SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 11-K
(Mark One)
[ X ]
ANNUAL REPORT PURSUANT TO SECTION
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Year Ended December 31, 2008
Or
[
]
TRANSITION REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13536
A. Full title of the plan if different from that of the
issuer named below:
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING
PLAN
B. Name of issuer of securities held pursuant to the plan and
the
address of its principal executive office:
MACY'S, INC.
7 West Seventh Street
Cincinnati, Ohio
45202
and
151 West 34th Street
New
York, New York 10001
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING
PLAN
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the members of the Pension and Profit Sharing Committee
(which is the administrative committee for The May Department Stores
Company Profit Sharing Plan) have duly caused this annual report to be
signed on its behalf by the undersigned hereunto duly
authorized.
The May Department Stores
Company
Profit Sharing Plan
Dated: June 30, 2009
By: /s/Karen M.
Hoguet
Karen M. Hoguet, Chairperson
Pension and Profit Sharing Committee
Macy's, Inc.
FINANCIAL
STATEMENTS AND EXHIBIT
Listed below are all financial
statements and exhibits filed as part of this annual report on Form
11-K:
Financial Statements
Page of this
Form 11-K
Report of Independent
Registered Public Accounting Firm
5
Financial Statements
of the Plan:
Statements of
Net Assets Available for Benefits-December 31, 2008
and 2007
6
Statements of
Changes in Net Assets Available for Benefits- Years
Ended December 31, 2008 and 2007
7
Notes to
Financial Statements- Years Ended December 31, 2008
and 2007
8
Exhibit
Exhibit 23.1-Consent
of Independent Registered Public Accounting
Firm
16
Pursuant to the requirements of the Securities Exchange Act
of 1934, the members of the Pension and Profit Sharing Committee (which is the
administrative committee for The May Department Stores Company Profit Sharing
Plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
The May Department Stores Company
Profit Sharing
Plan
Dated: June 30, 2009
By: /s/ Karen M.
Hoguet
Karen
M. Hoguet, Chairperson
Pension and Profit Sharing Committee
Macy's,
Inc.
The May Department Stores Company Profit Sharing Plan
Financial Statements as of and for the
Years Ended
December 31, 2008 and 2007, and
Report of Independent Registered Public
Accounting Firm
Report of
Independent Registered Public Accounting Firm
Pension and Profit Sharing
Committee
Macy's, Inc.:
We
have audited the accompanying statement of net assets available for benefits of
The May Department Stores Company Profit Sharing Plan (the Plan) as of December
31, 2008 and 2007, and the related statement of changes in net assets available
for benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As further discussed
in note 1, the Plan was merged into the Macy's, Inc. Profit Sharing 401(k)
Investment Plan effective December 31, 2008.
In our opinion, the
financial statements referred to above present fairly, in all material respects,
the net assets available for benefits of the Plan as of December 31, 2008 and
2007, and the changes in net assets available for benefits for the years then
ended in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Cincinnati,
Ohio
June 30, 2009
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR
BENEFITS
DECEMBER 31, 2008 AND 2007
(In thousands)
2008
2007
ASSETS:
Investments, at fair value:
Macy's, Inc. common stock (Note
1)
$
-
$ 360,534
Commingled equity index funds
-
398,382
Short-term investment fund
-
157,759
U.S. government securities
-
56,937
Fixed income investments
-
29,469
Total investments
-
1,003,081
Other assets:
-
Receivable-employer
contribution
-
13,542
Dividends and interest
receivable
-
3,509
Due from broker for securities sold
and other
-
1,160
Total assets
-
1,021,292
LIABILITIES:
-
Due to broker for securities purchases and
other
-
2,220
Due to affiliated retirement plans (Note
7)
-
201
Accrued administrative expenses
-
1,010
Total liabilities
-
3,431
NET ASSETS AVAILABLE FOR BENEFITS
$
-
$ 1,017,861
See accompanying notes to financial statements.
