Case 1 Debt Footnote Macy's The purpose of this case is to understand how bonds are issued and how bonds are shown on the financial statements. Necessary portions of the 10-K for Macy's and a bond prospectus for a Macy bond issue are included the file, "Case 1 Reference Material." Answer the following questions using complete sentences in the spaces provided We are focusing on the 3.45% senior note due 2021 issued December 7, 2015 Start with footnote 6, "Financing". The footnote tells us that the note was issued. 1. Copy and paste this part of the footnote here: 2. What was the principal amount of the debt? 3. What was the reason for borrowing the debt? Move to the bond prospectus. 4. How much money did Macy actually receive from the note issue? 5. Was the note issued at a premium or discount? 6. How much were the underwriters' fees? 7. List two of the underwriters for this note issue: a. b. 8. How often will interest be paid on the note? 9. The note is due in 2021. How many total interest payments will be made? 10. Prepare the journal entry for the first interest payment. Include the date. You can use the straight-line method to amortize the interest. Credit Date Accounts Debit Show your computations here: Move to the Statement of Cash Flows and specifically, Financing Activities 11.How much does Macy show as the increase to cash for the note? 12. Is this amount the proceeds from the issue or the principal amount of the note? 13. Prepare the journal entry to record the issuance of the note Date Accounts Debit Credit MACY'S, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) 2014 2013 2015 Cash flows from operating activities: 1,070 $ Net income 1,486 1,526 Adjustments to reconcile net income to net cash provided by operating activities: 288 Impairments, store closing and other costs 87 88 1,036 Depreciation and amortization 1,061 1,020 Stock-based compensation expense 65 73 62 Amortization of financing costs and premium on acquired debt Changes in assets and liabilities: (Increase) decrease in receivables (Increase) decrease in merchandise inventories (14) (5) (8) (58 22 (45) (60) (249) 44 Increase in prepaid expenses and other current assets (3) (2) Increase in other assets not separately identified (1) (61) (1) Increase (decrease) in merchandise accounts payable (78) (21) 101 Increase (decrease) in accounts payable, accrued liabilities and other items not separately identified Increase (decrease) in current income (144) 37 48 (69) taxes (65) 7 Increase (decrease) in deferred income taxes (1) (142) Increase (decrease) in other liabilities not separately identified Net cash provided by operating activities (88) 10 197 1,984 2,549 2,709 Cash flows from investing activities: Purchase of property and equipment Capitalized software Acquisition of Bluemercury, Inc., net of cash acquired (777) (336) (770) (298) (607) (256) (212) 172 Disposition of property and equipment Other, net 204 132 (74) (57) 29 Net cash used by investing activities (1,092) (970) (788) Cash flows from financing activities: Debt issued 1,044 (9) (870) (421) 499 400 (4) (152) (9) (124) (359) Financing costs Debt repaid Dividends paid Increase (decrease) in outstanding checks Acquisition of treasury stock Issuance of common stock (456) (83) (2,001) 133 24 (1,901) (1,571) 315 163 258 Proceeds from non-controlling interest Net cash used by financing activities 5 (2,029) (1,766) (1,324) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents beginning of period Cash and cash equivalents end of period (1,137) 2,246 1,109 $ 2,246 2,273 (27) 437 2,273 1,836 Supplemental cash flow information: 383 $ Interest paid 413 388 Interest received 2 2 2 Income taxes paid (net of refunds received) The accompanying notes are an integral part of these Consolidated Financial 635 834 835 Statem NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Financing The Company's debt is as follows: 6. January 30, 2016 January 31, 2015 (millions) Short-term debt: 5.9% Senior notes due 2016 577 7.45% Senior debentures due 2016 59 7.5% Senior debentures due 2015 69 Capital lease and current portion of other long-term obligations 7 $ 642 $ 76 Long-term debt: 2.875% Senior notes due 2023 750 750 3.875% Senior notes due 2022 550 550 4.5% Senior notes due 2034 550 550 3.45% Senior notes due 2021 500 3.625% Senior notes due 2024 500 500 6.375% Senior notes due 2037 500 500 400 4.375% Senior notes due 2023 400 6.9% Senior debentures due 2029 400 400 6.7% Senior debentures due 2034 400 400 7.45% Senior debentures due 2017 300 300 300 300 6.65% Senior debentures due 2024 