In the fourth quarter of 2007, Macy's, Inc. earned $1.73 per diluted share. Excluding May Company merger integration costs of $69 million ($43 million after tax or 10 cents per diluted share), fourth quarter 2007 earnings were $1.83 per diluted share. Included in 2007 fourth quarter is a non-cash tax credit of $78 million (18 cents per diluted share) from the settlement of a federal income tax examination, primarily attributable to losses related to the disposition of a former subsidiary. Also excluding the tax settlement, fourth quarter 2007 diluted earnings per share were $1.65.
For the full 52 weeks of fiscal 2008, Macy's, Inc. reported diluted earnings per share from continuing operations of 66 cents per share, compared with $2.01 per diluted share from continuing operations for the full 52 weeks of fiscal 2007. Excluding division consolidation and store closings costs of $187 million ($118 million after tax or 28 cents per diluted share) and asset impairment charges of $211 million ($133 million after tax or 32 cents per diluted share), diluted earnings per share from continuing operations were $1.26 for fiscal 2008. Excluding May Company merger integration costs of $219 million ($138 million after tax or 31 cents per diluted share) and the tax settlement of $78 million (17 cents per diluted share), diluted earnings per share from continuing operations were $2.15 for fiscal 2007.
As described in the notes to financial statements in this news release, the company is in the process of reviewing its goodwill, including that recorded in connection with its August 2005 acquisition of The May Department Stores Company, for impairment. The impairment review is related to the deterioration in the general economic environment and the resulting decline in the company's share price and market capitalization.
Due to the complexity of the impairment calculation process, and the need for appraisals and analyses that have not yet been obtained and performed, the company presently cannot make an actual determination of the amount by which its goodwill was impaired at year end. The company, however, currently estimates that the amount of goodwill to be written down in the fourth quarter of 2008 is between $4.5 billion and $5.5 billion (or between $10.00 and $12.50 per diluted share).
The company's Form 10-K for the fiscal year ended Jan. 31, 2009, to be filed with the Securities and Exchange Commission on or before April 1, 2009, will reflect the required reduction in the carrying value of the company's goodwill and the related non-cash impairment charge, which will reduce the reported amounts of operating income, net income and diluted earnings per share. The non-cash write-down of goodwill is expected to have no impact on the company's business, bank credit agreement or bond indentures.
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