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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 April 29, 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.
248,681,629 shares of common stock, $.50 par value, as of April 29,
1995.
1
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Millions)
April 29, April 30, Jan. 28,
ASSETS 1995 1994 1995
Current Assets:
Cash and cash equivalents $ 116 $ 109 $ 55
Accounts receivable, net 2,138 2,142 2,436
Merchandise inventories 2,455 2,215 2,207
Other current assets 204 224 212
Total Current Assets 4,913 4,690 4,910
Property and Equipment, at cost 5,906 5,185 5,794
Accumulated Depreciation (2,015) (1,701) (1,928)
Net Property and Equipment 3,891 3,484 3,866
Goodwill 598 614 602
Other Assets 94 87 94
Total Assets $ 9,496 $ 8,875 $ 9,472
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current maturities of
long-term debt $ 172 $ 47 $ 169
Accounts payable 961 1,008 837
Accrued expenses 698 753 761
Income taxes 50 11 128
Total Current Liabilities 1,881 1,819 1,895
Long-term Debt 2,858 2,809 2,875
Deferred Income Taxes 362 366 359
Other Liabilities 182 169 191
ESOP Preference Shares 372 379 374
Unearned Compensation (346) (359) (357)
Shareowners' Equity 4,187 3,692 4,135
Total Liabilities and
Shareowners' Equity $ 9,496 $ 8,875 $ 9,472
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)
(Millions, except per share) 13 Weeks Ended
April 29, April 30,
1995 1994
Net Retail Sales:
Department stores $ 2,128 $ 2,009
Payless ShoeSource 569 517
Total Net Retail Sales $ 2,697 $ 2,526
Revenues $ 2,787 $ 2,622
Cost of sales 1,946 1,820
Selling, general and
administrative expenses 592 555
Interest expense, net 58 59
Earnings before income taxes 191 188
Provision for income taxes 77 76
Net Earnings $ 114 $ 112
Primary Earnings per Share $ .44 $ .43
Fully Diluted Earnings
per Share $ .42 $ .41
Dividends Paid per
Common Share $ .26 $ .23
Primary Average Shares
Outstanding and Equivalents 249.4 250.0
Fully Diluted Average Shares
Outstanding and Equivalents 264.5 265.3
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
3
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions) 13 Weeks Ended
April 29, April 30,
1995 1994
Operating Activities:
Net earnings and depreciation/
amortization $ 211 $ 197
Decrease in working capital (excluding
cash, cash equivalents and short-term
debt) 41 166
Other assets and liabilities, net (9) (19)
243 344
Investing Activities:
Net additions to property and equipment (118) (154)
Other 2 4
(116) (150)
Financing Activities:
Net repayments of long-term debt (3) (72)
Net issuances of treasury stock 11 3
Dividend payments, net of tax benefit (74) (62)
(66) (131)
Increase in Cash and Cash Equivalents $ 61 $ 63
Cash paid during the period:
Interest $ 55 $ 57
Income Taxes 133 116
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 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. The LIFO provision
for the first quarter was $8 million in 1995 and 1994.
Reclassifications. Certain prior period amounts have been
reclassified to conform with current year presentation.
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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:
April 29, April 30, Jan. 28,
1995 1994 1995
Current Ratio 2.6 2.6 2.6
Debt-Capitalization Ratio 44% 44% 44%
Fixed Charge Coverage* 3.4x 3.3x 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, 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 stock.
Registrant's fixed charge coverage ratio for the 52 weeks ended
April 29, 1995 increased as compared with the 52 week period ended
April 30, 1994, due to an increased level of earnings, partially
offset by an increase in fixed charges, primarily rent expense.
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 (decreases) by business segment are as follows:
Store-for-
Total Store
Department stores 5.9% 2.4%
Payless ShoeSource 10.2 (4.6)
Total Net Retail Sales 6.8% 1.0%
Store-for-store sales represent sales of those stores open during
both periods.
The following table presents the components of costs and expenses,
as a percent of revenues, for the first quarter of 1995 and 1994.
1995 1994
Cost of sales 69.8% 69.4%
Selling, general and
administrative expenses 21.3 21.2
Interest expense, net 2.1 2.2
Earnings before income taxes 6.8% 7.2%
Effective income tax rate 40.5% 40.5%
Net Earnings 4.1% 4.3%
6
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Cost of sales was $1,946 million in the 1995 first quarter, up 6.9%
from $1,820 million in the 1994 first quarter. The overall
increase is primarily related to higher sales volume. As a percent
of revenues, cost of sales increased 0.4% from the first quarter of
1994 due to higher occupancy expenses. LIFO was a charge of $8
million in the first quarter of 1995 and 1994. There were no
significant changes in the other components of cost of sales.
Selling, general and administrative expenses were $592 million in
the 1995 first quarter, compared with $555 million in the 1994
first quarter, a 6.7% increase. The increase is primarily related
to higher sales volume. Selling, general and administrative
expenses, as a percent of revenues, increased 0.1% for the first
quarter of 1995 as compared with 1994.
