<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 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)
Registrant's telephone number, including area code: (314) 342-6300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par value $.50 per share New York Stock Exchange
Preferred stock purchase rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
(Title of Class)
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 (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
Aggregate market value of the registrant's common stock held by
non-affiliates as of April 1, 2000: $9,073,677,069
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
320,132,360 shares of common stock, $.50 par value, as of April 1,
2000.
<PAGE>
Documents incorporated by reference:
1. Portions of the registrant's 1999 Annual Report to Shareowners
are incorporated into Parts I and II.
2. Portions of the registrant's 2000 Proxy Statement, dated April
19, 2000, are incorporated into Part III.
PART I
Items 1 and 2. Business and Description of Property
The May Department Stores Company ("May"), a corporation organized
under the laws of the State of Delaware in 1976, became the
successor to The May Department Stores Company, a New York
corporation ("May NY") in a reincorporation from New York to
Delaware pursuant to a statutory share exchange accomplished in
1996. As a result of the share exchange, May NY became a wholly-
owned subsidiary of May. May NY was organized under the laws of
the State of New York in 1910, as the successor to a business
founded by David May, who opened his first store in Leadville,
Colorado, in 1877.
May operates eight quality regional department store companies
nationwide under 12 trade names. At fiscal year-end 1999, May
operated 408 department stores in 34 states and the District of
Columbia. The department store companies and the markets served
are shown in the table below.
Store Company Markets Served
Lord & Taylor 31 markets, including New York/New Jersey
Metro, Chicago, Boston, Philadelphia Metro,
Dallas/Fort Worth, Washington D.C. Metro,
Detroit, Houston, Atlanta, and Miami
Hecht's and 19 markets, including Washington D.C. Metro,
Strawbridge's Philadelphia Metro (Strawbridge's), Baltimore,
Norfolk, and Richmond
Foley's 17 markets, including Houston, Dallas/Fort
Worth, Denver, San Antonio, Austin, and
Oklahoma City
Robinsons-May 9 markets, including Los Angeles/Orange
County, Riverside/San Bernardino, Phoenix,
and San Diego
Filene's 16 markets, including Boston Metro, Southern
Connecticut, Hartford, Providence Metro, and
Albany
Kaufmann's 21 markets, including Pittsburgh, Cleveland,
Buffalo, Rochester, Syracuse, and Akron
Famous-Barr, L.S. 23 markets, including St. Louis Metro, Kansas
Ayres and The City Metro(The Jones Store), Indianapolis
Jones Store (L.S. Ayres), Fort Wayne, and South Bend
Meier & Frank and 10 markets, including Portland/Vancouver
ZCMI Metro and Salt Lake City Metro (ZCMI)
May employs approximately 62,000 full-time and 72,000 part-time
associates in 36 states, the District of Columbia, and nine offices
overseas.
2
<PAGE>
Management's Discussion and Analysis (pages 18-21) of May's 1999
Annual Report to Shareowners is incorporated herein by reference.
A. Property Ownership
The following summarizes the property ownership of department
stores at January 29, 2000:
% of Gross
Number of Building
Stores* Sq. Footage
Entirely or mostly owned 236 62%
Entirely or mostly leased 99 23
Owned on leased land 73 15
408 100%
* Includes a total of 22 department stores subject to
financing.
B. Credit Sales
Sales at May's department stores are made for cash or credit,
including May's 30-day charge accounts and open-end credit plans,
which include revolving charge accounts and revolving installment
accounts. During the fiscal year ended January 29, 2000, 40.7% of
net retail sales were made through May's credit plans.
In 1991, May formed May National Bank of Arizona (MBA) and May
National Bank of Ohio (MBO), which are indirectly wholly-owned and
consolidated subsidiaries of May.
During fiscal 1999, MBA and MBO extended credit to customers of
May's Lord & Taylor, Foley's, Hecht's, Strawbridge's, Robinsons-
May, Filene's, Kaufmann's, Famous-Barr, L.S. Ayres, The Jones Store
and Meier & Frank department stores companies. Throughout 1999,
MBA and MBO sold the resulting accounts receivables at face value
to May NY. In addition, MBA and MBO process remittances for their
parent, Grande Levee, Inc., and its other subsidiaries. MBA and
MBO receive processing fee revenue for this service.
C. Competition in Retail Merchandising
May conducts its retail merchandising business under highly
competitive conditions. Although May is one of the nation's
largest department store retailers, it has numerous competitors at
the national and local level which compete with May's individual
department stores. Competition is characterized by many factors
including location, reputation, assortment, advertising, price,
quality, service, and credit availability. May believes that it is
in a strong competitive position with regard to each of these
factors.
3
<PAGE>
D. Executive Officers of May
The names and ages (as of April 19, 2000) of all executive officers
of May, and the positions and offices held with May by each such
person are as follows:
Name Age Positions and Offices
Eugene S. Kahn 50 President and Chief Executive Officer
Jerome T. Loeb 59 Chairman of the Board
John L. Dunham 53 Vice Chairman and Chief Financial
Officer
Richard W. Bennet III 47 Vice Chairman
William P. McNamara 49 Vice Chairman
Anthony J. Torcasio 54 Vice Chairman
Judith K. Hofer 60 President and Chief Executive Officer,
May Merchandising Company
R. Dean Wolfe 56 Executive Vice President
Alan E. Charlson 51 Senior Vice President and Chief Counsel
Martin M. Doerr 45 Senior Vice President
William D. Edkins 47 Senior Vice President
Lonny J. Jay 58 Senior Vice President
Jan R. Kniffen 51 Senior Vice President
Richard A. Brickson 52 Secretary and Senior Counsel
Michael G. Culhane 37 Vice President
Each of the above named executive officers shall remain in office
until the annual meeting of directors following the next annual
meeting of shareowners of May and until the officer's successor
shall have been elected and shall qualify. Messrs. Kahn, Loeb,
Torcasio, Dunham, and Wolfe are also directors of May. Mr.
Torcasio will retire as an officer on September 30, 2000.
Each of the executive officers has been an officer of May for at
least the last five years, with the following exceptions: Mr. Kahn
served as president and chief executive officer of Filene's from
1992 to March 1996 when he became vice chairman. He was appointed
executive vice chairman in June 1997 and assumed his current
position in May 1998. Mr. Dunham served as chairman of May
Merchandising Company from 1993 to May 1996 when he became
Executive Vice President and Chief Financial Officer and an
executive officer of May. He assumed his current position in
November of 1999. Mr. Bennet served as president and chief
executive officer of Famous-Barr from 1995 to 1997 and as president
and chief executive officer of Kaufmann's from 1997 to February
2000 when he became vice chairman and an executive officer of May.
Mr. McNamara served as senior vice president and general
merchandise manager for May Merchandising Company from 1995 to
1997, president and chief executive officer of Famous-Barr from
1997 to 1998, and president of May Merchandising Company from 1998
to February 2000 when he became vice chairman and an executive
officer of May. Ms. Hofer served as president and chief executive
officer of Meier & Frank from 1988 to 1996, president and chief
executive officer of Filene's from 1996 to 1999, chief executive
officer of Filene's from 1999 to February 2000 when she assumed her
current position and became an executive officer of May. Mr.
Charlson served as senior counsel for May from 1988 to 1998 when he
4
<PAGE>
became senior vice president and chief counsel and an executive
officer of May. Mr. Culhane was associated with the public
accounting firm of Arthur Andersen LLP from 1984 to 1997. He
served in a financial position for May from 1997 to 1998 when he
became vice president and an executive officer of May.
Item 3. 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 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
13 weeks ended January 29, 2000.
PART II
Item 5. Market for May's Common Equity and Related
Shareowner Matters
Common Stock Dividends and Market Prices (page 21) of May's 1999
Annual Report to Shareowners are incorporated herein by reference.
Item 6. Selected Financial Data
The Eleven Year Financial Summary (pages 32 and 33) of May's 1999
Annual Report to Shareowners is incorporated herein by reference.
In addition, basic earnings per share from continuing operations
and the weighted average shares used to calculate basic earnings
per share for the last five years are as follows:
Earnings Shares
Per Share (millions)
1999 $ 2.73 332.2
1998 2.43 342.6
1997 2.18 348.5
1996 1.97 370.8
1995 1.82 373.4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Management's Discussion and Analysis (pages 18-21) and Notes to
Consolidated Financial Statements (pages 26-31) of May's 1999
Annual Report to Shareowners are incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
Consolidated Financial Statements (pages 22-25), Notes to
Consolidated Financial Statements (pages 26-31), Report of
Independent Public Accountants (page 36), and Quarterly Results
(page 26) of May's 1999 Annual Report to Shareowners are
incorporated herein by reference.
5
<PAGE>
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 for 1999,
1998 and 1997.
January 29, January 30,
(Millions) 2000 1999
Financial Position
Current assets $ 5,104 $ 4,984
Noncurrent assets 5,818 5,557
Current liabilities 2,425 2,083
Noncurrent liabilities 8,043 7,815
52 Weeks Ended
Jan. 29, Jan. 30, Jan. 31,
2000 1999 1998
Operating Results
Revenues $ 13,866 $ 13,090 $ 12,390
Cost of sales 9,370 8,901 8,437
Net earnings before
extraordinary loss 739 662 591
Net earnings 739 662 587
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Items 10, 11, 12, 13. Directors and Executive Officers of May,
Executive Compensation, Security
Ownership of Certain Beneficial Owners
and Management, Certain Relationships and
Related Transactions
Pursuant to paragraph G (Information to be Incorporated by
Reference) of the General Instructions to Form 10-K, the
information required by Items 10, 11, 12 and 13 (other than
information about executive officers of May) is incorporated by
reference from the definitive proxy statement dated April 19, 2000,
and filed pursuant to Regulation 14A. Information about executive
officers of May is set forth in Part I of this Form 10-K, under the
heading "Items 1. and 2. Business and Description of Property."
6
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) Documents filed as part of this report:
(1) Financial Statements. Incorporated by reference to May's
1999 Annual Report to Shareowners (Exhibit 13):
Page in
Annual Report
Financial Statements-
Consolidated Statement of Earnings for
the three fiscal years ended
January 29, 2000 22
Consolidated Balance Sheet -
January 29, 2000, and January 30, 1999 23
Consolidated Statement of Cash Flows
for the three fiscal years ended
January 29, 2000 24
Consolidated Statement of Shareowners'
Equity for the three fiscal years
ended January 29, 2000 25
Notes to Consolidated Financial Statements 26-31
Report of Independent Public Accountants 36
Page in
this Report
(2) Supplemental Financial Statement
Schedule (for the three fiscal years
ended January 29, 2000):
Report of Independent Public Accountants
on Schedule II 11
Schedule II Valuation and Qualifying Accounts 12
(3) Exhibits: Location
3.1 Amended and Restated Certificate Incorporated
of Incorporation of May, by Reference
dated May 22, 1996 to Exhibit
4(a) of Post
Effective
Amendment No.
1 to Form
S-8, filed
May 29, 1996.
3.2 Certificate of Amendment of the Incorporated
Amended and Restated Certificate of by Reference
Incorporation, dated May 21, 1999 to Exhibit
3(b) of Form
10-Q filed
June 8, 1999.
3.3 By-Laws of May, as amended Incorporated
by Reference
to Exhibit
3(c) of Form
10-Q, filed
June 8, 1999.
7
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K (continued)
Location
10.1 1994 Stock Incentive Plan Filed
herewith.
10.2 Deferred Compensatiion Plan Filed
herewith.
10.3 Executive Incentive Compensation Filed
Plan for Corporate Executives herewith.
10.4 Form of Employment Agreement Filed
herewith.
12 Computation of Ratio of Filed
Earnings to Fixed Charges herewith.
13 The May Department Stores Filed
Company 1999 Annual Report to herewith.
Shareowners (only those portions
specifically incorporated by
reference shall be deemed filed
with the Commission)
21 Subsidiaries of May Filed
herewith.
23 Consent of Independent Public Page 11 of
Accountants this Report.
27 Financial Data Schedule Filed
herewith.
99 Form 11-K Annual Report of the Filed
Profit Sharing and Savings Plan herewith.
of The May Department Stores
Company for the fiscal year ended
December 31, 1999
(4) Reports on Form 8-K
None.
All other schedules and exhibits of May for which provision is made
in the applicable regulations of the Securities and Exchange
Commission have been omitted, as they are not required or are
inapplicable or the information required thereby has been given
otherwise.
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Date: April 19, 2000 By: /s/ John L. Dunham
John L. Dunham
Director, Vice Chairman and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of May and in the capacities and on the dates indicated.
Date Signature Title
Principal Executive Officer:
April 19, 2000 /s/ Eugene S. Kahn Director,
Eugene S. Kahn President and
Chief Executive
Officer
Principal Financial and
Accounting Officer:
April 19, 2000 /s/ John L. Dunham Director,
John L. Dunham Vice Chairman and
Chief Financial
Officer
Directors:
April 19, 2000 /s/ Jerome T. Loeb Director and
Jerome T. Loeb Chairman of the
Board
9
<PAGE>
Date Signature Title
April 19, 2000 /s/ Anthony J. Torcasio Director and Vice
Anthony J. Torcasio Chairman
April 19, 2000 /s/ R. Dean Wolfe Director and
R. Dean Wolfe Executive Vice
President
April 19, 2000 /s/ Marsha J. Evans Director
Marsha J. Evans
April 19, 2000 /s/ Helene L. Kaplan Director
Helene L. Kaplan
April 19, 2000 /s/ James M. Kilts Director
James M. Kilts
April 19, 2000 /s/ Russell E. Palmer Director
Russell E. Palmer
April 19, 2000 /s/ Michael R. Quinlan Director
Michael R. Quinlan
April 19, 2000 /s/ William P. Stiritz Director
William P. Stiritz
April 19, 2000 /s/ Robert D. Storey Director
Robert D. Storey
10
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The May Department Stores Company:
We have audited, in accordance with auditing standards generally
accepted in the United States, the consolidated financial
statements included in The May Department Stores Company's Annual
Report to Shareowners incorporated by reference in this Form 10-K,
and have issued our report thereon dated February 9, 2000. Our
audit was made for the purpose of forming an opinion on those
statements taken as a whole. Schedule II included in this Form
10-K is the responsibility of the company's management and is
presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the consolidated
financial statements. The Schedule has been subjected to the
auditing procedures applied in the audit of the consolidated
financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth
therein in relation to the consolidated financial statements taken
as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
1010 Market Street
St. Louis, Missouri 63101-2089
February 9, 2000
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included or incorporated by reference
in this Annual Report on Form 10-K for the year ended January 29,
2000 into the Company's previously filed Registration Statements on
Form S-3 (No. 333-71413, 333-71413-01, 333-11539 and 333-11539-01)
and Form S-8 (No. 33-21415, 33-98045, 33-58985, 333-00957 and
333-76227).
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
1010 Market Street
St. Louis, Missouri 63101-2089
April 19, 2000
11
<PAGE>
SCHEDULE II
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE FISCAL YEARS ENDED January 29, 2000
(Millions)
Charges
to costs
and
Balance expenses Balance
beginning and other Deductions end of
of period adjustments (a) period
FISCAL YEAR ENDED
January 29, 2000
Allowance for
uncollectible
accounts $ 82 $ 81 $ (87) $ 76
FISCAL YEAR ENDED
January 30, 1999
Allowance for
uncollectible
accounts $ 96 $ 79 $ (93) $ 82
FISCAL YEAR ENDED
JANUARY 31, 1998
Allowance for
uncollectible
accounts $ 104 $ 104 $ (112) $ 96
(a) Write-off of accounts determined to be uncollectible, net of
recoveries of $23 million in 1999, $25 million in 1998 and $26
million in 1997.
12
<PAGE>
Exhibit 21
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF MAY
The corporations listed below are subsidiaries of May, and all are
included in the consolidated financial statements of May as
subsidiaries (unnamed subsidiaries, considered in the aggregate as
a single subsidiary, would not constitute a significant
subsidiary):
Jurisdiction
in which
Name organized
The May Department Stores Company New York
May Merchandising Company Delaware
May Department Stores International, Inc. Delaware
May Capital, Inc. Delaware
Grande Levee, Inc. Nevada
Leadville Insurance Company Vermont
Snowdin Insurance Company Vermont
<PAGE>
1994 STOCK INCENTIVE PLAN
I. GENERAL
1. Purpose. The purpose of the Plan is to aid the Company
and its Subsidiaries in attracting, retaining, and motivating
management employees.
2. Definitions. Whenever used herein, the following terms
shall have the meanings set forth below:
a. "Board" means the Board of Directors of the Company.
b. "Code" means the Internal Revenue Code of 1986, as
amended.
c. "Committee" means a committee designated by the
Board, which shall consist of not less than three members of
the Board who shall be appointed by and serve at the
pleasure of the Board and who shall be "disinterested"
within the meaning of Rule 16b-3 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as
amended, and who shall be "outside" directors within the
meaning of Section 162(m) of the Code.
d. "Company" means The May Department Stores Company, a
Delaware corporation.
e. "Disability" means a permanent and total disability
which enables the Participant to be eligible for and receive
a disability benefit under the Federal Social Security Act.
f. "Fair Market Value" means the average of the high and
low prices of the Stock on the New York Stock Exchange on
the date in question, or, if no sale or sales of the Stock
occurred on such Exchange on that day, the average of the
high and low prices of the Stock on the last preceding day
when the Stock was sold on the New York Stock Exchange; with
respect to a Stock Appreciation Right, the term means the
average of the high and low prices of the Stock on the New
York Stock Exchange on such date or dates as may be provided
in the Stock Appreciation Right Agreement.
<PAGE>
g. "Incentive Stock Option" means an Option granted
under the Plan which constitutes and shall be treated as an
"incentive stock option" as defined in Section 422 of the
Code.
h. "Non-Qualified Stock Option" means an Option granted
under the Plan which shall not constitute or be treated as
an Incentive Stock Option.
i. "Non-Tandem Stock Appreciation Right" means a Right
described in Part III, Section 3.
j. "Option" means a right or rights to purchase shares
of Stock described in Part II.
k. "Option Agreement" means the agreement between the
Company and a Participant evidencing the grant of an Option
and containing the terms and conditions, not inconsistent
with the Plan, that are applicable to such Option.
l. "Participant" means an individual to whom an Option
or Right is granted or Restricted Stock Grant is made.
m. "Performance Restricted Stock" means Restricted Stock
whose provisions include the restrictions described in Part
IV, Section 3(b).
n. "Plan" means the 1994 Stock Incentive Plan of the
Company, as amended from time to time.
o. "Related Option" means the Option in relation to
which a Tandem Stock Appreciation Right is granted.
p. "Restricted Stock Grant" means a grant described in
Part IV.
q. "Retirement" means retirement as that word is defined
in any retirement plan sponsored by the Company or a
Subsidiary which is applicable to the Participant.
r. "Stock" means the Common Stock of the Company.
2
<PAGE>
s. "Stock Appreciation Right" or "Right" means a right
described in Part III which provides for the payment of an
amount in cash or Stock in accordance with such terms and
conditions as are provided in the Stock Appreciation Right
Agreement applicable to such Right; provided however, that
in Part III, Section 2, "Right" shall refer only to a
"Tandem Stock Appreciation Right" and that in Part III,
Section 3, "Right" shall refer only to a "Non-Tandem Stock
Appreciation Right".
t. "Stock Appreciation Right Agreement" means the
agreement between the Company and a Participant evidencing
the grant of a Stock Appreciation Right and containing the
terms and conditions, not inconsistent with the Plan, that
are applicable to such Right.
u. "Subsidiary" means a subsidiary of the Company or an
unincorporated organization controlled, directly or
indirectly, by the Company.
v. "Tandem Stock Appreciation Right" means a Right
described in Part III, Section 2.
3. Administration. The Plan shall be administered by the
Committee. Subject to all applicable provisions of the Plan, the
Committee is authorized to approve grants of Options or Rights or
the making of Restricted Stock Grants in accordance with the
Plan, to construe and interpret the Plan, to prescribe, amend,
and rescind rules and regulations relating to the Plan and to
make all determinations and take all actions necessary or
advisable for the Plan's administration. The Committee shall act
by vote or written consent of a majority of its members.
Whenever the Plan authorizes or requires the Committee to take
any action, make any determination or decision or form any
opinion, then any such action, determination, decision or opinion
by or of the Committee shall be in the absolute discretion of the
Committee.
3
<PAGE>
4. Shares Subject to the Plan.
(a) Maximum Number of Shares. Stock issued under the
Plan shall be treasury shares subject to the following
limitations:
(i) Plan Maximum. The maximum number of shares of
Stock which may be issued under the Plan is
41,361,879, of which no more than 3,400,553 may be
issued pursuant to Restricted Stock Grants.
(ii) Participant Maximum. The maximum number of
Options and Stock Appreciation Rights which may be
granted to any Participant during the term of the
Plan is 1,243,093; provided, however, that if a Stock
Appreciation Right is issued in substitution for an
existing stock option or in tandem with a stock
option, then the grant of such a Stock Appreciation
Right shall not count against the limit. The maximum
number of shares of Stock which may be issued to each
Participant free from restrictions pursuant to a
grant of Performance Restricted Stock is 82,873 per
year.1
(b) Expired Options or Rights. If an Option or Right
expires, terminates, ceases to be exercisable or is
surrendered without having been exercised in full, then the
shares relating to the Option or Right shall, unless the
Plan has been terminated, again become available under the
Plan.
