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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 October 31, 1998
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)
Delaware 43-1104396
(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 May (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.
223,615,619 shares of common stock, $0.50 par value, as of October
31, 1998.
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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)
Oct. 31, Nov. 1, Jan. 31,
ASSETS 1998 1997 1998
Current Assets:
Cash and cash equivalents $ 32 $ 23 $ 199
Accounts receivable, net 1,856 1,957 2,164
Merchandise inventories 3,300 3,102 2,433
Other current assets 99 135 82
Total Current Assets 5,287 5,217 4,878
Property and Equipment, at cost 7,125 6,720 6,787
Accumulated Depreciation (2,646) (2,495) (2,563)
Net Property and Equipment 4,479 4,225 4,224
Goodwill and other assets 1,054 839 828
Total Assets $ 10,820 $ 10,281 $ 9,930
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 451 $ 560 $ 233
Accounts payable 1,458 1,323 842
Accrued expenses 786 689 640
Income taxes 5 14 151
Total Current Liabilities 2,700 2,586 1,866
Long-term Debt 3,868 3,517 3,512
Deferred Income Taxes 471 425 449
Other Liabilities 290 273 277
ESOP Preference Shares 330 341 337
Unearned Compensation (302) (319) (320)
Shareowners' Equity 3,463 3,458 3,809
Total Liabilities and
Shareowners' Equity $ 10,820 $ 10,281 $ 9,930
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Millions, except per share) 13 Weeks Ended 39 Weeks Ended
Oct. 31, Nov. 1, Oct. 31, Nov. 1,
1998 1997 1998 1997
Net Retail Sales $ 3,020 $ 2,889 $ 8,570 $ 8,124
Revenues $ 3,089 $ 2,969 $ 8,795 $ 8,393
Cost of sales 2,180 2,097 6,182 5,899
Selling, general and
administrative expenses 625 599 1,796 1,713
Interest expense, net 69 74 201 226
Earnings before income taxes 215 199 616 555
Provision for income taxes 85 79 245 221
Net earnings before
extraordinary loss 130 120 371 334
Extraordinary loss related to
early extinguishment
of debt - - - (4)
Net Earnings $ 130 $ 120 $ 371 $ 330
Basic earnings per share:
Net earnings before
extraordinary loss .55 .50 1.55 1.37
Extraordinary loss - - - (.01)
Net Earnings $ .55 $ .50 $ 1.55 $ 1.36
Diluted earnings per share:
Net earnings before
extraordinary loss .52 .48 1.49 1.32
Extraordinary loss - - - (.01)
Net Earnings $ .52 $ .48 $ 1.49 $ 1.31
Dividends Paid per
Common Share $ .31-3/4 $ .30 $ .95-1/4 $ .90
Weighted average shares
outstanding:
Basic 227.8 231.3 230.1 232.7
Diluted 244.1 248.3 246.7 249.4
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
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THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions) 39 Weeks Ended
Oct. 31, Nov. 1,
1998 1997
Operating Activities:
Net earnings and depreciation/amortization $ 691 $ 634
Decrease in working capital (excluding
cash, cash equivalents and short-term
debt) 40 142
Other assets and liabilities, net 31 30
762 806
Investing Activities:
Net additions to property and equipment (557) (349)
Net additions to goodwill and other assets (248) -
(805) (349)
Financing Activities:
Net issuances of notes payable 381 327
Net issuances (repayments) of long-term debt 219 (334)
Net acquisitions of treasury stock (491) (305)
Dividend payments, net of tax benefit (233) (224)
(124) (536)
Increase (Decrease) in Cash and Cash
Equivalents $ (167) $ (79)
Cash paid during the period:
Interest $ 220 $ 240
Income Taxes 351 356
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
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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 Notes to Consolidated Financial
Statements (pages 21-27) in the 1997 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. Merchandise inventories are stated on the LIFO (last-
in, first-out) cost basis. The LIFO provision for the third
quarter was $4 million in 1998 and 1997. The year-to-date LIFO
provision was $20 million in 1998 and 1997.
Long-term Debt. During the third quarter of 1998, May issued a
total of $350 million in new debt: $200 million of 6.70% debentures
due September 15, 2028, and $150 million of 5.95% notes due
November 1, 2008. The net proceeds from the issuances were
primarily used for repayment of a portion of May's short-term
indebtedness, store acquisitions and stock repurchases.
Acquisition. In September 1998, May completed the purchase of 11
former Mercantile stores from Dillard's. The transaction, which
was accounted for as a purchase, did not have a material impact on
May's financial statements.
Common Stock Repurchase Program. In August 1998, May reduced its
$650 million common stock repurchase program, announced in February
1998, to $500 million. The company completed the repurchase during
the third quarter, totalling 8.4 million shares at an average price
of $60 per share.
Extraordinary Item. During the first quarter of 1997, May recorded
an extraordinary aftertax loss of $4 million ($5 million pretax),
or $.01 per share, as it retired $100 million of 9.875% debentures
due to mature June 1, 2017.
