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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, 2000
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 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.
317,891,786 shares of common stock, $.50 par value, as of April 29,
2000.
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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, May 1, Jan. 29,
ASSETS 2000 1999 2000
Current Assets:
Cash and cash equivalents $ 40 $ 152 $ 41
Accounts receivable, net 1,913 1,906 2,173
Merchandise inventories 3,191 2,930 2,817
Other current assets 83 69 84
Total Current Assets 5,227 5,057 5,115
Property and Equipment, at cost 7,945 7,356 7,797
Accumulated Depreciation (3,136) (2,850) (3,028)
Net Property and Equipment 4,809 4,506 4,769
Goodwill and Other Assets 1,044 1,021 1,051
Total Assets $ 11,080 $ 10,584 $ 10,935
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable $ 49 $ - $ -
Current maturities of
long-term debt 260 104 259
Accounts payable 1,323 1,181 1,030
Accrued expenses 824 741 892
Income taxes 100 78 234
Total Current Liabilities 2,556 2,104 2,415
Long-term Debt 3,709 3,791 3,560
Deferred Income Taxes 548 489 540
Other Liabilities 307 306 314
ESOP Preference Shares 311 325 315
Unearned Compensation (248) (277) (286)
Shareowners' Equity 3,897 3,846 4,077
Total Liabilities and
Shareowners' Equity $ 11,080 $ 10,584 $ 10,935
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
April 29, May 1,
2000 1999
Net Retail Sales $ 3,041 $ 2,937
Revenues $ 3,050 $ 2,989
Cost of sales 2,141 2,086
Selling, general and
administrative expenses 638 629
Interest expense, net 71 71
Earnings before income taxes 200 203
Provision for income taxes 80 81
Net Earnings $ 120 $ 122
Basic earnings per share $ .36 $ .35
Diluted earnings per share $ .35 $ .34
Dividends paid per common share $ .23-1/4 $ .22-1/4
Weighted average shares outstanding:
Basic 322.5 334.7
Diluted 344.2 358.6
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) 13 Weeks Ended
April 29, May 1,
2000 1999
Operating Activities:
Net earnings $ 120 $ 122
Depreciation and amortization 119 111
Decrease (increase) in working capital (29) 3
Other, net 4 18
214 254
Investing Activities:
Net additions to property and equipment (153) (97)
(153) (97)
Financing Activities:
Net issuances of notes payable 49 -
Net issuances (repayments) of long-term
debt 192 (2)
Net purchases of common stock (223) (36)
Dividend payments, net of tax benefit (80) (79)
(62) (117)
Increase (decrease) in Cash and Cash
Equivalents $ (1) $ 40
Cash paid during the period:
Interest $ 67 $ 70
Income Taxes 202 181
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 26-31) in the 1999 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 first
quarter was $8 million in 2000 and 1999.
Long-term Debt. During the first quarter of 2000, the company
issued $200 million of 7.875% debentures due March 1, 2030.
Subsequent to the first quarter of 2000, the company issued $250
million of 8.75% debentures due May 15, 2029 and $200 million of
8.5% debentures due June 1, 2019. The company intends to use the
net proceeds from the sale of the debentures for stock repurchases,
capital expenditures, working capital needs, and other general
corporate purposes including investments and acquisitions.
Common Stock Repurchase Program. During the first quarter of 2000,
May's board of directors authorized a common stock repurchase
program of up to $650 million. This authorization, combined with
the remaining $139 million of common stock repurchases related to
the 1999 stock purchase program, allows May to purchase up to $789
million of common stock in 2000. Through the end of the first
quarter, May has repurchased approximately $217 million of common
stock, or approximately 7.8 million shares at an average price of
$28 per share. Such purchases are being made in the open market as
market conditions and regulatory rules allow.
Summarized Financial Information - The May Department Stores
Company, New York. Summarized financial information for The May
Department Stores Company, New York, is set forth below for 2000
and 1999.
April 29, Jan. 29,
2000 2000
Financial Position
Current assets $ 5,213 $ 5,104
Noncurrent assets 6,093 5,818
Current liabilities 2,543 2,425
Noncurrent liabilities 8,198 8,043
13 Weeks Ended
April 29, May 1,
2000 1999
Operating Results
Revenues $ 3,050 $ 2,989
Cost of sales 2,141 2,086
Net earnings 68 75
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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).