(c) Lapse of Restrictions on Restricted Stock. If any
shares of Stock shall be returned to the Company pursuant to
the provisions of Sections 2 or 3 of Part IV or in the
instruments evidencing the making of Restricted Stock
Grants, then such shares shall, unless the Plan has been
terminated, again become available under the Plan.
_________________
1 The number of shares reflected in this paragraph were
adjusted as of May 24, 1996 to reflect the spin-off by May of
Payless ShoeSource, Inc. and as of March 22, 1999 to reflect a
three-for-two stock split.
4
<PAGE>
5. Participants. Participants in the Plan shall be
determined as follows:
(a) Eligibility. The individuals who are eligible to
receive Options, Rights or Restricted Stock Grants hereunder
shall be limited to management employees of the Company and
its Subsidiaries (including employees who are directors
and/or officers).
(b) Determination. From time to time the Committee
shall, in its sole discretion, but subject to all of the
provisions of the Plan, determine which of those eligible
employees shall receive Option(s), Stock Appreciation
Right(s) or Restricted Stock Grant(s) under the Plan and the
size, terms, conditions and/or restrictions of the
Option(s), Right(s) or Restricted Stock Grant(s).
(c) Differing Terms; Effect of Grant. The Committee
may approve the grant of Option(s) or Right(s) or the making
of Restricted Stock Grant(s) subject to differing terms,
conditions and/or restrictions to any eligible employee in
any year. The Committee's decision to approve the grant of
an Option or Right or the making of a Restricted Stock Grant
to an eligible employee in any year shall not require the
Committee to approve the grant of an Option or Right or the
making of a Restricted Stock Grant to that employee in any
other year or to any other employee in any year; nor shall
the Committee's decision with respect to the size, terms,
conditions and/or restrictions of any Option or Right to be
granted to an employee or any Restricted Stock Grant to be
made to an employee in any year require the Committee to
approve the grant of an Option or Right or the making of a
Restricted Stock Grant of the same size or with the same
terms, conditions and/or restrictions to that employee in
any other year or to any other employee in any year. The
Committee shall not be precluded from approving the grant of
an Option or Right or the making of a Restricted Stock Grant
to any eligible employee solely because such employee may
previously have been granted an Option or Right or may
previously have received a Restricted Stock Grant.
5
<PAGE>
6. Rights with Respect to Shares of Stock. A Participant
who has exercised an Option or Right (payable all or in part in
Stock) or to whom a Restricted Stock Grant has been made shall
have, after a certificate or certificates for the number of
shares of Stock granted have been issued in his name, absolute
ownership of such shares including the right to vote the same and
receive dividends thereon; provided, however that rights with
respect to shares issued in connection with a Restricted Stock
Grant shall be subject to the terms, conditions and restrictions
described in the Plan and in the instrument evidencing the making
of the Restricted Stock Grant to such Participant.
7. Employment. In the absence of any specific agreement to
the contrary, no grant of an Option or Right or making of a
Restricted Stock Grant to a Participant under the Plan shall
affect any right of the Company or its Subsidiaries to terminate
the Participant's employment at any time.
II. OPTIONS
1. General. Each employee chosen to receive an Option(s)
may be granted an Incentive Stock Option, a Non-Qualified Stock
Option or both, subject to the following terms, conditions and
restrictions. Each Option granted under the Plan shall be
evidenced by an Option Agreement which shall contain such terms
and conditions consistent with the Plan as the Committee shall
determine; provided, however, that each Option shall satisfy the
following requirements and each Incentive Stock Option shall
satisfy the requirement of Part II, Section 2:
(a) Option Price. The option price for each share
purchased under any Option shall be specified in the Option
Agreement and, subject to the provisions of Part V, Section
3, shall not be less than Fair Market Value on the date the
Option is granted; provided, however, that in no event shall
the option price per share be less than the par value
thereof.
(b) Option Period.
6
<PAGE>
(i) General. The period in which an Option may be
exercised shall not exceed ten years from the date the
Option is granted; provided, however, that the Option
may be sooner terminated in accordance with the
provisions of this paragraph (b). Subject to the
foregoing, the Committee may provide that any Option may
be exercised, in whole or in part, at such time or times
as the Committee may in its discretion determine.
(ii) Termination of Employment. If the Participant
ceases to be an employee of the Company or a Subsidiary
for any reason other than Retirement, Disability, or
death, all of such Participant's outstanding Options
shall immediately terminate.
(iii) Retirement or Disability. If a Participant's
employment is terminated by Retirement or Disability,
the term of any then outstanding Option held by the
Participant shall extend for a period specified by the
Committee in the agreement pertaining to such Option,
and the number of shares in respect of which the Option
may be exercised after the Participant's Retirement or
Disability shall be determined by the agreement
pertaining to such Option; provided, however, that such
agreement shall provide that the Committee may cancel
the Participant's Option during such period if the
Participant's Retirement was without the consent of the
Company, or if the Participant engages during such
period of Retirement or Disability in employment or
activities contrary, in the opinion of the Committee, to
the best interests of the Company.
2. Incentive Stock Options. Each Option Agreement
evidencing an Incentive Stock Option shall satisfy the
requirement that to the extent that the aggregate Fair Market
Value of Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Participant during any
calendar year (under the Plan and all stock option plans of the
Company and its Subsidiaries) exceeds $100,000, such Options
shall be treated as Non-Qualified Stock Options. For purposes of
7
<PAGE>
this Section 2, aggregate Fair Market Value of Stock shall be
determined as of the time the Option with respect to such Stock
is granted.
3. Death. If a Participant's employment is terminated by
death at a time when he or she has not fully exercised any then
outstanding Option, or if a Participant dies after Retirement or
Disability without having fully exercised any then outstanding
Option, the beneficiary designated by the Participant (or, in the
absence of such designation, the executors or administrators or
legatees or distributees of the Participant's estate) shall have
the right to exercise such Option in whole or in part during such
period following the Participant's death as is set forth in the
Option Agreement. The Company shall prescribe the procedures and
requirements for beneficiary designations not inconsistent with
this provision and has the right to review and approve such
designations.
4. Nonassignability. Each Option shall not be transferable
(other than, upon the death of the Participant, by beneficiary
designation, by last will and testament or by the laws of descent
and distribution) and shall be exercisable during the
Participant's lifetime only by the Participant.
5. Payment for Stock. Full payment in cash or, if the
Committee approves, in Stock, for shares purchased shall be made
at the time of exercising the Option in whole or in part. No
certificates for shares so purchased shall be issued until full
payment therefor has been made, and a Participant shall have none
of the rights of a shareowner until such certificates are issued
to him or her. In addition, if the Committee approves, the
Option Agreement may provide that the Participant may elect, on
terms set forth in the Option Agreement, to have the Company
withhold from the shares of Stock payable to the Participant upon
exercise of an Option the number of shares of Stock having a fair
market value equal to the amount of any required withholding
taxes.
6. Use of Proceeds. The proceeds received by the Company
from the sale of Stock pursuant to the exercise of an Option may
be used for general corporate purposes.
8
<PAGE>
7. Restrictions Upon Exercise of Option. The exercise of
each Option shall be subject to the condition that if at any time
the Company shall determine in its discretion that the
satisfaction of withholding tax or other withholding liabilities
under any state or Federal law, or that the listing, registration
or qualification of any shares otherwise deliverable upon such
exercise upon any securities exchange or under any state or
Federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in
connection with, such exercise or the delivery or purchase of
shares thereunder, then in any such event such exercise shall not
be effective unless such withholding, listing, registration,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
8. Repricing Prohibited. There shall be no grant of an
Option(s) to a Participant in exchange for a Participant's
agreement to cancellation of a higher-priced Option(s) that was
previously granted to such Participant.
III. STOCK APPRECIATION RIGHTS
1. General. Each employee chosen to receive a Stock
Appreciation Right(s) may be granted a Tandem Stock Appreciation
Right, a Non-Tandem Stock Appreciation Right or both, subject to
the following terms, conditions and restrictions and subject to
such additional terms, conditions and restrictions as may be
determined by the Committee from time to time hereafter; provided
however, that no Right shall be subject to additional terms,
conditions or restrictions which are more favorable to a
Participant than the terms, conditions and restrictions set forth
in the Plan.
2. Tandem Stock Appreciation Rights. Each Tandem Stock
Appreciation Right may be granted only with respect to a share(s)
of Stock for which an Option(s) has been granted under the Plan,
and may be awarded concurrently with the grant of such Option or
at any time thereafter while the Option is outstanding. If the
Committee so determines, a Tandem Stock Appreciation Right may
also be granted with respect to a share(s) of Stock for which an
option has been granted and is outstanding under any other plan
9
<PAGE>
of the Company. A Stock Appreciation Right shall be evidenced by
a Stock Appreciation Right Agreement which shall contain such
terms and conditions (which may include limitations as to the
time when such Stock Appreciation Right becomes exercisable and
when it ceases to be exercisable that are more restrictive than
the limitations applicable to the Related Option(s)) not
inconsistent with the Plan as the Committee shall determine;
provided, however, that each Tandem Stock Appreciation Right
shall satisfy the following requirements:
(a) Termination of a Right. If the Related Option is
exercised, in whole or in part, then the Right with respect
to the shares of Stock purchased pursuant to such exercise
(but not with respect to any unpurchased shares of Stock)
shall terminate as of the date of the exercise. If an
unexercised Right is otherwise exercisable on the date that
the Related Option expires, and if the Fair Market Value of
the shares of Stock with respect to which such Right was
granted, determined as of the date of such expiration,
exceeds the Option price of such shares, then,
notwithstanding Section 2(b), the Right shall automatically
be deemed to have been exercised as of the date of such
expiration; otherwise, on the date that the Related Option
expires, any outstanding Right related thereto shall be
terminated as of the date of such expiration.
(b) Exercise. Tandem Stock Appreciation Rights may be
exercised (i) only at such time or times as, and to the
extent that, the Related Options shall be exercisable, (ii)
only upon surrender of the Related Options with respect to
the shares for which the Rights are then being exercised,
and (iii) subject to the terms and conditions set forth in
the Stock Appreciation Right Agreement; provided that no
Tandem Stock Appreciation Right may be exercised prior to
the expiration of six (6) months from the date of the grant
and can only be exercised during the ten-day period
beginning on the third business day following the release of
the Company's quarterly or annual statement of sales and
earnings.
10
<PAGE>
3. Non-Tandem Stock Appreciation Rights. Each Non-Tandem
Stock Appreciation Right may be granted with respect to a
share(s) of Stock or, if the Committee so determines, in exchange
for an outstanding Option or an outstanding stock option granted
under any other plan of the Company. A Non-Tandem Stock
Appreciation Right shall be evidenced by a Stock Appreciation
Right Agreement which shall contain such terms and conditions not
inconsistent with the Plan as the Committee shall determine;
provided, however, that each Non-Tandem Stock Appreciation Right
shall satisfy the following requirements:
(a) Termination of a Right. A Non-Tandem Stock
Appreciation Right shall terminate as of the earlier of (i)
the date of exercise of such Right, to the extent that it is
exercised; or (ii) the termination date specified in the
Stock Appreciation Right Agreement. If an unexercised Right
is otherwise exercisable on the date that it expires, and if
the Fair Market Value of the shares of Stock with respect to
which such Right was granted, determined as of the date of
such expiration, exceeds the exercise price of such Right
(set forth in the Stock Appreciation Right Agreement), then
the Right shall automatically be deemed to have been
exercised as of the date of such expiration.
(b) Exercise. Non-Tandem Stock Appreciation Rights
may be exercised in accordance with the terms and conditions
set forth in the Stock Appreciation Right Agreement;
provided that (i) no Non-Tandem Stock Appreciation Right
that is payable all or in part in Stock may be exercised
prior to the expiration of six (6) months from the date of
the grant; (ii) the exercise price of any Non-Tandem Stock
Appreciation Right granted in exchange for an outstanding
Option or for an outstanding stock option granted under any
other plan of the Company shall be the same exercise price
as that outstanding Option or option and (iii) the exercise
price of any Non-Tandem Stock Appreciation Right not granted
in exchange for an outstanding Option or for an outstanding
stock option granted under any other plan of the Company
shall be the Fair Market Value of the Stock on the date of
the grant of the Right(s).
11
<PAGE>
4. Payment.
(a) Amount. Upon the exercise of a Stock Appreciation
Right, a Participant shall be entitled to receive the excess
of the aggregate Fair Market Value of the shares of Stock
with respect to which the Right is being exercised
(determined as of the date of such exercise) over (i) the
aggregate option price of such shares in the case of Tandem
Stock Appreciation Rights; or (ii) the aggregate exercise
price (set forth in the Stock Appreciation Right Agreement)
in the case of Non-Tandem Stock Appreciation Rights.
(b) Form. Any amount which becomes payable upon
exercise of a Stock Appreciation Right under the Plan shall
be paid entirely in cash, entirely in Stock or partly in
cash and partly in Stock in accordance with such terms and
conditions as are provided in the applicable Stock
Appreciation Right Agreement; provided, however, that
notwithstanding any provision in any Stock Appreciation
RightAgreement, the Committee may determine in its sole and
absolute judgment that any amount which may become payable
upon exercise of a Right shall be paid entirely in cash.
5. Termination of Employment.
(a) General. If a Participant ceases to be an
employee of the Company or of a Subsidiary for any reason
other than Retirement, Disability or death, all of such
Participant's outstanding Rights shall immediately
terminate.
(b) Retirement or Disability. If a Participant's
employment is terminated by Retirement or Disability, the
Participant's right to exercise all or any portion of any
Right after the date of such Retirement or Disability shall
be determined by the provisions of the Stock Appreciation
Right Agreement; provided, however, that such Agreement
shall provide that the Committee may terminate the
Participant's Right prior to the date on which the Right is
exercised if the Participant's Retirement was without the
consent of the Company, or if the Participant engages during
12
<PAGE>
such period of Retirement or Disability in employment or
activities contrary, in the opinion of the Committee, to the
best interests of the Company.
(c) Death. If a Participant's employment is terminated
by death at a time when the Participant has not fully
exercised any then outstanding Rights, or if a Participant
dies after Retirement or Disability without having fully
exercised any then outstanding Rights, the beneficiary
designated by the Participant (or, in the absence of such
designation, the executors or administrators or legatees or
distributees of the Participant's estate) shall have the
right to exercise such Right in whole or in part during such
period following the Participant's death as set forth in the
Stock Appreciation Right Agreement. The Company shall
prescribe the procedures and requirements for beneficiary
designations not inconsistent with this provision and has
the right to review and approve such designations.
6. Expiration. If the period in which a Stock Appreciation
Right is exercisable expires and the Right has not been
exercised, then such Right shall terminate as of the last day on
which it was exercisable.
7. Nonassignability. Each Right shall not be transferable
(other than, upon the death of the Participant, by beneficiary
designation, by last will and testament or by the laws of descent
and distribution) and shall be exercisable during the
Participant's lifetime only by the Participant.
8. Restrictions Upon Exercise of Rights. The exercise of
each Right shall be subject to the condition that if at any time
the Company shall determine in its discretion that the
satisfaction of withholding tax or other withholding liabilities
under any state or Federal law, or that the consent or approval
of any regulatory body, is necessary or desirable as a condition
of, or in connection with, such exercise, then, in any such
event, such exercise shall not be effective unless such
withholding, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Company.
13
<PAGE>
IV. RESTRICTED STOCK GRANTS
1. General. A Restricted Stock Grant made under the Plan
shall contain the following terms, conditions and restrictions
and such additional terms, conditions and restrictions as may be
determined by the Committee from time to time hereafter;
provided, however, that no Restricted Stock Grant shall be
subject to additional terms, conditions or restrictions which are
more favorable to a Participant than the terms, conditions and
restrictions set forth in the Plan.
2. Restrictions. Subject to the provisions of Part IV,
Section 3, shares of Stock granted to a Participant pursuant to a
Restricted Stock Grant:
(i) shall not be sold, assigned, conveyed, transferred,
pledged, hypothecated, or otherwise disposed of, and
(ii) shall be returned to the Company forthwith, and
all the rights of the Participant to such shares shall
immediately terminate without any payment or consideration
by the Company, if the Participant's continuous employment
with the Company or any Subsidiary shall terminate for any
reason, except as provided in Part IV, Section 4. Such
return of such Stock shall be accomplished by the
Participant's delivering or causing to be delivered to the
Secretary or any Assistant Secretary of the Company the
certificate(s) for such shares of Stock, accompanied by such
endorsement(s) and/or instrument(s) of transfer as may be
required by the Secretary or any Assistant Secretary of the
Company.
3. Lapse of Restrictions.
(a) General. Subject to the provisions of Part IV,
Sections 3(b) and 4 and of Part V, Section 4, the
restrictions set forth in Part IV, Section 2 shall lapse on
such date or dates on or after the first anniversary and on
or before the tenth anniversary of the date as of which the
Restricted Stock Grant is made, as the Committee shall
determine at the time of the Restricted Stock Grant.
14
<PAGE>
(b) Performance Restricted Stock. If the Committee has
designated the Stock covered by a Restricted Stock Grant as
Performance Restricted Stock, then the lapse of restrictions
set forth in Part IV, Section 2 that would otherwise occur
on a specified date shall also be subject to the following:
(i) if the Company meets or exceeds the Target Long-
Term EPS Growth Objective (after adjustment for Relative
Performance Rank) for the most recently ended Long-Term
Performance Period, then the restrictions that would
otherwise lapse on such date shall lapse as to 100% of
the shares of such Performance Restricted Stock; and
(ii) if the Company meets or exceeds the Threshold
Long-Term EPS Growth Objective (after adjustment for
Relative Performance Rank) but does not meet or exceed
the Target Long-Term Growth Objective (after adjustment
for Relative Performance Rank) for the most recently
ended Long-Term Performance Period, then the
restrictions on the shares of Performance Restricted
Stock that would otherwise lapse on such date shall
lapse as to (i) 50% of such shares plus (ii) 50% of such
shares multiplied by a fraction (not less than zero and
not greater than one), the numerator of which is the
Company's actual Long-Term EPS Growth for the most
recently ended Long-Term Performance Period less the
Threshold Long-Term EPS Growth Objective for such period
and the denominator of which is the Target Long-Term EPS
Growth Objective for such period less the Threshold
Long-Term EPS Growth Objective for such period, and the
remaining shares of Performance Restricted Stock shall
immediately forfeit to the Company; and
(iii) if the Company does not meet or exceed the
Threshold Long-Term EPS Objective (after adjustment for
Relative Performance Rank) for the most recently ended
Long-Term Performance Period, then 100% of the shares of
such Performance Restricted Stock shall immediately
forfeit to the Company.
15
<PAGE>
For purposes of this Section 3(b), the terms Long-Term
Performance Period, Relative Performance Rank, Target Long-
Term EPS Objective and Threshold Long-Term EPS Objective
shall have the same meanings as in the Company's Executive
Incentive Compensation Plan for Corporate Executives. No
restrictions shall lapse on any Performance Restricted Stock
until the Committee certifies, in writing, that the
requirements set forth in this Section 3(b) have been
satisfied.
(c) Forfeiture. All shares of Stock forfeited under
this Section 3 shall be returned to the Company forthwith,
and all the rights of the Participant to such shares shall
immediately terminate without any payment or consideration
by the Company.
4. Termination of Employment By Reason of Death or
Disability. If a Participant who has been in the continuous
employment of the Company or of a Subsidiary since the date as of
which a Restricted Stock Grant was made to such Participant
shall, while in such employment, die or become Disabled and such
Participant's death or Disability shall occur more than one year
after the date as of which the Restricted Stock Grant was made to
such Participant, then the restrictions set forth in Part IV,
Section 2 shall lapse as to all shares of Restricted Stock
granted to such Participant pursuant to such Restricted Stock
Grant on the date of such event. A Participant may file a
written designation of beneficiary to receive, in the event of
the Participant's death, any shares for which restrictions lapse
on the date of death. The Company shall prescribe procedures and
requirements for beneficiary designations not inconsistent with
this provision and has the right to review and approve such
designations.
5. Agreement by Employee Regarding Withholding Taxes. Each
Participant shall agree that, subject to the provisions of Part
IV, Section 6,
(i) no later than the date as of which the restrictions
mentioned in Part IV, Section 2 and in the instrument
evidencing the making of the Restricted Stock Grant shall
16
<PAGE>
lapse, such Participant will pay to the Company in cash, or,
if the Committee approves, in Stock, or make other
arrangements satisfactory to the Committee regarding payment
of, any Federal, state or local taxes of any kind required
by law to be withheld with respect to the shares of Stock
subject to such Restricted Stock Grant, and
(ii) the Company and its Subsidiaries shall, to the
extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the Participant any
Federal, state or local taxes of any kind required by law to
be withheld with respect to the shares of Stock subject to
such Restricted Stock Grant.
6. Election to Recognize Gross Income in the Year of Grant.
If any Participant properly elects, within thirty (30) days of
the date of grant, to include in gross income for Federal income
tax purposes an amount equal to the fair market value of the
shares of Stock granted on the date of grant, such Participant
shall pay to the Company, or make arrangements satisfactory to
the Committee to pay to the Company in the year of such grant,
any Federal, state or local taxes required to be withheld with
respect to such shares. If such Participant shall fail to make
such payments, the Company and its Subsidiaries shall, to the
extent permitted by law, have the right to deduct from any
payment of any kind otherwise due to the employee any Federal,
state or local taxes of any kind required by law to be withheld
with respect to such shares.
