<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended October 29, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-79
THE MAY DEPARTMENT STORES COMPANY
(Exact name of registrant as specified in its charter)
New York 43-0398035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
611 Olive Street, St. Louis, Missouri 63101
(Address of principal executive offices) (Zip Code)
(314) 342-6300
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
248,261,780 shares of common stock, $0.50 par value, as of October
29, 1994.
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
(Millions)
Oct. 29, Oct. 30, Jan. 29,
ASSETS 1994 1993 1994
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 26 $ 74 $ 46
Accounts receivable, net 2,102 2,099 2,394
Merchandise inventories 2,565 2,362 2,020
Other current assets 227 292 219
Total Current Assets 4,920 4,827 4,679
Property and Equipment, at cost 5,660 5,144 5,047
Accumulated Depreciation (1,866) (1,764) (1,636)
Net Property and Equipment 3,794 3,380 3,411
Goodwill 607 623 619
Other Assets 81 98 91
Total Assets $ 9,402 $ 8,928 $ 8,800
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 305 $ 347 $ 113
Accounts payable 1,090 1,021 870
Accrued expenses 794 861 740
Income taxes 3 10 48
Total Current Liabilities 2,192 2,239 1,771
Long-term Debt 2,881 2,822 2,822
Deferred Income Taxes 326 337 373
Other Liabilities 184 178 182
ESOP Preference Shares 375 382 380
Unearned Compensation (359) (371) (367)
Shareowners' Equity 3,803 3,341 3,639
Total Liabilities and
Shareowners' Equity $ 9,402 $ 8,928 $ 8,800
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.
2
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
(Millions, except per share) 13 Weeks Ended 39 Weeks Ended
Oct. 29, Oct. 30, Oct. 29, Oct. 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net Retail Sales:
Department stores $ 2,325 $ 2,173 $ 6,410 $ 5,931
Payless ShoeSource 540 519 1,601 1,489
Total Net Retail Sales $ 2,865 $ 2,692 $ 8,011 $ 7,420
Revenues $ 2,945 $ 2,814 $ 8,273 $ 7,822
Cost of sales 2,052 1,956 5,756 5,430
Selling, general and
administrative expenses 605 578 1,707 1,631
Interest expense, net 56 60 172 183
Earnings before income taxes 232 220 638 578
Provision for income taxes 93 87 257 232
Net Earnings $ 139 $ 133 $ 381 $ 346
Primary Earnings per Share $ .54 $ .51 $ 1.47 $ 1.33
Fully Diluted Earnings
per Share $ .51 $ .49 $ 1.41 $ 1.28
Dividends Paid per
Common Share $ .26 $ .23 $ .75 $ .66-3/4
Primary Average Shares
Outstanding and Equivalents 249.6 250.3 249.8 249.9
Fully Diluted Average Shares
Outstanding and Equivalents 264.7 265.9 265.0 266.1
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
3
<PAGE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Millions) 39 Weeks Ended
Oct. 29, Oct. 30,
1994 1993
<S> <C> <C>
Operating Activities:
Net earnings and depreciation/amortization $ 647 $ 594
Increase in working capital (excluding
cash, cash equivalents and short-term debt) (32) (102)
Other assets and liabilities, net (45) 25
570 517
Investing Activities:
Net additions to property and equipment (637) (456)
Other 10 (8)
(627) (464)
Financing Activities:
Increase in notes payable 137 208
Net issuances (repayments) of long-term debt 121 (165)
Net purchases of treasury stock (7) (14)
Dividend payments, net of tax benefit (214) (180)
37 (151)
Decrease in Cash
and Cash Equivalents $ (20) $ (98)
Cash paid during the period:
Interest $ 167 $ 188
Income Taxes 333 218
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
4
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Interim Results. These unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-Q of the Securities and Exchange Commission and should
be read in conjunction with the Summary of Significant Accounting
Policies (page 18) and the Notes to Consolidated Financial
Statements (pages 23-29) in the 1993 Annual Report. In the opinion
of management, this information is fairly presented and all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the results for the interim
periods have been included; however, certain items are included in
these statements based on estimates for the entire year. Also,
operating results of periods which exclude the Christmas season may
not be indicative of the operating results that may be expected for
the full fiscal year.
