<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 28, 1995
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.
248,970,011 shares of common stock, $0.50 par value, as of October
28, 1995.
1
<PAGE>
<TABLE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Millions)
<CAPTION>
Oct. 28, Oct. 29, Jan. 28,
ASSETS 1995 1994 1995
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 28 $ 26 $ 55
Accounts receivable, net 2,151 2,102 2,436
Merchandise inventories 2,974 2,565 2,207
Other current assets 267 227 212
Total Current Assets 5,420 4,920 4,910
Property and Equipment, at cost 6,475 5,660 5,794
Accumulated Depreciation (2,216) (1,866) (1,928)
Net Property and Equipment 4,259 3,794 3,866
Goodwill 672 607 602
Other Assets 93 81 94
Total Assets $ 10,444 $ 9,402 $ 9,472
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 53 $ 305 $ 169
Accounts payable 1,231 1,090 837
Accrued expenses 818 794 761
Income taxes 7 3 128
Total Current Liabilities 2,109 2,192 1,895
Long-term Debt 3,456 2,881 2,875
Deferred Income Taxes 354 326 359
Other Liabilities 196 184 191
ESOP Preference Shares 368 375 374
Unearned Compensation (346) (359) (357)
Shareowners' Equity 4,307 3,803 4,135
Total Liabilities and
Shareowners' Equity $ 10,444 $ 9,402 $ 9,472
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.
</TABLE>
2
<PAGE>
<TABLE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
<CAPTION>
(Millions, except per share) 13 Weeks Ended 39 Weeks Ended
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Retail Sales:
Department stores $ 2,489 $ 2,325 $ 6,860 $ 6,409
Payless ShoeSource 587 540 1,779 1,601
Total Net Retail Sales $ 3,076 $ 2,865 $ 8,639 $ 8,010
Revenues $ 3,155 $ 2,945 $ 8,890 $ 8,273
Cost of sales 2,221 2,055 6,238 5,766
Selling, general and
administrative expenses 647 602 1,822 1,697
Interest expense, net 62 56 177 172
Earnings before income taxes 225 232 653 638
Provision for income taxes 90 93 263 257
Net Earnings $ 135 $ 139 $ 390 $ 381
Primary Earnings per Share $ .53 $ .54 $ 1.51 $ 1.47
Fully Diluted Earnings
per Share $ .50 $ .51 $ 1.45 $ 1.41
Dividends Paid per
Common Share $ .28-1/2 $ .26 $ .83 $ .75
Primary Average Shares
Outstanding and Equivalents 250.4 249.6 249.9 249.8
Fully Diluted Average Shares
Outstanding and Equivalents 265.3 264.7 264.9 265.0
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
</TABLE>
3
<PAGE>
<TABLE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
(Millions) 39 Weeks Ended
Oct. 28, Oct. 29,
1995 1994
<S> <C> <C>
Operating Activities:
Net earnings and depreciation/amortization $ 701 $ 647
Increase in working capital (excluding cash,
cash equivalents and short-term debt) (206) (32)
Other assets and liabilities, net (9) (45)
486 570
Investing Activities:
Net additions to property and equipment (773) (637)
Other 8 10
(765) (627)
Financing Activities:
Increase in notes payable 31 137
Net issuances of long-term debt 445 121
Net issuances (purchases) of treasury stock 10 (7)
Dividend payments, net of tax benefit (234) (214)
252 37
Decrease in Cash
and Cash Equivalents $ (27) $ (20)
Cash paid during the period:
Interest $ 183 $ 167
Income Taxes 372 333
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
</TABLE>
4
<PAGE>
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 1994 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 third quarter in 1995 or 1994. The year-to-date
LIFO provision was $16 million in 1995 and 1994.
Acquisition. Effective August 28, 1995, registrant purchased 14
John Wanamaker stores in the Philadelphia area and three Woodward
& Lothrop stores in the Washington, D.C. area, for approximately
$415 million, including $175 million for inventory, receivables and
other current assets, subject to certain conditions and
adjustments. The asset acquisition has been accounted for as a
purchase and, accordingly, the operating results of the acquired
stores have been included in the registrant's consolidated results
since the effective acquisition date. The acquisition was funded
principally with long-term debt. The acquisition did not have a
material effect on the results of operations or financial position
of the registrant in 1995.
Litigation Costs. During the 1994 third quarter, the registrant
recorded a pretax charge of $10 million, or $0.02 per share, which
represented the settlement of a 1992 lawsuit filed by certain
bondholders.
5
<PAGE>
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:
Oct. 28, Oct. 29, Jan. 28,
1995 1994 1995
Current Ratio 2.6 2.2 2.6
Debt-Capitalization Ratio 47% 46% 44%
Fixed Charge Coverage* 3.3x 3.4x 3.4x
* 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, total 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 1995 current ratio increased as compared
with third quarter 1994 primarily due to a decrease in notes
payable and current maturities of long-term debt. The impact of
the increase in inventories was offset by an increase in accounts
payable.