7. Restrictive Legend; Certificates May be Held in Custody.
Each certificate evidencing shares of Stock granted pursuant to a
Restricted Stock Grant shall, (i) if issued to any person other
than the Company for safekeeping while the restrictions apply,
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Restricted Stock Grant and (ii)
if issued to the Company for safekeeping while the restrictions
apply, be noted as restricted on the records of the transfer
agent. Any attempt to dispose of such shares of Stock in
contravention of such terms, conditions and restrictions shall be
ineffective. The Committee may adopt rules which provide that
the certificates evidencing such shares may be held in custody by
17
<PAGE>
a bank or other institution, or that the Company may itself hold
such shares in custody, until the restrictions thereon shall have
lapsed.
8. Restrictions upon Making of Restricted Stock Grants.
The listing upon the New York Stock Exchange or the registration
or qualification under any Federal or state law of any shares of
Stock to be granted pursuant to Restricted Stock Grants (whether
to permit the making of Restricted Stock Grants or the resale or
other disposition of any such shares of Stock by or on behalf of
the employees receiving such shares) may be necessary or
desirable as a condition of or in connection with such Restricted
Stock Grants and if, in any such event, the Board in its sole
discretion so determines, delivery of the certificates for such
shares of Stock shall not be made until such listing,
registration or qualification shall have been completed. In such
connection, the Company agrees that it will use its best effort
to effect any such listing, registration or qualification;
provided, however, the Company shall not be required to use its
best efforts to effect such registration under the Securities Act
of 1933 other than on Form S-8, as presently in effect, or such
other forms as may be in effect from time to time calling for
information comparable to that presently required to be furnished
under Form S-8.
9. Restrictions upon Resale of Stock. If the shares of
Stock that have been granted to a Participant pursuant to the
terms of the Plan are not registered under the Securities Act of
1933, as amended, pursuant to an effective registration
statement, such Participant, if the Committee shall deem it
advisable, may be required to represent and agree in writing that
(i) any shares of Stock acquired by such employee pursuant to the
Plan will not be sold except pursuant to an effective
registration statement under the Securities Act of 1933, as
amended, or pursuant to an exemption from registration under said
Act and (ii) such Participant is acquiring such shares of Stock
for the Participant's own account and not with a view to the
distribution thereof.
18
<PAGE>
V. MISCELLANEOUS
1. Effective Date. The Plan became effective on March 18,
1994, subject to approval by shareowners before March 18, 1995.
2. Duration of Plan. Unless sooner terminated, the Plan
shall remain in effect until March 18, 2004. Termination of the
Plan shall not affect any Options or Rights previously granted,
which Options or Rights shall remain in effect until exercised,
surrendered, or cancelled, or until they have expired, all in
accordance with their terms. Termination of the Plan shall not
affect any Restricted Stock Grants previously made, or Stock
previously granted pursuant to a Restricted Stock Grant; the
terms, conditions and restrictions applicable to shares issued
pursuant to a Restricted Stock Grant shall remain in effect until
such terms, conditions and restrictions shall have lapsed all in
accordance with their terms.
3. Changes in Capital Structure. In the event that there
is any change in the capital structure of the Company through
merger, consolidation, reorganization, recapitalization, spin-off
or otherwise, or if there shall be any dividend on the Company's
Stock, payable in such Stock, or if there shall be a Stock split
or a combination of shares, then:
(i) the number of shares reserved for Options (both in
the aggregate and with respect to each Participant) and the
number of shares subject to outstanding Options and the
price per share of each such Option;
(ii) the number of shares with respect to which Rights
may be exercised (both in the aggregate and with respect to
each Participant); and
(iii) the number of shares of Stock reserved for
Restricted Stock Grants under the Plan shall be proportionately adjusted
by the Board as it deems equitable, in its absolute discretion, to prevent
dilution or enlargement of the rights of a Participant and any shares issued
pursuant to such change in capital structure shall be subject to
19
<PAGE>
the same terms, conditions and restrictions as the shares of
Stock with respect to which newly issued shares are issued. The
issuance of Stock for consideration and the issuance of Stock
rights shall not be considered a change in the Company's capital
structure. No adjustment provided for in this Section 3 shall
require the issuance of any fractional share.
4. Change in Control. If while unexercised Options,
Rights, or Restricted Stock Grants remain outstanding under the
Plan:
(i) any "person," as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareowners of the Company in
substantially the same proportions as their ownership of
stock of the Company), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 50%
or more of the combined voting power of the Company's then
outstanding securities;
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute
the Board, and any new director (other than a director
designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause
(i), (iii) or (iv) of this Section) whose election by the
Board or nomination for election by the Company's
shareowners was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease
for any reason to constitute at least a majority thereof;
(iii) the shareowners of the Company approve a merger or
consolidation of the Company with any other Company, other
than (1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
20
<PAGE>
outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger
or consolidation or (2) a merger or consolidation effected
to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(iv) the shareowners of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets,
then (a) from and after the date of the first of the foregoing
events to occur, all Options and Rights held by active employees
on such date shall be exercisable in full, whether or not
otherwise exercisable; and (b) on the date of the first of the
foregoing events to occur, the restrictions set forth in Part IV,
Section 2 on all outstanding Restricted Stock Grants, including
Performance Restricted Stock Grants, shall lapse.
5. Amendment or Termination. The Board may, by resolution,
amend or terminate the Plan at any time; provided, however, that
(i) shareowner approval shall be required for any changes to
the Plan which would require shareowner approval under the
Delaware General Corporation Law, Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, or Section
162(m) of the Code; and
(ii) the Board may not, without the written consent of the
Participant, alter, impair or adversely affect any right of
such Participant with respect to any Option or Right
previously granted or Restricted Stock Grant previously made
to such Participant under the Plan except as authorized
herein.
Notwithstanding the foregoing, the Board may, by resolution,
amend the Plan in any way that it deems necessary or appropriate
in order to make income with respect to the Plan deductible for
21
<PAGE>
Federal income tax purposes under Section 162(m) of the Code
without regard to the foregoing provisos (i) and (ii), and any
such amendment shall be effective as of such date as is necessary
to make such income under the Plan so deductible.
6. Unfunded Plan. The Plan shall be unfunded. Neither the
Company nor the Committee shall be required to segregate any
assets that may at any time be represented by Options or Rights
under the Plan. Neither the Company nor the Committee shall be
deemed to be a trustee of any amounts to be paid under the Plan.
Any liability of the Company to any Participant with respect to a
right shall be based solely upon any contractual obligations
created by the Plan or a Stock Appreciation Right Agreement or
Option Agreement; no such obligation shall be deemed to be
secured by any pledge or any encumbrance on any property of the
Company.
VI. CANCELLATION AND RESCISSION
1. Competition; Confidential Information; Termination for
Cause
(a) Unless an Option Agreement or a Stock Appreciation
Right Agreement (any such agreement being referred to herein
as an "Agreement") specifies otherwise, the Committee may
(1) cancel at any time any unexercised Option or Right; or
(2) rescind any exercise of an Option or Right;
if the Participant is not in compliance with all other
applicable provisions of the Agreement or the Plan or if,
prior to any such exercise or within six months after such
exercise, the Participant
(i) engages in a Competing Business, as such term is
defined in the Agreement; or
(ii) solicits for employment, hires or offers employment
to, or discloses information to or otherwise aids or
assists any other person or entity other than the
22
<PAGE>
Company in soliciting for employment, hiring or offering
employment to, any employee of the Company; or
(iii) takes any action which is intended to harm the
Company or its reputation, which the Company reasonably
concludes could harm the Company or its reputation or
which the Company reasonably concludes could lead to
unwanted or unfavorable publicity to the Company;
(iv) discloses to anyone outside the Company, or uses in
other than the Company's business, any "confidential
information", as such term is defined in the Agreement;
or
(v) is terminated by the Company for "cause".
(b) Upon exercise of an Option or Right, the
Participant shall certify on a form acceptable to the
Committee that the Participant is in compliance with the
terms and conditions of the Agreement and the Plan.
(c) The Company shall immediately notify the
Participant in writing of any cancellation of any
unexercised Option or Right. Following issuance of such
notice, the Participant shall have no further rights with
respect to such Option or Right.
(d) The Company shall notify the Participant in
writing of any rescission of an exercise of an Option or
Right within one year after the activity referred to in Part
VI, Section 1(a). Within ten days after receiving such a
notice from the Company, the Participant shall either (i)
pay to the Company the excess of the fair market value of
the Stock on the date of exercise of an Option over the
exercise price for the Option or the fair market value of
the Stock and/or cash distributed to the Participant as a
result of the exercise of a Right or (ii) return the Stock
received upon the exercise of an Option (in which case the
Company will return the exercise price to the Participant)
or return the Stock and/or cash distributed upon the
exercise of a Right.
23
<PAGE>
(e) The term "cause" shall mean (i) an intentional act
of fraud, embezzlement, theft or any other material
violation of law in connection with the Participant's duties
or in the course of the Participant's employment with the
Company; or (ii) intentional damage to assets of the
Company; or (iii) intentional disclosure of confidential
information of the Company contrary to the policy of the
Company; or (iv) breach of the Participant's obligations the
Company; or (v) intentional engagement in any competitive
activity which would constitute a breach of the Partici-
pant's duty of loyalty or of the Participant's obligations
under any written contract of employment; or (vi)
intentional breach of any policy of the Company; or (vii)
the willful and continued failure by the Participant to
substantially perform the Participant's duties with the
Company (other than any such failure resulting from the
Participant's incapacity due to physical or mental illness);
or (viii) the willful engaging by the Participant in conduct
which is demonstrably and materially injurious to the
Company, monetarily or otherwise.
2. Agreement by Participant Regarding Deduction. The
Participant shall agree and consent to a deduction from any
amounts the Company owes to the Participant from time to
time (including amounts owed as wages or other compensation,
fringe benefits, or vacation pay, as well as any other
amounts owed to the Participant by the Company) to the
extent of the amounts the Participant owes the Company under
this Part VI. Whether or not the Company elects to make any
set-off in whole or in part, if the Company does not recover
by means of set-off the full amount owned by the
Participant, calculated as set forth in this Part VI, then
the Participant agrees to pay immediately the unpaid balance
to the Company.
24
<PAGE>
DEFERRED COMPENSATION PLAN
Section 1.Purpose.
The purpose of this Plan is to provide an additional incentive to
the key employees of The May Department Stores Company and its
subsidiaries to achieve superior performance.
Section 2.Definitions.
(a) Board means the Board of Directors of May, as hereinafter
defined.
(b) Committee means the Committee appointed to administer the
Plan, as hereinafter defined, as provided in Section 8 hereof.
(c) Common Stock means the Common Stock of May, as hereinafter
defined.
(d) Corporation means May, as hereinafter defined, or any
subsidiary of May which is an employer of an Executive, as
hereinafter defined, who is a Participant, as hereinafter
defined, in the Plan, as hereinafter defined.
(e) Executive means any individual employed by the Corporation
in an executive capacity who receives regular stated compensation
in respect of such employer-employee relationship other than a
pension, retainer or fee under a contract.
(f) Fiscal Year means the fiscal year of the Corporation as
established from time to time.
(g) May means The May Department Stores Company, a Delaware
corporation, its successors and assigns.
(h) Participant means an Executive who has been designated by
the Committee as eligible, and who has elected to participate in
the Plan, as hereinafter defined.
(i) Plan means the Deferred Compensation Plan of the
Corporation, as described herein.
(j) Restricted Stock means shares of Common Stock described in
Section 10 hereof.
(k) Stock Unit means an accounting equivalent of one share of
Common Stock.
<PAGE>
(l) Stock Unit Account means an account on the records of the
Corporation in respect of Stock Units which have been and/or may
be allocated to a Participant in the manner hereinafter set
forth.
Section 3.Methods of Payment.
(a) Except as hereinafter provided, prior to the commencement of
the calendar year that includes the first day of a Fiscal Year,
each Participant shall be afforded the opportunity of making an
election to have any one or more of the following alternative
methods of payment applied to all or a part of any portion (which
such portion shall not exceed one-half, unless specifically
provided for to the contrary in the participant's written
contract of employment) of any compensation of which such
Participant shall be the recipient in respect of his performance
during such Fiscal Year:
(i) Alternative (i): Payment of any such compensation that
is paid in the form of a bonus on the first day of April
next following the close of such Fiscal Year or on such
subsequent date as the amount thereof is ascertainable.
(ii) Alternative (ii): Payment thereof at a deferred date
or dates either in a lump sum or in annual installments, as
may be determined by the Committee, such payment when made
to include interest, as hereinafter provided, from the first
day of April next following the Fiscal Year in respect of
which the compensation was payable to the date of payment.
(iii) Alternative (iii): [reserved]
(iv) Alternative (iv): Payment thereof at a deferred date
or dates either in a lump sum or in annual installments, as
may be determined by the Committee, and either in cash or in
Common Stock or in both cash and Common Stock, as may be
determined by the Committee, in respect of Stock Units to be
allocated to the Participant as hereinafter provided.
If any Participant shall fail to make an election with respect to
any year, he shall be deemed to have elected not to defer any
portion of his compensation for such year. Notwithstanding the
requirements imposed by this paragraph (a) with respect to the
time by which an election must be made, an employee who is
designated by the Committee as a Participant for the first time
may, within 60 days of such designation, make any election
otherwise permitted under this paragraph (a) with respect to the
Participant's compensation in respect of employment subsequent to
the date on which the election is made.
2
<PAGE>
(b) In connection with all determinations to be made by the
Committee as respects Alternative (ii) and, except for the
determination of whether payment thereunder is to be made in cash
or in Common Stock or in both cash and Common Stock (which
determination shall be in the absolute discretion to the
Committee), Alternative (iv), the Participant shall be given an
opportunity at the time he makes his election of indicating his
preferences, which preferences shall be taken into account by the
Committee in making its determinations. Except as provided in
Section 13 and Section 14 in no event shall payments under
Alternative (ii) or (iv) commence prior to the earliest of the
Participant's retirement, termination of employment or death (or
prior to the occurrence of a severe financial hardship, as
provided below).
The Committee shall make its determination with respect to the
payment schedule (i.e., a lump sum payment or payments in annual
installments) under Alternative (ii) or (iv) prior to the
commencement of the calendar year that includes the first day of
the Fiscal Year for which such alternative is elected. Except in
the event of a severe financial hardship, as provided below, the
Committee's determination with respect to a payment schedule
shall become irrevocable as of the first day of the calendar year
that includes the first day of the Fiscal Year for which the
determination is made. However, upon the written request of the
Participant (or if applicable, the beneficiary or distributee)
the payment schedule may be revised by the Committee, in its
absolute discretion, in the event that the Participant (or if
applicable, the beneficiary or distributee) incurs a severe
financial hardship. Such severe financial hardship must have
been caused by an accident, illness or other event which was
beyond the control of the Participant (or, if applicable, the
beneficiary or distributee); and the Committee shall revise the
payment schedule that it had previously established only to the
extent that the Committee considers necessary to eliminate the
severe financial hardship. Notwithstanding the requirements
imposed by this paragraph (b) regarding the date by which the
Committee must make a determination with respect to the payment
schedule under Alternative (ii) or (iv) and the date as of which
such determination shall become irrevocable (except in the event
of a severe financial hardship), when a Participant makes an
election pursuant to the last sentence of paragraph (a) of this
Section 3, the Committee shall make its determination with
respect to the payment schedule at any time prior to the date as
of which the Participant's election becomes effective, and its
determination shall become irrevocable (except in the event of a
severe financial hardship) as of such effective date.
3
<PAGE>
(c) In the case of a Participant who elects to have all or any
part of his compensation for a particular Fiscal Year paid under
Alternative (iv), Stock Units shall be allocated to such
Participant by crediting the same to his Stock Unit Account, and
the number of Stock Units to be so credited for such Fiscal Year
shall be the sum of the following:
(i) the quotient, disregarding fractions, resulting from
dividing the dollar amount of such portion of the
Participant's compensation as is to be so applied to
Alternative (iv) by the average closing price of the Common
Stock on the New York Stock Exchange during the month of
February ending in the Fiscal Year next following the Fiscal
Year in respect of which such compensation was payable; plus
(ii) the quotient, disregarding fractions, resulting from
dividing the aggregate dollar amount of cash dividends which
would have been paid to the Participant during such Fiscal
Year had the Stock Units standing in his Stock Unit Account
from time to time during such Fiscal Year been shares of
Common Stock by the average closing price of the Common
Stock on the New York Stock Exchange during the month of
February ending in the year next following such Fiscal Year;
plus
(iii) the number of shares of Common Stock, disregarding
fractions, which would have been received by the Participant
as stock dividends during such Fiscal Year had the Stock
Units standing in his Stock Unit Account at the date or
dates of payment of such stock dividend(s) been shares of
Common Stock.
Any allocation of Stock Units to a Participant's Stock Unit
Account required to be made pursuant to this paragraph (c) shall
be made as of the first day of April next following the Fiscal
Year in respect of which such compensation was payable or such
dividends were paid, as the case may be. The aggregate value of
the fraction or fractions remaining after making the applicable
calculations referred to in subparagraphs (c)(i), (c)(ii) and
(c)(iii) of this Section 3 (based upon the average closing price
of Common Stock on the New York Stock Exchange during the month
of February next preceding such month of April), shall not be
converted into Stock Units but shall be allocated and added to
the amount elected by the Participant to be paid to him under
Alternative (ii) above, or, if the Participant shall have made no
such election under Alternative (ii), then such remaining amount
shall be paid to the Participant as if he had made an election
under Alternative (i) above to be so paid.
4
<PAGE>
(d) Notwithstanding the provisions of Section 3(c) to the
contrary, in the event of a recapitalization of May pursuant to
which the outstanding shares of Common Stock shall be changed
into a greater or smaller number of shares (including, without
limitation, a stock split or a stock dividend of 25% or more of
the number of outstanding shares of Common Stock), the number of
Stock Units credited to a Participant's Stock Unit Account shall
be appropriately adjusted as of the effective date of such
recapitalization.
(e) Interest to be paid under Alternative (ii) shall be credited
annually as of April 1 of each year and shall be at the following
rates:
(i) to and including March 31, 1974, the rate shall be 3%,
compounded annually, and
(ii) after March 31, 1974, the rate shall be equal to the
average yield on long-term United States Government Bonds
(as determined by the Board of Governors of the Federal
Reserve Board and published in the Federal Reserve Bulletin)
for the calendar year prior to said April 1, compounded
annually, provided, however, that if the method of
calculation of such average yield shall be changed, or if
the determination and/or the publication thereof be
discontinued, then the Committee shall substitute therefor
such alternative method of determining such interest rate as
it, in its discretion, shall deem appropriate.
(f) Prior to the commencement of a specified period of time, the
Corporation may credit a Participant with a bonus ("Contingent
Bonus") with respect to his employment during such period of
time. The Contingent Bonus will be subject to forfeiture for
such period as the Committee may determine and upon such terms
and conditions as the Committee may establish, either by adopting
resolutions of general applicability or by making individual
determinations on a case-by-case basis. Prior to the date on
which a Contingent Bonus is credited with respect to a
Participant, the Committee will give the Participant an
opportunity to elect that one or more of the alternative methods
of payment provided for in Section 3(a)(ii) and (iv) shall be
applied to all or a portion of such Contingent Bonus, both with
respect to the period during which the Contingent Bonus is
forfeitable and with respect to the period after the forfeiture
provisions lapse. The forfeiture provisions that are applied to
a Contingent Bonus in accordance with this paragraph (f) shall
also be applicable to any increments thereon under Alternative
(ii) or (iv). In the event that no election is made with respect
5
<PAGE>
to a Contingent Bonus (or portion thereof) for the period after
the forfeiture provisions lapse, then such Contingent Bonus (or
portion thereof) shall be distributed under Alternative (i) upon
the lapse of the forfeiture provisions.
Section 4.Limitation of Stock Units.
In no event shall the aggregate number of Stock Units allocated
under this Plan in respect of compensation for any Fiscal Year
exceed a number equal to 1/2 of 1% of the total number of shares of
Common Stock outstanding at the close of such Fiscal Year
(inclusive of any Restricted Stock then outstanding).
Section 5.Distribution from the Stock Unit Account.
(a) Distribution from a Participant's Stock Unit Account shall
be made in accordance with the determinations made by the
Committee, as in this Plan provided. Stock Units shall be
adjusted from time to time in accordance with this Plan until all
distributions to which a Participant is entitled hereunder shall
have been made.
(b) If the Committee determines that distribution to a
Participant is to be made in annual installments, the Committee
may determine from time to time whether each particular
installment shall be distributed in cash or in Common Stock or in
both cash and Common Stock.