Summarized Financial Information - The May Department Stores
Company, New York. Summarized financial information of The May
Department Stores Company, New York, is set forth below (millions).
October 31, January 31,
1998 1998
Financial Position
Current assets $ 5,287 $ 4,878
Noncurrent assets 6,135 5,048
Current liabilities 2,723 1,894
Noncurrent liabilities 7,828 7,437
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October 31, 1998 November 1, 1997
13 Weeks 39 Weeks 13 Weeks 39 Weeks
Ended Ended Ended Ended
Operating Results
Revenues $ 3,089 $ 8,795 $ 2,969 $ 8,393
Cost of sales 2,180 6,182 2,097 5,899
Net earnings before
extraordinary loss 83 230 74 193
Net earnings 83 230 74 189
Earnings per Share. The following tables reconcile net earnings
and weighted average shares outstanding to amounts used to
calculate basic and diluted earnings per share ("EPS") for the
periods shown (millions, except per share).
<TABLE>
<CAPTION>
13 Weeks Ended
October 31, 1998 November 1, 1997
Earnings Shares EPS Earnings Shares EPS
<S> <C> <C> <C> <C> <C> <C>
Net earnings $ 130 $ 120
ESOP preference
shares' dividends (5) (5)
Basic EPS 125 227.8 $ 0.55 115 231.3 $ 0.50
ESOP preference
shares 4 14.7 4 15.2
Assumed exercise of
options (treasury
stock method) - 1.6 - 1.8
Diluted EPS $ 129 244.1 $ 0.52 $ 119 248.3 $ 0.48
39 Weeks Ended
October 31, 1998 November 1, 1997
Earnings Shares EPS Earnings Shares EPS
Net earnings $ 371 $ 334
ESOP preference
shares' dividends (14) (14)
Basic EPS 357 230.1 $ 1.55 320 232.7 $ 1.37
ESOP preference
shares 11 14.8 11 15.3
Assumed exercise of
options (treasury
stock method) - 1.8 - 1.4
Diluted EPS $ 368 246.7 $ 1.49 $ 331 249.4 $ 1.32
</TABLE>
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
Key financial ratios for the periods indicated are as follows:
Oct. 31, Nov. 1, Jan. 31,
1998 1997 1998
Current Ratio 2.0 2.0 2.6
Debt-Capitalization Ratio 50% 49 44%
Fixed Charge Coverage* 4.4x 3.9x 4.1x
* Fixed charge coverage, which is presented for the trailing 52
weeks ended October 31, 1998, January 31, 1998, and November 1,
1997, 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, and total rent expense.
May's October 31, 1998 current ratio, which was the same as
November 1, 1997, decreased compared with year-end 1997 due mainly
to seasonal working capital changes.
The October 31, 1998 debt-capitalization ratio increased from
January 31, 1998 due to seasonal borrowings to finance working
capital needs; net increases in long-term debt used to finance
capital expenditures, store acquisitions and common stock
repurchases; and a decrease in shareowners' equity resulting from
the $500 million common stock repurchase program.
May's fixed charge coverage ratio for the 52 weeks ended October
31, 1998 increased as compared with the 52 week periods ended
November 1, 1997 and January 31, 1998 due primarily to decreased
net interest expense. The decrease in net interest expense for the
52 weeks ended October 31, 1998 was a result of lower average debt
balances and higher cash equivalent balances.
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 are as follows:
Third Quarter First Nine Months
Store-for- Store-for-
Total Store Total Store
4.5% 2.2% 5.5% 3.6%
Store-for-store sales represent sales of those stores open during
both periods.
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The following table presents the components of costs and expenses,
as a percent of revenues. Revenues include finance charge revenues
and all sales from all stores operating during the period.
Third Quarter First Nine Months
1998 1997 1998 1997
Cost of sales 70.6% 70.6% 70.3% 70.3%
Selling, general and
administrative expenses 20.2 20.2 20.4 20.4
Interest expense, net 2.3 2.5 2.3 2.7
Earnings before income taxes 6.9 6.7 7.0 6.6
Provision for income taxes 39.6* 39.6* 39.9* 39.9*
Net Earnings 4.2% 4.0% 4.2% 4.0%
* - Percent represents effective income tax rate.
Cost of sales was $2,180 million in the 1998 third quarter, up 4.0%
from $2,097 million in the 1997 third quarter. For the first nine
months of 1998, cost of sales was $6,182 million, a 4.8% increase
from $5,899 million in the 1997 period. The overall increases are
primarily related to higher sales. As a percent of revenues, cost
of sales remained constant in comparison to both the third quarter
and first nine months of 1997. A small deterioration in gross
margin, resulting from the impact of a decrease in the finance
charge component of revenues, was offset by an improvement in
buying and occupancy expenses. The finance charge component of
revenues decreased 7.9% for the third quarter and 7.8% for the
first nine months with no corresponding decrease in cost of sales.
For the third quarter and first nine months of each year, the LIFO
charge was $4 million and $20 million, respectively.
