Macy's 2012 Annual Report Download - page 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-14
During January 2013, the Company announced the closure of six Macy's and Bloomingdale's stores; during January 2012,
the Company announced the closure of ten Macy's and Bloomingdale's stores; and during January 2011, the Company
announced the closure of three Macy’s stores. In connection with these announcements and the plans to dispose of these
locations, the Company incurred severance costs and other costs related to lease obligations and other store liabilities. For 2012,
these costs also included a gain on the sale of one property that was disposed in 2013 and for 2010 these costs also included a
loss on the sale of one property that was disposed in 2011.
As a result of the Company’s projected undiscounted future cash flows related to certain store locations being less than
the carrying value of those assets, the Company recorded the impairment charges reflected in the table above relating to
properties held and used, including properties that were the subject of announced store closings. The fair values of these
locations were calculated based on the projected cash flows and an estimated risk-adjusted rate of return that would be used by
market participants in valuing these assets or based on prices of similar assets.
During 2011, the Company recognized a gain on the sale of store leases related to the 2006 divestiture of Lord & Taylor,
partially offset by impairment charges and other costs and expenses related to store closings.
At January 28, 2012, the Company had $82 million of cash in a qualified escrow account related to the sale of store leases
discussed above, included in prepaid expenses and other current assets, which was utilized during 2012 for the purchase of two
parcels of the Macy's flagship Union Square location in San Francisco in tax deferred like-kind exchange transactions.
3. Receivables
Receivables were $371 million at February 2, 2013, compared to $368 million at January 28, 2012.
In connection with the sale of most of the Company's credit card accounts and related receivable balances to Citibank, 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 services. The amounts earned
under the Program Agreement related to the servicing functions are deemed adequate compensation and, accordingly, no
servicing asset or liability has been recorded on the Consolidated Balance Sheets.
Amounts received under the Program Agreement were $865 million for 2012, $772 million for 2011 and $528 million for
2010, and are treated as reductions of SG&A expenses on the Consolidated Statements of Income. The Company’s earnings
from credit operations, net of servicing expenses, were $663 million for 2012, $582 million for 2011, and $332 million for
2010.