(c) If the Committee determines that a distribution to a
Participant is to be made in a lump sum in Common Stock, the
number of shares of Common Stock to be so distributed to such
Participant shall equal the number of Stock Units then in his
Stock Unit Account. For the purpose of determining the number of
shares of Common Stock to be distributed on a particular annual
installment distribution date, the Committee shall make its
calculations as if that annual installment and all subsequent
annual installments were in fact to be made in shares of Common
Stock, as follows: the number of shares of Common Stock which
would be then so distributable, except in the case of the last
distribution, shall be equal to the product, disregarding
fractions, of the total number of Stock Units then credited to
the Participant's Stock Unit Account, multiplied by a fraction,
the numerator of which shall be one and the denominator of which
shall be the number of remaining installments; and in the case of
the last distribution, shall be the number of shares of Common
Stock equal to the Stock Units then remaining in the
Participant's Stock Unit Account. The Participant's Stock Unit
Account shall be decreased by one Stock Unit for each share of
Common Stock distributed to a Participant.
6
<PAGE>
(d) If the Committee determines that a particular distribution
to a Participant is to be made in cash, a computation shall first
be made of the number of shares of Common Stock which would then
be distributable pursuant to paragraph (c) of this Section 5 if
such distribution were to be made in shares of Common Stock. The
number of shares thus determined shall then be converted into
cash in respect of each such distribution by valuing such shares
at the average closing price of the Common Stock on the New York
Stock Exchange during the month of February next preceding the
date of such distribution, and the resulting amount of cash shall
be distributed to the Participant. The Participant's Stock Unit
Account shall then be decreased by one Stock Unit for each share
of Common Stock which would have been distributed to the
Participant had such cash distribution been made in shares of
Common Stock.
(e) If the Committee determines that a distribution is to be
made in part in Common Stock and in part in cash, paragraphs (c)
and (d) of this Section 5 shall be applied separately to the
respective parts of such distribution and to the respective parts
of the Stock Unit Account with respect to which the distribution
is to be made.
Section 6.Death of Participant.
In the event of the death of a Participant prior to complete
distribution under Alternatives (ii) and/or (iv) hereof, all cash
and/or Stock Units then remaining undistributed, or which shall
thereafter become distributable to him pursuant to such
Alternatives, shall be distributed to such beneficiary as the
Participant shall have designated in writing to the Corporation,
or, in the absence of such designation, to his personal
representative. Such distribution shall be made at such date or
dates either in a lump sum or in annual installments, as may be
determined by the Committee prior to the beginning of the
calendar year that includes the first day of the Fiscal Year for
which alternative is elected (or, where applicable, the date
specified by the last sentence of Section 3(b)); provided,
however, that in the event of a severe financial hardship, the
Committee may subsequently revise its determination in accordance
with the applicable provisions of Section 3(b).
Section 7.Participant's Right Unsecured; Investments.
The right of a Participant to receive any distribution hereunder
shall be an unsecured claim against the general assets of the
Corporation. Nothing in this Agreement shall require the
Corporation to invest any amount, the payment of which has been
deferred under Alternative (iv), in Common Stock or in any other
medium.
7
<PAGE>
Section 8.Administration of the Plan--Committee.
(a) The Plan shall be administered by a Committee of not less
than three nor more than five persons designated by the Board
(which may, but need not, be the compensation committee of the
Board), all of whom shall be directors of the Corporation and
shall serve at the pleasure of the Board. In no event shall any
member of the Committee be a Participant. The Committee shall
act by vote or written consent of a majority of its members. The
Plan may be amended, modified or terminated by the Board, except
that no change may be made without the approval of the Common
Shareowners of May (i) in the maximum number of shares or Stock
Units deliverable or allocable in respect of any Fiscal Year
under the plan or (ii) in the provisions of subparagraphs (c)(i)
and (c)(ii) of Section 3 of this Plan relating to the method of
determining the number of Stock Units allocable to a Participant.
(b) The Committee shall prescribe such forms as it considers
appropriate for the administration of the Plan. The forms shall
set forth such terms and conditions not inconsistent with the
terms of the Plan as the Committee may determine and shall
designate:
(i) the alternative or alternatives elected by the
Participant pursuant to Section 3(a);
(ii) the Committee's determination of the time or times when
payment of such compensation will be made to the Participant
pursuant to Section 3(b)(in the absence of a severe
financial hardship);
(iii) the beneficiary (if any) designated by the
Participant pursuant to Section 6; and
(iv) the Committee's determination of the time or times when
payment of such compensation will be made after the
Participant's death pursuant to Section 6 (in the absence of
a severe financial hardship).
Section 9.Successors.
The provisions of the Plan with respect to each Participant shall
bind the legatees, heirs, executors, administrators or other
successors in interest of such Participant.
Section 10.Restricted Stock.
With respect to Fiscal Years ending prior to February 1, 1970,
Participants were entitled to elect a method of payment in shares
8
<PAGE>
of fully paid and non-assessable Common Stock of May ("Restricted
Stock"), the transfer of which such shares was restricted. The
following terms and conditions shall continue to apply to shares
of Restricted Stock:
(a) Such shares in the hands of the Participant will be subject
to the restrictions that they may not be sold, assigned,
transferred, discounted or pledged as collateral for a loan or as
security for the performance of any obligation or for any purpose
by the Participant without the prior written consent of the
Committee. Such restrictions shall expire with respect to such
shares at the time or times determined by the Committee and
specified on the legend affixed to the certificate therefor.
(b) Any Participant to whom Restricted Stock is issued shall have
all the rights of a shareowner with respect to such stock
including, without limitation, the right to receive the dividends
and to vote the same, subject only to the restrictions on
transfer set forth in paragraph (a) of this Section 10.
(c) There shall be imprinted on each certificate for shares of
Restricted Stock delivered to a Participant the appropriate
legend setting forth the substance of the restriction. In the
event that there becomes issuable to a Participant a substitute
certificate or an additional certificate by reason of any
corporate reorganization, recapitalization, stock dividend or
like corporate change, any share represented by such substitute
certificate or additional certificate shall be subject to the
same restriction as the share in respect of which it was issued
and the certificate evidencing the same shall be similarly
stamped.
(d) In the granting of any consent by the Committee to release
Restricted Stock from the aforesaid restrictions, the Committee
shall be governed by the basic purpose of the Plan to provide an
additional incentive to the Participants, and in no event shall
the Committee consent to any such change in the absence of
illness, accident or other form of hardship.
(e) In the event of the death of a Participant, any shares of
Restricted Stock registered in his name may, notwithstanding the
restriction on the transfer thereof, be transferred pursuant to
his will or the laws of descent and distribution; it being
understood, however, that such shares in the hands of the
transferee shall be subject to the same restriction as was
applicable to their transfer by the Participant.
9
<PAGE>
Section 11.Alienation.
(a) Subject to the provisions of Section 6 and paragraph (b) of
this Section 11, no amount, the payment of which as been deferred
under Alternative (ii) or (iv), shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, levy or charge, and any attempt to so anticipate,
alienate, sell, transfer, assign, pledge, encumber, levy or
charge the same shall be void; nor shall any such amount be in
any manner liable for or subject to the debts, contracts,
liabilities, engagements or torts of the person entitled to such
benefit.
(b) Nothing in this Section 11 shall prohibit the personal
representative of a Participant from designating that any amount
be distributed in accordance with the terms of the Participant's
will or pursuant to the laws of descent and distribution.
Section 12.Withholding.
There shall be deducted from all amounts paid under this Plan any
taxes required to be withheld by any federal, state or local
government. The Participants and their beneficiaries,
distributees and personal representatives will bear any and all
federal, foreign, state, local or other income or other taxes
imposed on amounts paid under this Plan as to which no amounts
are withheld, irrespective of whether withholding is required.
Section 13.Discretionary Payment.
(a) Notwithstanding any other provision in any other Section of
the Plan to be contrary, the Committee may, in its sole and
absolute discretion, direct an immediate payment of cash,
distribution of Stock and/or release of restrictions on
Restricted Stock with respect to amounts (except those referred
to in the next proviso) previously deferred under this Plan if
the Committee determines that such action is in the best
interests of May, the Participants and their beneficiaries;
provided, however, that the Committee may not direct an immediate
payment, distribution and/or release with respect to amounts
deferred pursuant to elections filed on or before October 1,
1985, by a Participant unless such Participant shall have
consented, during the period, not to exceed thirty (30) days,
designated by the Corporation and communicated to all such
Participants, to the application of this Section 13 to such
amounts (which consent, once given, shall be irrevocable).
(b) In the event that the Committee shall so direct an immediate
payment, distribution and/or release in accordance with Section
13(a), then
10
<PAGE>
(i) the amounts of cash and the numbers of shares of Stock
to be so paid and/or distributed shall be determined by the
Committee so as to reflect fairly and equitably appropriate
interest and dividends since the preceding April 1 and so as
to reflect fairly and equitably such other facts and
circumstances as the Committee deems appropriate, including,
without limitation, recent price of the Stock;
(ii) amounts which were otherwise deferred or to be deferred
with respect to the Fiscal Year or long-term period in which
such payment or distribution occurs shall be paid when
otherwise payable (such amounts which would otherwise have
been payable prior to the date of such payment or
distribution shall be paid as soon as practicable
thereafter);
(iii) in the event that cash is not paid or made available
to a Participant when otherwise due or that shares of Stock
are not distributed or otherwise made available to a
Participant when otherwise due, then such Participant may
file a claim for such payment or distribution and, if such
Participant is successful, then the Corporation shall
reimburse such Participant for reasonable attorneys' fees
actually paid by the Participant in enforcing such
Participant's rights to such payment or distribution; and
(iv) in the event that cash is not paid or made available to
a Participant when otherwise due, then interest will accrue
with respect to such unpaid amount from the date it was
otherwise due until the date it is actually paid at a rate
equal to two percentage points over the prime rate as in
effect from time to time, as determined in good faith the
Committee based on the prime rate charged from time to time
by major banks in the City of New York.
Section 14.Change in Control.
Notwithstanding any other provision in any other Section of this
Plan to the contrary, (i) the value of all amounts deferred by a
Participant which have not yet been credited to the Participant's
accounts under this Plan and (ii) the value of all of a
Participant's accounts under this Plan shall be paid to such
Participant in each case in a lump sum cash payment on the
occurrence of a Change in Control of the Corporation or as soon
thereafter as practicable, but in no event later than five days
after the Change in Control of the Corporation, and (iii)
restrictions on all Restricted Stock, as defined in Section 10 of
this Plan shall lapse upon the occurrence of Change in Control of
11
<PAGE>
the Corporation. The amounts of cash credited to each
Participant's accounts prior to determining the amount of cash to
be paid from these accounts shall be determined by the Committee
(which, for this purpose, shall be comprised of members of the
Board prior to the Change in Control of the Corporation) so as to
reflect fairly and equitably appropriate interest and dividends
since the preceding April 1 and so as to reflect fairly and
equitably such other facts and circumstances as the Committee
deems appropriate, including, without limitation, recent price of
the stock. For purposes of payments under this Section 14, the
value of Stock Unit shall be computed as the greater of (a) the
closing price of shares of Common Stock as reported on the New
York Stock Exchange on or nearest the date on which the Change in
Control is deemed to occur (or, if not listed on such exchange,
on a nationally recognized exchange or quotation system on which
trading volume in the Common Stock is highest) or (b) the highest
per share price for shares of Common Stock actually paid in
connection with any Change in Control.
For purposes of this Plan, a "Change in Control of the
Corporation" shall be deemed to have occurred if
(a) any "person" as such term is used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (other than the Corporation, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Corporation, or any company owned, directly or indirectly, by the
shareowners of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation), is
or becomes the "beneficial owner" (as defined in Rule 13d-3 under
Exchange Act), directly or indirectly of securities of the
Corporation representing 50% or more of the combined voting power
of the Corporation's then outstanding securities;
(b) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has
entered into an agreement with the Corporation to effect a
transaction described in clause (a), (c) or (d) of this Section
whose election by the Board or nomination for election by the
Corporation's shareowners was approved by a vote of at least two-
thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election
or nomination for election was previously so approved cease for
any reason to constitute at least a majority thereof;
12
<PAGE>
(c) the shareowners of the Corporation approve a merger or
consolidation of the Corporation with any other Corporation,
other than (1) a merger or consolidation which would result in
the voting securities of the Corporation outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of
the voting securities of the Corporation or such surviving entity
outstanding immediately after such merger or consolidation or (2)
a merger or consolidation effected to implement a
recapitalization of the Corporation (or similar transaction) in
which no "person" (as hereinabove defined) acquires more than 50%
of the combined voting power of the Corporation's then
outstanding securities; or
(d) the shareowners of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the
Corporation's assets.
Records/Notes
13
<PAGE>
EXECUTIVE INCENTIVE COMPENSATION PLAN
FOR CORPORATE EXECUTIVES
This document constitutes and sets forth the terms of The
May Department Stores Company Executive Incentive Compensation
Plan for Corporate Executives.
Section 1. Purposes of the Plan. The purposes of the Plan
are (i) to provide a means to attract, retain and motivate
talented personnel and (ii) to provide to participating
management employees added incentive for high levels of
performance and for additional effort to improve the Company's
financial performance. Payments of awards under this Plan are
intended to qualify for tax deductibility under the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). Notwithstanding any other provisions of this Plan,
if any decision must be made before a specified date in order for
payments to qualify for such tax deductibility under the tax
rules in effect from time to time, then such decision is to be
made before such date.
Section 2. Definitions. Whenever used herein, the
following terms shall have the following meanings:
(a) "Annual Award" means, for a Participant for a Fiscal
Year, the product of the Participant's Minimum Annual
Compensation for such Fiscal Year multiplied by the
aggregate of:
(i) the Participant's Annual EPS Factor for such
Fiscal Year, plus
(ii) the Participant's Annual RONA Factor for such
Fiscal Year.
(b) "Annual EPS Factor" means, for a Participant for a
Fiscal Year
(1) if actual EPS Growth for such Fiscal Year equals or
exceeds the Participant's Threshold Annual EPS Growth
Objective for such Fiscal Year but is less than the
Participant's Target Annual EPS Growth Objective for such
Fiscal Year,
(i) seven and one-half percent (up to fifteen percent
for the Chairman of the Board or the Chief Executive
Officer), plus
<PAGE>
(ii) seven and one-half percent (up to fifteen
percent for the Chairman of the Board or the Chief
Executive Officer) multiplied by a fraction (not less
than zero and not greater than one), the numerator of
which is the actual EPS Growth for such Fiscal Year
less the Participant's Threshold Annual EPS Growth
Objective for such Fiscal Year and the denominator of
which is the Participant's Target Annual EPS Growth
Objective for such Fiscal Year less the Participant's
Threshold Annual EPS Growth Objective for such Fiscal
Year; or
(2) if actual EPS Growth for such Fiscal Year equals or
exceeds the Participant's Target Annual EPS Growth
Objective for such Fiscal Year but is less than the
Participant's Maximum Annual EPS Growth Objective for
such Fiscal Year,
(i) fifteen percent (up to thirty percent for the
Chairman of the Board or the Chief Executive
Officer), plus
(ii) seven and one-half percent (up to fifteen
percent for the Chairman of the Board or the Chief
Executive Officer) multiplied by a fraction (not less
than zero and not greater than one), the numerator of
which is the actual EPS Growth for such Fiscal Year
less the Participant's Target Annual EPS Growth
Objective for such Fiscal Year and the denominator of
which is the Participant's Maximum Annual EPS Growth
Objective for such Fiscal Year less the Participant's
Target Annual EPS Growth Objective for such Fiscal
Year; or
(3) if actual EPS Growth for such Fiscal Year equals or
exceeds the Participant's Maximum Annual EPS Growth
Objective for such Fiscal Year, twenty-two and one-half
percent (up to forty-five percent for the Chairman of the
Board or the Chief Executive Officer);
provided, however,
(1) that the Annual EPS Factor shall be subject to
adjustment as provided in Section 6(b); and
(2) that the percentages referred to in this
definition may be adjusted by the Committee as
provided in Section 4(b).
2
<PAGE>
(c) "Annual RONA Factor" means, for a Participant for a
Fiscal Year
(1) if actual RONA for such Fiscal Year equals or
exceeds the Participant's Threshold Annual RONA Objective
for such Fiscal Year but is less than the Participant's
Target Annual RONA Objective for such Fiscal Year,
(i) seven and one-half percent (up to fifteen
percent for the Chairman of the Board or the Chief
Executive Officer), plus
(ii) seven and one-half percent (up to fifteen
percent for the Chairman of the Board or Chief
Executive Officer) multiplied by a fraction (not less
than zero and not greater than one), the numerator of
which is the actual RONA for such Fiscal Year less
the Participant's Threshold Annual RONA Objective for
such Fiscal Year and the denominator of which is the
Participant's Target Annual RONA Objective for such
Fiscal Year less the Participant's Threshold Annual
RONA Objective for such Fiscal Year; or
(2) if actual RONA for such Fiscal Year equals or
exceeds the Participant's Target Annual RONA Objective
for such Fiscal Year but is less than the Participant's
Maximum Annual RONA Objective for such Fiscal Year,
(i) fifteen percent (up to thirty percent for the
Chairman of the Board or the Chief Executive
Officer), plus
(ii) seven and one-half percent (up to fifteen
percent for the Chairman of the Board or Chief
Executive Officer) multiplied by a fraction (not less
than zero and not greater than one), the numerator of
which is the actual RONA for such Fiscal Year less
the Participant's Target Annual RONA Objective for
such Fiscal Year and the denominator of which is the
Participant's Maximum Annual RONA Objective for such
Fiscal Year less the Participant's Target Annual RONA
Objective for such Fiscal Year; or
(3) if actual RONA for such Fiscal Year equals or
exceeds the Participant's Maximum Annual RONA Objective
for such Fiscal Year, twenty-two and one-half percent (up
to forty-five percent for the Chairman of the Board or
the Chief Executive Officer);
3
<PAGE>
provided, however,
(1) that the Annual RONA Factor shall be subject to
adjustment as provided in Section 6(b); and
(2) that the percentages referred to in this
definition may be adjusted by the Committee as
provided in Section 4(b).
(d) "Average Annual Compensation" means, for a Long-Term
Performance Period, the Participant's average annual salary
rate during such period, determined on a monthly basis, or
such lesser amount as the Participant and the Company shall
agree to, in writing.
(e) "Board" means the Board of Directors of the Company.
(f) "Committee" means a committee designated by the
Board, which shall consist of not less than three members of
the Board who shall be appointed by and serve at the
pleasure of the Board and who shall be "outside" directors
within the meaning of Section 162(m) of the Code.
(g) "Company" means The May Department Stores Company, a
Delaware corporation.1
(h) "Disability" means the inability of a Participant to
perform the normal duties of the Participant's regular
occupation.
(i) "EPS Growth" means (i) for a Fiscal Year, the annual
growth rate in EPS measured from the immediately preceding
Fiscal Year; and (ii) for a Long-Term Performance Period,
the compound annual growth rate in EPS measured from the
Fiscal Year immediately preceding the Long-Term Performance
Period to the last Fiscal Year in the Long-Term Performance
Period. For purposes of this definition, "EPS" for a Fiscal
Year means the Company's EPS for such Fiscal Year as
reported in the Company's annual report to its shareholders
for the year of determination (or, in the event that such
1 The definition of "Company" was amended on May 24, 1996 to
reflect the reincorporation of the company from New York to
Delaware pursuant to a statutory share exchange approved by
shareowners on May 24, 1996.
4
<PAGE>
item is not included in such annual report, such comparable
figure as may be determined by the Committee) adjusted by
the Company's independent certified public accountants to
exclude such non-recurring or extraordinary items as the
Committee shall determine are not representative of the on-
going operations of the Company.
(j) "Fiscal Year" means the fiscal year of the Company.
(k) "Long-Term Award" means, for a Participant for a
Long-Term Performance Period, the product of the
Participant's Average Annual Compensation for such period
multiplied by the aggregate of:
(i) the Participant's Long-Term EPS Factor for such
period, plus
(ii) the Participant's Long-Term RONA Factor for such
period
as such product is adjusted in accordance with Section 5(b)
of the Plan.
(l) "Long -Term EPS Factor" means, for a Participant for
a Long-Term Performance Period,
(1) if actual EPS Growth for such period equals or
exceeds the Participant's Threshold Long-Term EPS Growth
Objective for such period but is less than the
Participant's Target Long-Term EPS Growth Objective for
such period,
(i) five percent (up to ten percent for the Chairman
of the Board or the Chief Executive Officer), plus
(ii) five percent (up to ten percent for the Chairman
of the Board or the Chief Executive Officer)
multiplied by a fraction (not less than zero and not
greater than one), the numerator of which is the
actual EPS Growth for such period less the
Participant's Threshold Long-Term EPS Growth
Objective for such period and the denominator of
which is the Participant's Target Long-Term EPS
Growth Objective for such period less the
Participant's Threshold Long-Term EPS Growth
Objective for such period; or
5
<PAGE>
(2) if actual EPS Growth for such period equals or
exceeds the Participant's Target Long-Term EPS Growth
Objective for such period but is less than the
Participant's Maximum Long-Term EPS Growth Objective for
such period,
(i) ten percent (up to twenty percent for the
Chairman of the Board or the Chief Executive
Officer), plus
(ii) five percent (up to ten percent for the Chairman
of the Board or the Chief Executive Officer)
multiplied by a fraction (not less than zero and not
greater than one), the numerator of which is the
actual EPS Growth for such period less the
Participant's Target Long-Term EPS Growth Objective
for such period and the denominator of which is the
Participant's Maximum Long-Term EPS Growth Objective
for such period less the Participant's Target Long-
Term EPS Growth Objective for such period; or
(3) if actual EPS Growth for such period equals or
exceeds the Participant's Maximum Long-Term EPS Growth
Objective for such period, fifteen percent (up to thirty
percent for the Chairman of the Board or the Chief
Executive Officer);
provided, however, that the Long-Term EPS Factor shall be
subject to adjustment as provided in Section 6(b).