Selling, general and administrative expenses were $625 million in
the 1998 third quarter, compared with $599 million in the 1997
third quarter, a 4.4% increase. For the first nine months of 1998,
selling, general and administrative expenses were $1,796 million
compared with $1,713 million in the 1997 period, a 4.9% increase.
The increases are primarily related to higher sales. Selling,
general and administrative expenses, as a percent of revenues,
remained constant for both the third quarter and first nine months
of 1998 as compared with 1997. A decrease in bad debt expense
related to lower delinquency and charge-off rates combined with
decreased use of May's proprietary credit cards was offset by
increases in advertising expense and retirement and profit sharing
expense.
Net interest expense for the third quarter and first nine months of
1998 and 1997 was as follows (millions):
Third Quarter First Nine Months
1998 1997 1998 1997
Interest expense $ 79 $ 79 $ 228 $ 244
Interest income (5) (2) (16) (8)
Capitalized interest (5) (3) (11) (10)
Net Interest Expense $ 69 $ 74 $ 201 $ 226
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Net interest expense decreased in the 1998 third quarter and first
nine months due to decreased average debt balances and increased
average cash equivalent balances. As a percent of revenues, net
interest expense decreased 0.2% for the third quarter and 0.4% for
the first nine months.
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
Oct. 31, Nov. 1,
1998 1997
Net retail sales $ 12,776 $ 12,093
Revenues $ 13,087 $ 12,494
Net earnings $ 816 $ 757
Diluted earnings per share $ 3.28 $ 2.93
Year 2000 Readiness
In 1996, May began preparing its information systems,
communications networks, equipment and facilities for the year
2000. As of the end of the third quarter of 1998, May completed
its assessment of all critical information systems, communication
networks, equipment and facilities and substantially completed the
coding, testing and installation of necessary modifications. May
will test certain interfaces with some merchandise and service
vendors for year 2000 compliance through the spring of 1999.
Since May is substantially complete with its modifications, May
does not expect any material disruption of business. Through
participation in a National Retail Federation sponsored survey and
other means, May is receiving assurances from its primary
merchandise vendors and service providers regarding their year 2000
readiness.
May developed, and maintains, most of its application systems
internally. Over the past twelve months May utilized approximately
15% of it's information systems resources to address companywide
year 2000 issues. May's use of outside consultants and
contractors to address year 2000 compliance has not been
significant. Through the third quarter of 1998, the cumulative
cost of May's year 2000 effort approximates $6 million, which May
expensed as incurred.
Under the most reasonably likely worst case scenario, May does not
anticipate more than isolated, temporary disruptions of its
operations caused by year 2000 failures affecting either the
company or its primary merchandise and service vendors. May
expects that its technically trained personnel, working in
cooperation with key vendors and service providers, should be able
to address year 2000 system issues that may arise. To the extent
May's vendors are unable to deliver products and provide services
due to their own year 2000 issues, May believes it will generally
have alternative sources for comparable products and services and
does not expect to experience any material business disruptions.
Many risks, however, such as the failure to perform by public
utilities, telecommunications providers, and financial institutions
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and the impact of the year 2000 issue on the economy as a whole,
are outside May's control and could adversely affect the company
and the conduct of its business. While May has made a significant
effort to address all anticipated risks within its control, this is
an event without precedent, consequently, there can be no assurance
that the year 2000 issue will not have a material adverse impact on
May's financial condition, operating results or business.
Forward-Looking Statements
The discussion of the year 2000 issue included in Management's
Discussion and Analysis of Financial Condition and Results of
Operations contains "forward-looking" statements as defined in the
Private Securities Litigation Reform Act of 1995. While such
statements reflect all available information and management's
judgement and estimates of current and anticipated conditions and
circumstances, prepared with the assistance of specialists, within
and outside the company, many factors outside of May's control
exist that impact its operations. Such factors include, but are
not limited to, possible widespread inability to perform by
merchandise vendors, public utilities, telecommunications
providers, and financial institutions and the general economic
impact of the year 2000 issue. Because of these outside influences
that cannot be controlled by the company's management, actual
performance could differ materially from that described in the
forward-looking statements.
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
May 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 - None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(3) - By-laws of May, as amended
(12) - Computation of Ratio of Earnings to Fixed Charges
(27) - Financial Data Schedule
(b) Reports on Form 8-K
A report dated September 22, 1998 (Date of earliest event
reported - September 3, 1998) which contained a press
release announcing May's August 1998 and year-to-date sales
results.
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A report dated September 29, 1998 (Date of earliest event
reported - September 28, 1998) which contained a copy of the
Underwriting Agreement, dated September 22, 1998, among May,
The May Department Stores Company - New York, Morgan Stanley
& Co. Incorporated, NationsBanc Montgomery Securities LLC
and Salomon Smith Barney Inc.; and a specimen of a global
certificate for the 6.70% debentures due September 15, 2028.
A report dated October 28, 1998 (Date of earliest event
reported - October 8, 1998) which contained a press release
announcing May's September 1998 and year-to-date sales
results.