Inventories. Department store merchandise inventories are stated
on the LIFO (last-in, first-out) cost basis. There was no LIFO
provision for the 1994 third quarter versus $4 million in 1993.
The year-to-date LIFO provision was $16 million in 1994 and $20
million in 1993.
Litigation Costs. During the 1994 third quarter, the registrant
recorded a pretax charge of $10 million, or $0.02 per share, which
represents the registrant's share of the settlement of a 1992
lawsuit filed by certain bondholders and is net of previously
established reserves.
5
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Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
A summary of key financial information for the periods indicated is
as follows:
<TABLE>
<CAPTION>
Oct. 29, Oct. 30, Jan. 29,
1994 1993 1994
<S> <C> <C> <C>
Current Ratio 2.2 2.2 2.6
Debt-Capitalization Ratio 46% 49% 45%
Fixed Charge Coverage* 3.2x 2.9x 3.1x
</TABLE>
* Fixed charge coverage, which is presented for the trailing 52
weeks in each period ended above, is defined as earnings before
gross interest expense, the expense portion of interest on the
ESOP debt, rent expense and income taxes divided by gross
interest expense, interest expense on the ESOP debt, total rent
expense and the pretax equivalent of dividends on redeemable
preferred stock.
Registrant's third quarter 1994 current ratio decreased as compared
with year-end 1993 primarily due to the seasonal decrease in
accounts receivable and an increase in commercial paper borrowings
to fund working capital needs. The impact of the increase in
merchandise inventories was offset by the impact of the increase in
accounts payable.
The decrease in registrant's third quarter 1994 debt-capitalization
ratio as compared with third quarter 1993 is primarily due to
growth in retained earnings. The increase in registrant's third
quarter 1994 debt-capitalization ratio as compared with year-end
1993 is due to an increase in commercial paper borrowings and a net
increase in long-term debt activity described below. These
increases were partially offset by the growth in retained earnings.
During the 1994 third quarter, registrant issued $200 million,
8-3/8% debentures due in 2024. The proceeds from the issuance were
added to registrant's general funds and will be available to retire
a portion of its outstanding commercial paper and other short-term
indebtedness, finance operations, and for general corporate
purposes, including investments and acquisitions. In February
1994, registrant repaid $34 million of its medium-term notes. In
April 1994, registrant repaid $35 million of its 10-3/4% debentures
due in 2018.
The increase in registrant's third quarter 1994 fixed charge
coverage ratio as compared with third quarter 1993 is primarily
due to increased level of earnings. Fixed charges were slightly
lower in the third quarter 1994 as lower gross interest expense due
to net reductions in debt in 1993 and the first six months of 1994
was substantially offset by higher rent expense.
6
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Results of Operations
Net retail sales represent the sales of stores operating at the end
of the latest period. They exclude finance charge revenue and the
sales of stores which have been closed and not replaced. Sales
percent increases by business segment are as follows:
<TABLE>
<CAPTION>
Third Quarter First Nine Months
Store-for- Store-for-
Total Store Total Store
<S> <C> <C> <C> <C>
Department stores 6.9% 4.4% 8.1% 5.4%
Payless ShoeSource 4.1 (2.6) 7.5 0.7
Total Net Retail Sales 6.4% 3.1% 8.0% 4.5%
</TABLE>
Store-for-store sales represent sales of those stores open during
both periods.
The following table presents the components of net earnings as a
percent of revenues.