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR
BENEFITS
YEARS ENDED DECEMBER 31, 2008 AND 2007
(In thousands)
2008
2007
Contributions:
Member
$ 42,767
$ 76,158
Employer
-
13,542
Total
contributions
42,767
89,700
Investment income:
Appreciation (depreciation) in fair
value of investments:
Macy's, Inc. common
stock (Note 1)
(70,604)
(173,667)
Commingled equity index
funds
(43,042)
21,531
U.S. government
securities
(90)
2,000
Fixed income
investments
2,772
(89)
Total depreciation in fair value of investments
(110,964)
(150,225)
Dividends
3,522
7,848
Interest
3,162
13,305
Total dividend and interest income
6,684
21,153
(61,513)
(39,372)
Benefits paid to members
(133,807)
(278,594)
Transfer of assets to the Macy's, Inc. Profit
Sharing 401(k) Investment Plan (Note 1)
(819,221)
-
Transfer of assets to the David's Bridal 401(k)
Retirement Plan (Note 6)
-
(32,419)
Administrative expenses (Note 2)
(3,218)
(4,576)
Cash dividend payments to members
(102)
(216)
(956,348)
(315,805)
DECREASE IN NET ASSETS
AVAILABLE FOR
BENEFITS
(1,017,861)
(355,177)
NET ASSETS AVAILABLE FOR BENEFITS-Beginning of
year
1,017,861
1,373,038
NET ASSETS AVAILABLE FOR BENEFITS-End of year
$
-
$
1,017,861
See accompanying notes to financial statements.
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING
PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008
AND
2007
1. DESCRIPTION
OF THE PLAN
The following description of The
May Department Stores Company Profit Sharing Plan (the "Plan") is provided for
general informational purposes only. Associates should refer to the Plan
document dated January 1, 2004 and Summary Plan Description dated November 2002
(with updates) for more complete information.
General-The
Plan was sponsored and administered by Macy's, Inc. ("Macy's"). The Plan was a
defined contribution profit sharing plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and U.S.
tax law. The Plan covered certain eligible associates of Macy's, a
Delaware corporation, and its subsidiaries or affiliates who elected to
participate in the Plan. An associate's membership in the Plan was
voluntary for those associates who became eligible through December 31,
2006. The Plan adopted automatic enrollment for newly eligible associates
as of January 1, 2007.
Merger of Macy's and May- On August
30, 2005, Macy's completed its acquisition of The May Department Stores Company
("May") (the "Merger").
Plan Merger- On
September 1, 2008 the Plan was merged into the Macy's, Inc. Profit Sharing
401(k) Investment Plan ("Macy's Profit Sharing Plan") (the "Plan Merger").
Prior to the Plan Merger, the assets of the Plan were held by The Bank of New
York Mellon (the "Trustee"). Effective September 1, 2008, the Plan's
investments began to be transferred into the Macy's, Inc. Defined Contribution
Plans Master Trust and the Bank of New York Mellon was terminated as
Trustee. The transfer of these Plan investments was completed on December
31, 2008. As a result of the Plan Merger, the Net Assets Available for
Benefits was $0 as of December 31, 2008.
Eligible
Associates-In general, associates employed in a former May location (as
determined on the Merger date) or certain of its subsidiaries or affiliates
(excluding foreign national associates working in foreign countries and certain
members of collective bargaining units) became members of the Plan upon
attaining age 21 and working for at least one year in which they were paid for
1,000 hours or more. Eligible associates entered the Plan through July 1, 2008.
After that date, the newly eligible associates entered the Macy's Profit Sharing
Plan.
Member Contributions-Plan members may have elected to
contribute 1% to 50% (1% to 15% for "highly compensated associates") of their
pay as defined by the Plan. Contributions could be made prior to federal and
certain other income taxes pursuant to Section 401(k) of the Internal Revenue
Code. Effective January 1, 2003, participants who were age 50 or older
were permitted supplemental "catch-up" pre-tax contributions. Such contributions
in 2008 and 2007 did not have a material impact on the
Plan.