The increase in registrant's third quarter 1995 debt-capitalization
ratio as compared with third quarter 1994 and year-end 1994 is
primarily due to third quarter 1995 long-term debt activity as
described below. These long-term debt increases were partially
offset by the growth in retained earnings.
During the 1995 third quarter, registrant issued $125 million,
7.15% notes due 2004, $125 million, 7.625% debentures due in 2013
and $150 million, 8.125% debentures due in 2035. The proceeds from
the issuance were added to registrant's general funds and were
available for the acquisition of certain assets of John Wanamaker
and Woodward & Lothrop (page 5).
The registrant's fixed charge coverage ratio for the 52 weeks ended
October 28, 1995 decreased slightly as compared with the 52 week
periods ended October 29, 1994 and January 28, 1995 due to
increases in fixed charges, primarily rent and interest expenses,
partially offset by an increased level of earnings.
6
<PAGE>
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 changes 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 7.1% 1.5% 7.0% 2.9%
Payless ShoeSource 8.6 (4.7) 11.1 (3.6)
Total Net Retail Sales 7.4% 0.3% 7.9% 1.6%
Store-for-store sales represent sales of those stores open during
both periods.
</TABLE>
The following table presents the components of net earnings as a
percent of revenues.
Third Quarter First Nine Months
1995 1994 1995 1994
Cost of sales 70.3% 69.8% 70.2% 69.7%
Selling, general and
administrative expenses 20.5 20.4 20.5 20.5
Interest expense, net 2.0 1.9 2.0 2.1
Earnings before income taxes 7.2% 7.9% 7.3% 7.7%
Effective income tax rate 40.0 40.0 40.3% 40.3%
Net Earnings 4.3% 4.7% 4.4% 4.6%
Cost of sales was $2,221 million in the 1995 third quarter, up 8.0%
from $2,055 million in the 1994 period. For the first nine months
of 1995, cost of sales was $6,238 million, an 8.2% increase from
$5,766 million in the 1994 period. The overall increases are
principally related to higher sales volume. For the third quarter
and first nine months, cost of sales, as a percent of revenues,
increased 0.5% due to an increase in buying and occupancy expenses
and a small deterioration in gross margin. For the third quarter
and first nine months of each year, the LIFO charge was $0 and $16
million, respectively. There were no significant changes in the
other components of cost of sales.
7
<PAGE>
Selling, general and administrative expenses were $647 million in
the 1995 third quarter, up 7.7% from $602 million a year ago. For
the first nine months of 1995, selling, general and administrative
expenses were $1,822 million compared with $1,697 million in the
1994 period, a 7.4% increase. The 1994 amounts include a $10
million litigation cost charge discussed in the Notes to Condensed
Consolidated Financial Statements (page 5) of this report. The
overall increases are primarily related to higher sales volume.
Selling, general and administrative expenses as a percent of
revenues, excluding 1994 litigation costs, increased 0.4% to 20.5%
for the third quarter and 0.1% to 20.5% for the first nine months.
These increases were principally related to increased payroll
costs.
<TABLE>
Net interest expense for the third quarter and first nine months of
1995 and 1994 is as follows (millions):
<CAPTION>
Third Quarter First Nine Months
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest expense $ 72 $ 66 $ 204 $ 190
Interest income (4) (3) (11) (6)
Capitalized interest (6) (7) (16) (12)
Net Interest Expense $ 62 $ 56 $ 177 $ 172
The increase in 1995 net interest for the third quarter and first
nine months is due to increased average borrowings. Interest
income for the same periods increased due to an increase in average
short term investments and higher short term interest rates. As a
percent of revenues, interest expense increased 0.1% for the third
quarter and decreased 0.1% for the first nine months.
</TABLE>
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
Oct. 28, Oct. 29,
1995 1994
Net retail sales $ 12,504 $ 11,578
Revenues $ 12,840 $ 11,980
Net earnings $ 791 $ 746
Fully diluted earnings per share $ 2.96 $ 2.78
8
<PAGE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material pending legal proceedings, other than
routine litigation incidental to the business, to which
registrant or any of its subsidiaries is party or of which any
of their 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
(27) - Financial Data Schedule
(b) Reports on Form 8-K
A report dated August 3, 1995 which contained a July, 1995
Sales Release dated August 3, 1995; a second quarter, 1995
Earnings Release dated August 7, 1995; a release announcing
the purchase of John Wanamaker and Woodward & Lothrop stores
in the Philadelphia, Washington, D.C. and Baltimore areas
by the registrant and J.C. Penney Company, Inc. dated August
8, 1995.