A report dated October 30, 1998 which contained a copy of
the Underwriting Agreement, dated October 27, 1998 among
May, The May Department Stores Company - New York, Morgan
Stanley & Co. Incorporated, Chase Securities Inc., and
Salomon Smith Barney Inc.; and a specimen of a global
certificate for the 5.95% notes due November 1, 2008.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, May 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 8, 1998
\s\ John L. Dunham
John L. Dunham
Executive Vice President and
Chief Financial Officer
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BY-LAWS
OF
THE MAY DEPARTMENT STORES COMPANY
(a Delaware Corporation)
(as amended through November 20, 1998)
------------------
ARTICLE I.
MEETINGS OF SHAREOWNERS
Section 1. The annual meeting of shareowners shall be held
on such date (not more than thirteen months after the most recent
annual meeting) and at such place and time as may be fixed by the
board and stated in the notice thereof, for the purpose of the
election of directors and for the transaction of only such other
business as is properly brought before the meeting in accordance
with these By-laws. The annual meeting may be adjourned from day
to day until its business is completed.
Section 2. Written notice of the date, time and place of
each annual meeting of the shareowners shall be mailed not less
than ten nor more than sixty days previous to the date of such
meeting, postage prepaid, to each shareowner of record in the
Company entitled to vote thereat, at such address as shall appear
on the books of the Company.
Section 3. The business transacted at any special meeting
of shareowners shall be confined to the object or objects specified
in the notice therefor, and matters germane thereto.
Section 4. Written notice of every special meeting of
shareowners stating the date, time, place and object thereof, shall
be mailed, postage prepaid, not less than ten nor more than sixty
days before the date specified for such meeting to each shareowner
of record in the Company entitled to vote thereat, at such address
as shall appear on the books of the Company.
Section 5. Except as otherwise provided in the Certificate
of Incorporation, and subject to the provisions and limitations
therein contained, at all meetings of shareowners each shareowner
of record shall be entitled to cast one vote for each share
appearing on the stock book of the Company as standing in his name,
which vote may be cast either in person or by proxy, or power of
attorney, but no proxy shall be voted on after three years from its
date.
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Section 6. Each shareowner entitled to vote at a meeting
of shareowners or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or
persons to act for such shareowner by proxy by any means authorized
by the board and lawful under the Delaware General Corporation Law.
Section 7. No shareowner who is in default in the payment
of any part of his subscription for any stock of the Company or who
is disqualified by law, shall be entitled to vote at any meeting of
shareowners.
Section 8. Every pledgor of stock standing in his name on
the books of the Company shall be deemed the owner thereof.
Section 9. Except as otherwise provided by law, the
Certificate of Incorporation or these By-laws, the owners of not
less than a majority of the shares issued and outstanding, entitled
to vote thereat, present in person or by proxy or power of
attorney, are requisite for and shall constitute a quorum at all
meetings of shareowners for the transaction of business, including
the election of directors. The owners of a majority of the shares
present in person or by proxy or power of attorney at any meeting,
whether or not constituting a quorum, shall have power to adjourn
the meeting from time to time (provided that each adjournment shall
be for a period not exceeding twenty days), without notice other
than announcement at the meeting, and at any adjourned meeting, any
business may be transacted which might have been transacted at the
meeting as originally notified.
Section 10. The board of directors, in advance of the
meeting of shareowners, shall appoint not less than two persons who
are not directors to serve as inspectors of election. It shall be
their duty to receive and canvass the votes for election of
directors and on any proposal voted on by ballot and to certify the
results to the chairman. In all cases where the right to vote upon
any share of the Company shall be questioned, it shall be the duty
of the inspectors to examine the stock ledger of the Company as
evidence of the shares held, and all shares that appear standing
thereon in the name of any person or persons may be voted upon by
such person or persons. Each inspector of election before entering
upon the duties of such office shall take and subscribe the
following oath before an officer authorized by law to administer
oaths: "I do solemnly swear that I will execute the duties of an
inspector of the election now to be held with strict impartiality
and according to the best of my ability."
Section 11. To be properly brought before the annual or any
special shareowners' meeting, business must be either (a) specified
in the notice of meeting (or any supplement thereto) given by or at
the direction of the board, (b) otherwise properly brought before
the meeting by or at the direction of the board or (c) otherwise
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properly brought before the meeting by a shareowner. In addition
to any other applicable requirements, for business to be properly
brought before the annual or any special shareowners' meeting by a
shareowner, the shareowner must have given timely notice thereof in
writing to the secretary of the Company. To be timely, a
shareowner's notice must be delivered to or mailed and received at
the principal executive offices of the Company not less than 90
days nor more than 105 days prior to the anniversary date of the
immediately preceding annual meeting of shareowners; provided,
however, that in the event that the annual or special meeting is
called for a date that is not within thirty days before or after
such anniversary date, notice by the shareowner to be timely must
be so received not later than the close of business on the 15th day
following the first day on which notice or public disclosure of the
date of the meeting is given or made to shareowners. Public
disclosure shall include, but not be limited to, disclosure in a
filing with the Securities and Exchange Commission or similar
governmental agency. Such shareowner's notice to the secretary
shall set forth as to each matter the shareowner proposes to bring
before the meeting (i) a brief description of the business desired
to be brought before the meeting and the reasons for conducting
such business at the meeting, (ii) the name and record address of
the shareowner proposing such business, (iii) the class and number
of shares of common stock of the Company which are beneficially
owned by the shareowner and (iv) any material interest of the
shareowner in such business.