Employer Contribution- Participating Plan members
were entitled to an annual discretionary employer contribution equal to a
matching rate times a member's basic contributions (generally, contributions up
to 5% of pay). The Plan provided for a minimum matching employer
contribution of 33 1/3% of basic contributions.
The employer
contributions for the 2008 and 2007 plan years were based on the minimum amount
necessary to produce a matching rate of 33-1/3% of a member's basic
contributions, after considering the impact of forfeitures. The 2008 employer
contribution was contributed in cash directly to Macy's Profit Sharing Plan
following the participant's investment fund choices. The employer contribution
was based on employee contributions made prior to and subsequent to the Plan
Merger. The 2007 employer contribution was contributed in cash directly to the
Macy's Common Stock Fund on March 31, 2008. The Plan Trustee used the cash
contribution to immediately purchase additional shares of Macy's common stock in
that Fund.
Members were permitted to elect to immediately redirect
the value of employer contributions to other investment options in the
Plan.
Investments-Members' contributions were invested in
any of the following investment funds:
Money Market Fund-Invested
in the Bank of New York Mellon Collective Short-Term Investment Fund, which
invested in short-term (less than one year) obligations of high-quality issuers
including banks, corporations, municipalities, the U.S. Treasury and other
federal agencies.
Bond Index Fund-Invested primarily in corporate,
U.S. Government, federal agency and certain foreign obligations that made up the
Lehman Intermediate Government/Credit Bond Index. The Lehman Intermediate
Government/Credit Bond Index represented the combined overall performance of
intermediate-term, fixed income securities that have maturities ranging from one
to 10 years, with an average maturity of four years.
Balanced
Equity/Bond Fund-Invested in the S&P 500 Equity Index Fund and the Bond
Index Fund, with a targeted investment allocation of approximately 60% to the
S&P 500 Equity Index Fund and 40% to the Bond Index Fund. The fund was
rebalanced by the Plan's Trustee at the end of each calendar
quarter.
S&P 500 Equity Index Fund-Invested primarily in the
Northern Trust Collective Daily Stock Index Fund, a collective trust which
invested in the common stock of corporations that made up the Standard &
Poor's 500 Composite Stock Price Index. This index represented the
composite performance of 500 major stocks in the United States. Investment
mix was determined based on the relative market size of the 500 corporations,
with larger corporations making up a higher proportion than smaller
corporations.
Russell 2000 Equity Index Fund-Invested primarily in
the Northern Trust Daily Russell 2000 Equity Index Fund, a collective trust that
invested in the common stock of corporations that made up the Russell 2000
Index. This Index was commonly used to represent the small market
capitalization (small company) segment of the U.S. equity market.
Investment mix was determined based on the relative market size of 2,000
corporations, with larger corporations in this group making up a higher
proportion than smaller corporations.
International Equity Index
Fund-Invested primarily in the Northern Trust Daily EAFE Equity Index Fund,
a collective trust that invested in the common stock of corporations that made
up the Morgan Stanley Capital International Europe, Australasia and Far East
Index. Investment mix was determined based on the relative country weights
within the Index, with securities issued in countries having larger economies
making up a higher proportion than countries with smaller
economies.
Macy's Common Stock Fund-Consists primarily of the
common stock of Macy's.
The investments were exposed to
various risks such as interest rate, credit, overall market volatility,
political, currency and regulatory risks. Further, due to the level of
risk associated with certain investments, it was reasonably possible that
changes in the value of investments could occur in the near term and such
changes could materially affect the amounts reported in the Statements of Net
Assets Available for Benefits.
Vesting-The method of
calculating vesting service was the elapsed time method. Elapsed time was
measured by calculating the time that has elapsed between the member's hire date
and retirement date/termination date (excluding certain break-in-service
periods). Plan members were 100% vested in (a) May Common Stock Fund
dividends earned in their company accounts beginning with the 2002 quarterly
dividends, (b) ESOP Preference Fund dividends earned in their company accounts
beginning with the October 2004 semi-annual dividend and (c) Macy's Common Stock
Fund dividends earned in their company accounts beginning with the December 2005
quarterly dividend.