Net interest expense for the first quarter 1995 and 1994 was as
follows (millions):
1995 1994
Interest expense $ 65 $ 62
Interest income (3) (1)
Capitalized interest (4) (2)
Net Interest Expense $ 58 $ 59
Interest expense net of capitalized interest increased in the 1995
first quarter due to increased debt balances. The increase in
first quarter 1995 interest income primarily resulted from higher
short term interest rates. As a percent of revenues, net interest
expense for the first quarter of 1995 decreased 0.1% from the first
quarter of 1994.
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
April 29, April 30,
1995 1994
Net retail sales $ 12,046 $ 11,245
Revenues $ 12,388 $ 11,729
Net earnings $ 784 $ 727
Fully diluted earnings per share $ 2.93 $ 2.71
7
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
registrant or any of its subsidiaries is a 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
On June 9, 1995, Registrant signed an underwriting agreement with
Morgan Stanley & Co. Incorporated and Merrill Lynch & Co. to
sell $100,000,000 principal amount of 7.50% Debentures due 2015
and $100,000,000 principal amount of 7.60% Debentures due 2025
("the Debentures"). The Registrant expects the sale of the
Debentures to be completed June 14, 1995. The Registrant intends
to use the net proceeds from the sale of the Debentures for
capital expenditures, working capital needs and other general
corporate purposes, including investments and acquisitions.
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 April 19, 1995, which contained information
concerning debt ratings and incorporated by reference
registrant's Annual Report on Form 10-K for the fiscal year
ended January 28, 1995.
8
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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: June 9, 1995 /s/ Jerome T. Loeb
Jerome T. Loeb
President and
Chief Financial Officer
9
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<CAPTION>
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Exhibit 11
THE MAY DEPARTMENT STORES COMPANY
COMPUTATION OF NET EARNINGS PER SHARE
13 Weeks Ended
April 29, April 30,
1995 1994
(millions, except per share)
<S> <C> <C>
Net earnings $ 114 $ 112
ESOP Preferred Dividends, net of tax
benefit on unallocated shares (5) (5)
Dividend requirements on redeemable
preferred stock - -
Net earnings available for
common shareowners $ 109 $ 107
Average common shares outstanding 248.5 248.5
Net earnings per share $ 0.44 $ 0.43
Primary Computation
Net earnings available for
common shareowners $ 109 $ 107
Net earnings adjustment for
dividend equivalents - -
Adjusted net earnings $ 109 $ 107
Average common shares outstanding 248.5 248.5
Common share equivalents under stock
option and deferred compensation plans,
based upon the treasury stock method .9 1.5
Average common and common equivalent shares 249.4 250.0
Primary earnings per share $ 0.44 $ 0.43
Fully Diluted Computation
Adjusted net earnings $ 109 $ 107
Impact of assumed conversion of
ESOP Preference Shares 3 2
Adjusted net earnings $ 112 $ 109
Average common and common equivalent shares 249.4 250.0
Additional common stock equivalents
attributable to application of the
treasury stock method - -
Assumed conversion of ESOP
Preference Shares 15.1 15.3
Average common and common equivalent shares,
assuming full dilution 264.5 265.3
Fully diluted earnings per share $ 0.42 $ 0.41
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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
THIRTEEN WEEKS ENDED APRIL 29, 1995, AND APRIL 30, 1994
13 Weeks Ended Fiscal Year Ended
April 29, April 30, 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 $ 191 $ 188 $ 1,296 $ 1,178 $ 791 $ 796 $ 762
Fixed charges (excluding interest
capitalized and pretax preferred
stock dividend requirements) 97 93 377 381 432 474 421
Dividends on ESOP Preference Shares (7) (7) (28) (29) (29) (30) (30)
Capitalized interest amortization 1 1 4 4 3 3 3
282 275 1,649 1,534 1,197 1,243 1,156
Fixed Charges:
Gross interest expense (a) $ 74 $ 71 $ 290 $ 297 $ 341 $ 388 $ 347
Interest factor attributable to
rent expense 27 24 102 94 94 92 83
Other (b) - - - - 4 8 5
101 95 392 391 439 488 435
Ratio of Earnings to Fixed Charges 2.8 2.9 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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED APRIL 29,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> APR-29-1995
<CASH> 15
<SECURITIES> 101
<RECEIVABLES> 2,209
<ALLOWANCES> 71
<INVENTORY> 2,455
<CURRENT-ASSETS> 4,913
<PP&E> 5,906
<DEPRECIATION> 2,015
<TOTAL-ASSETS> 9,496
<CURRENT-LIABILITIES> 1,881
<BONDS> 3,030
<COMMON> 124
3
0
<OTHER-SE> 4,063
<TOTAL-LIABILITY-AND-EQUITY> 9,496
<SALES> 2,697
<TOTAL-REVENUES> 2,787
<CGS> 1,946
<TOTAL-COSTS> 2,538
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 191
<INCOME-TAX> 77
<INCOME-CONTINUING> 114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114
<EPS-PRIMARY> .44
<EPS-DILUTED> .42
</TABLE>