Notwithstanding anything in the By-laws to the contrary, no
business shall be conducted at the annual or any special meeting
except in accordance with the procedures set forth in this Section
11, provided, however, that nothing in this Section 11 shall be
deemed to preclude discussion by any shareowner of any business
properly brought before the meeting.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of
this Section 11, and if he should so determine and declare, any
such business not properly brought before the meeting shall not be
transacted.
Section 12. Except as provided in Section 1 of Article II,
only persons who are nominated in accordance with the following
procedures shall be eligible for election as directors.
Nominations of persons for election to the board of directors of
the Company at the annual meeting may be made at that meeting by or
at the direction of the board of directors, by any nominating
committee or person appointed by the board of directors or by any
shareowner of the Company entitled to vote for the election of
directors at the meeting who complies with the notice procedures
set forth in this Section 12. Such nominations, other than those
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made by or at the direction of the board of directors, shall be
made pursuant to timely notice in writing to the secretary of the
Company. To be timely, a shareowner's notice must be delivered to
or mailed and received at the principal executive offices of the
Company not less than 90 days nor more than 105 days prior to the
anniversary date of the immediately preceding annual meeting of
shareowners; provided, however, that in the event that the annual
meeting is called for a date that is not within thirty days before
or after such anniversary date, notice by the shareowner to be
timely must be so received not later than the close of business on
the 15th day following the first day on which notice or public
disclosure of the date of the meeting is given or made to
shareowners. Public disclosure shall include, but not be limited
to, disclosure in a filing with the Securities and Exchange
Commission or similar governmental agency. Such shareowner's
notice to the secretary shall set forth (a) as to each person whom
the shareowner proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment
of the person, (iii) the class and number of shares of common stock
of the Company which are beneficially owned by the person, and (iv)
any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended; and (b) as to the shareowner giving the notice (i) the
name and record address of the shareowner and (ii) the class and
number of shares of common stock of the Company which are
beneficially owned by the shareowner. Such notice shall be
accompanied by the executed consent of each nominee to serve as a
director if so elected. The Company may require any proposed
nominee to furnish such other information as may reasonably be
required by the Company to determine the eligibility of such
proposed nominee to serve as a director of the Company.
The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made
in accordance with the foregoing procedure, and if he should so
determine and declare, the defective nomination shall be
disregarded.
ARTICLE II.
THE BOARD OF DIRECTORS
Section 1. The business and affairs of the Company shall
be managed and conducted by or under the direction of a board of
sixteen directors.
Newly created directorships resulting from an increase in the
number of directors and vacancies occurring in the board of
directors for any reason may be filled by vote of a majority of the
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directors then in office, although less than a quorum or by the
sole remaining director. A director elected to fill a newly
created directorship, and a director elected to fill a vacancy,
shall hold office for the remainder of the term of the Class to
which such director was elected and until his successor shall be
chosen and qualified in his stead.
Section 2. The directors shall prescribe rules and
regulations for voting at all elections and shall cause the result
of each such election to be filed with the minutes of the
proceedings of the board of directors, or of any committee of the
board of directors appointed in accordance with Section 12 of this
Article II.
Section 3. The board of directors at its first meeting
after each annual meeting of shareowners, or at any subsequent
meeting at which such action may be appropriate, shall elect a
chairman of the executive committee, a chairman of the board, a
president, a vice chairman of the board, one or more vice
presidents, a secretary, a controller, and a treasurer, and such
other officers as it may determine. The board of directors shall
by resolution provide for the authority and duties of any and all
such officers in the management of the Company to the extent not so
provided in these By-laws.
The dates of the commencement and expiration of the term of
office of any such officer may be fixed by the board of directors
at the time of his election; but unless so fixed, such officer
shall hold office from the date of his election until the first
meeting of the board of directors following the next ensuing annual
meeting of shareowners, or until his successor is elected.
The chairman of the executive committee, the chairman of the
board, the president and the vice chairman of the board shall be
members of the board of directors. No other officers need be
members of the board of directors.
Any two offices, except the offices of president and
secretary, may be held by the same person.
Section 4. If for any reason the election of officers
shall not be held on or as of the date fixed therefor, the board of
directors shall designate another day for such election.
Section 5. The board of directors may also appoint such
additional officers and agents, including additional vice
presidents, one or more assistant treasurers, one or more assistant
secretaries and one or more assistant controllers, as it may from
time to time deem advisable, and may remove any of the persons so
appointed at its pleasure, and may, in its discretion, contract for
a definite period of employment for any officer or agent upon such
5
<PAGE>
terms as it may deem advisable. The board of directors may by
resolution provide for the powers and duties of any and all such
additional officers and agents so appointed.
