Macy's 2009 Annual Report Download - page 68

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
In October 2006, the Company completed the sale of its Lord & Taylor division and in January 2007, the
Company completed the sale of its David’s Bridal and Priscilla of Boston businesses.
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 ASC Topic 460, “Guarantees,” the Company is required to record a
liability for the fair value of the guarantees. 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. 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.
7. Receivables
Receivables were $358 million at January 30, 2010, compared to $360 million at January 31, 2009.
In connection with the sales of credit card accounts and related receivable balances, 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 term, an additional renewal term of three
years. The Program Agreement provides for, among other things, (i) the ownership by Citibank of the accounts
purchased by Citibank, (ii) the ownership by Citibank of new accounts opened by the Company’s customers,
(iii) the provision of credit by Citibank to the holders of the credit cards associated with the foregoing accounts,
(iv) the servicing of the foregoing accounts, and (v) the allocation between Citibank and the Company of the
economic benefits and burdens associated with the foregoing and other aspects of the alliance.
Pursuant to the Program Agreement, the Company continues to provide certain servicing functions related to
the accounts and related receivables owned by Citibank and receives compensation from Citibank for these
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