Macy's 2009 Annual Report Download - page 67

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Company had announced that it planned to divest certain store locations and distribution center facilities as a
result of the acquisition of May, and, during 2007, the Company completed its review of store locations and
distribution center facilities, closing certain underperforming stores, temporarily closing other stores for
remodeling to optimize merchandise offering strategies, closing certain distribution center facilities, and
consolidating operations in existing or newly constructed facilities.
During 2007, the Company completed the integration and consolidation of May’s operations into Macy’s
operations and recorded $219 million of associated integration costs. Approximately $121 million of these costs
related to impairment charges in connection with store locations and distribution facilities planned to be closed
and disposed of, including $74 million related to nine underperforming stores identified in the fourth quarter of
2007. The remaining $98 million of May integration costs incurred during the year included additional costs
related to closed locations, severance, system conversion costs, impairment charges associated with acquired
indefinite-lived private brand tradenames and costs related to other operational consolidations, partially offset by
approximately $41 million of gains from the sale of previously closed distribution center facilities.
During 2007, approximately $105 million of property and equipment was transferred to assets held for sale
upon store or facility closure. In addition, property and equipment totaling approximately $110 million was
disposed of in connection with the May integration and the Company collected approximately $50 million of
receivables from prior year dispositions.
The impairment charges for the locations to be disposed of were calculated based on the excess of historical
cost over fair value less costs to sell. The fair values were determined based on prices of similar assets.
In connection with the allocation of the May purchase price in 2005, the Company recorded a liability for
termination of May employees in the amount of $358 million, of which $69 million had been paid as of
January 28, 2006. During 2007 and 2006, the Company recorded additional severance and relocation liabilities
for May employees and severance liabilities for certain Macy’s employees in connection with the integration of
the acquired May businesses. Severance and relocation liabilities for May employees recorded subsequent to the
one-year anniversary of the acquisition of May and all severance liabilities for Macy’s employees were charged
to May integration costs.
The following tables show, for 2008 and 2007, the beginning and ending balance of, and the activity
associated with, the severance and relocation accrual established in connection with the May integration:
February 2, 2008 Payments January 31, 2009
(millions)
Severance and relocation costs .............................. $30 $(30) $ –
February 3, 2007
Charged to
May
Integration
Costs Payments February 2, 2008
(millions)
Severance and relocation costs .................... $73 $50 $(93) $30
6. Discontinued Operations
On September 20, 2005 and January 12, 2006, the Company announced its intention to dispose of the
acquired May bridal group business, which included the operations of David’s Bridal, After Hours Formalwear
and Priscilla of Boston, and the acquired Lord & Taylor division of May, respectively. Accordingly, for financial
statement purposes, the results of operations and cash flows of these businesses have been segregated from those
of continuing operations for all periods presented.
F-19