Macy's 2012 Annual Report Download - page 29

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The Company is a party to a credit agreement with certain financial institutions 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. The agreement is set to expire June 20, 2015. As of February 2, 2013 and
throughout all of 2012, the Company had no borrowings outstanding under its credit agreement.
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 2012 was 8.41 and its leverage ratio at February 2, 2013 was 1.81, in each case as calculated in
accordance with the credit agreement. The interest coverage ratio is defined as EBITDA 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 is adjusted to exclude the premium on acquired debt and net interest is adjusted to exclude the
amortization of premium on acquired debt and premium on early retirement of debt.
A breach of a restrictive covenant in the Company's credit agreement or the inability of the Company to maintain the
financial ratios described above could result in an event of default under the credit agreement. In addition, an event of default
would occur under the credit agreement if any indebtedness of the Company in excess of an aggregate principal amount of
$150 million becomes due prior to its stated maturity or the holders of such indebtedness become able to cause it to become
due prior to its stated maturity. Upon the occurrence of an event of default, the lenders could, subject to the terms and
conditions of the credit agreement, elect to declare the outstanding principal, together with accrued interest, to be immediately
due and payable.
Moreover, most of the Company's senior notes and debentures contain cross-default provisions based on the non-payment
at maturity, or other default after an applicable grace period, of any other debt, the unpaid principal amount of which is not less
than $100 million, that could be triggered by an event of default under the credit agreement. In such an event, the Company's
senior notes and debentures that contain cross-default provisions would also be subject to acceleration.
At February 2, 2013, no notes or debentures contain provisions requiring acceleration of payment upon a debt rating
downgrade. However, the terms of approximately $3,300 million in aggregate principal amount of the Company's senior notes
outstanding at that date require the Company to offer to purchase such notes at a price equal to 101% of their principal amount
plus accrued and unpaid interest in specified circumstances involving both a change of control (as defined in the applicable
indenture) of the Company and the rating of the notes by specified rating agencies at a level below investment grade.
As a result of upgrades of the notes by specified rating agencies, the rate of interest payable in respect of $407 million in
aggregate principal amount of the Company's senior notes outstanding at February 2, 2013 decreased by .25 percent per annum
to 8.125% effective in May 2011 and decreased by .25 percent per annum to 7.875%, its stated interest rate, effective in January
2012. The rate of interest payable in respect of these senior notes outstanding at February 2, 2013 could increase by up to 2.0
percent per annum from its current level in the event of one or more downgrades of the notes by specified rating agencies.
The Company's board of directors approved additional authorizations to purchase Common Stock of $1,000 million on
January 5, 2012 and $1,500 million on December 7, 2012. During 2012, the Company repurchased approximately 35.6 million
shares of its common stock for a total of $1,350 million. As of February 2, 2013, the Company had $1,502 million of
authorization remaining under its share repurchase program. 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.
On February 22, 2013, the Company's board of directors declared a quarterly dividend of 20 cents per share on its
common stock, payable April 1, 2013 to Macy's shareholders of record at the close of business on March 15, 2013.