Section 6. Except as may be otherwise specifically
provided by law, the Certificate of Incorporation or these By-laws,
at all meetings of the board of directors, a majority of the entire
board of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the board of
directors. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present.
All matters coming before the board of directors shall, except
as otherwise provided by the General Corporation Law of the State
of Delaware ("GCL") or by these By-laws, be determined by a
majority vote of the members present, provided that a quorum shall
be present.
Any one or more members of the board of directors or of any
committee thereof may participate in any meeting of such board or
of such committee thereof by means of a conference telephone or
similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at any such
meeting.
Section 7. The directors may hold their meetings and cause
the books of the Company (except the Stock and Transfer Books) to
be kept within or without the State of Delaware, at such place or
places as they may from time to time determine.
Section 8. Subject to Section 15 of this Article II, there
shall be an annual meeting of the board of directors on the day of
the annual meeting of shareowners in each year or as soon
thereafter as convenient, such annual meeting to be at such place
and time (and, if applicable, on such date) as the chairman of the
board shall designate by written notice to the directors, and
regular meetings shall be held on such dates and at such times and
places either as the directors shall by resolution provide or as
the chairman of the board shall designate by written notice to the
directors. Except as above provided, no notice of said annual
meeting or such regular meetings of the board of directors need be
given.
Section 9. Special meetings of the board of directors may
be called by the chairman of the executive committee, the chairman
of the board, the president, the vice chairman of the board, or the
secretary or the treasurer. Notice thereof stating the place, date
6
<PAGE>
and hour of the meeting shall be given to each director either by
mail not less than forty-eight (48) hours before the date of the
meeting, by telephone or facsimile transmission not later than the
day preceding the date of such meeting, or on such shorter notice
as the person or persons calling such meeting may deem necessary or
appropriate in the circumstance. Special meetings shall be called
by one of the foregoing officers in like manner on the written
request of five directors, specifying the object or objects of such
special meeting. In the event that one of the foregoing officers
shall fail to call a meeting within two days after receipt of such
request, such meeting may be called in like manner by the directors
making such request.
Section 10. If any vacancy shall occur in the board of
directors by reason of death, removal, resignation or otherwise,
such vacancy may be filled by the vote of a majority of the
remaining directors then in office, although less than a quorum, or
by a sole remaining director.
Section 11. Any director may resign his office at any time,
such resignation to be made in writing and delivered to the
chairman of the executive committee, the chairman of the board, the
president, the vice chairman of the board, or the secretary.
Section 12. The board of directors shall appoint an
executive committee, which shall consist of one or more directors
and may from time to time designate the number of such executive
committee members that shall constitute a quorum and may provide
for the holding of regular meetings thereof. In the absence of any
such designation, a majority of the members of the executive
committee shall constitute a quorum. To the extent permitted by
law (including, without limitation, Section 141(c)(2) of the GCL)
and by the Certificate of Incorporation, the executive committee
shall have and may exercise all the powers vested in the board of
directors during the intervals between the meetings of the board of
directors. The affirmative vote of a majority of those present at
a meeting of the executive committee, at which a quorum is present,
shall be necessary for the adoption of any resolution. The
executive committee shall, whenever called upon, report to the
board of directors and be subject to its direction, and the board
of directors may remove members and appoint new members thereof to
fill vacancies therein, and may increase or decrease the membership
thereof. Meetings of the executive committee shall be called by
the chairman of the executive committee or, upon the request of not
less than two members, by the secretary by notice deposited in the
mail, sent by telegram or delivered by hand not less than two days
prior to the date of such meeting. Waiver of notice by any member
of the executive committee, whether before or after the meeting to
which such waiver relates, shall be equivalent to notice.
The board of directors may appoint such other committees, each
consisting of one or more directors, as the board of directors may
7
<PAGE>
at any time and from time to time deem appropriate; subject to the
limitations contained in Section 141(c)(2) of the GCL, the board of
directors from time to time may by resolution prescribe for each
such committee such duties, powers and authority as the board of
directors shall deem appropriate.
Section 13. In addition to the powers by these By-laws
expressly conferred upon them, the board of directors may exercise
such powers and do such lawful acts and things as are not
prohibited by law or required by the Certificate of Incorporation
or by these By-laws to be exercised and done by the shareowners.
Section 14. Directors as such may be paid such compensation
as the board of directors may from time to time determine. Nothing
herein contained shall be construed to preclude any director from
serving the Company in any other capacity and receiving
compensation therefor.
Section 15. Anything in this Article II to the contrary
notwithstanding, any action required or permitted to be taken by
the board of directors at any regular, annual or special meeting
thereof, or by any committee thereof, may be taken without a
meeting if all members of the board of directors or such committee
consent in writing to the adoption of a resolution authorizing the
action. The resolution and the written consents thereto by the
members of the board of directors or such committee shall be filed
with the minutes of the proceedings of the board of directors or
such committee.