7.0% Senior debentures due 2028 300 300 6.9% Senior debentures due 2032 250 250 5.125% Senior debentures due 2042 250 250 4.3% Senior notes due 2043 250 250 6.7% Senior debentures due 2028 200 200 6.79% Senior debentures due 2027 165 165 7.875% Senior debentures due 2036 108 108 8.75% Senior debentures due 2029 61 61 8.5% Senior debentures due 2019 36 36 10.25% Senior debentures due 2021 33 33 7.6% Senior debentures due 2025 24 24 7.875% Senior debentures due 2030 18 18 9.5% amortizing debentures due 2021 9.75% amortizing debentures due 2021 5.9% Senior notes due 2016 17 21 12 577 8.125% Senior debentures due 2035 76 7.45% Senior debentures due 2016 59 (32) (16) Unamortized debt issue costs (32) (18) Unamortized debt discount Premium on acquired debt, using an effective interest yield of 5.415% to 6.165% 143 164 Capital lease and other long-term obligations 29 29 7,233 6,995 Interest expense and premium on early retirement of debt is as follows: 2015 2014 2013 (millions) 393 $ 411 407 Interest on debt Amortization of debt premium Amortization of financing costs and debt discount Interest on capitalized leases (21) (12) (15) 6 7 7 2 2 2 380 408 401 Less interest capitalized on construction 13 17 11 395 $ $ 363 $ 390 Interest expense 17 $ Premium on early retirement of debt On November 14, 2014, the Company provided a notice of redemption related to all of the $407 million of 7.875% senior notes due 2015, 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 $17 million during 2014. This additional interest expense 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, are shown below: (millions) Fiscal year 2017 306 2018 6 2019 41 2020 539 2021 553 After 2021 5,426 During 2015, 2014 and 2013, the Company repaid $69 million, $453 million and $109 million, respectively, of indebtedness at maturity. On August 17, 2015, the Company redeemed at par the principal amount of $76 million of 8.125% senior debentures due 2035, pursuant to the terms of the debentures. Interest expense in 2015 benefited from the recognition of unamortized debt premium associated with this debt. On December 7, 2015, the Company issued $500 million aggregate principal amount of 3.45% senior notess due 2021, the proceeds of which were used for general corporate purposes On November 18, 2014, the Company issued $550 million aggregate principal amount of 4.5% senior notes due 2034. This debt was used to pay for the redemption of the $407 million of 7.875% senior notes due 2015 described above. On May 23, 2014, the Company issued $500 million aggregate principal amount of 3.625% senior unsecured notes due 2024, the proceeds of which were used for general corporate purposes On September 6, 2013, the Company issued $400 million aggregate principal amount of 4.375% senior notes due 2023, the proceeds of which were used for general corporate purposes The following table shows the detail of debt repayments: 2015 2014 2013 (millions) 69 $ 7.5% Senior debentures due 2015 $ 8.125% Senior debentures due 2035 76 5.75% Senior notes due 2014 453 7.875% Senior notes due 2015 407 7.625% Senior debentures due 2013 109 9.5% amortizing debentures due 2021 9.75% amortizing debentures due 2021 Capital leases and other obligations 4 3 2 2 4 152 $ 870 $ 124 The following summarizes certain components of the Company's debt: Bank Credit Agreement The Company entered into a new credit agreement with certain financial institutions on May 10, 2013 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which 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 May 10, 2018 and replaced the prior agreement which was set to expire June 20, 2015 As of January 30, 2016, and January 31, 2015, there were no revolving credit loans outstanding under this credit agreement, and there were no borrowings under the agreement throughout all of 2015 and 2014. However, there were less than $1 million of standby letters of credit outstanding at January 30, 2016 and January 31, 2015 Revolving loans under the credit agreement bear interest based on various published rates The Company's credit agreement, which is an obligation of a 100%-owned subsidiary of Macy's, Inc. ("Parent'), is not secured. However, Parent has fully and unconditionally guaranteed this obligation, subject to specified limitations. The Company's interest coverage ratio for 2015 was 8.85 and its leverage ratio at January 30, 2016 was 2.21, in each case as calculated in accordance with the 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 interest coverage ratio is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) divided