(m) "Long-Term Performance Period" means three
consecutive Fiscal Years.
(n) "Long-Term RONA Factor" means, for a Participant for
a Long-Term Performance Period
(1) if actual RONA for such period equals or exceeds the
Participant's Threshold Long-Term RONA Objective for such
period but is less than the Participant's Target Long-
Term RONA Objective for such period,
(i) five percent (up to ten percent for the Chairman
of the Board or the Chief Executive Officer), plus
(ii) five percent (up to ten percent for the Chairman
of the Board or the Chief Executive Officer)
multiplied by a fraction (not less than zero and not
6
<PAGE>
greater than one), the numerator of which is the
actual RONA for such period less the Participant's
Threshold Long-Term RONA Objective for such period
and the denominator of which is the Participant's
Target Long-Term RONA Objective for such period less
the Participant's Threshold Long-Term RONA Objective
for such period; or
(2) if actual RONA for such period equals or exceeds the
Participant's Target Long-Term RONA Objective for such
period but is less than the Participant's Maximum Long-
Term RONA Objective for such period,
(i) ten percent (up to twenty percent for the
Chairman of the Board or the Chief Executive
Officer), plus
(ii) five percent (up to ten percent for the Chairman
of the Board or the Chief Executive Officer)
multiplied by a fraction (not less than zero and not
greater than one), the numerator of which is the
actual RONA for such period less the Participant's
Target Long-Term RONA Objective for such period and
the denominator of which is the Participant's Maximum
Long-Term RONA Objective for such period less the
Participant's Target Long-Term RONA Objective for
such period; or
(3) if actual RONA for such period equals or exceeds the
Participant's Maximum Long-Term RONA Objective for such
period, fifteen percent (up to thirty percent for the
Chairman of the Board or the Chief Executive Officer);
provided, however, that the Long-Term RONA Factor shall be
subject to adjustment as provided in Section 6(b).
(o) "Market Value" means the average closing price of the
Stock on the New York Stock Exchange, Inc. during the month
of February of the year specified.
(p) "Minimum Annual Compensation" means, for a Fiscal
Year, the Participant's rate of minimum annual salary on the
first day of the fiscal month of November in the Fiscal
Year.
(q) "Participant" means an individual who has been
designated to participate in the Plan in accordance with
Section 3 of the Plan.
7
<PAGE>
(r) "Plan" mean The May Department Stores Company
Executive Incentive Compensation Plan for Corporate
Executives.
(s) "Relative Performance Rank" means, for a Fiscal Year
or for a Long-Term Performance Period, the relative rank of
the Company (as among the Company and a group of competitors
designated by the Committee) based on the EPS Growth and
RONA, respectively, of all such corporations for such
corporations' comparable fiscal periods, as determined by
the Committee. Relative Performance Rank shall be
determined based on data provided by the Company's
independent certified public accountants from publicly
available information about all such corporations, and
adjusted by such independent certified public accountants
for comparability (adjustments for LIFO, major non-recurring
transactions, etc.) subject to the direction and approval of
the Committee. The competitors designated by the Committee
for the 1994 Fiscal Year and for the Long-Term Performance
Period commencing in 1994 are Dayton-Hudson Company, Dillard
Department Stores, J.C. Penney, Melville Stores, Mercantile
Stores and Nordstrom. The Committee may change the number
of competitors or corporations included in the group when,
as a result of extraordinary or unforeseen events, it is no
longer appropriate for a particular corporation to be
included in the competitor group (such as when one of the
group ceases operations, merges with another corporation,
files for bankruptcy protection or significantly changes the
nature of its business).2 3
_____________________
2 March 15, 1996: The Committee changed the competitor
group to drop Melville and to add Sears for Fiscal Years and
Long-Term Performance Periods ending after March 15, 1996.
Melville had announced its planned restructuring; the Company had
announced its planned spin-off of Payless; Sears was more closely
positioned to the Company in the marketplace.
3 November 20, 1998: The Committee changed the competitor
group to drop Mercantile Stores and to add Federated Department
Stores and Kohl's for Fiscal Years and Long-Term Performance
Periods ending after November 20, 1998. Mercantile Stores was
acquired by other retailers in the fall of 1998.
8
<PAGE>
(t) "Retirement" means, as to a Participant, retirement
as that word is defined in any retirement plan sponsored by
the Company or any Subsidiary which is applicable to such
Participant.
(u) "RONA" means (i) for a Fiscal Year, the Company's
return on beginning net assets for such Fiscal Year as
reported in the Company's annual report to its shareowners
for the year of determination (or, in the event that such
item is not included in such annual report, such comparable
figure as may be determined by the Committee) adjusted by
the Company's independent certified public accountants to
exclude such non-recurring or extraordinary items as the
Committee shall determine are not representative of the
ongoing operations of the Company; and (ii) for a Long-Term
Performance Period, the sum of the RONA for each Fiscal Year
in the Long-Term Performance Period divided by three.
(v) "Stock" means the common stock of the Company.
(w) "Subsidiary" means a subsidiary corporation of the
Company within the meaning of Section 425(f) of Code.
(x) The terms "Maximum Annual EPS Growth Objective,"
"Maximum Long-Term EPS Growth Objective," "Target Annual EPS
Growth Objective," "Target Long-Term EPS Growth Objective,"
"Threshold Annual EPS Growth Objective," "Threshold Long-
Term EPS Growth Objective," "Maximum Annual RONA Objective,"
"Maximum Long-Term RONA Objective," "Target Annual RONA
Objective," "Target Long-Term RONA Objective," "Threshold
Annual RONA Objective" and "Threshold Long-Term RONA
Objective" shall mean the respective objectives determined
by the Committee for each Participant pursuant to Section 7
of the Plan.
Section 3. Eligibility. Management employees of the
Company and its Subsidiaries shall be eligible to participate in
the Plan. The Committee may, in its sole discretion, designate
any such individual as a Participant for a particular Fiscal Year
and/or for a particular Long-Term Performance Period before the
end of such Fiscal Year and Long-Term Performance Period,
respectively. Designation of an individual as a Participant for
any period shall not require designation of such individual as a
Participant in any other period, and designation of one
individual as a Participant shall not require designation of any
other individual as a Participant in such period or in any other
period.
9
<PAGE>
Section 4. Annual Award. (a) Subject to the other
provisions of the Plan, a Participant for a Fiscal Year who is
designated as such for an entire Fiscal Year shall be entitled to
an Annual Award for such Fiscal Year. Subject to the other
provisions of the Plan, a Participant for a Fiscal Year who is
designated as such for less than an entire Fiscal Year shall be
entitled to a reduced Annual Award for such Fiscal Year equal to
the Annual Award for such Fiscal Year multiplied by a fraction,
the numerator of which shall be the number of complete fiscal
months between (i) the first day of the fiscal month in which
occurs the date as of which the Participant was so designated and
(ii) the end of such Fiscal Year and the denominator of which
shall be twelve.
(b) The Committee may change the percentages referred to in
the definitions of "Annual EPS Factor" and "Annual RONA Factor"
for any Fiscal Year, provided that the maximum Annual Award which
may be paid under such different percentages may not be greater
than 45% (90% for the Chairman of the Board or the Chief
Executive Officer) of the Participant's Minimum Annual
Compensation for such Fiscal Year.
(c) Notwithstanding any other provision of the Plan, the
maximum dollar amount of any Annual Award for any Participant for
any Fiscal Year shall not exceed $2,000,000.
Section 5. Long-Term Award. (a) Subject to the other
provisions of the Plan, a Participant for a Long-Term Performance
Period who is designated as such for an entire Long-Term
Performance Period shall be entitled to a Long-Term Award for
such period. Subject to the other provisions of the Plan, a
Participant for a Long-Term Performance Period who is designated
as such for less than an entire Long-Term Performance Period
shall be entitled to a reduced Long-Term Award for such period
equal to the Long-Term Award for such period multiplied by a
fraction, the numerator of which shall be the number of complete
fiscal months between (i) the first day of the fiscal month in
which occurs the date as of which the Participant was so
designated and (ii) the end of such Long-Term Performance Period
and the denominator of which shall be thirty-six.
(b) The Long-Term Award otherwise payable pursuant to
Section 5(a) of the Plan for a Long-Term Performance Period shall
be adjusted by multiplying such Long-Term Award by a percentage
equal to a fraction, the numerator of which shall be the Market
Value of the Stock in February of the calendar year in which such
Long-Term Performance Period ends and the denominator of which
10
<PAGE>
shall be the Market Value of the Stock in February of the
calendar year in which such Long-Term Performance Period begins;
provided, however, that such percentage shall in no event be
greater than one hundred fifty percent nor less than seventy-five
percent.
(c) Notwithstanding any other provision of the Plan, the
maximum dollar amount of any Long-Term Award for any Participant
for any Long-Term Performance Period shall not exceed $2,000,000.
Section 6. Adjustments. (a) Discretionary Adjustment of
Awards. In the event that the Committee determines, in its
absolute discretion, that an Annual Award or a Long-Term Award
payable to a Participant in accordance with the other terms of
the Plan should be adjusted, upwards or downwards, based on all
the facts and circumstances known to the Committee at the time,
then, the Committee may, in its sole and absolute discretion,
increase or decrease any such Annual Award or Long-Term Award to
such amount as it determines; provided, however, that the
Committee may not adjust upwards any Annual Award or Long-Term
Award of any Participant who is a "covered employee" (as defined
in Section 162 (m) of the Code and the regulations thereunder)
with respect to the particular performance period for which the
Annual Award or Long-Term Award is being granted.
(b) Adjustment for Relative Rank. A Participant's Annual
EPS Factor, Annual RONA Factor, Long-Term EPS Factor and Long-
Term RONA Factor shall be adjusted in the following manner based
upon the number of competitors in the group of competitors used
to determine the Company's Relative Performance Rank and the
Company's Relative Performance Rank therein:
Number of Competitor Companies (not including the Company)
10 9 8 7 6 5 4
Factor will be no less than
"Target" if the Company's 1st- 1st- 1st- 1st- 1st- 1st- 1st-
rank is: 3rd 3rd 3rd 2nd 2nd 2nd 2nd
Factor will be no less than
"Threshold" if the
Company's 4th- 4th- 4th- 3rd- 3rd- 3rd- 3rd -
rank is: 6th 6th 6th 4th 4th 4th 4th
Factor will be no higher than
"Threshold" if the
Company's 9th- 8th- 7th- 7th- 6th- 5th- 5th
rank is: 11th 10th 9th 8th 7th 6th
11
<PAGE>
Section 7. Annual and Long-Term Targets. Threshold, target
and maximum annual and long-term objectives with respect to EPS
Growth and with respect to RONA shall be determined by the
Committee as soon as practicable prior to the commencement of
each Fiscal Year and each Long-Term Performance Period for each
Participant or within the period permitted by applicable law.
The Committee shall cause the respective objectives for each
Participant to be provided to such Participant as soon thereafter
as practicable. Such objectives shall remain in effect for the
entire Fiscal Year or Long-Term Performance Period, as
appropriate.
Section 8. Payment of Awards. (a) Annual Awards for a
Fiscal Year shall be payable in cash within three months after
the close of such Fiscal Year or as soon thereafter as
practicable.
(b) Long-Term Awards for a Long-Term Performance Period shall
be payable in cash within three months after the close of such
Long-Term Performance Period or as soon thereafter as
practicable.
(c) A Participant may elect to defer all or a portion of an
award by making such election under the Deferred Compensation
Plan with respect to such award. Such election must be made not
later than December 31 of the calendar year preceding the
commencement of the Fiscal Year or Long-Term Performance Period,
as appropriate.
(d) The Company shall have the right to deduct any sums that
federal, state or local tax laws require to be withheld with
respect to any payment of awards.
(e) Before any award is paid to a Participant who is a
"covered employee" (as defined in Section 162(m) of the Code and
the regulations thereunder), the Committee shall certify in
writing that the material terms of the Plan have been satisfied.
Section 9. Termination of Employment.
(a) Death or Disability. In the event of either the death or
Disability of the Participant while employed (a "Section 9(a)
Event"), the Participant shall be entitled to the following:
(i) An Annual Award with respect to the Fiscal Year in
which the Section 9(a) Event occurs equal to the Annual
Award otherwise payable (if any) for that Fiscal Year,
12
<PAGE>
prorated to the end of the fiscal month in which such
Section 9(a) Event occurs; and
(ii) A Long-Term Award with respect to each Long-Term
Performance Period which includes the Fiscal Year of the
Section 9(a) Event; provided, however, that for purposes
of this Section 9(a)(ii) the Long-Term Award for any Long-
Term Performance Period (1) shall be determined at the end
of the Fiscal Year in which the Section 9(a) Event occurs,
(2) shall be determined (and averages used in that
determination shall be calculated) based only on the
Fiscal Year and any preceding Fiscal Years otherwise
included in the Long-Term Performance Period and (3) shall
be prorated to the end of the fiscal month in which the
Section 9(a) Event occurs.
(b) Retirement.
(i) In the event of the Retirement of the Participant with
the written consent of the Company, such event shall be
deemed to be a Section 9(a) Event, and the Participant
shall be entitled to an Annual Award and to a Long-Term
Award as provided in Section 9(a).
(ii) In the event of the Retirement of the Participant
without the consent of the Company (a "Section 9(b)(ii)
Event"), the Participant shall be entitled to the
following:
(1) An Annual Award with respect to the Fiscal Year in
which the Section 9(b)(ii) Event occurs equal to the
Annual Award otherwise payable (if any) for the Fiscal
Year, prorated to the end of the fiscal month in which
the Section 9(b)(ii) Event occurs; and
(2) No Long-Term Award following the Section 9(b)(ii)
Event. The Participant shall forfeit any right or
entitlement to any award with respect to any Long-Term
Performance Period which has not been completed on the
date of the Section 9(b)(ii) Event. Any Long-Term
Award for a period which ended prior to the Section
9(b)(ii) Event shall remain unaffected.
(c) Termination of Employment.
(i) In the event of the termination of employment of the
Participant not covered by Sections 9(a) or 9(b) above
13
<PAGE>
which occurs at the end of the term of the Participant's
then-current written employment agreement (if any) with
the Company or Subsidiary, or in the event of such a
termination of a Participant who has no current written
employment agreement with the Company or Subsidiary, such
event shall be deemed to be a Section 9(b)(ii) Event, and
the Participant shall be entitled to an Annual Award (but
not to a Long-Term Award) as provided in Section 9(b)(ii).
(ii) In the event of the termination of employment of the
Participant not covered by Sections 9(a) or 9(b) above
before the end of the term of the Participant's then-
current written employment agreement (if any) with the
Company or Subsidiary, with the written consent of the
Company (a "Section 9(c)(ii) Event"), the Participant
shall be entitled to the following:
(1) An Annual Award with respect to the Fiscal Year in
which the Section 9(c)(ii) Event occurs equal to the
actual award otherwise payable for the Fiscal Year (if
any); provided, however, that in the event that the
term of the Participant's then-current employment
agreement is due to expire during that Fiscal Year,
then the Annual Award shall be prorated to the end of
the fiscal month in which such term is due to expire;
and
(2) A Long-Term Award with respect to each Long-Term
Performance Period which includes the Fiscal Year of
the 9(c)(ii) Event equal to the Long-Term Award
otherwise payable with respect to each Long-Term
Performance Period; provided, however, that in the
event that the term of the Participant's then-current
employment agreement (if any) with the Company is
otherwise due to expire during any such period, then
the Long-Term Award with respect to such period shall
be prorated to the end of the calendar month in which
such term is due to expire.
(iii) In the event of the termination of employment of the
Participant not otherwise covered by this Section 9 before
the end of the term of the then-current written employment
agreement (if any) with the Company or Subsidiary, without
the written consent of the Company, the Participant shall
not be entitled to any Annual Award or to any Long-Term
Award with respect to any Fiscal Year or Long-Term
Performance Period which has not been completed as of the
14
<PAGE>
date of such termination of employment. The Participant
shall forfeit any right or interest in any award for any
such Fiscal Year or Long-Term Performance Period. Annual
Awards and Long-Term Awards with respect to Fiscal Years
and Long-Term Performance Periods which ended prior to the
date of such termination of employment shall remain
unaffected.
(d) For purposes of this Section 9, the term "written consent
of the Company" shall refer to an express written consent of the
Company, duly executed by the Company, which, by its own terms,
expressly refers to this Section 9 of the Plan.
Section 10. Transfers and Changes in Responsibilities. In
the event that (i) the duties of a Participant change and the
Participant becomes eligible to participate in another bonus plan
of the Company, or (ii) the duties of an employee who is a
participant in another bonus plan of the Company change and the
employee is newly designated by the Committee as a Participant in
this Plan, then the maximum amount that such Participant would be
entitled to receive under the Plan shall be
(1) the Annual Award determined in accordance with the
provisions of the Plan with respect to the entire Fiscal Year
in which such event occurred; and
(2) a Long-Term Award with respect to each Long-Term
Performance Period which has commenced at the time of the
event, determined in accordance with the provisions of the
Plan,
subject, in all events, to the Committee's right to adjust such
awards in accordance with and subject to the restrictions set
forth in Section 6(a), in its absolute discretion, which may be
exercised in such a way that the Committee deems fair and
equitable based on the performance of Participant while
participating in the other bonus plan of the Company.
Section 11. Rights of Participants and Beneficiaries. (a)
Nothing contained in the Plan shall confer upon any Participant
any right to continue in the employ of the Company or constitute
any contract or agreement of employment or interfere in any way
with the right of the Company to terminate or change the
conditions of employment.
(b) The Company shall pay all amounts payable hereunder only
to the Participant or his or her personal representatives. In
15
<PAGE>
the event of the death of a Participant, payments of all amounts
otherwise due to the Participant under the Plan shall be made to
the Participant's beneficiary at the time of death under the
Company Paid Life Plan of The May Department Stores Company or to
such other beneficiary as the Participant shall have designated,
in writing, for purposes of this Plan on a form provided by the
Company.
(c) Subject to the provisions of Section 11(d), rights to
payments under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, levy or charge, and any attempt to do so shall be
void; nor shall any such amounts be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or
torts of the Participant or his or her beneficiaries.
(d) Nothing in this Section 11 shall prohibit the personal
representatives of a Participant from designating that any amount
that would otherwise be distributed to the Participant's estate
should be distributed in accordance with the terms of the
Participant's last will and testament or pursuant to the laws of
descent and distribution.
Section 12. Unfunded Character of the Plan. The right of a
Participant to receive any Annual Award or Long-Term Award
hereunder shall be an unsecured claim against the general assets
of the Company. Nothing in the Plan shall require the Company to
invest any amounts in Stock or in any other medium.
Section 13. Changes in Capital Structure. In the event that
there is any change in the Stock through merger, consolidation,
reorganization, recapitalization, spin-off or otherwise, or if
there shall be any dividend on the Stock, payable in such Stock,
or if there shall be a stock split or combination of shares, then
the fraction provided for in Section 5(b) of the Plan shall be
adjusted by the Committee as it deems desirable, in its absolute
discretion, to prevent dilution or enlargement of the rights of
Participants. The issuance of Stock for consideration and the
issuance of Stock rights shall not be considered a change in the
Company's capital structure.
Section 14. Amendment or Termination. The Committee may, by
resolution, amend or terminate the Plan at any time. Any
amendment necessary to bring the Plan into compliance with
Section 162(m) of the Code and any regulations thereunder shall
not require shareowner approval and the effectiveness of such
amendment shall be as of the effective date of the provision in
16
<PAGE>
Section 162(m) of the Code or regulations thereunder giving rise
to the amendment. However, (i) shareowner approval shall be
sought for any changes to the Plan which would require shareowner
approval under Section 162(m) of the Code and (ii) except as
provided in the preceding sentence, the Committee may not,
without the consent of the Participant, amend or terminate the
Plan in such a manner as to affect adversely any Annual Award or
Long-Term Award which would have been payable, based on the terms
of the Plan immediately prior to any such amendment or
termination, for any Fiscal Year or Long-Term Performance Period
which has already commenced as of the effective date of the
amendment or termination.
17
<PAGE> EMPLOYMENT AGREEMENT
This Agreement is entered into as of the [first day of the
Contract Term] between THE MAY DEPARTMENT STORES COMPANY ("May")
and [name] (generally referred to as "you").
1. Employment. (a) May will employ you and you will provide
personal services to May, from [start date] to [end date] (the
"Contract Term") as [position] and/or perform such other
executive duties as may be required of you by May. You represent
that you are not subject to any other employment agreement or
other obligation that would prevent you from performing or would
interfere with your ability to perform your obligations under
this Agreement.
(b) May will pay you basic compensation for your services at
the annual rate of [annual rate], payable semi-monthly. The
annual rate will be subject to review by May each year and may be
increased but not decreased. If you are selected to participate
in a May bonus plan (the "Incentive Plan"), you will be entitled
to the awards, if any, that may be payable under the terms of the
Incentive Plan. You may elect to have all or any part of your
compensation paid under the terms of any applicable deferred
compensation plan.