A report dated August 18, 1995 which contained a copy of the
Underwriting Agreement, dated August 15, 1995, among
registrant, Morgan Stanley & Co., Incorporated and Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated; a specimen of 7.15% notes due 2004; a specimen
of 7.625% debentures due August 15, 2013; a specimen of
8.125% debentures due August 15, 2035.
9
<PAGE>
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 5, 1995
\s\ Jerome T. Loeb
Jerome T. Loeb
President and
Chief Financial Officer
10
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11
THE MAY DEPARTMENT STORES COMPANY
COMPUTATION OF NET EARNINGS PER SHARE
13 Weeks Ended 39 Weeks Ended
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
(millions, except per share) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net earnings $ 135 $ 139 $ 390 $ 381
ESOP Preferred Dividends, net of tax
benefit on unallocated shares (4) (5) (14) (14)
Dividend requirements on redeemable
preferred stock - - - -
Net earnings available for
common shareowners $ 131 $ 134 $ 376 $ 367
Average common shares outstanding 249.2 248.3 248.9 248.4
Net earnings per share $ 0.52 $ 0.54 $ 1.51 $ 1.48
Primary Computation
Net earnings available for
common shareowners $ 131 $ 134 $ 376 $ 367
Net earnings adjustment for
dividend equivalents - - 1 1
Adjusted net earnings $ 131 $ 134 $ 377 $ 368
Average common shares outstanding 249.2 248.3 248.9 248.4
Common share equivalents under stock
option and deferred compensation plans,
based upon the treasury stock method 1.2 1.3 1.0 1.4
Average common and common equivalent shares 250.4 249.6 249.9 249.8
Primary earnings per share $ 0.52(A)$ 0.54 $ 1.51(A)$ 1.47
Fully Diluted Computation
Adjusted net earnings $ 131 $ 134 $ 377 $ 368
Impact of assumed conversion of
ESOP Preference Shares 3 3 8 7
Adjusted net earnings $ 134 $ 137 $ 385 $ 375
Average common and common equivalent shares 250.4 249.6 249.9 249.8
Additional common stock equivalents
attributable to application of the
treasury stock method - - - -
Assumed conversion of ESOP
Preference Shares 14.9 15.1 15.0 15.2
Average common and common equivalent shares,
assuming full dilution 265.3 264.7 264.9 265.0
Fully diluted earnings per share $ 0.50 $ 0.52(B)$ 1.45 $ 1.41(B)
(A) The primary earnings per share reported on the face of the Condensed
Consolidated Statement of Earnings was $.53 in order for reported quarterly
amounts to sum to the reported year-to-date primary earnings per share of
$1.51.
(B) 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>
11
<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 28, 1995, AND FOR THE
THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995, AND OCTOBER 29, 1994
39 Weeks Ended Fiscal Year Ended
Oct. 28, Oct. 29, Jan. 28, Jan. 29, Jan. 30, Feb. 1, Feb. 2,
1995 1994 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges:
Pretax earnings from continuing operations $ 653 $ 638 $ 1,296 $ 1,178 $ 791 $ 796 $ 762
Fixed charges (excluding interest
capitalized and pretax preferred stock
dividend requirements) 295 276 377 381 432 474 421
Dividends on ESOP Preference Shares (21) (21) (28) (29) (29) (30) (30)
Capitalized interest amortization 4 3 4 4 3 3 3
931 896 1,649 1,534 1,197 1,243 1,156
Fixed Charges:
Gross interest expense (a) $ 228 $ 214 $ 290 $ 297 $ 341 $ 388 $ 347
Interest factor attributable to
rent expense 83 73 102 94 94 92 83
Other (b) - - - - 4 8 5
311 287 392 391 439 488 435
Ratio of Earnings to Fixed Charges 3.0 3.1 4.2 3.9 2.7 2.6 2.7
(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>
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MAY
DEPARTMENT STORES COMPANY FORM 10-Q FOR THE QUARTER ENDED OCTOBER 28, 1995 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> FEB-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 28
<SECURITIES> 0
<RECEIVABLES> 2151
<ALLOWANCES> 0
<INVENTORY> 2974
<CURRENT-ASSETS> 5420
<PP&E> 6475
<DEPRECIATION> 2216
<TOTAL-ASSETS> 10444
<CURRENT-LIABILITIES> 2109
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 4307
<TOTAL-LIABILITY-AND-EQUITY> 10444
<SALES> 8639
<TOTAL-REVENUES> 8890
<CGS> 6238
<TOTAL-COSTS> 6238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
<INCOME-PRETAX> 653
<INCOME-TAX> 263
<INCOME-CONTINUING> 390
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 390
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.45
</TABLE>