by net interest expense and the leverage ratio is defined as debt divided by 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 Commercial Paper The Company is a party to a $1,500 million unsecured commercial paper program. The Company may issue and sell commercial paper in an aggregate amount outstanding at any particular time not to exceed its then-current combined borrowing availability under the bank credit agreement described above. The issuance of commercial paper will have the effect, while such commercial paper is outstanding, of reducing the Company's borrowing capacity under the bank credit agreement by an amount equal to the principal amount of such commercial paper. During 2015, the Company utilized seasonal borrowings available under this commercial paper program The amount of borrowings under the commercial paper program increased to its highest level for 2015 of approximately $1,100 million during the fourth quarter. As of January 30, 2016, there were no remaining borrowings outstanding under the commercial paper program. The Company had no commercial paper outstanding under its commercial paper program throughout 2014 This program, which is an obligation of a 100%-owned subsidiary of Macy's, Inc., is not secured. However, Parent has fully and unconditionaly guaranteed the obligations Senior Notes and Debentures The senior notes and the senior debentures are unsecured obligations of a 100% owned subsidiary of Macy's, Inc. and Parent has fully and unconditionally guaranteed these obligations (see Note 16, "Condensed Consolidating Financial Information"). Other Financing Arrangements At January 30, 2016 and January 31, 2015, the Company had dedicated $37 million of cash, included in prepaid expenses and other current assets, which is used to collateralize the Company's issuances of standby letters of credit. There were $21 million and $29 million of other standby letters of credit outstanding at January 30, 2016 and January 31, 2015, respectively. 424B2 1 d49698d424b2.htm FINAL PROSPECTUS SUPPLEMENT Table of Contents Filed pursuant to Rule 424(b)(2) SEC File No. 333-208285 333-208285-01 CALCULATION OF REGISTRATION FEE Title of each Class of Securities to Amount Maximum Maximum Offering Price Per Aggregate to be Amount of be Registered Registered 3.450% Senior Offering Price Registration Fee (1) Unit Notes due $500,000,000 $499,495,000 99.899% $50,300 2021 (1) Pursuant to Rule 457(r), the total registration fee for this offering is $50,300. Table of Contents PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED DECEMBER 1, 2015) $500,000,000 Macy's Retail Holdings, Inc. 3.450% Senior Notes Due 2021 Payment of principal and interest unconditionally guaranteed by Macy's, Inc. Macy's Retail Holdings, Inc. ("Macy's Holdings") is offering $500,000,000 aggregate principal amount of its 3.450% Senior Notes due January 15, 2021, which we refer to as the "senior notes. The senior notes mature on January 15, 2021, unless earlier redeemed. Macy's Holdings will pay interest on the senior notes semi-annually in arrears on each January 15 and July 15 of each year. The first interest payment will be made on 2016. The senior notes will rank equal in right of payment to any other existing or future July 15 senior unsecured obligations of Macy's Holdings. The guarantee will rank equal in right of payment to all other existing and future senior unsecured obligations of Macy's, Inc. Macy's Holdings may redeem the senior notes at any time at the redemption price set forth herein. Upon the occurrence of both () a change of control of Macy's, Inc. and (ii) within a specified period in relation to the change of control, the senior notes being downgraded by at least two of Fitch Ratings, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Services and being rated below an investment grade rating by at least two of such rating agencies, Macy's Holdings will be required to make an offer to purchase the senior notes at 101% of their principal amount. On and after December 15, 2020, Macy's Holdings may redeem the senior notes at par, plus accrued and unpaid interest Investing in the senior notes involves risks. See the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015. Senior Notes Per Note Total Initial public offering price (1) Underwriting discounts and commissions Proceeds to Macy's Holdings (1) 99.899% $499,495,000 0.600% 99.299% $3,000,000 $496,495,000 (1) Plus accrued interest, if any, from December 10, 2015 Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supple representation