Macy's 2012 Annual Report Download - page 66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-19
Interest expense and premium on early retirement of debt is as follows:
2012 2011 2010
(millions)
Interest on debt................................................................................................ $ 449 $ 467 $ 535
Amortization of debt premium........................................................................ (19)(23)(31)
Amortization of financing costs...................................................................... 7 8 11
Interest on capitalized leases........................................................................... 3 3 3
440 455 518
Less interest capitalized on construction ........................................................ 15 8 5
Interest expense............................................................................................... $ 425 $ 447 $ 513
Premium on early retirement of debt .............................................................. $ 137 $ — $ 66
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. During 2010, the Company used $1,067 million of cash to repurchase $1,000 million of indebtedness prior to
maturity. In connection with these repurchases, the Company recognized additional interest expense of $66 million in 2010 due
to the expenses associated with the early retirement of this debt. The additional interest expense resulting from these
transactions is presented as premium on early retirement of debt on the Consolidated Statements of Income.
Future maturities of long-term debt, other than capitalized leases and premium on acquired debt, are shown below:
(millions)
Fiscal year
2014................................................................................................................................................................ $ 461
2015................................................................................................................................................................ 481
2016................................................................................................................................................................ 642
2017................................................................................................................................................................ 306
2018................................................................................................................................................................ 6
After 2018...................................................................................................................................................... 4,687
During 2012, 2011 and 2010, the Company repaid $914 million, $439 million and $226 million, respectively, of
indebtedness at maturity.
On January 10, 2012, the Company issued $550 million aggregate principal amount of 3.875% senior notes due 2022 and
$250 million aggregate principal amount of 5.125% senior notes due 2042, the proceeds of which were used to retire
indebtedness that matured during the first half of 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. 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.