Third Quarter First Nine Months
1994 1993 1994 1993
Cost of sales 69.7% 69.6% 69.6% 69.4%
Selling, general and
administrative expenses 20.5 20.5 20.6 20.9
Interest expense, net 1.9 2.1 2.1 2.3
Earnings before income taxes 7.9% 7.8% 7.7% 7.4%
Effective income tax rate 40.0% 39.8% 40.3% 40.1%
Net Earnings 4.7% 4.7% 4.6% 4.4%
Cost of sales was $2,052 million in the 1994 third quarter, up 4.9%
from $1,956 million in the 1993 period. For the first nine months
of 1994, cost of sales was $5,756 million, a 6.0% increase from
$5,430 million in the 1993 period. The overall increases are
principally related to higher sales volume. For the third quarter,
cost of sales, as a percent of revenues, increased 0.1% due to an
increase in occupancy expenses, partially offset by a small
increase in merchandise gross margin. The increase in merchandise
gross margin was due to no LIFO charge in the 1994 third quarter
compared with $4 million in 1993. For the first nine months, cost
of sales, as a percent of revenues, increased 0.2% due to an
increase in occupancy expenses, and a small decline in merchandise
gross margin. For the first nine months, the LIFO charge was $16
million in 1994 and $20 million in 1993. There were no significant
changes in the other components of cost of sales.
7
<PAGE>
Selling, general and administrative expenses were $605 million in
the 1994 third quarter, up 4.6% from $578 million a year ago. For
the first nine months of 1994, selling, general and administrative
expenses were $1,707 million compared with $1,631 million in the
1993 period, 4.7% increase. The overall increases are primarily
related to higher sales volume and the 1994 third quarter
litigation costs charge of $10 million discussed in the Notes to
Condensed Consolidated Financial Statements (page 5) of this
report. Selling, general and administrative expenses as a percent
of revenues, excluding litigation costs, decreased 0.3% to 20.2%
for the third quarter and 0.4% to 20.5% year-to-date as compared
with 1993. The improvements were generally achieved across most
selling, general and administrative expense accounts.
Net interest expense for the third quarter and first nine months of
1994 and 1993 is as follows (millions):
Third Quarter First Nine Months
1994 1993 1994 1993
Interest expense $ 66 $ 65 $ 190 $ 198
Interest income (3) (2) (6) (7)
Capitalized interest (7) (3) (12) (8)
Net Interest Expense $ 56 $ 60 $ 172 $ 183
The decrease in 1994 net interest for the first nine months is due
to reduced average borrowings. As a percent of revenues, interest
expense decreased 0.2% for the third quarter and the first nine
months.
The effective income tax rate for the third quarter and first nine
months of 1994 increased as compared with 1993 primarily due to
slightly higher state income tax rates.
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
Oct. 29, Oct. 30,
1994 1993
Net retail sales $ 11,580 $ 10,733
Revenues $ 11,980 $ 11,427
Net earnings $ 746 $ 665
Fully diluted earnings per share $ 2.78 $ 2.48
8
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The legal proceeding identified in response to Item 3 to
registrant's Annual Report on Form 10-K for the fiscal year ended
January 29, 1994, has been settled in the third quarter and is
discussed in the Notes to Condensed Consolidated Financial
Statements (page 5) of this report. The settlement did not have
a material adverse effect on registrant's results of operations
or its financial position.
There are no material pending legal proceedings, other than
routine litigation incidental to the business, to which
registrant is party of or which any of registrant's property is
the subject.
Item 2 - Changes in Securities - None.
Item 3 - Defaults Upon Senior Securities - None.
Item 4 - Submission of Matters to a Vote
of Security Holders - None.