to the contrary is a criminal offense or the accompanying prospectus is truthful or complete. Any The underwriters expect to deliver the senior notes in book-entry form only through the facilities of The Depository Trust Company for the accounts of its participants, including Clearstream Banking, societe anonyme, and Euroclear Bank S.A./N.V., as operator of the Euroclear System, against payment in New York, New York on December 10, 2015 Joint Book-Running Managers BofA Merrill Lynch J.P. Morgan Credit Suisse Goldman, Sachs & Co. US Bancorp Wells Fargo Securities Co-Managers BNY Mellon Capital Markets, LLC Citigroup Fifth Third Securities Loop Capital Markets Ramirez & Co., Inc. PNC Capital Markets LLC Standard Chartered Bank The Williams Capital Group, L.P. MUFG The date of this prospectus supplement is December 7, 2015. Table of Contents TABLE OF CONTENTS PROSPECTUS SUPPLEMENT Page S-1 S-3 S-4 S-22 S-27 S-32 S-32 SUMMARY USE OF PROCEEDS DESCRIPTION OF NOTES U.S. FEDERAL INCOME TAX CONSIDERATIONS UNDERWRITING EXPERTS LEGAL MATTERS PROSPECTUS Page ABOUT THIS PROSPECTUS WHERE YOU CAN FIND MORE INFORMATION INCORPORATION BY REFERENCE FORWARD-LOOKING STATEMENTS DESCRIPTION OF DEBT SECURITIES DESCRIPTION OF MACY'S CAPITAL STOCK DESCRIPTION OF DEPOSITARY SHARES DESCRIPTION OF WARRANTS DESCRIPTION OF PURCHASE CONTRACTS DESCRIPTION OF UNITS RATIO OF EARNINGS TO FIXED CHARGES USE OF PROCEEDS CERTAIN LEGAL MATTERS EXPERTS 1 3 3 4 14 16 16 17 17 18 18 18 18 None of Macy's, Inc., Macy's Holdings or any underwriter has authorized anyone to provide any information or to make any representation other than those contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or in any free writing prospectus that we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that you obtain from other sources or that others may give you. This document may only be used where it is legal to sell the senior notes. The information in this document may be accurate only on the date of this document Table of Contents SUMMARY The following summary contains basic information about the senior notes and is not intended to be complete. For a more complete discussion of the senior notes, please refer to the section entitled "Description of Notes" in this prospectus supplement. You should read the entire prospectus supplement and the accompanying prospectus, as well as the documents incorporated by reference into them, before making an investment decision Macy's Retail Holdings, Inc. Issuer Macy's, Inc. Guarantor Securities Offered $500,000,000 aggregate principal amount of 3.450% Senior Notes due 2021 Maturity Date January 15, 2021. Semi-annually in arrears on each January 15 and July 15 of each year, commencing on July 15, 2016 Interest on the senior notes being offered by this prospectus supplement will accrue from December 10, 2015 Interest Payment Dates The senior notes will rank equal in right of payment to any other existing or future senior unsecured obligations of Macy's Holdings. Ranking The obligations of Macy's Holdings under the senior notes will be fully and unconditionally guaranteed on a senior unsecured basis by Macy's, Inc. The guarantee Guarantee will rank equal in right of payment to all other existing and future senior unsecured obligations of Macy's, Inc. Optional Redemption Macy's Holdings may, at its option, at any time in whole or from time to time in part, prior to December 15, 2020 (one month prior to the maturity date (the "Par Call Date")) redeem the senior notes at the redemption prices described in this prospectus supplement, plus accrued interest to the date of redemption At any time on and after the Par Call Date, Macy's Holdings may, at its option, redeem the senior notes in whole or from time to time in part at a redemption price equal to 100% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest on the senior notes to be redeemed to the date of redemption. Change of Control Upon the occurrence of both () a change of control of Macy's, Inc. and (ii) within a specified period in relation to the change of control, the senior notes being downgraded by at least two of Fitch Ratings, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Services and being rated below an investment grade rating by at least two of such rating agencies, Macy's Holdings will be required to make an offer to purchase the senior notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. See "Description of Notes-Change of Control." Case 1 Debt Footnote Macy's The purpose of this case is to understand how bonds are issued and how bonds are shown on the financial statements. Necessary portions of the 10-K for Macy's and a bond prospectus for a Macy bond issue are included the file, "Case 1 Reference Material." Answer the following questions using complete sentences in the spaces provided We are focusing on the 3.45% senior note due 2021 issued December 7, 2015 Start with footnote 6, "Financing". The footnote tells us that the note was issued. 