Section 16. No contract or transaction between the Company
and one or more of its directors or officers, or between the
Company and any other corporation, partnership, association, or
other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the
meeting of the board of directors or committee thereof which
authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose if (i) the material facts
as to his or their relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors
or the committee, and the board of directors or committee in good
faith authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material
facts as to his or their relationship or interest and as to the
contract or transaction are disclosed or are known to the
shareowners entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
shareowners; or (iii) the contract or transaction is fair as to the
Company as of the time it is authorized, approved or ratified, by
8
<PAGE>
the board of directors, a committee thereof or the shareowners.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of
a committee which authorizes the contract or transaction.
ARTICLE III.
ELECTED OFFICERS
The elected officers of the Company shall be the chairman of
the executive committee, the chairman of the board, the president,
the vice chairman of the board, the secretary, the treasurer, the
controller, and such other officers of the Company as shall be
elected by the board of directors.
ARTICLE IV.
AUTHORITY AND DUTIES OF OFFICERS
Each officer of the Company shall be subject to the control of
the board of directors and shall have such duties in the management
of the Company as may be provided by appropriate resolution of the
board of directors and/or provided in these By-laws.
ARTICLE V.
DUTIES OF OFFICERS MAY BE DELEGATED
In the case of the absence of any officer of the Company, or
for any other reason that the board of directors may deem
sufficient, the board of directors may delegate the powers or
duties of such officer to any other officer or to any other
director, or to any other person for the time being.
ARTICLE VI.
INDEMNIFICATION
Section 1. The Company shall indemnify to the fullest
extent authorized or permitted by law (as now or hereafter in
effect) any person made, or threatened to be made a party to or
otherwise involved in any action or proceeding (whether civil or
criminal or otherwise) by reason of the fact that he, his testator
or intestate, is or was a director or officer of the Company or by
reason of the fact that such director or officer, at the request of
the Company, is or was serving any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, in
any capacity. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and
officers may be entitled by law. No amendment or repeal of this
9
<PAGE>
Section 1 shall apply to or have any effect on any right to
indemnification provided hereunder with respect to any acts or
omissions occurring prior to such amendment or repeal.
Section 2. The Company may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee
or agent of the Company or was serving at the request of the
Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Company would have the power to
indemnify him against such liability under the provisions of the
law. The Company may create a trust fund, grant a security
interest and/or use other means (including, without limitation,
letters of credit, surety bonds and/or other similar arrangements),
as well as enter into contracts providing for indemnification to
the fullest extent authorized or permitted by law and including as
part thereof any or all of the foregoing, to ensure the payment of
such sums as may become necessary to effect full indemnification.
Section 3. The rights to indemnification conferred in this
Article VI shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, the
Certificate of Incorporation of the Company, these By-laws or any
agreement, vote of stockholders or directors or otherwise.
ARTICLE VII.
POWER OF OFFICERS TO CONTRACT, ETC.
Section 1. All contracts and agreements, purporting to be
the act of this Company shall be signed by such officer(s) of the
Company or other person(s) as may be designated by resolution of
the board of directors, in order that the same shall be binding
upon the Company.
Section 2. The board of directors may, from time to time,
authorize any officer or officers of the Company, or any other
person or persons, to sign, countersign and endorse bills of
exchange, checks, notes, leases, deeds and other instruments,
agreements and documents in behalf of the Company.
ARTICLE VIII.
ORDER OF BUSINESS
Section 1. The order of business at all meetings of the
shareowners shall be as follows:
1. The election of directors.
10
<PAGE>
2. Other matters to be acted upon.
3. The reports of officers.
4. Election of inspectors of election.
The order of business at any meeting may be changed by a vote
of the owners of a majority of the shares represented at such
meeting.
Section 2. The order of business at meetings of the board
of directors shall be as the directors may determine.
ARTICLE IX.
SHARES OF STOCK
Section 1. The interest of each shareowner shall be
evidenced by a certificate or certificates for shares of stock of
the Company in such form as the board of directors may from time to
time prescribe. The certificates of stock shall be signed by the
chairman of the executive committee, the chairman of the board, the
president, the vice chairman of the board, or a vice president and
the treasurer or an assistant treasurer or the secretary or an
assistant secretary and sealed with the seal of the Company, and
shall be countersigned and registered in such manner, if any, as
the board of directors may by resolution prescribe; provided that,
in case such certificates are required by such resolution to be
signed by a transfer agent or transfer clerk and by a registrar,
the signatures of the above designated officers and the seal of the
Company upon such certificates may be facsimiles, engraved or
printed. In case any such officer who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such before such certificate is issued, it may be
issued with the same effect as if such officer had not ceased to be
such at the date of its issue.
Section 2. Shares of stock of the Company shall be
transferred only on the books of the Company, by the holder thereof
in person or by his attorney, upon surrender for cancellation of
certificates for the same number of shares, with an assignment and
power of transfer endorsed thereon or attached thereto, duly
executed, with such proof of the authenticity of the signature as
the Company or its agents may reasonably require.