(c) May will reimburse you for all reasonable normal expenses
you incur in accordance with May's employee expense reimbursement
policies.
(d) If you continue as a May employee after the Contract Term
expires, this Agreement will continue in full force, except that
your employment will then become terminable "at will" by either
you or May.
(e) The most recent Executive Compensation Change Memorandum,
as initialed by May and by you, is incorporated by reference and
is a part hereof.
(f) May provides to its executives certain employee benefit
plans and fringe benefits. May reserves the right to amend,
modify or terminate any of these plans and benefits. You will be
entitled to whatever benefits may be provided to you in
accordance with the terms of these plans and benefits, as amended
from time to time.
<PAGE>
2. Your Duties. For the remaining period of the Contract Term
and for any period you may continue to work for May after the
Contract Term expires,
(a) you will (i) faithfully and diligently perform your duties
in accordance with May's directions and serve May to the best of
your ability; (ii) devote your undivided time and attention to
May's business, subject to reasonable vacations in accordance
with May's vacation policy, to such extent as may be reasonably
necessary for you to perform your personal services properly; and
(iii) maintain your residence in [principal city] or within
reasonable access to the business activities of May in that city;
and
(b) you will not (i) engage in any activity that conflicts
with or adversely affects your performance of your duties under
this Agreement; (ii) accept any other employment, whether as an
executive, as a consultant or in any other capacity, whether or
not you are compensated therefor, or (iii) violate any of the
policies described in May's then applicable Policy of Business
Conduct.
3. Disability. You will be "Totally Disabled" if you are
unable to substantially fulfill the normal duties of your
position under this Agreement. If you remain Totally Disabled
for more than 180 days during any 360 day period, May may
terminate its obligations under this Agreement by giving you
written notice. If May does so, your employment will terminate
on the last day of the month in which notice is given. If you
have previously elected to participate in May's Long Term
Disability Plan, then the terms of that plan will apply.
4. Termination of Employment. (a) If your employment
terminates because of your death or Total Disability or your
voluntary termination of employment or if it is terminated by May
for Cause, (i) you will not be entitled to receive basic
compensation and employee benefits following your termination or
any other payment or benefit except as expressly provided herein
or in any applicable employee benefit plan or arrangement; and
2
<PAGE>
(ii) you (or your legal representative(s)) will be entitled to
receive any incentive compensation payable under the terms of the
Incentive Plan.
(b) If your employment terminates because of your voluntary
termination of employment, or if it is terminated by May for
Cause, then your obligations under this Agreement, including
those contained in Paragraphs 5 through 13, remain in full force
and effect, and May will be entitled to all legal and equitable
rights and remedies under this Agreement.
(c) If your employment is terminated by May without Cause,
then
(i) your obligations under this Agreement, including those
contained in Paragraphs 5 through 13, remain in full force and
effect, and May will be entitled to all legal and equitable
rights and remedies under this Agreement; and
(ii) you will be entitled to your basic compensation and the
other benefits provided for in Paragraph 1(f) for the
remaining period of the Contract Term, subject to the
provisions of Paragraph 4(c)(v); and
(iii) you will be entitled to any incentive compensation
payable under the terms of the Incentive Plan; and
(iv) you will be entitled to post-termination benefits payable
under May's employee benefit plans, including any right to
participate in May's medical plans under COBRA, based on your
service up to the termination date; and
(v) you will use your best efforts to obtain other employment
consistent with the terms of Paragraph 5. If you accept other
employment, you will promptly notify May of the compensation
receivable or which you expect to receive from that employment
that is attributable to the remaining period of the Contract
Term. All basic compensation otherwise payable under
Paragraph 4(c) (except pursuant to Paragraph 4(c)(vi)) for any
remaining period of the Contract Term will be reduced by the
amount of any compensation receivable or which you expect to
receive from your subsequent employment; and
3
<PAGE>
(vi) notwithstanding the foregoing, the minimum amount payable
to you upon your termination shall be your basic compensation
for the period during which your post-termination obligations
under Paragraph 5 are in force.
(d) "Cause" in this Agreement means (i) an intentional act of
fraud, embezzlement, theft or any other material violation of law
that occurs during or in the course of your employment with May;
(ii) intentional damage to May's assets; (iii) intentional
disclosure of May's confidential information contrary to May's
policies; (iv) breach of your obligations under this Agreement;
(v) intentional engagement in any competitive activity which
would constitute a breach of your duty of loyalty or of your
obligations under this Agreement; (vi) intentional breach of any
of May's policies; (vii) the willful and continued failure to
substantially perform your duties for May (other than as a result
of incapacity due to physical or mental illness); or (viii)
willful conduct by you that is demonstrably and materially
injurious to May, monetarily or otherwise. For purposes of this
Paragraph 4(d), an act, or a failure to act, shall not be deemed
"willful" or "intentional" unless it is done, or omitted to be
done, by you in bad faith or without a reasonable belief that
your action or omission was in the best interest of May. Failure
to meet performance standards or objectives, by itself, does not
constitute "Cause". "Cause" also includes any of the above
grounds for dismissal regardless of whether May learns of it
before or after terminating your employment.
(e) In addition to any other remedies, May can offset any
amount due to you as wages, compensation, bonus, deferred
compensation or otherwise by any unpaid amount which you owe to
May.
5. Avoiding Conflict of Interest. (a) At all times while you
are employed by May and for two years after your employment
terminates, you will not directly or indirectly:
(i) own, manage, operate, finance, join, control, advise,
consult, render services to, have an interest or future
interest in or participate in the ownership, management,
4
<PAGE>
operation, financing or control of, or be employed by or
connected in any manner with any Competing Business;
(ii) solicit for employment, hire or offer employment to, or
otherwise aid or assist (by disclosing information about
employees or otherwise) any other person or entity other than
May or a May subsidiary in soliciting for employment, hiring
or offering employment to, any employee of May or a May
subsidiary; or
(iii) take any action which is intended to harm May or its
reputation, or that May reasonably concludes could harm May or
its reputation or lead to unwanted or unfavorable publicity
for May.
Ownership of an investment of less than the greater of $25,000 or
1% of any class of equity or debt security of a Competing
Business will not be deemed ownership or participation in
ownership for purposes of Paragraph 5(a).
(b) "Competing Business" includes, but is not limited to,
(i) any (x) retail department store, specialty store or other
retail business that sells goods or merchandise of the types
sold in May's (or its subsidiaries' or divisions') stores at
retail to consumers or (y) any group of such stores or
businesses or any other business that (A) competes (for
customers, suppliers, employees or any other resource) with
May or a May subsidiary, division or store; (B) is located in
the United States or another country where May or a May
subsidiary or division operates a store or stores; and (C) had
annual gross sales volume or revenues (including sales in
leased departments) in the prior fiscal year of more than $25
million or is reasonably expected to have gross sales volume
or revenues in either of the current fiscal year or the next
following fiscal year of more than $25 million; or
(ii) any business that provides buying office services to any
store or group of stores or businesses referred to in
Paragraph 5(b)(i); or
5
<PAGE>
(iii) any business in the United States or another country
where May or a May subsidiary or division operates a store or
stores in which your duties and functions would be
substantially similar to your duties and functions under this
Agreement and that is in material competition with May or a
May subsidiary or division.
(c) You agree that the restrictions set forth above are
reasonable, appropriate and enforceable because:
(i) May is one of the leading retail companies in the United
States, with department stores throughout the United States;
(ii) as an integral part of its business, May has expended a
great deal of time, money and effort to develop and maintain
confidential, proprietary and trade secret information to
compete against similar businesses; this information, if
misused or disclosed, could be very harmful to May's business
and its competitive position in the marketplace;
(iii) your position with May provides you with access to
May's confidential and proprietary trade secret information,
strategies and other confidential business information that
would be of considerable value to a Competing Business;
(iv) May compensates its executives and other associates to,
among other things, develop and maintain valuable goodwill and
relationships on May's behalf and to develop and maintain
business information for May's exclusive ownership and use;
(v) long-term customer and supplier relationships are
difficult to develop and maintain and require a significant
investment of time, effort and expense;
(vi) May is entitled to appropriate safeguards (x) to ensure
that you do not use any confidential information given to you
during your employment by May or take any other action that
could result in a loss of May's goodwill developed on May's
behalf and at its expense, and (y) to prevent you and/or any
Competing Business from having an unfair competitive advantage
over May;
6
<PAGE>
(vii) the amount of compensation and benefits you receive from
May is based in considerable part on your express agreement to
refrain from competing with May and to maintain the
confidentiality of May's proprietary information in accordance
with the terms of this Agreement;
(viii) the limited time period during which you have agreed
not to compete with May after leaving May's employment, the
limited scope of the restriction and the limited prohibition
on your activities are reasonable to ensure that May's
confidential current and long-term business methods,
strategies and plans are not made available to its
competitors; and
(ix) on balance, in light of your training and background, the
restrictions will not pose an undue hardship on you.
(d) If you engage in any activity which would violate your
obligations under this Agreement (including this Paragraph 5) and
which involves another person or employer or a Competing
Business, you will disclose your obligations under this Agreement
to that other person, employer or Competing Business.
(e) Any time during which you violate any of these
restrictions will not be counted in determining the time during
which the restrictions apply. For example, if you were to join a
Competing Business in violation of the restrictions in Paragraph
5(a) and work for that business for a month before a court
enjoined this violation, then the time period of the restriction
would begin when the injunction was issued and the month during
which you violated the restriction would not be included in the
time that the restriction is to apply.
6. Preservation of Confidential Information. (a) You will not,
at any time, directly or indirectly, use or disclose any of May's
Confidential Information except as authorized and within the
scope of your employment with May.
(b) At May's request and/or on termination of your employment
with May, you will return to May all documents, records,
7
<PAGE>
notebooks, computer diskettes and tapes and anything else
containing May's Confidential Information, including all copies
thereof, as well as any other May property, in your possession,
custody or control. You will also delete from your own computer
or other electronic storage medium any of May's proprietary or
confidential information. Not later than 20 days after your
employment is terminated, you will certify in writing to May that
you have complied with these obligations.
(c) During your employment with May and thereafter, you will
(i) notify and provide May immediately with the details of any
unauthorized possession, use or knowledge of any of May's
Confidential Information, (ii) assist in preventing any
reoccurrence of this possession, use or knowledge, and (iii)
cooperate with May in any litigation or other action to protect
or retrieve May's Confidential Information.
(d) "Confidential Information" means any non-public
information pertaining to May's business. Confidential
Information includes information disclosed by May to you, and
information developed or learned by you during the course of or
as a result of your employment with May, which you also agree is
May's property. You further agree that any item of intellectual
or artistic property generated or prepared by you, by yourself or
with others, in connection with your employment by May is May's
sole property and shall remain so unless May otherwise
specifically agrees in writing. Confidential Information
includes, without limitation, information and documents
concerning May's processes; suppliers (including May's terms,
conditions and other business arrangements with suppliers);
supplier and customer lists; advertising and marketing plans and
strategies; profit margins; seasonal plans, goals, objectives and
projections; compilations, analyses and projections regarding
May's divisions, stores, product segments, product lines,
suppliers, sales and expenses; files; trade secrets and patent
applications (prior to their being public); salary, staffing and
employment information (including information about performance
of other executives); and "know-how," techniques or any technical
information not of a published nature relating, for example, to
how May conducts its business.
8
<PAGE>
(e) You agree that you will not disclose to May or use, or
induce May to use, any proprietary information, trade secret or
confidential business information of any other person or entity,
including any previous employer of yours. You also represent
that you have returned all property, proprietary information,
trade secret and confidential business information belonging to
any prior employer.
7. Automatic Amendment by Court Order and Interim Enforcement.
(a) If a court determines that, but for the provisions of this
Paragraph 7, any part of this Agreement is illegal, void as
against public policy or otherwise unenforceable, then the
relevant part will automatically be amended to the extent
necessary to make it sufficiently narrow in scope, time and
geographic area to be legally enforceable. All other terms will
remain in full force and effect.
(b) If you raise any question as to the enforceability of any
part or terms of this Agreement, including, without limitation,
Paragraphs 5 and 6, you specifically agree that you will comply
fully with this Agreement unless and until an appropriate court
designated in Paragraph 13 has entered a final judgment to the
contrary.
(c) You agree that the restrictions in Paragraphs 5 and 6
will apply regardless of the manner in which your employment with
May is terminated, whether voluntarily, for Cause, without Cause
or otherwise.
8. Equitable and Legal Remedies. (a) May and you shall each
be entitled to pursue all legal and equitable rights and remedies
to secure performance of their respective obligations and duties
under this Agreement, unless otherwise expressly provided herein,
and enforcement of one or more of these rights and remedies will
not preclude May or you from pursuing any other rights and
remedies.
(b) You acknowledge and agree that the individualized
services and capabilities that you will provide to May under this
Agreement are of a personal, special, unique, unusual,
extraordinary and intellectual character.
9
<PAGE>
(c) You acknowledge and agree that the restrictions in this
Agreement are reasonable to protect May's rights under this
Agreement and to safeguard May's Confidential Information. You
expressly consent to injunctive and other equitable relief.
Without limiting the foregoing, if you breach or threaten to
breach your obligations under Paragraphs 5 or 6, you consent to
entry of a temporary, preliminary and/or permanent injunction
enjoining you from breaching those obligations.
(d) If any legal proceeding is instituted, neither you nor
May will be entitled to seek or obtain punitive or exemplary
damages of any kind from the other or, in your case, from May's
subsidiaries or divisions, or from the officers, directors or
employees of May, its subsidiaries or divisions, or to seek or
obtain damages or compensation for emotional distress. Nothing
herein shall preclude an award of compensatory and punitive
damages against any other third party.
(e) If you terminate your employment voluntarily or if your
employment is terminated by May for Cause, you will be liable for
all attorneys' fees and costs incurred by May in seeking to
enforce its rights under this Agreement.
9. Entire Understanding. The entire understanding and
agreement between you and May has been incorporated into this
Agreement, and this Agreement supersedes any other agreements and
understandings between you and May with respect to your
employment by May. There are no other promises, representations,
understandings or inducements other than those specifically set
forth in this Agreement. This Agreement may not be altered,
amended or added to except in a single writing signed by both you
and May.
10. Arm's Length. This Agreement was entered into at arm's
length, without duress or coercion, and is to be interpreted as
an agreement between two parties of equal bargaining strength.
Both you and May agree that this Agreement is clear and
unambiguous as to its terms, and that no parol or other evidence
will be used or admitted to alter or explain the terms of this
Agreement, but that it will be interpreted based on the language
10
<PAGE>
within its four corners in accordance with the purposes for which
it is entered into.
11. Successors and Assigns. This Agreement will inure to the
benefit of, and will be binding upon, May, its successors and
assigns and you and your heirs, successors and assigns; provided,
however, that, because this is an agreement for the personal
services, you cannot assign any of your obligations under this
Agreement to anyone else. May may assign its obligations under
this Agreement to a May subsidiary; any assignment, however, will
not relieve May of any of its obligations hereunder except to the
extent that they are actually discharged by the subsidiary.
Whenever this Agreement refers to May, that reference includes
any of May's subsidiaries or divisions in existence at any time
during which this Agreement governs the conduct of you and May.
12. Signing this Agreement. This Agreement may be executed in
counterparts, in which case each of the two counterparts will be
deemed to be an original and the final counterpart will be deemed
to have been executed in St. Louis, Missouri.
13. Missouri Law Governs. This Agreement has been executed by
May at May's corporate headquarters and principal executive
offices in St. Louis, Missouri. May and you agree that your
relationship with May is centered in St. Louis, Missouri and that
the weight of your contacts with and obligations to May is also
in St. Louis, Missouri. Any questions or other matter arising
under this Agreement, whether of validity, interpretation,
performance or otherwise, will therefore be governed by and
construed in accordance with the laws of the State of Missouri
applicable to agreements made and to be performed in Missouri
without regard to Missouri's choice of law rules. All actions
and proceedings arising out of or relating directly or indirectly
to this Agreement will be filed and litigated exclusively in any
state court or federal court located in the City or County of St.
Louis, Missouri. May and you expressly consent to the
jurisdiction of these courts, agree that venue is proper is these
courts and consent to service of process made upon the Secretary
of State of the State of Missouri or at your last known address
in May's records.
11
<PAGE>
BY SIGNING THIS AGREEMENT, YOU HEREBY CERTIFY THAT YOU (A)
HAVE RECEIVED A COPY OF THIS AGREEMENT TO REVIEW AND STUDY BEFORE
SIGNING IT; (B) HAVE READ THIS AGREEMENT CAREFULLY BEFORE SIGNING
IT; (C) HAVE HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING IT TO ASK
ANY QUESTIONS ABOUT IT AND HAVE RECEIVED SATISFACTORY ANSWERS TO
ALL YOUR QUESTIONS; (D) HAVE HAD AN OPPORTUNITY TO DISCUSS IT
WITH YOUR OWN LEGAL COUNSEL AND TO BE ADVISED AS TO ITS TERMS AND
YOUR OBLIGATIONS AND RIGHTS UNDER IT, AND (E) UNDERSTAND YOUR
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT.
IN WITNESS WHEREOF, this Agreement has been executed by you
and then by May in St. Louis, Missouri on the dates shown below,
but effective as of the date and year first above written.
Date:
Executive
THE MAY DEPARTMENT STORES
COMPANY
Date: BY:
12
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
FOR THE FIVE FISCAL YEARS ENDED JANUARY 29, 2000
(Dollars in Millions) Fiscal Year Ended
Jan. 29, Jan. 30, Jan. 31, Feb. 1, Feb. 3,
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Earnings Available for Fixed Charges:
Pretax earnings from continuing operations $ 1,523 $ 1,395 $ 1,279 $ 1,232 $ 1,160
Fixed charges (excluding interest
capitalized and pretax preferred stock
dividend requirements) 346 344 363 346 317
Dividends on ESOP Preference Shares (24) (25) (26) (26) (28)
Capitalized interest amortization 7 7 6 6 5
1,852 1,721 1,622 1,558 1,454
Fixed Charges:
Gross interest expense (a) $ 340 $ 339 $ 353 $ 341 $ 316
Interest factor attributable to
rent expense 22 21 23 22 20
362 360 376 363 336
Ratio of Earnings to Fixed Charges 5.1 4.8 4.3 4.3 4.3
(a) Represents interest expense on long-term and short-term debt, ESOP debt and amortization of
debt discount and debt issue expense.
</TABLE>
Management's Discussion and Analysis
Our 25th consecutive year of record sales and earnings per share
marks an important milestone for May and is a performance record
few companies in retailing can match. Our 25-year compound earnings
per share growth rate of 11.0% and total return to shareowners of
16.1% demonstrate the underlying strength of our store companies to
perform under a range of economic conditions.
Our 1999 performance was highlighted by a 13.0% increase in diluted
earnings per share to $2.60 from last year's $2.30. Net earnings
totaled $927 million versus $849 million last year. Our three-year
earnings per share compound growth rate of 11.6%, our return on
equity of 24.1%, and our return on net assets of 20.7% continue to
be among the best in retailing.
Sales were $13.9 billion, an increase of 6.3% over 1998 sales of
$13.0 billion. The increase reflects a 2.6% rise in store-for-store
sales, 1999 store openings, and the full-year impact of 1998 store
openings. We discontinued our consumer electronics business in
1999, which penalized sales by about 1% for the year.
We also opened the following 18 department stores during 1999,
adding 2.5 million square feet of retail space:
Lord & Taylor: 5 stores
Emerald Square North Attleboro, MA
Lynnhaven Mall Virginia Beach, VA
Mall of Georgia Atlanta, GA
Meriden Square Meriden, CT
Park Meadows Denver, CO
Hecht's: 3 stores
Operating as Hecht's:
Chesapeake Sq. Chesapeake, VA
Valley Mall Hagerstown, MD
Operating as Strawbridge's:
Moorestown Mall Moorestown, NJ
Robinsons-May: 2 stores
Pacific View Mall San Buenaventura, CA
The Promenade Temecula, CA
Filene's: 2 stores
Burlington Square Burlington, VT
Providence Place Providence, RI
Kaufmann's: 2 stores
Washington Crown Ctr. Washington, PA
Nittany Mall State College, PA
Famous-Barr: 4 stores
Operating as Famous-Barr:
Eastland Mall Bloomington, IL
Greenwood Mall Bowling Green, KY
Market Place Mall Champaign, IL
Operating as The Jones Store:
Westroads Mall Omaha, NE
We remodeled 23 department stores in 1999 totaling 1.5 million
square feet, which included the expansion of 17 stores by 519,000
square feet. We continued aggressively pursuing home store sales by
converting space previously dedicated to consumer electronics in
181 stores in 1999. At fiscal year-end we operated 408 department
stores in 34 states and the District of Columbia.
On December 31, 1999 we completed the acquisition of Zions
Co-operative Mercantile Institution (ZCMI) stores. Our Meier &
Frank division opened 13 ZCMI stores located in Utah and Idaho on
January 31, 2000.
Our 2000 new-store plan includes 10 new department stores in
addition to the ZCMI stores, adding 3.3 million square feet of
retail space. We also plan to remodel 30 department stores totaling
1.9 million square feet of retail space that includes the expansion
of 17 stores by a total of 535,000 square feet.