Plan members were vested in the remainder of their
company accounts in accordance with the following schedule:
Years of Vesting Service
Vesting
Percentage
Less than 2 years
0 %
2 years
20 %
3 years
40 %
4 years
60 %
5 years
80 %
6 years
100 %
Plan members were always fully
vested in the value of their member accounts from member contributions. Plan
member's vesting was generally not impacted by the Plan Merger.
Payment of Benefits-Amounts in a member's account and the
vested portion of a member's company account, have been distributed upon
retirement, death or termination of employment. Distributions from an
investment fund holding employer securities were made in shares of Macy's common
stock or cash. All other distributions were made in
cash.
Dividend Passthrough-The Plan's funds holding
employer securities were Employee Stock Ownership Plans ("ESOP") under Section
4975(e)(7) of the Internal Revenue Code. This feature allowed members with
accounts in the Macy's Common Stock Fund to elect to either reinvest employer
stock dividends into their Plan accounts or to receive these dividends in cash
each quarter.
Administration of the Plan-The Plan was
administered by a committee appointed by the Board of Directors of Macy's,
Inc. The assets of the Plan were held in a trust (the "Trust") for which
The Bank of New York Mellon was the Trustee (the "Trustee").
2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting-In accordance with
accounting principles generally accepted in the United States of America, the
Plan has changed its basis of accounting from the ongoing basis used in
presenting the December 31, 2007 financial statements to the liquidation basis
used in presenting the December 31, 2008 financial statements as a
result of the Plan Merger.
Investments-The Plan's
investments in common stock, U.S. government securities and fixed income
securities were stated at fair value based on publicly reported price
information. Investments in commingled equity index funds were stated at
fair value as determined by the investment manager. Short-term investments
were recorded at cost, which approximated fair value.
The Plan presents
in the Statement of Changes in Net Assets Available for Benefits, the net
appreciation (depreciation) in the fair value of its investments which consists
of the realized gains or losses and the unrealized appreciation (depreciation)
on those investments.
Purchases and sales of securities were recorded on a
trade-date basis. Interest income was recorded on the accrual basis.
Dividend income was recorded on the ex-dividend date. Realized gains and
losses were recorded using the average cost method.
Federal Income
Taxes-The Trust established under the Plan to hold the Plan's assets was
tax exempt under 501(a) as the Plan was qualified pursuant to Sections 401(a),
401(k) and 4975(e)(7) of the Internal Revenue Code ("IRC") and accordingly, the
Trust's net investment income was exempt from income taxes. The Internal
Revenue Service has determined and informed the Company by a letter dated
February 10, 2005, that the Plan and related trust were designed in accordance
with applicable sections of the IRC. Although the Plan has been amended
since receiving the determination letter, the Plan administrator and the Plan's
tax counsel believe that the Plan and related Trust are designed and are
currently being operated in compliance with the applicable requirements of the
IRC.
Employer allocations and contributions, member before-tax
contributions and any cumulative investment returns on member accounts were not
taxable to the members until distributions were
made.
Administrative Expenses- The Plan pays reasonable and
necessary expenses incurred for the ongoing administration of the Plan.
Administrative expenses include third party service providers, allocable portion
of data processing services provided by Macy's and salaries and benefits for
associates who provide services to the Plan.
Valuation of the
Trust-The Plan provided for daily valuations of the accounts.
The
unit values of all other investment funds were determined by dividing the market
value of the particular investment fund by the total number of units outstanding
in all member accounts in such investment fund. On each valuation date,
the value of each fund was redetermined and account balances in each fund were
adjusted as follows:
(a)
All payments made from an account were valued based on the unit value as of the
distribution date.
(b)
Member contributions were invested in the investment funds directed by the
participant.