1. Copy and paste this part of the footnote here: 2. What was the principal amount of the debt? 3. What was the reason for borrowing the debt? Move to the bond prospectus. 4. How much money did Macy actually receive from the note issue? 5. Was the note issued at a premium or discount? 6. How much were the underwriters' fees? 7. List two of the underwriters for this note issue: a. b. 8. How often will interest be paid on the note? 9. The note is due in 2021. How many total interest payments will be made? 10. Prepare the journal entry for the first interest payment. Include the date. You can use the straight-line method to amortize the interest. Credit Date Accounts Debit Show your computations here: Move to the Statement of Cash Flows and specifically, Financing Activities 11.How much does Macy show as the increase to cash for the note? 12. Is this amount the proceeds from the issue or the principal amount of the note? 13. Prepare the journal entry to record the issuance of the note Date Accounts Debit Credit MACY'S, INC CONSOLIDATED STATEMENTS OF CASH FLOWS (millions) 2014 2013 2015 Cash flows from operating activities: 1,070 $ Net income 1,486 1,526 Adjustments to reconcile net income to net cash provided by operating activities: 288 Impairments, store closing and other costs 87 88 1,036 Depreciation and amortization 1,061 1,020 Stock-based compensation expense 65 73 62 Amortization of financing costs and premium on acquired debt Changes in assets and liabilities: (Increase) decrease in receivables (Increase) decrease in merchandise inventories (14) (5) (8) (58 22 (45) (60) (249) 44 Increase in prepaid expenses and other current assets (3) (2) Increase in other assets not separately identified (1) (61) (1) Increase (decrease) in merchandise accounts payable (78) (21) 101 Increase (decrease) in accounts payable, accrued liabilities and other items not separately identified Increase (decrease) in current income (144) 37 48 (69) taxes (65) 7 Increase (decrease) in deferred income taxes (1) (142) Increase (decrease) in other liabilities not separately identified Net cash provided by operating activities (88) 10 197 1,984 2,549 2,709 Cash flows from investing activities: Purchase of property and equipment Capitalized software Acquisition of Bluemercury, Inc., net of cash acquired (777) (336) (770) (298) (607) (256) (212) 172 Disposition of property and equipment Other, net 204 132 (74) (57) 29 Net cash used by investing activities (1,092) (970) (788) Cash flows from financing activities: Debt issued 1,044 (9) (870) (421) 499 400 (4) (152) (9) (124) (359) Financing costs Debt repaid Dividends paid Increase (decrease) in outstanding checks Acquisition of treasury stock Issuance of common stock (456) (83) (2,001) 133 24 (1,901) (1,571) 315 163 258 Proceeds from non-controlling interest Net cash used by financing activities 5 (2,029) (1,766) (1,324) Net increase (decrease) in cash and cash equivalents Cash and cash equivalents beginning of period Cash and cash equivalents end of period (1,137) 2,246 1,109 $ 2,246 2,273 (27) 437 2,273 1,836 Supplemental cash flow information: 383 $ Interest paid 413 388 Interest received 2 2 2 Income taxes paid (net of refunds received) The accompanying notes are an integral part of these Consolidated Financial 635 834 835 Statem NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Financing The Company's debt is as follows: 6. January 30, 2016 January 31, 2015 (millions) Short-term debt: 5.9% Senior notes due 2016 577 7.45% Senior debentures due 2016 59 7.5% Senior debentures due 2015 69 Capital lease and current portion of other long-term obligations 7 $ 642 $ 76 Long-term debt: 2.875% Senior notes due 2023 750 750 3.875% Senior notes due 2022 550 550 4.5% Senior notes due 2034 550 550 3.45% Senior notes due 2021 500 3.625% Senior notes due 2024 500 500 6.375% Senior notes due 2037 500 500 400 4.375% Senior notes due 2023 400 6.9% Senior debentures due 2029 400 400 6.7% Senior debentures due 2034 400 400 7.45% Senior debentures due 2017 300 300 300 300 6.65% Senior debentures due 2024 7.0% Senior debentures due 2028 300 300 6.9% Senior debentures due 2032 250 250 