The new-store plan for 2000 through 2004 would add 83 new
department stores totaling 13 million retail square feet, a 4%
annualized increase. During this five-year period the major
components of our $3.5 billion capital plan include plans to invest
$1.4 billion for new stores, $1.0 billion to expand and remodel
existing stores, and $370 million related to systems and operations
improvements.
Common stock repurchase programs authorized by May's board of
directors since 1996 totaled more than $2.5 billion, as shown
below:
Shares Repurchased
(in millions) Authorized $ Shares
2000 $650 $ - -
1999 500 361 9.9
1998 500 500 12.5
1997 300 300 9.6
1996 600 600 19.1
Review of Operations
Diluted earnings per share reached $2.60 in 1999, compared with
$2.30 in 1998 and $2.07 in 1997. Net earnings totaled $927 million
in 1999, compared with $849 million in 1998 and $779 million in
1997. The 1999, 1998, and 1997 diluted earnings per share growth
rates were 13.0%, 11.1%, and 10.7%, respectively. Return on
revenues was 6.7% in 1999, compared with 6.5% in 1998 and 6.3% in
1997.
Results for the past three years and the related percent of
revenues were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(dollars in millions,
except per share data) $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C>
Net retail sales $13,869 $13,048 $12,265
Revenues $13,866 100.0% $13,090 100.0% $12,390 100.0%
Cost of sales 9,370 67.6 8,901 68.0 8,437 68.1
Selling, general, and
administrative 2,686 19.4 2,516 19.2 2,375 19.2
Interest expense, net 287 2.0 278 2.1 299 2.4
Earnings before
income taxes 1,523 11.0 1,395 10.7 1,279 10.3
Provision for
income taxes* 596 39.1 546 39.1 500 39.1
Net earnings $ 927 6.7% $ 849 6.5% $ 779 6.3%
Diluted earnings
per share** $ 2.60 13.0% $ 2.30 11.1% $ 2.07 10.7%
*Percent of revenues columns represent effective income tax rates.
**Percent of revenues columns represent diluted earnings per share growth rates.
</TABLE>
The following table shows earnings before interest and taxes
excluding the LIFO (last-in, first-out) credit of $30 million in
1999, $28 million in 1998, and $5 million in 1997:
(dollars in millions) 1999 1998 1997
Operating earnings $1,780 $1,645 $1,573
Percent of revenues 12.8% 12.6% 12.7%
<PAGE>
Our 408 quality department stores are operated by eight regional
department store companies across the United States under 12
long-standing and widely recognized trade names. Each store company
holds a leading market position in its region.
The table below summarizes net retail sales, sales per square foot,
gross retail square footage, and the number of stores for each
store company:
<TABLE>
<CAPTION>
Net Retail Gross Retail
Sales in Millions Sales per Square Footage
of Dollars Square Foot in Thousands Number of Stores
Store Company: Headquarters 1999 1998 1999 1998 1999 1998 1999 New Closed 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lord & Taylor: New York City $ 2,129 $ 1,976 $222 $232 10,070 9,461 78 5 0 73
Hecht's, Strawbridge's: Washington, D.C. 2,457 2,368 203 200 12,668 12,231 74 3 0 71
Foley's: Houston 2,174 2,060 203 196 10,975 10,993 57 0 0 57
Robinsons-May: Los Angeles 2,057 1,925 210 196 10,198 10,156 55 2 2 55
Filene's: Boston 1,703 1,578 253 244 7,212 6,710 44 2 0 42
Kaufmann's: Pittsburgh 1,597 1,549 196 199 8,513 8,177 50 2 0 48
Famous-Barr, L.S. Ayres,
The Jones Store: St. Louis 1,348 1,193 189 207 7,655 7,159 42 4 1 39
Meier & Frank, ZCMI*: Portland, Ore. 404 399 233 231 1,769 1,768 8 0 0 8
The May Department Stores Company $13,869 $13,048 $210 $209 69,060 66,655 408 18 3 393
Net retail sales exclude the sales of stores that have been closed and not replaced and include lease department sales.
Sales per square foot are calculated from net retail sales plus finance charge revenues and average gross retail square footage.
Gross retail square footage represents square footage of stores open at the end of the period presented.
*Table excludes 13 ZCMI stores that opened in fiscal 2000.
</TABLE>
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net retail sales $13,869 $13,048 $12,265 $11,465 $10,347 $9,643 $8,905 $8,291 $7,748 $7,378 $6,907
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings per share $2.60 $2.30 $2.07 $1.87 $1.75 $1.62 $1.43 $1.18 $1.02 $1.01 $1.00
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales per square foot $210 $209 $204 $201 $201 $200 $191 $179 $171 $172 $168
</TABLE>
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows $1,396 $1,288 $1,191 $1,123 $1,033 $947 $859 $755 $677 $657 $659
Depreciation and amortization $469 $439 $412 $374 $333 $297 $281 $283 $273 $253 $234
Net earnings $927 $849 $779 $749 $700 $650 $578 $472 $404 $404 $425
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Return on equity 24.1% 22.2% 21.2% 19.4% 20.8% 21.3% 22.1% 21.5% 20.7% 21.8% 18.0%
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Return on net assets 20.7% 19.8% 18.5% 18.8% 20.1% 20.1% 19.0% 15.4% 14.5% 15.8% 16.9%
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dividend rate at year-end
(per common share) $0.89 $0.85 $0.80 $0.77 $0.76 $0.69 $0.61 $0.55 $0.54 $0.53 $0.47
</TABLE>
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock closing price
and price range:
Low price $29.19 $33.17 $29.08 $27.00 $22.33 $21.50 $22.29 $17.33 $15.08 $12.46 $11.54
High price $45.38 $47.25 $38.08 $34.83 $30.83 $30.08 $31.00 $24.83 $20.13 $19.71 $17.54
Closing price $31.25 $40.25 $35.04 $29.67 $29.25 $23.42 $26.50 $23.46 $18.29 $15.17 $15.25
</TABLE>
<PAGE>
Net Retail Sales
Net retail sales (sales) exclude the sales of
stores that have been closed and not replaced and include lease
department sales. Sales increases for 1999 and 1998 were as
follows:
1999 1998
Store-for- Store-for-
Quarter Total Store Total Store
First 8.1% 3.5% 6.3% 4.6%
Second 9.2 4.7 5.9 4.3
Third 5.4 1.1 4.6 2.2
Fourth 4.0 1.6 8.0 3.3
Year 6.3% 2.6% 6.4% 3.5%
The total sales increase for 1999 reflects a 2.6% rise in
store-for-store sales, the opening of 15 net new stores in 1999,
and the full-year impact of 1998 store openings. We discontinued
our consumer electronics business in 1999, which penalized sales
comparisons by about 1% for the year. The total sales increase for
1998 includes a 3.5% store-for-store sales increase, the opening of
24 net new stores, and the full-year impact of 1997 store openings.
Revenues (see page 26 for definition) include finance charge
revenues of $304 million, $298 million, and $319 million in 1999,
1998, and 1997, respectively.
Cost of Sales
Cost of sales includes cost of merchandise sold and
buying and occupancy costs. The impact of LIFO on cost of sales and
the related percent of revenues is shown below:
1999 1998 1997
(dollars in millions) $ % $ % $ %
Cost of sales $9,370 67.6% $8,901 68.0% $8,437 68.1%
LIFO credit 30 0.2 28 0.2 5 0.0
Cost of sales
before LIFO credit $9,400 67.8% $8,929 68.2% $8,442 68.1%
Before the LIFO credit, cost of sales as a percentage of revenues
decreased in 1999 compared with 1998 due to the elimination of the
lower-margin consumer electronics business. Before the LIFO credit,
cost of sales as a percentage of revenues increased in 1998
compared with 1997 as a result of higher promotional mark-down
levels.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses were $2.69 billion in 1999,
compared with $2.52 billion in 1998, a 6.8% increase. The overall increase
was due to a 6.3% increase in sales. As a percent of revenues, selling,
general, and administrative expenses increased from 19.2% in 1998
to 19.4% in 1999 as a result of increases in payroll, retirement,
and profit sharing expense.
Selling, general, and administrative expenses were $2.52 billion in
1998, compared with $2.38 billion in 1997, a 5.9% increase. The
overall increase was due to a 6.4% increase in sales. As a percent
of revenues, selling, general, and administrative expenses remained
constant at 19.2% in 1998 and 1997. A decrease in credit expense
partly related to lower bankruptcy rates was offset by increases in
advertising, retirement, and profit sharing expense.
Selling, general, and administrative expenses included advertising
and sales promotion costs of $540 million, $500 million, and $463
million in 1999, 1998, and 1997, respectively.
Interest Expense
Interest expense components were:
(dollars in millions) 1999 1998 1997
Interest expense $315 $311 $324
Interest income (12) (19) (11)
Capitalized interest (16) (14) (14)
Interest expense, net $287 $278 $299
Percent of revenues 2.0% 2.1% 2.4%
Interest expense principally relates to long-term debt. Seasonal
working capital requirements were met through commercial paper
borrowings. We did not issue any long-term debt in 1999 or 1997. In
the third quarter of 1998, we issued $350 million in new debt.
Impact of Inflation
Inflation did not have a material impact on our 1999 sales and
earnings growth. We value inventory on a LIFO basis, and as a result,
the current cost of merchandise is reflected in current operating results.
Review of Financial Condition
We continue to meet our objective of generating superior shareowner
returns while maintaining access to capital at reasonable costs.
Return on Equity
Return on equity is our principal measure for evaluating our performance
for shareowners and our ability to invest shareowners' funds profitably.
Our objective is performance that places our return on equity in the top
quartile of the retail industry. Return on beginning equity was 24.1% in
1999, compared with 22.2% in 1998 and 21.2% in 1997.
Return on Net Assets
Return on net assets measures performance independent of capital structure.
Return on net assets is pretax earnings before net interest expense and the
interest component of operating leases, divided by beginning-of-year net
assets (including present value of operating leases). Return on net assets
was 20.7% in 1999, compared with 19.8% in 1998 and 18.5% in 1997.
<PAGE>
Cash Flows
Cash flows from operations (net earnings plus depreciation/amortization) was
$1.4 billion, or 10.1% of revenues in 1999. This compares with 9.8% in 1998
and 9.6% in 1997. Our cash flows as a percent of revenues continues to be one
of the highest in the retail industry and provides us with significant resources
to enhance shareowners' value.
Sources (uses) of cash flows are summarized below:
(dollars in millions) 1999 1998 1997
Net earnings plus
depreciation/amortization $1,396 $1,288 $1,191
Working capital decreases 14 158 265
Other operating activities 120 59 70
Capital expenditures and
other investing activities (718) (888) (463)
Net long-term debt
issuances (repayments) (135) 129 (340)
Net purchases of common stock (434) (525) (329)
Dividend payments (314) (308) (297)
Increase (decrease) in
cash and cash equivalents $ (71) $ (87) $ 97
See "Consolidated Statement of Cash Flows" on page 24.
Available Credit and Debt Ratings
We can borrow up to $780 million under our multiyear credit agreements.
In addition we have filed with the Securities and Exchange Commission
shelf registration statements that enable us to issue up to $1.0 billion
of debt securities, of which $200 million was issued in February 2000.
In July 1999, our bond rating by Standard & Poor's Corporation was
increased from A to A+. Our bonds continue to be rated A1 by
Moody's Investors Service, Inc. Our commercial paper is rated P1 by
Moody's and A1 by Standard & Poor's. Our senior unsecured bank
credit agreement is rated A1 by Moody's.
Capital Expenditures
Our strong financial condition enables us to make capital expenditures
to enhance shareowners' returns. The operating measures we emphasize
when we invest in new stores and remodel or expand existing stores include
return on net assets, internal rate of return, and sales per square foot.
Financial Ratios
Our debt-to-capitalization and fixed-charge coverage ratios are consistent
with our capital structure objective. Our capital structure provides us with
substantial financial and operational flexibility.
The debt-to-capitalization ratios were 44%, 45%, and 44% for 1999, 1998, and
1997, respectively. For purposes of the debt-to-capitalization ratio, we
define total debt as short-term and long-term debt (including the Employee
Stock Ownership Plan (ESOP) debt reduced by unearned compensation) and the
capitalized value of all leases including operating leases. We define
capitalization as total debt, noncurrent deferred taxes, ESOP
preference shares, and shareowners' equity. See "Profit Sharing" on
page 27 for discussion of the ESOP.
The fixed-charge coverage ratios were 4.8x in 1999, 4.5x in 1998,
and 4.1x in 1997. We define fixed charges as gross interest
expense, interest expense on the ESOP debt, total rent expense, and
the pretax equivalent of dividends on redeemable preferred stock.
Common Stock Dividends and Market Prices
Our dividend policy is based on earnings growth and capital investment
requirements. We increased the annual dividend by 4.5%, or 4 cents, to 93
cents per share effective with the March 2000 dividend. This is our 25th
consecutive annual dividend increase. We have paid consecutive
quarterly dividends since 1911.
During the first quarter of 1999, we effected a three-for-two
common stock split. All share and per share data included in this
annual report have been restated to reflect the split.
The quarterly price ranges of the common stock and dividends per
share in 1999 and 1998 were:
1999 1998
Market Price Dividends Market Price Dividends
Quarter High Low per Share High Low per Share
First $42-3/16 $36 $.22-1/4 $44-5/16 $35-5/16 $.21-1/6
Second 45-3/8 38-1/8 .22-1/4 47-1/4 41-5/16 .21-1/6
Third 41-9/16 32-1/2 .22-1/4 44-11/16 33-3/16 .21-1/6
Fourth 34-5/8 29-3/16 .22-1/4 43 37-11/16 .21-1/6
Year $45-3/8 $29-3/16 $.89 $47-1/4 $33-3/16 $.84-2/3
The approximate number of common shareowners as of March 1, 2000,
was 45,000.
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.
<PAGE>
Consolidated Statement of Earnings
(dollars in millions, except per share) 1999 1998 1997
Net retail sales $13,869 $13,048 $12,265
Revenues $13,866 $13,090 $12,390
Cost of sales 9,370 8,901 8,437
Selling, general, and administrative expenses 2,686 2,516 2,375
Interest expense, net 287 278 299
Earnings before income taxes 1,523 1,395 1,279
Provision for income taxes 596 546 500
Net earnings before extraordinary loss 927 849 779
Extraordinary loss, net of income taxes - - (4)
Net earnings $ 927 $ 849 $ 775
Basic earnings per share:
Net earnings before extraordinary loss $ 2.73 $ 2.43 $ 2.18
Extraordinary loss - - (0.01)
Basic earnings per share $ 2.73 $ 2.43 $ 2.17
Diluted earnings per share:
Net earnings before extraordinary loss $ 2.60 $ 2.30 $ 2.07
Extraordinary loss - - (0.01)
Diluted earnings per share $ 2.60 $ 2.30 $ 2.06
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Balance Sheet
January 29, January 30,
(dollars in millions, except per share) 2000 1999
Assets
Current assets:
Cash $ 16 $ 15
Cash equivalents 25 97
Accounts receivable, net 2,173 2,144
Merchandise inventories, net of
LIFO reserves of $35 and $65 2,817 2,655
Other current assets 84 76
Total current assets 5,115 4,987
Property and equipment:
Land 326 316
Buildings and improvements 3,863 3,656
Furniture, fixtures, and equipment 3,543 3,232
Property under capital leases 65 56
Total property and equipment 7,797 7,260
Accumulated depreciation (3,028) (2,747)
Property and equipment, net 4,769 4,513
Goodwill, net of accumulated
amortization of $228 and $199 981 933
Other assets 70 100
Total assets $10,935 $10,533
Liabilities and shareowners' equity
Current liabilities:
Current maturities of long-term debt $ 259 $ 98
Accounts payable 1,030 965
Accrued expenses 892 807
Income taxes payable 234 189
Total current liabilities 2,415 2,059
Long-term debt 3,560 3,825
Deferred income taxes 540 482
Other liabilities 314 309
ESOP preference shares 315 327
Unearned compensation (286) (305)
Shareowners' equity:
Common stock 163 167
Additional paid-in capital - -
Retained earnings 3,914 3,669
Total shareowners' equity 4,077 3,836
Total liabilities and
shareowners' equity $10,935 $10,533
Common stock has a par value of $.50 per share; 1 billion shares
are authorized and 470.5 million shares were issued. At January 29,
2000, 325.5 million shares were outstanding, and 145.0 million
shares were held in treasury. At January 30, 1999, 334.7 million
shares were outstanding, and 135.8 million shares were held in
treasury.
ESOP preference shares have a par value of $.50 per share and a
stated value of $507 per share; 800,000 shares are authorized. At
January 29, 2000, 622,197 shares (convertible into 21.0 million
shares of common stock) were issued and outstanding. At January 30,
1999, 645,320 shares (convertible into 21.8 million shares of
common stock) were issued and outstanding.
See Notes to Consolidated Financial Statements.
<PAGE>
Consolidated Statement of Cash Flows
(dollars in millions) 1999 1998 1997
Operating activities
Net earnings $ 927 $ 849 $ 775
Adjustments for noncash items included in earnings:
Depreciation and amortization 469 439 412
Deferred income taxes 75 48 58
Working capital changes:
Accounts receivable, net 13 20 262
Merchandise inventories (137) (176) (53)
Other current assets (22) 12 46
Accounts payable 57 176 (30)
Accrued expenses 57 89 26
Income taxes payable 46 37 14
Other assets and liabilities, net 45 11 16
Total operating activities 1,530 1,505 1,526
Investing activities
Capital expenditures (703) (630) (496)
Dispositions of property and equipment 25 44 33
Acquisitions (40) (302) -
Total investing activities (718) (888) (463)
Financing activities
Issuances of long-term debt - 350 -
Repayments of long-term debt (135) (221) (340)
Purchases of common stock (468) (589) (394)
Issuances of common stock 34 64 65
Dividend payments (314) (308) (297)
Total financing activities (883) (704) (966)
Increase (decrease) in cash and cash equivalents (71) (87) 97
Cash and cash equivalents, beginning of year 112 199 102
Cash and cash equivalents, end of year $ 41 $ 112 $ 199
Cash paid during the year:
Interest expense $ 307 $ 297 $ 319
Income taxes 463 411 355
See Acquisitions in Notes to Consolidated Financial Statements for a
description of noncash transactions.
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Shareowners' Equity
Outstanding Additional Total
Common Stock Paid-in Retained Shareowners'
(dollars in millions, shares in thousands) Shares Dollars Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance at February 1, 1997 355,389 $178 $ - $3,472 $3,650
Net earnings - - - 775 775
Dividends paid:
Common stock ($0.80 per share) - - - (279) (279)
ESOP preference shares,
net of tax benefit - - - (18) (18)
Common stock issued 3,419 2 73 - 75
Common stock purchased (12,296) (7) (73) (314) (394)
Balance at January 31, 1998 346,512 173 - 3,636 3,809
Net earnings - - - 849 849
Dividends paid:
Common stock ($0.84-2/3 per share) - - - (290) (290)
ESOP preference shares,
net of tax benefit - - - (18) (18)
Common stock issued 3,141 1 74 - 75
Common stock purchased (14,989) (7) (74) (508) (589)
Balance at January 30, 1999 334,664 167 - 3,669 3,836
Net earnings - - - 927 927
Dividends paid:
Common stock ($0.89 per share) - - - (295) (295)
ESOP preference shares,
net of tax benefit - - - (19) (19)
Common stock issued 3,678 2 94 - 96
Common stock purchased (12,877) (6) (94) (368) (468)
Balance at January 29, 2000 325,465 $163 $ - $3,914 $4,077
</TABLE>
Treasury Shares
(shares in thousands) 1999 1998 1997
Balance, beginning of year 135,791 123,943 115,066
Common stock issued:
Exercise of stock options (673) (1,914) (2,372)
Deferred compensation plan (224) (227) (243)
Restricted stock grants, net of forfeitures (372) (306) (156)
Conversion of ESOP preference shares (781) (694) (648)
Acquisition (1,628) - -
(3,678) (3,141) (3,419)
Common stock purchased 12,877 14,989 12,296
Balance, end of year 144,990 135,791 123,943
Outstanding common stock excludes shares held in treasury.
See Notes to Consolidated Financial Statements.
<PAGE>
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
Fiscal Year
The company's fiscal year ends on the Saturday closest
to January 31. Fiscal years 1999, 1998, and 1997 ended on January
29, 2000, January 30, 1999, and January 31, 1998, respectively.
References to years in this annual report relate to fiscal years or
year-ends rather than calendar years.
Basis of Reporting
The consolidated financial statements include
the accounts of The May Department Stores Company, a Delaware
corporation, and all wholly owned subsidiaries (May or the
company). The company's 408 quality department stores are operated
by eight regional department store companies across the United
States under 12 long-standing and widely recognized trade names.
The company aggregates its eight store companies into one
reportable segment.
Use of Estimates
Management makes estimates and assumptions that
affect the amounts reported in the consolidated financial
statements. Actual results could differ from these estimates.
Net Retail Sales
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 years.
Revenues
Revenues include sales from all stores operating during
the period, finance charge revenues, and lease department income.
Sales are net of returns and exclude sales tax. A reserve is
provided for estimated merchandise returns based on experience. In
December 1999 new accounting rules were issued requiring lease
department income rather than lease department sales to be included
in revenues. The company has restated its revenues and cost of
sales to reflect this accounting change with no impact on earnings
or earnings per share.