Section 3. The board of directors may direct a new
certificate or certificates of stock to be issued in the place of
any certificate or certificates theretofore issued and alleged to
have been lost, stolen or destroyed; but the board of directors,
when authorizing the issue of such new certificate or certificates,
may in its discretion require the owner of the stock represented by
11
<PAGE>
the certificate so lost, stolen or destroyed, or his legal
representatives, to execute and deliver to the Company a bond with
one or more sureties, in such sum as it may direct, indemnifying
the Company and its agents against any claim that may be made
against it by reason of the issue of such new certificate. The
board of directors, however, may refuse to authorize any such new
certificate except upon the order of a court having jurisdiction in
such matter.
Section 4. The board of directors may from time to time
appoint such transfer agents and registrars of shares as it may
deem advisable and may define their powers and duties.
ARTICLE X.
DIVIDENDS
Subject to the limitations and provisions set forth in the
Certificate of Incorporation of the Company, dividends on the stock
of the Company shall be paid at such times and in such amounts as
the board of directors shall, from time to time, determine.
ARTICLE XI.
CORPORATE SEAL
The corporate seal shall consist of the words "THE MAY
DEPARTMENT STORES COMPANY" arranged in a circular around the words
and figures "Corporate Seal -- Delaware" and shall be kept by the
secretary in the office of the Company. The impression of the seal
may be made and attested upon contracts, certificates of stock and
other papers requiring the seal of the Company, when authorized by
resolution of the board of directors, by the secretary, or by an
assistant secretary or by any other officer of the Company, and the
board of directors may authorize the use of a duplicate corporate
seal by any assistant secretary or other officer of the Company.
ARTICLE XII.
FISCAL YEAR
The fiscal year of the Company shall end on the Saturday
closest to the 31st day of January in each year.
12
<PAGE>
ARTICLE XIII.
AMENDMENTS
In furtherance and not in limitation of the powers conferred
by statute, the board of directors, by vote of two-thirds of the
entire board of directors of the Company, is expressly authorized
to adopt, repeal, alter, amend or rescind the foregoing By-laws at
any meeting of the board of directors, provided that the substance
of the proposed amendment or addition or the subject matter thereof
shall have been submitted in writing at a preceding meeting of the
board of directors or notice thereof shall have been given to the
directors; waiver of notice by any director being deemed equivalent
to such notice to him.
The By-laws may also be amended at any general or special
meeting ofshareowners, provided notice of the proposed amendment
shall have been given in the call for such meeting.
ARTICLE XIV.
WAIVER OF NOTICE
Any notice required to be given by law or by the Certificate
of Incorporation or by these By-laws may be waived in writing, and
such waiver may be made either before or after the act or event to
which the same relates.
13
<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 31, 1998, AND FOR THE
THIRTY-NINE WEEKS ENDED OCTOBER 31, 1998, AND NOVEMBER 1, 1997
39 Weeks Ended Fiscal Year Ended
Oct. 31, Nov. 1, Jan. 31, Feb. 1, Feb. 3, Jan. 28, Jan. 29,
1998 1997 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges:
Pretax earnings from continuing
operations $ 616 $ 554 $ 1,279 $ 1,232 $ 1,160 $ 1,079 $ 957
Fixed charges (excluding interest
capitalized and pretax preferred
stock dividend requirements) 256 274 363 346 317 293 305
Dividends on ESOP Preference Shares (19) (19) (26) (26) (28) (28) (28)
Capitalized interest amortization 5 5 6 6 5 4 4
858 814 1,622 1,558 1,454 1,348 1,238
Fixed Charges:
Gross interest expense (a) $ 249 $ 267 353 $ 341 $ 316 $ 289 $ 295
Interest factor attributable to
rent expense 18 17 23 22 20 19 20
267 284 376 363 336 308 315
Ratio of Earnings to Fixed Charges 3.2 2.9 4.3 4.3 4.3 4.4 3.9
(a) Represents interest expense on long-term and short-term debt, ESOP debt and amortization of
debt discount and debt issue expense.
</TABLE>
<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 31, 1998 AND
IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-1999
<PERIOD-END> OCT-31-1998
<CASH> 14
<SECURITIES> 18
<RECEIVABLES> 1,931
<ALLOWANCES> 75
<INVENTORY> 3,300
<CURRENT-ASSETS> 5,287
<PP&E> 7,125
<DEPRECIATION> 2,646
<TOTAL-ASSETS> 10,820
<CURRENT-LIABILITIES> 2,700
<BONDS> 3,868
0
0
<COMMON> 0
<OTHER-SE> 3,463
<TOTAL-LIABILITY-AND-EQUITY> 10,820
<SALES> 8,570
<TOTAL-REVENUES> 8,795
<CGS> 6,182
<TOTAL-COSTS> 6,182
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 201
<INCOME-PRETAX> 616
<INCOME-TAX> 245
<INCOME-CONTINUING> 371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 371
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.49
</TABLE>