5.125% Senior debentures due 2042 250 250 4.3% Senior notes due 2043 250 250 6.7% Senior debentures due 2028 200 200 6.79% Senior debentures due 2027 165 165 7.875% Senior debentures due 2036 108 108 8.75% Senior debentures due 2029 61 61 8.5% Senior debentures due 2019 36 36 10.25% Senior debentures due 2021 33 33 7.6% Senior debentures due 2025 24 24 7.875% Senior debentures due 2030 18 18 9.5% amortizing debentures due 2021 9.75% amortizing debentures due 2021 5.9% Senior notes due 2016 17 21 12 577 8.125% Senior debentures due 2035 76 7.45% Senior debentures due 2016 59 (32) (16) Unamortized debt issue costs (32) (18) Unamortized debt discount Premium on acquired debt, using an effective interest yield of 5.415% to 6.165% 143 164 Capital lease and other long-term obligations 29 29 7,233 6,995 Interest expense and premium on early retirement of debt is as follows: 2015 2014 2013 (millions) 393 $ 411 407 Interest on debt Amortization of debt premium Amortization of financing costs and debt discount Interest on capitalized leases (21) (12) (15) 6 7 7 2 2 2 380 408 401 Less interest capitalized on construction 13 17 11 395 $ $ 363 $ 390 Interest expense 17 $ Premium on early retirement of debt On November 14, 2014, the Company provided a notice of redemption related to all of the $407 million of 7.875% senior notes due 2015, 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 $17 million during 2014. This additional interest expense 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, are shown below: (millions) Fiscal year 2017 306 2018 6 2019 41 2020 539 2021 553 After 2021 5,426 During 2015, 2014 and 2013, the Company repaid $69 million, $453 million and $109 million, respectively, of indebtedness at maturity. On August 17, 2015, the Company redeemed at par the principal amount of $76 million of 8.125% senior debentures due 2035, pursuant to the terms of the debentures. Interest expense in 2015 benefited from the recognition of unamortized debt premium associated with this debt. On December 7, 2015, the Company issued $500 million aggregate principal amount of 3.45% senior notess due 2021, the proceeds of which were used for general corporate purposes On November 18, 2014, the Company issued $550 million aggregate principal amount of 4.5% senior notes due 2034. This debt was used to pay for the redemption of the $407 million of 7.875% senior notes due 2015 described above. On May 23, 2014, the Company issued $500 million aggregate principal amount of 3.625% senior unsecured notes due 2024, the proceeds of which were used for general corporate purposes On September 6, 2013, the Company issued $400 million aggregate principal amount of 4.375% senior notes due 2023, the proceeds of which were used for general corporate purposes The following table shows the detail of debt repayments: 2015 2014 2013 (millions) 69 $ 7.5% Senior debentures due 2015 $ 8.125% Senior debentures due 2035 76 5.75% Senior notes due 2014 453 7.875% Senior notes due 2015 407 7.625% Senior debentures due 2013 109 9.5% amortizing debentures due 2021 9.75% amortizing debentures due 2021 Capital leases and other obligations 4 3 2 2 4 152 $ 870 $ 124 The following summarizes certain components of the Company's debt: Bank Credit Agreement The Company entered into a new credit agreement with certain financial institutions on May 10, 2013 providing for revolving credit borrowings and letters of credit in an aggregate amount not to exceed $1,500 million (which 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 May 10, 2018 and replaced the prior agreement which was set to expire June 20, 2015 As of January 30, 2016, and January 31, 2015, there were no revolving credit loans outstanding under this credit agreement, and there were no borrowings under the agreement throughout all of 2015 and 2014. However, there were less than $1 million of standby letters of credit outstanding at January 30, 2016 and January 31, 2015 Revolving loans under the credit agreement bear interest based on various published rates The Company's credit agreement, which is an obligation of a 100%-owned subsidiary of Macy's, Inc. ("Parent'), is not secured. However, Parent has fully and unconditionally guaranteed this obligation, subject to specified limitations. The Company's interest coverage ratio for 2015 was 8.85 and its leverage ratio at January 30, 2016 was 2.21, in each case as calculated in accordance with the 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 interest coverage ratio is defined as EBITDA (earnings before interest, taxes, depreciation