Macy's 2011 Annual Report Download - page 22

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reflecting higher net income and a lower pension contribution in 2011. During 2011, the Company made pension funding
contributions totaling approximately $375 million, compared to pension funding contributions made during 2010 of
approximately $825 million.
The Company is currently planning to make a pension funding contribution of approximately $150 million in 2012.
Net cash used by investing activities was $617 million for 2011, compared to net cash used by investing activities of
$465 million for 2010. Investing activities for 2011 include purchases of property and equipment totaling $555 million and
capitalized software of $209 million, compared to purchases of property and equipment totaling $339 million and capitalized
software of $166 million for 2010. Cash flows from investing activities included $114 million and $74 million from the
disposition of property and equipment for 2011 and 2010, respectively.
The Company's budgeted capital expenditures are approximately $850 million for 2012, primarily related to new stores,
store remodels, maintenance, the renovation of Macy's Herald Square, technology and omnichannel investments, and
distribution network improvements, including construction of a new fulfillment center. Management presently anticipates
funding such expenditures with cash on hand and cash from operations.
Net cash used by the Company for all financing activities was $113 million for 2011, including the acquisition of the
Company's common stock under its share repurchase program at an approximate cost of $500 million, the repayment of $454
million of debt and the payment of $148 million of cash dividends, partially offset by the issuance of $800 million of debt, the
issuance of $162 million of common stock, primarily related to the exercise of stock options, and an increase in outstanding
checks of $49 million. The debt issued during 2011 includes $550 million of 3.875% senior notes due 2022 and $250 million
of 5.125% senior notes due 2042, the proceeds of which will be used to retire indebtedness maturing during the first half of
2012. The debt repaid during 2011 includes $330 million of 6.625% senior notes due April 1, 2011 and $109 million of 7.45%
senior debentures due September 15, 2011.
Net cash used by the Company for all financing activities was $1,263 million for 2010, including the repayment of
$1,245 million of debt and the payment of $84 million of cash dividends, partially offset by an increase in outstanding checks
of $24 million and the issuance of $43 million of common stock, primarily related to the exercise of stock options. The debt
repaid during 2010 included the early retirement of approximately $1,000 million of outstanding debt with various stated
maturities, and payment at maturity of $76 million of 8.5% senior notes due June 1, 2010 and $150 million of 10.625% senior
debentures due November 1, 2010.
On February 27, 2012, the Company notified holders of the $173 million of 8.0% senior debentures due July 15, 2012 of
the Company's intent to redeem the debentures on March 29, 2012, as allowed under the terms of the indenture. The price for
the redemption is calculated pursuant to the indenture and will result in the recognition of additional interest expense of
approximately $4 million. By redeeming this debt early, the Company will save approximately $4 million of interest expense
during 2012. In addition, the Company repaid $616 million of 5.35% senior notes due March 15, 2012 at maturity. The
Company will also repay $298 million of debt maturing in January 2013, and presently anticipates funding the repayment with
cash on hand and cash from operations. Additionally, the Company presently anticipates using cash on hand to continue the
acquisition of the Company's common stock during 2012. The Company may continue or, from time to time, suspend
repurchases of shares under its share repurchase program, depending on prevailing market conditions, alternate uses of capital
and other factors.
The Company entered into a credit agreement with certain financial institutions on June 20, 2011 providing for revolving
credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which amount may be increased to
$1,750 million at the option of the Company, subject to the willingness of existing or new lenders to provide commitments for
such additional financing) outstanding at any particular time. This agreement is set to expire June 20, 2015 and replaced a
$2,000 million facility which was set to expire August 30, 2012. As of January 28, 2012 and throughout all of 2011, the
Company had no borrowings outstanding under its credit agreements.
The credit agreement requires the Company to maintain a specified interest coverage ratio for the latest four quarters of
no less than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75. The Company's
interest coverage ratio for 2011 was 7.44 and its leverage ratio at January 28, 2012 was 2.17, in each case as calculated in
accordance with the credit agreement. The interest coverage ratio is defined as EBITDA (earnings before interest, taxes,
depreciation and amortization) over net interest expense and the leverage ratio is defined as debt over EBITDA. For purposes
of these calculations EBITDA is calculated as net income plus interest expense, taxes, depreciation, amortization, non-cash
impairment of goodwill, intangibles and real estate, non-recurring cash charges not to exceed in the aggregate $400 million and
extraordinary losses less interest income and non-recurring or extraordinary gains. Debt and net interest are adjusted to exclude
the premium on acquired debt and the resulting amortization, respectively.