13 Weeks Ended
April 29, 2000 May 1, 1999
Earnings Shares EPS Earnings Shares EPS
Net earnings $ 120 $ 122
ESOP preference
shares' dividends (5) (5)
Basic EPS 115 322.5 $ 0.36 117 334.7 $ 0.35
ESOP preference
shares 4 20.9 4 21.7
Assumed exercise of
options (treasury
stock method) - 0.8 - 2.2
Diluted EPS $ 119 344.2 $ 0.35 $ 121 358.6 $ 0.34
Reclassifications. Certain prior period amounts have been
reclassified to conform with current year presentation.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net retail sales (sales) represent sales of stores operating at the
end of the latest period including lease department sales and
excluding finance charge revenues and the sales of stores that have
been closed and not replaced. Store-for-store sales represent
sales of those stores open during both periods. Sales percent
increases are as follows:
Store-for-
Total Store
13 Weeks Ended April 29, 2000 3.5% 0.0%
The following table presents the components of costs and expenses,
as a percent of revenues, for the first quarter of 2000 and 1999.
Revenues include sales from all stores operating during the period,
finance charge revenues and lease department income.
2000 1999
Revenues 100.0% 100.0%
Cost of sales 70.2 69.8
Selling, general and
administrative expenses 20.9 21.0
Interest expense, net 2.4 2.4
Earnings before income taxes 6.5 6.8
Provision for income taxes 40.0* 40.0*
Net Earnings 3.9% 4.1%
*-Percent represents effective income tax rate.
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Cost of sales was $2,141 million in the 2000 first quarter, up 2.6%
from $2,086 million in the 1999 first quarter. The overall
increase is primarily related to higher sales. As a percent of
revenues, cost of sales increased 0.4% compared with the first
quarter of 1999 due to higher markdowns and an increase in buying
and occupancy costs.
Selling, general and administrative expenses were $638 million in
the 2000 first quarter, compared with $629 million in the 1999
first quarter, a 1.5% increase. The increase is primarily related
to higher sales volume. Selling, general and administrative
expenses as a percent of revenues decreased 0.1% for the first
quarter of 2000 as compared with 1999 mainly due to lower employee
benefit expenses which were partially offset by increases in
payroll expenses.
Net interest expense for the first quarter 2000 and 1999 was as
follows (millions):
2000 1999
Interest expense $ 79 $ 78
Interest income (4) (4)
Capitalized interest (4) (3)
Net Interest Expense $ 71 $ 71
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
April 29, May 1,
2000 1999
Net retail sales $ 13,958 $ 13,266
Revenues 13,927 13,319
Net earnings 925 861
Diluted earnings per share 2.61 2.35
Financial Condition
Key financial ratios for the periods indicated are as follows:
April 29, May 1, Jan. 29,
2000 1999 2000
Current Ratio 2.0 2.4 2.1
Debt-Capitalization Ratio 46% 45% 44%
Fixed Charge Coverage* 4.8x 4.5x 4.8x
* Fixed charge coverage, which is presented for the 52 weeks
ended April 29, 2000, May 1, 1999 and January 29, 2000, 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.
Forward-looking Statements. Management's Discussion and Analysis
contains forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995. While such statements
reflect all available information and management's judgment and
estimates of current and anticipated conditions and circumstances
and are prepared with the assistance of specialists within and
outside the company, there are many factors outside of our control
that have an impact on our operations. Such factors include, but
are not limited to: competitive changes, general and regional
economic conditions, consumer preferences and spending patterns,
availability of adequate locations for building or acquiring new
stores, and our ability to hire and retain qualified associates.
Because of these factors, actual performance could differ
materially from that described in the forward-looking statements.
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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 - None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(12) - Computation of Ratio of Earnings to Fixed Charges
(15) - Letter Re: Unaudited Interim Financial Information
(27) - Financial Data Schedule
(b) Reports on Form 8-K
A report dated February 24, 2000, which contained a press
release announcing registrant's January and fiscal 1999 sales
results and a press release announcing registrant's fiscal
1999 earnings results, including Condensed Consolidated
Results of Operations for the 13 and 52 weeks ended January
29, 2000 and a Condensed Consolidated Balance Sheet as of
January 29, 2000.
A reported dated February 29, 2000, which contained
information concerning the registrant's sale of $200 million
principal amount of its 7-7/8% debentures due March 1, 2030.
A report dated April 19, 2000, which contained information
concerning debt ratings and incorporated by reference
registrant's Annual Report on Form 10-K for the fiscal year
ended January 29, 2000.
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 6, 2000 /s/ John L. Dunham
John L. Dunham
Executive Vice President and
Chief Financial Officer
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareowners of
The May Department Stores Company:
We have reviewed the accompanying condensed consolidated balance
sheet of The May Department Stores Company (a Delaware corporation)
and subsidiaries as of April 29, 2000, and May 1, 1999, and the
related condensed consolidated statements of earnings and cash
flows for the thirteen week periods ended April 29, 2000 and May 1,
1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial
statements referred to above for them to be in conformity with
accounting principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the consolidated balance
sheet of The May Department Stores Company as of January 29, 2000,
(not presented separately herein), and in our report dated February
9, 2000, we expressed an unqualified opinion on that statement. In
our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of January 29, 2000, is
fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/Arthur Andersen LLP
St. Louis, Missouri
June 6, 2000