and amortization) divided by net interest expense and the leverage ratio is defined as debt divided by 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 Commercial Paper The Company is a party to a $1,500 million unsecured commercial paper program. The Company may issue and sell commercial paper in an aggregate amount outstanding at any particular time not to exceed its then-current combined borrowing availability under the bank credit agreement described above. The issuance of commercial paper will have the effect, while such commercial paper is outstanding, of reducing the Company's borrowing capacity under the bank credit agreement by an amount equal to the principal amount of such commercial paper. During 2015, the Company utilized seasonal borrowings available under this commercial paper program The amount of borrowings under the commercial paper program increased to its highest level for 2015 of approximately $1,100 million during the fourth quarter. As of January 30, 2016, there were no remaining borrowings outstanding under the commercial paper program. The Company had no commercial paper outstanding under its commercial paper program throughout 2014 This program, which is an obligation of a 100%-owned subsidiary of Macy's, Inc., is not secured. However, Parent has fully and unconditionaly guaranteed the obligations Senior Notes and Debentures The senior notes and the senior debentures are unsecured obligations of a 100% owned subsidiary of Macy's, Inc. and Parent has fully and unconditionally guaranteed these obligations (see Note 16, "Condensed Consolidating Financial Information"). Other Financing Arrangements At January 30, 2016 and January 31, 2015, the Company had dedicated $37 million of cash, included in prepaid expenses and other current assets, which is used to collateralize the Company's issuances of standby letters of credit. There were $21 million and $29 million of other standby letters of credit outstanding at January 30, 2016 and January 31, 2015, respectively. 424B2 1 d49698d424b2.htm FINAL PROSPECTUS SUPPLEMENT Table of Contents Filed pursuant to Rule 424(b)(2) SEC File No. 333-208285 333-208285-01 CALCULATION OF REGISTRATION FEE Title of each Class of Securities to Amount Maximum Maximum Offering Price Per Aggregate to be Amount of be Registered Registered 3.450% Senior Offering Price Registration Fee (1) Unit Notes due $500,000,000 $499,495,000 99.899% $50,300 2021 (1) Pursuant to Rule 457(r), the total registration fee for this offering is $50,300. Table of Contents PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED DECEMBER 1, 2015) $500,000,000 Macy's Retail Holdings, Inc. 3.450% Senior Notes Due 2021 Payment of principal and interest unconditionally guaranteed by Macy's, Inc. Macy's Retail Holdings, Inc. ("Macy's Holdings") is offering $500,000,000 aggregate principal amount of its 3.450% Senior Notes due January 15, 2021, which we refer to as the "senior notes. The senior notes mature on January 15, 2021, unless earlier redeemed. Macy's Holdings will pay interest on the senior notes semi-annually in arrears on each January 15 and July 15 of each year. The first interest payment will be made on 2016. The senior notes will rank equal in right of payment to any other existing or future July 15 senior unsecured obligations of Macy's Holdings. The guarantee will rank equal in right of payment to all other existing and future senior unsecured obligations of Macy's, Inc. Macy's Holdings may redeem the senior notes at any time at the redemption price set forth herein. Upon the occurrence of both () a change of control of Macy's, Inc. and (ii) within a specified period in relation to the change of control, the senior notes being downgraded by at least two of Fitch Ratings, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Services and being rated below an investment grade rating by at least two of such rating agencies, Macy's Holdings will be required to make an offer to purchase the senior notes at 101% of their principal amount. On and after December 15, 2020, Macy's Holdings may redeem the senior notes at par, plus accrued and unpaid interest Investing in the senior notes involves risks. See the "Risk Factors" section in our Annual Report on Form 10-K for the fiscal year ended January 31, 2015. Senior Notes Per Note Total Initial public offering price (1) Underwriting discounts and commissions Proceeds to Macy's Holdings (1) 99.899% $499,495,000 0.600% 99.299% $3,000,000 $496,495,000 (1) Plus accrued interest, if any, from December 10, 2015 Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supple representation to the contrary is a criminal offense or the accompanying prospectus is truthful or complete. Any The underwriters expect to deliver the senior notes in book-entry form only through the facilities of The Depository Trust Company for the accounts of its participants, including Clearstream Banking, societe anonyme, and Euroclear Bank S.A./N.V., as operator of the Euroclear System, against payment in New York, New York on December 10, 2015 Joint Book-Running Managers BofA Merrill Lynch J.P. Morgan Credit Suisse Goldman, Sachs & Co. US Bancorp Wells Fargo Securities Co-Managers BNY Mellon Capital Markets, LLC Citigroup Fifth Third Securities Loop Capital Markets Ramirez & Co., Inc. PNC Capital Markets LLC Standard Chartered Bank The Williams Capital Group, L.P. MUFG The date of this prospectus supplement is December 7, 2015. Table of Contents TABLE OF CONTENTS PROSPECTUS SUPPLEMENT Page S-1 S-3 S-4 S-22 S-27 S-32 S-32 SUMMARY USE OF PROCEEDS DESCRIPTION OF NOTES U.S. FEDERAL INCOME TAX CONSIDERATIONS UNDERWRITING EXPERTS LEGAL MATTERS PROSPECTUS Page ABOUT THIS PROSPECTUS WHERE YOU CAN FIND MORE INFORMATION INCORPORATION BY REFERENCE FORWARD-LOOKING STATEMENTS DESCRIPTION OF DEBT SECURITIES DESCRIPTION OF MACY'S CAPITAL STOCK DESCRIPTION OF DEPOSITARY SHARES DESCRIPTION OF WARRANTS DESCRIPTION OF PURCHASE CONTRACTS DESCRIPTION OF UNITS RATIO OF EARNINGS TO FIXED CHARGES USE OF PROCEEDS CERTAIN LEGAL MATTERS EXPERTS 1 3 3 4 14 16 16 17 17 18 18 18 18 None of Macy's, Inc., Macy's Holdings or any underwriter has authorized anyone to provide any information or to make any representation other than those contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or in any free writing prospectus that we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that you obtain from other sources or that others may give you. This document may only be used where it is legal to sell the senior notes. The information in this document may be accurate only on the date of this document Table of Contents SUMMARY The following summary contains basic information about the senior notes and is not intended to be complete. For a more complete discussion of the senior notes, please refer to the section entitled "Description of Notes" in this prospectus supplement. You should read the entire prospectus supplement and the accompanying prospectus, as well as the documents incorporated by reference into them, before making an investment decision Macy's Retail Holdings, Inc. Issuer Macy's, Inc. Guarantor Securities Offered $500,000,000 aggregate principal amount of 3.450% Senior Notes due 2021 Maturity Date January 15, 2021. Semi-annually in arrears on each January 15 and July 15 of each year, commencing on July 15, 2016 Interest on the senior notes being offered by this prospectus supplement will accrue from December 10, 2015 Interest Payment Dates The senior notes will rank equal in right of payment to any other existing or future senior unsecured obligations of Macy's Holdings. Ranking The obligations of Macy's Holdings under the senior notes will be fully and unconditionally guaranteed on a senior unsecured basis by Macy's, Inc. The guarantee Guarantee will rank equal in right of payment to all other existing and future senior unsecured obligations of Macy's, Inc. Optional Redemption Macy's Holdings may, at its option, at any time in whole or from time to time in part, prior to December 15, 2020 (one month prior to the maturity date (the "Par Call Date")) redeem the senior notes at the redemption prices described in this prospectus supplement, plus accrued interest to the date of redemption At any time on and after the Par Call Date, Macy's Holdings may, at its option, redeem the senior notes in whole or from time to time in part at a redemption price equal to 100% of the principal amount of the senior notes to be redeemed plus accrued and unpaid interest on the senior notes to be redeemed to the date of redemption. Change of Control Upon the occurrence of both () a change of control of Macy's, Inc. and (ii) within a specified period in relation to the change of control, the senior notes being downgraded by at least two of Fitch Ratings, Inc., Moody's Investors Service, Inc. and Standard & Poor's Ratings Services and being rated below an investment grade rating by at least two of such rating agencies, Macy's Holdings will be required to make an offer to purchase the senior notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. See "Description of Notes-Change of Control