Item 5 - Other Information - None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(11) - Computation of Net Earnings Per Share
(12) - Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE MAY DEPARTMENT STORES COMPANY
(Registrant)
Date: December 6, 1994
\s\ Jerome T. Loeb
Jerome T. Loeb
President and
Chief Financial Officer
9
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<TABLE>
<CAPTION>
Exhibit 11
THE MAY DEPARTMENT STORES COMPANY
COMPUTATION OF NET EARNINGS PER SHARE
13 Weeks Ended 39 Weeks Ended
Oct. 29, Oct. 30, Oct. 29, Oct. 30,
(millions, except per share) 1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net earnings $ 139 $ 133 $ 381 $ 346
ESOP Preferred Dividends, net of tax
benefit on unallocated shares (5) (5) (14) (14)
Dividend requirements on redeemable
preferred stock - - - -
Net earnings available for
common shareowners $ 134 $ 128 $ 367 $ 332
Average common shares outstanding 248.3 248.5 248.4 248.4
Net earnings per share $ 0.54 $ 0.52 $ 1.48 $ 1.34
Primary Computation
Net earnings available for
common shareowners $ 134 $ 128 $ 367 $ 332
Net earnings adjustment for
dividend equivalents - - 1 1
Adjusted net earnings $ 134 $ 128 $ 368 $ 333
Average common shares outstanding 248.3 248.5 248.4 248.4
Common share equivalents under stock
option and deferred compensation plans,
based upon the treasury stock method 1.3 1.8 1.4 1.5
Average common and common equivalent shares 249.6 250.3 249.8 249.9
Primary earnings per share $ 0.54 $ 0.51 $ 1.47 $ 1.33
Fully Diluted Computation
Adjusted net earnings $ 134 $ 128 $ 368 $ 333
Impact of assumed conversion of
ESOP Preference Shares 3 2 7 7
Adjusted net earnings $ 137 $ 130 $ 375 $ 340
Average common and common equivalent shares 249.6 250.3 249.8 249.9
Additional common stock equivalents
attributable to application of the
treasury stock method - 0.2 - 0.6
Assumed conversion of ESOP
Preference Shares 15.1 15.4 15.2 15.6
Average common and common equivalent shares,
assuming full dilution 264.7 265.9 265.0 266.1
Fully diluted earnings per share $ 0.52(A)$ 0.49 $ 1.41(A)$ 1.28
(A) The fully diluted earnings per share reported on the face of the Condensed
Consolidated Statement of Earnings was $.51 in order for reported quarterly
amounts to sum to the reported year-to-date fully diluted earnings per share
of $1.41.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE FIVE FISCAL YEARS ENDED JANUARY 29, 1994, AND FOR THE
THIRTY-NINE WEEKS ENDED OCTOBER 29, 1994, AND OCTOBER 30, 1993
39 Weeks Ended Fiscal Year Ended
Oct. 29, Oct. 30, Jan. 29, Jan. 30, Feb. 1, Feb. 2, Feb. 3,
1994 1993 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges:
Pretax earnings from continuing operations $ 638 $ 578 $ 1,178 $ 791 $ 796 $ 762 $ 799
Fixed charges (excluding interest
capitalized and pretax preferred stock
dividend requirements) 276 291 381 432 474 421 357
Dividends on ESOP Preference Shares (21) (21) (29) (29) (30) (30) (23)
Capitalized interest amortization 3 3 4 3 3 3 3
896 851 1,534 1,197 1,243 1,156 1,136
Fixed Charges:
Gross interest expense (a) $ 214 $ 223 $ 297 $ 341 $ 388 $ 347 $ 291
Interest factor attributable to
rent expense 73 76 94 94 92 83 73
Other (b) - - - 4 8 5 4
287 299 391 439 488 435 368
Ratio of Earnings to Fixed Charges 3.1 2.8 3.9 2.7 2.6 2.7 3.1
(a) Represents interest expense on long-term and short-term debt, ESOP debt and amortization of
debt discount and debt issue expense.
(b) Represents the company's proportionate share of interest of unconsolidated 50% owned persons and
pretax preferred stock dividend requirements.
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED OCTOBER 29,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-1994
<PERIOD-END> OCT-29-1994
<CASH> 15
<SECURITIES> 11
<RECEIVABLES> 2,173
<ALLOWANCES> (71)
<INVENTORY> 2,565
<CURRENT-ASSETS> 4,920
<PP&E> 5,660
<DEPRECIATION> (1,866)
<TOTAL-ASSETS> 9,402
<CURRENT-LIABILITIES> 2,192
<BONDS> 3,049
<COMMON> 124
3
0
<OTHER-SE> 3,679
<TOTAL-LIABILITY-AND-EQUITY> 9,402
<SALES> 8,011
<TOTAL-REVENUES> 8,273
<CGS> 5,756
<TOTAL-COSTS> 7,463
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 48
<INTEREST-EXPENSE> 172
<INCOME-PRETAX> 638
<INCOME-TAX> 257
<INCOME-CONTINUING> 381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.41
</TABLE>