(c)
In the event that a member's employment was terminated and a portion of such
member's company account had been forfeited, the forfeited units shall be
cancelled as of the last day of the Plan year. Forfeited amounts were
allocated as part of the employer matching contribution for such Plan year. On
September 1, 2008, the Plan's forfeitures totaling $145,000 were transferred to
the Macy's Profit Sharing Plan. At December 31, 2007, forfeited non-vested
accounts totaled $607,000.
Due to/from Brokers for
Securities Sold and Other-These amounts represented contributions
provided to the Plan's brokers for investment securities to be purchased, or
proceeds not yet received from brokers for investments that had been sold.
Use of Estimates-The preparation of financial statements
in conformity with accounting principles generally accepted in the United States
of America requires management to make estimates and assumptions that affect the
reported amounts of net assets available for benefits and the reported amounts
of additions to and deductions from net assets available for benefits during the
year. Actual results could have differed from those estimates.
3. INVESTMENTS
The fair value of the Plan's
investments that represented 5% or more of the Plan's net assets available for
benefits as of December 31, 2008 and 2007, are as follows (fair value in
thousands):
2008
2007
Number
of
Number
of
Shares or
Fair
Shares or
Fair
Description of Investments
Principal
Amount
Value
Principal
Amount
Value
Macy's, Inc.
Common Stock *
-
-
13,936,375
$ 360,534
Northern Trust Collective
Daily Stock Index Fund
-
$ -
57,938
$ 234,788
Northern Trust Daily
Russell 2000 Fund
-
$ -
86,667
$ 78,831
Northern Trust EAFE
Equity Index Fund
-
$ -
185,663
$ 84,763
The Bank of New York
Collective Short-Term
Investment Fund-
Master Notes
$ -
157,758,829
$ 157,759
All other assets held less than
5% of the Plan's net assets
-
$ -
-
$ 86,406
*nonparticipant-directed
Information about the significant
components of the changes in net assets relating to the nonparticipant-directed
investments for the years ended December 31, 2008 and 2007 are as follows:
2008
2007
(in
thousands)
Contributions..............................................................
$ 23,802
$ 36,884
Net depreciation in the fair
value of investments..........
(70,604)
(173,667)
Benefits
paid to participants........................................
(26,206)
(82,354)
Transfers
to participant-directed investments..............
(38,941)
(70,154)
Transfer to Macy's Profit Sharing Plan
(258,248)
-
$(370,197)
$
(289,291)
At December 31, 2007, the Plan beneficially owned
shares of Macy's Common Stock, representing 3.3% of the voting power of Macy's,
Inc.
Effective January 1, 2008, the Plan adopted
Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements," ("SFAS 157"), as it applies to financial assets and liabilities
that are recognized or disclosed at fair value on a recurring basis. SFAS 157
defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles and expands disclosures
about fair value measurements. The SFAS 157 fair value hierarchy consists of
three levels: Level 1 fair values are valuations based on quoted market prices
in active markets for identical assets or liabilities that Macy's has the
ability to access; Level 2 fair values are those valuations based on quoted
prices for similar assets or liabilities, quoted prices in markets that are not
active, or other inputs that are observable or can be corroborated by observable
data for substantially the full term of the assets or liabilities; and Level 3
fair values are valuations based on inputs that are supported by little or no
market activity and that are significant to the fair value of the assets or
liabilities. The Plan's investments consisted of only Level 1 and Level 2
investments. The adoption of SFAS 157 as it applied to financial assets and
liabilities that were recognized or disclosed at fair value on a recurring basis
did not have and is not expected to have a material impact on the Plan. The Plan
had no financial assets or liabilities as of December 31, 2008 to report due to
the Plan Merger.
SFAS No. 159 "The Fair Value Option for Financial
Assets and Financial Liabilities," which provides companies with the option to
report selected financial assets and liabilities at fair value, became effective
for the Plan beginning January 1, 2008. The adoption of this statement did not
and is not expected to have an impact on the Plan.
