Macy's 2012 Annual Report Download - page 28

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Liquidity and Capital Resources
The Company's principal sources of liquidity are cash from operations, cash on hand and the credit facility described
below.
Operating Activities
Net cash provided by operating activities was $2,261 million in 2012 compared to $2,093 million in 2011, reflecting
higher net income and a lower pension contribution in 2012. During 2012, the Company made a pension funding contribution
totaling $150 million, compared to pension funding contributions made during 2011 of $375 million.
The Company is currently planning to make a pension funding contribution of approximately $150 million in 2013.
Investing Activities
Net cash used by investing activities for 2012 was $863 million, compared to net cash used by investing activities of
$617 million for 2011. Investing activities for 2012 includes purchases of property and equipment totaling $698 million and
capitalized software of $244 million, compared to purchases of property and equipment totaling $555 million and capitalized
software of $209 million for 2011. Purchases of property and equipment during 2012 includes the purchase of two parcels of
the Macy's flagship Union Square location in San Francisco and the first year of the planned four year renovation of Macy's
Herald Square. Cash flows from investing activities included $66 million and $114 million from the disposition of property and
equipment for 2012 and 2011, respectively.
During 2012, the Company opened two new Macy's stores and five new Bloomingdale's Outlet stores. Also during 2012
the Company opened its new 1.3 million square foot fulfillment center in Martinsburg, WV. During 2011, the Company opened
three new Bloomingdale's Outlet stores and re-opened one Macy's store that had been closed in 2010 due to flood damage.
Financing Activities
Net cash used by the Company for financing activities was $2,389 million for 2012, including the acquisition of the
Company's common stock under its share repurchase program at an approximate cost of $1,350 million, the repayment of
$1,803 million of debt, the payment of $324 million of cash dividends and a decrease in outstanding checks of $88 million,
partially offset by the issuance of $1,000 million of debt and the issuance of $234 million of common stock, primarily related to
the exercise of stock options.
On November 28, 2012, the Company repurchased $700 million aggregate principal amount of its outstanding senior
unsecured notes, which had a net book value of $706 million. The repurchased senior unsecured notes had stated interest rates
ranging from 5.9% to 7.875% and maturities in 2015 and 2016. The Company recorded the redemption premium and other
costs related to these repurchases as additional interest expense of $133 million in 2012. On March 29, 2012, the Company
redeemed the $173 million of 8.0% senior debentures due July 15, 2012, as allowed under the terms of the indenture. The price
for the redemption was calculated pursuant to the indenture and resulted in the recognition of additional interest expense of $4
million in 2012. On November 20, 2012, the Company issued $750 million aggregate principal amount of 2.875% senior
unsecured notes due 2023 and $250 million aggregate principal amount of 4.3% senior unsecured notes due 2043. This debt
was used to pay for the notes repurchased on November 28, 2012 described above, and to retire $298 million of 5.875% senior
unsecured notes that matured in January 2013. The debt repaid in 2012 also includes $616 million of 5.35% senior notes at
maturity. Through these transactions, the Company has improved its debt maturity profile, decreased its ongoing interest
expense by taking advantage of the current low interest rate environment and reduced its refinancing and interest rate risk over
the next few years. The favorable impact of these transactions on the Company's annual interest expense is approximately $30
million on a full year basis.
Net cash used by the Company for financing activities was $113 million for 2011 and included 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 included $550 million of 3.875% senior notes due 2022 and $250 million of
5.125% senior notes due 2042, the proceeds of which were used to retire indebtedness maturing during the first half of 2012.
The debt repaid during 2011 included $330 million of 6.625% senior notes due April 1, 2011 and $109 million of 7.45% senior
debentures due September 15, 2011.