements of
the pension plans. A significant increase in future funding requirements could have a negative impact on the
Company’s cash flows, financial condition or results of operations.
Increases in the cost of employee benefits could impact the Company’s financial results and cash flow.
The Company’s expenses relating to employee health benefits are significant. Unfavorable changes in the
cost of such benefits could impact the Company’s financial results and cash flow. Healthcare costs have risen
significantly in recent years, and recent legislative and private sector initiatives regarding healthcare reform
could result in significant changes to the U.S. healthcare system. The Company is not able at this time to
determine the impact that healthcare reform could have on the Company-sponsored medical plans.
Inability to access capital markets could adversely affect the Company’s business or financial condition.
Changes in the credit and capital markets, including market disruptions, limited liquidity and interest rate
fluctuations, may increase the cost of financing or restrict the Company’s access to this potential source of future
liquidity. A decrease in the ratings that rating agencies assign to the Company’s short and long-term debt may
negatively impact the Company’s access to the debt capital markets and increase the Company’s cost of
borrowing. In addition, the Company’s bank credit agreements require the Company to maintain specified
interest coverage and leverage ratios. The Company’s ability to comply with the ratios may be affected by events
beyond its control, including prevailing economic, financial and industry conditions. If the Company’s results of
operations or operating ratios deteriorate to a point where the Company is not in compliance with its debt
covenants, and the Company is unable to obtain a waiver, much of the Company’s debt would be in default and
could become due and payable immediately. The Company’s assets may not be sufficient to repay in full this
indebtedness, resulting in a need for an alternate source of funding. The Company cannot assure you that it
would be able to obtain such an alternate source of funding on satisfactory terms, if at all, and its inability to do
so could cause the holders of its securities to experience a partial or total loss of their investments in the
Company.
The Company periodically reviews the carrying value of its goodwill for possible impairment; if future
circumstances indicate that goodwill is impaired, the Company could be required to write down amounts of
goodwill and record impairment charges.
In the fourth quarter of fiscal 2008, the Company reduced the carrying value of its goodwill from $9,125
million to $3,743 million and recorded a related non-cash impairment charge of $5,382 million. The Company
continues to monitor relevant circumstances, including consumer spending levels, general economic conditions
and the market prices for the Company’s common stock, and the potential impact that such circumstances might
have on the valuation of the Company’s goodwill. It is possible that changes in such circumstances, or in the
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