4. RELATED
PARTIES
Certain Plan investments were shares of The Bank of New York
Mellon Collective Short-Term Investment Fund. The Bank of New York Mellon was
the Trustee of the Plan and, therefore, these transactions qualify as
party-in-interest transactions. In addition, the Plan paid the Trustee
approximately $431,000 and $621,000 in administrative expenses, principally
Trustee fees, in 2008 and 2007, respectively. In addition to expenses incurred
by third party service providers, these expenses include an allocable portion of
data processing services provided by Macy's and salaries and benefits for
associates who provide services to the Plan. Macy's allocated approximately
$792,000 and $485,000 in administrative expenses to the Plan in 2008 and 2007,
respectively.
The Plan holds shares of the common stock of Macy's, the
Plan administrator. Macy's common stock held by the Plan was 36% of the Plan's
total investments at December 31, 2007.
5. RECONCILIATION
TO FORM 5500
As of December 31, 2007, the Plan had approximately
$10,311,000 of pending distributions to participants. These amounts were
included in net assets available for benefits. For reporting on the Plan's
Form 5500, these amounts were classified as benefit claims payable with a
corresponding reduction in net assets available for benefits. The
following table reconciles the financial statements to the Form 5500, which will
be filed by the Plan for the Plan year ended December 31, 2008 (dollars in
thousands):
Benefits
Net
Assets
Payable
to
Benefits
Available
Participants
Paid
for
Benefits
Per 2008 financial statements
$
-
$
133,807
$
-
Pending benefit distributions-December 31, 2008
-
-
-
Pending benefit distributions-December 31, 2007
-
(10,311)
-
Per 2008 Form 5500
$ -
$
123,496
$
-
6. SALE
OF COMPANIES
In January 2007, Macy's completed the sale of the
acquired David's Bridal and Priscilla of Boston businesses of May.
As a
result, in March 2007 $32,218,000 of plan assets related to plan members
employed at David's Bridal and Priscilla of Boston were transferred to the
David's Bridal 401(k) Retirement Plan, which is not sponsored by Macy's. At
December 31, 2007, $201,000 of additional plan assets related to plan members
employed at David's Bridal and Priscilla of Boston were transferred to the
David's Bridal Retirement Plan on March 28, 2008.
7. LEGAL
PROCEEDINGS
On January 11, 2006, Edward
Decristofaro, an alleged former May stockholder, filed a purported class action
lawsuit in the Circuit Court of St. Louis, Missouri on behalf of all former May
stockholders against May and the former members of the board of directors of
May. The complaint generally alleges that the directors of May breached their
fiduciary duties of loyalty, due care, good faith and candor to May stockholders
in connection with the Merger. The plaintiffs seek rescission of the Merger or
an unspecified amount of recissory damages and costs including attorneys' fees
and experts' fees. In July 2007, the court denied the defendants' motion to
dismiss the case. Macy's believes the lawsuit is without merit and intends to
contest it vigorously.
On October 3, 2007, Ebrahim
Shanehchian, an alleged participant in the Macy's, Inc. Profit Sharing 401(k)
Investment Plan (the "Macy's 401(k) Plan"), filed a purported class action
lawsuit in the United States District Court for the Southern District of Ohio on
behalf of persons who participated in the Macy's 401(k) Plan and the Plan
between February 27, 2005 and the present. The complaint charges the Company, as
well as members of the Company's board of directors and certain members of
senior management, with breach of fiduciary duties owed under the Employee
Retirement Income Security Act ("ERISA") to participants in the Macy's 401(k)
Plan and the Plan, alleging that the defendants made false and misleading
statements regarding the Company's business, operations and prospects in
relation to the integration of the acquired May operations, resulting in
supposed "artificial inflation" of the Company's stock price between August 30,
2005 and May 15, 2007. The plaintiff seeks an unspecified amount of compensatory
damages and costs. Macy's believes the lawsuit is without merit and intends to
contest it vigorously.