Cost of Sales
Cost of sales includes the cost of merchandise sold and the company's
buying and occupancy costs.
Advertising Costs
Advertising and sales promotion costs are expensed at the time the
advertising takes place.
Preopening Expenses
Preopening expenses of new stores are expensed as incurred.
Income Taxes
Income taxes are accounted for by the liability method. The liability method
applies statutory tax rates in effect at the date of the balance sheet to
differences between the book basis and the tax basis of assets and liabilities.
Earnings per Share
References to earnings per share relate to diluted earnings per share.
Common Stock Split
All share and per share data included in this annual report have been
restated to reflect a three-for-two common stock split effective March 22, 1999.
Stock-based Compensation
The company accounts for stock-based compensation by applying APB Opinion No.
25, as allowed under SFAS No. 123, "Accounting for Stock-based Compensation."
Cash Equivalents
Cash equivalents consist primarily of commercial paper with maturities of
less than three months. Cash equivalents are stated at cost, which
approximates fair value.
Merchandise Inventories
Merchandise inventories are valued by the retail method and are stated on the
lower of LIFO (last-in, first-out) cost basis or market.
Property and Equipment
Property and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives. Investments in
properties under capital leases and leasehold improvements are amortized over
the shorter of their useful lives or related lease terms. Costs associated
with the acquisition or development of software for internal use are
capitalized and amortized over the expected useful life of the software.
Goodwill
Goodwill represents the excess of cost over the fair value of net tangible
assets acquired at the dates of acquisition. Substantially all amounts are
amortized using the straight-line method over a 40-year period.
Long-lived Assets
Long-lived assets and certain identifiable intangibles are reviewed to
determine whether the net book value is recoverable. Impairment losses
resulting from these reviews have not been significant.
Financial Derivatives
The company uses financial derivatives only to reduce risk in specific
business transactions. The company periodically purchases forward contracts
on firm commitments to minimize the risk of foreign currency fluctuations.
These contracts are not significant. The company will adopt SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," in
2000. This statement will not have a material impact on the company.
Reclassifications
Certain prior-period amounts have been reclassified to conform with the
current-year presentation.
Quarterly Results (Unaudited)
Quarterly results are determined in accordance with annual
accounting policies. They include certain items based upon
estimates for the entire year. Summarized quarterly results for the
last two years were as follows:
(dollars in millions, 1999
except per share) First Second Third Fourth Year
Revenues $2,989 $3,067 $3,176 $4,634 $13,866
Cost of sales 2,086 2,098 2,218 2,968 9,370
Selling, general, and
administrative expenses 629 640 660 757 2,686
Pretax earnings 203 257 228 835 1,523
Net earnings 122 154 138 513 927
Earnings per share:
Basic $ 0.35 $ 0.45 $ 0.40 $ 1.53 $ 2.73
Diluted 0.34 0.43 0.38 1.45 2.60
(dollars in millions, 1998
except per share) First Second Third Fourth Year
Revenues $2,760 $2,826 $3,027 $4,477 $13,090
Cost of sales 1,926 1,956 2,118 2,901 8,901
Selling, general, and
administrative expenses 584 587 625 720 2,516
Pretax earnings 183 218 215 779 1,395
Net earnings 110 131 130 478 849
Earnings per share:
Basic $ 0.30 $ 0.37 $ 0.36 $ 1.40 $ 2.43
Diluted 0.29 0.35 0.35 1.31 2.30
<PAGE>
There are variables and uncertainties in the factors used to
estimate the annual LIFO provision (credit) on an interim basis. If
the final variables and factors had been known at the beginning of
the year, the pro forma diluted earnings (loss) per share impact of
LIFO would have been as follows:
1999 1998
Pro As Pro As
Quarter Forma Reported Forma Reported
First $0.01 $(0.01) $0.01 $(0.01)
Second 0.01 (0.01) 0.01 (0.01)
Third 0.01 (0.01) 0.01 (0.01)
Fourth 0.02 0.08 0.02 0.08
Year $0.05 $ 0.05 $0.05 $ 0.05
Profit Sharing
The company has a qualified profit sharing plan that covers
associates who work 1,000 hours or more in a year and have attained
age 21. The plan is a defined-contribution program that provides
for discretionary matching allocations at a variable matching rate
generally based upon changes in the company's annual earnings per
share, as defined in the plan. The plan's matching allocation value
totaled $54 million for 1999, an effective match rate of 100%. The
matching allocation values were $57 million in 1998 and $48 million
in 1997.
The plan includes an Employee Stock Ownership Plan (ESOP) under
which the plan borrowed $400 million in 1989, guaranteed by the
company, at an average rate of 8.5%. The proceeds were used to
purchase $400 million (788,955 shares) of convertible preference
stock of the company (ESOP preference shares). Each share is
convertible into 33.787 shares of common stock and has a stated
value of $15.01 per common share equivalent. The annual dividend
rate on the ESOP preference shares is 7.5%.
The $286 million outstanding portion of the guaranteed ESOP debt is
reflected on the consolidated balance sheet as long-term debt
because the company will fund the required debt service through
2004. The company's contributions to the ESOP and the dividends on
the ESOP preference shares are used to repay the loan principal and
interest. Interest expense associated with the ESOP debt was $25
million in 1999, $27 million in 1998, and $29 million in 1997. ESOP
preference shares' dividends were $24 million in 1999, $25 million
in 1998, and $26 million in 1997.
The release of ESOP preference shares is based upon debt-service
payments. Upon release, the shares are allocated to participating
associates' accounts. Unearned compensation, initially an equal
offsetting amount to the $400 million guaranteed ESOP debt, has
been adjusted for the difference between the expense related to the
ESOP and cash payments to the ESOP. It is reduced as principal is
repaid.
The company's profit sharing expense was $40 million in 1999, $28
million in 1998, and $24 million in 1997.
At January 29, 2000, the plan beneficially owned 15.3 million
shares of the company's common stock and 100% of the company's ESOP
preference shares, representing 10.5% of the company's common
stock.
Pension and Other Postretirement Benefits
The company has two qualified defined-benefit plans that cover
associates who work 1,000 hours or more in a year and have attained
age 21. The company also maintains two nonqualified, supplementary
defined-benefit plans for certain associates. All plans are
noncontributory and provide benefits based upon years of service
and pay during employment.
Pension expense is based on information provided by an outside
actuarial firm that uses assumptions to estimate the total benefits
ultimately payable to associates and allocates this cost to service
periods. The actuarial assumptions used to calculate pension costs
are reviewed annually.
The accumulated benefit obligations (ABO), change in projected
benefit obligations (PBO), change in net plan assets, and funded
status of the benefit plans are summarized in the tables below:
Qualified Plans Nonqualified Plans
(dollars in millions) 1999 1998 1999 1998
Change in PBO (1)
PBO at beginning of year $ 517 $476 $ 122 $ 102
Service cost 36 30 3 3
Interest cost 36 32 9 8
Business combinations 27 8 - -
Actuarial loss (gain) (2) (74) 24 1 12
Plan amendments 68 - - 2
Benefits paid (68) (53) (6) (5)
PBO at end of year $ 542 $517 $ 129 $ 122
ABO at end of year (3) $ 516 $464 $ 104 $ 99
Change in net plan assets
Fair value of net plan assets
at beginning of year $ 579 $490 $ - $ -
Actual return on plan assets 38 89 - -
Employer contribution 48 44 - -
Business combinations 25 9 - -
Benefits paid (68) (53) - -
Fair value of net plan
assets at end of year $ 622 $579 $ - $ -
Funded status
Plan assets in excess of
(less than) PBO $ 80 $ 62 $(129) $(122)
Unrecognized net actuarial
loss (gain) (124) (50) 19 21
Unrecognized prior service cost 66 2 14 14
Additional minimum liability (4) - - (8) (12)
Prepaid (accrued) benefit cost $ 22 $ 14 $(104) $ (99)
Plan assets in excess of
(less than) ABO $ 106 $115 $(104) $ (99)
(1) PBO is the actuarial present value of benefits attributed by
the benefit formula to prior associate service; it takes into
consideration future salary increases.
(2) Actuarial loss (gain) is the change in value of the benefit
obligations or the plan assets resulting from changes in
actuarial assumptions or from experience different than
assumed.
(3) ABO is the actuarial present value of benefits attributed by
the pension benefit formula to prior associate service based on
current and past compensation levels.
(4) The additional minimum liability represents the excess of the
accumulated benefit obligation over the accrued pension costs
recognized. Recognizing the additional minimum liability
results in an intangible asset being recorded for an equal
amount.
<PAGE>
The components of net periodic benefit costs and actuarial
assumptions for the benefit plans are summarized in the following
tables:
(dollars in millions) 1999 1998 1997
Components of pension expense (all plans)
Service cost $ 39 $ 33 $ 28
Interest on PBO 45 40 34
Expected return on assets (39) (34) (30)
Net amortization (1) 8 3 2
Total $ 53 $ 42 $ 34
(1) Prior service cost and actuarial (gain) loss are amortized over
the remaining service period.
(as of January 1) 2000 1999 1998
Actuarial assumptions
Discount rate 8.00% 6.75% 7.00%
Expected return on plan assets 8.25 7.00 7.25
Salary increase 4.50 4.25 4.50
The accrued pension costs are included in other liabilities.
Prepaid pension costs and intangible assets are included in other
assets.
The company also provides postretirement life and/or health
benefits for certain associates. As of January 29, 2000 the
company's estimated PBO (at a discount rate of 8.00%) for
postretirement benefits was $48 million, which was accrued in other
liabilities. As of January 30, 1999 the company's estimated PBO (at
a discount rate of 6.75%) for postretirement benefits was $48
million, of which $45 million was accrued in other liabilities. The
postretirement plan is unfunded. The postretirement benefit expense
was $4 million in 1999 and 1998 and $3 million in 1997.
The estimated future obligations for postretirement medical
benefits are based upon assumed annual healthcare cost increases of
12% for 2000 and 2001, decreasing by 1% annually to 8% for 2005 and
future years. A 1% increase or decrease in the assumed annual
health care cost increases would increase or decrease the present
value of estimated future obligations for postretirement benefits
by approximately $2 million.
Another important element in the retirement programs is the Social
Security system, into which the company paid $163 million in 1999
as its matching contribution to the $163 million paid in by
associates.
Taxes
The provision for income taxes and the related percent of pretax
earnings for the last three years were as follows:
1999 1998 1997
(dollars in millions) $ % $ % $ %
Federal $440 $420 $359
State and local 81 77 65
Current taxes 521 34.2% 497 35.6% 424 33.2%
Federal 63 41 64
State and local 12 8 12
Deferred taxes 75 4.9 49 3.5 76 5.9
Total $596 39.1% $546 39.1% $500 39.1%
The reconciliation between the statutory federal income tax rate
and the effective income tax rate for the last three years follows:
(percent of pretax earnings) 1999 1998 1997
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes 6.1 6.1 6.0
Federal tax benefit of state
and local income taxes (2.2) (2.2) (2.1)
Other, net 0.2 0.2 0.2
Effective income tax rate 39.1% 39.1% 39.1%
Major components of deferred tax assets (liabilities) were as
follows:
(dollars in millions) 1999 1998
Accrued expenses and reserves $ 96 $ 102
Deferred and other compensation 139 123
Depreciation/amortization and basis differences (528) (474)
Other deferred income tax liabilities, net (216) (206)
Net deferred income taxes (509) (455)
Less: Net current deferred income tax assets 31 27
Noncurrent deferred income taxes $(540) $(482)
Net current deferred income tax assets are included in other
current assets in the accompanying balance sheet.
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 for 1999, 1998, and 1997.
1999
Net Earnings
(in millions, except per share) Earnings Shares per Share
Net earnings $927
ESOP preference shares' dividends (19)
Basic earnings per share $908 332.2 $2.73
ESOP preference shares 16 21.5
Assumed exercise of options
(treasury stock method) - 1.9
Diluted earnings per share $924 355.6 $2.60
1998
Net Earnings
(in millions, except per share) Earnings Shares per Share
Net earnings $849
ESOP preference shares' dividends (18)
Basic earnings per share $831 342.6 $2.43
ESOP preference shares 15 22.2
Assumed exercise of options
(treasury stock method) - 2.6
Diluted earnings per share $846 367.4 $2.30
<PAGE>
1997
Net Earnings
(in millions, except per share) Earnings Shares per Share
Net earnings $779
ESOP preference shares' dividends (18)
Basic earnings per share $761 348.5 $2.18
ESOP preference shares 14 22.9
Assumed exercise of options
(treasury stock method) - 2.2
Diluted earnings per share $775 373.6 $2.07
Accounts Receivable
Credit sales under department store credit programs as a percent of
net retail sales were 40.7% in 1999. This compares with 42.3% in
1998 and 44.3% in 1997. An estimated 26 million customers hold
credit cards under the company's various credit programs. Sales
made through third-party credit cards totaled $4.6 billion in 1999,
compared with $4.1 billion in 1998 and $3.6 billion in 1997.
Net accounts receivable consisted of:
(dollars in millions) 1999 1998
Customer accounts receivable $2,124 $2,127
Other accounts receivable 125 99
Total accounts receivable 2,249 2,226
Allowance for uncollectible accounts (76) (82)
Accounts receivable, net $2,173 $2,144
In accordance with industry practice, installments on
deferred-payment accounts receivable maturing in more than one year
have been included in current assets. The fair value of customer
accounts receivable approximates their carrying values at January
29, 2000 and January 30, 1999 due to the short-term nature of these
accounts.
Other Current Assets
In addition to net current deferred income tax assets, other
current assets consisted of prepaid expenses and supply inventories
of $53 million in 1999 and $49 million in 1998.
Other Assets
Other assets consisted of:
(dollars in millions) 1999 1998
Prepaid and intangible pension asset $32 $ 26
Deferred debt expense 31 33
Notes receivable - 30
Other 7 11
Total $70 $100
Accrued Expenses
Accrued expenses consisted of:
(dollars in millions) 1999 1998
Salaries, wages, and employee benefits $196 $147
Insurance costs 184 178
Interest and rent expense 143 156
Advertising and other operating expenses 128 112
Sales, use, and other taxes 110 106
Construction costs 71 59
Other 60 49
Total $892 $807
Short-term Debt and Lines of Credit
Short-term borrowings for the last three years were:
(dollars in millions) 1999 1998 1997
Balance outstanding at year end $ - $ - $ -
Average balance outstanding 67 195 182
Average interest rate on average balance 5.7% 5.4% 5.7%
Maximum balance outstanding $407 $621 $487
The average balance of short-term borrowings outstanding, primarily
commercial paper, and the respective weighted average interest
rates are based on the number of days such short-term borrowings
were outstanding during the year. The company has $780 million
available under credit agreements.
Long-term Debt
Long-term debt and capital lease obligations were:
(dollars in millions) 1999 1998
5.7% to 10.6% unsecured notes and
sinking-fund debentures due 2000-2036 $3,638 $3,741
3.0% to 10.0% mortgage notes and
bonds due 2000-2015 124 134
Capital lease obligations 57 48
Total debt 3,819 3,923
Less: Current maturities of long-term debt 259 98
Long-term debt $3,560 $3,825
The annual maturities of long-term debt, including sinking fund
requirements, are $259 million, $85 million, $329 million, $132
million, and $258 million for 2000 through 2004.
The net book value of property encumbered under long-term debt
agreements was $143 million at January 29, 2000.
The company recorded an extraordinary aftertax loss of $4 million
($5 million pretax) in 1997 related to the early retirement of
debt.
The fair value of long-term debt (excluding capital lease
obligations) was approximately $3.7 billion and $4.5 billion at
January 29, 2000, and January 30, 1999, respectively. The fair
value was determined using borrowing rates for debt instruments
with similar terms and maturities.
<PAGE>
Lease Obligations
The company owns approximately 77% of its stores. Rental expense
for the company's operating leases consisted of:
(dollars in millions) 1999 1998 1997
Minimum rentals $48 $49 $47
Contingent rentals based on sales 18 18 17
Real property rentals 66 67 64
Equipment rentals 3 3 4
Total $69 $70 $68
Future minimum lease payments at January 29, 2000 were as follows:
Capital Operating
(dollars in millions) Leases Leases Total
2000 $ 7 $ 51 $ 58
2001 7 46 53
2002 7 43 50
2003 7 40 47
2004 7 38 45
After 2004 93 264 357
Minimum lease payments $128 $482 $610
The present value of minimum lease payments under capital leases
was $57 million at January 29, 2000, of which $1 million was
included in current liabilities. The present value of operating
leases was $291 million at January 29, 2000.
Property under capital leases is summarized as follows:
(dollars in millions) 1999 1998
Cost $ 65 $ 56
Accumulated amortization (32) (31)
Total $ 33 $ 25
Other Liabilities
In addition to accrued pension and postretirement costs, other
liabilities consisted principally of deferred compensation
liabilities of $162 million at January 29, 2000 and $161 million at
January 30, 1999. Under the company's deferred compensation plan,
eligible associates may elect to defer part of their compensation
each year into cash and/or stock unit alternatives. The company
issues shares to settle obligations with participants who defer in
stock units and it maintains shares in treasury sufficient to
settle all outstanding stock unit obligations.
Acquisitions
On December 31, 1999 May completed the acquisition of Zions
Co-operative Mercantile Institution (ZCMI) stores. May issued 1.6
million shares of May common stock valued at $50 million to ZCMI
shareholders and assumed $73 million of debt, of which $40 million
was repaid at closing. The company repurchased a comparable number
of shares in the open market as were issued to acquire ZCMI.
In September 1998, May purchased 11 former Mercantile stores for
approximately $302 million including merchandise inventories. At
the date of acquisition nine of these stores were leased. The
leases have both put and call options that obligate the company to
buy the underlying properties for approximately $100 million. As of
January 29, 2000 the company has purchased three of these stores
for $42 million.
These acquisitions have been accounted for as purchases and did not
have a material effect on the results of operations or financial
position.
Stock Option and Stock-related Plans
Under the company's common stock option plans, options are granted
at the market price on the date of grant. Options to purchase may
extend for up to 10 years, may be exercised in installments only
after stated intervals of time, and are conditional upon continued
active employment with the company. The company's plans are
accounted for as provided by APB Opinion No. 25. For stock options,
no compensation cost has been recognized because the option
exercise price is fixed at the market price on the date of grant.
A combined summary of the stock option plans at the end of 1999, 1998, and 1997
and of the changes in outstanding shares within years is presented below:
1999 1998 1997
Average Average Average
Exercise Exercise Exercise
(shares in thousands) Shares Price Shares Price Shares Price
Beginning of year 11,764 $33 10,230 $28 10,081 $25
Granted 4,329 44 4,230 43 3,158 32
Exercised (690) 25 (1,922) 25 (2,384) 21
Forfeited or expired (531) 42 (774) 33 (625) 28
End of year 14,872 $37 11,764 $33 10,230 $28
Exercisable at
end of year 5,904 $30 3,719 $26 3,214 $24
Shares available
for grants 4,218 8,015 11,471
Fair value of
options granted $14 $12 $11
<PAGE>
The following table summarizes information about stock options outstanding at
January 29, 2000:
Options Outstanding Options Exercisable
Average
Exercise Number Remaining Average Number Average
Price Outstanding Contractual Exercise Exercisable Exercise
Range (in thousands) Life Price (in thousands) Life
$ 7 2 1 $ 7 2 1
16-24 1,699 4 22 1,699 4
25-33 5,119 7 30 3,127 7
35-45 8,052 9 42 1,076 8
14,872 7 $30 5,904 6
Under the 1994 Stock Incentive Plan, the company is authorized to
grant up to 2.9 million shares of restricted stock to management
associates with or without performance restrictions. No monetary
consideration is paid by associates who receive restricted stock.
All restrictions lapse over periods of up to 10 years. In 1999 and
1998 the company granted 407,167 and 328,356 shares of restricted
stock, respectively, under the 1994 Stock Incentive Plan. For
restricted stock grants, compensation expense is based upon the
grant date market price; it is recorded over the lapsing period.
For performance-based restricted stock, compensation expense is
recorded over the performance period and is based on estimates of
performance levels.
As an alternative to accounting for stock-based compensation under
APB No. 25, SFAS No. 123, "Accounting for Stock-based
Compensation," establishes a fair-value method of accounting for
employee stock options or similar equity instruments. The company
used the Black-Scholes option pricing model to estimate the grant
date fair value of its 1995 and later option grants. The fair value
is recognized over the option vesting period, which is typically
four years. Had compensation cost for these plans been determined
in accordance with SFAS No. 123, the company's net earnings and net
earnings per share would have been as follows:
(dollars in millions, except per share) 1999 1998 1997
Net earnings:
As reported $ 927 $ 849 $ 779
Pro forma 903 833 766
Basic earnings per share:
As reported $2.73 $2.43 $2.18
Pro forma 2.66 2.38 2.14
Diluted earnings per share:
As reported $2.60 $2.30 $2.07
Pro forma 2.54 2.27 2.04
The following Black-Scholes assumptions were used:
Assumptions 1999 1998 1997
Risk-free interest rate 5.5% 5.6% 6.6%
Expected dividend yield $0.89 $0.85 $0.80
Expected option life (years) 7 7 7
Expected volatility 26% 23% 24%
Common Stock Repurchase Programs
During 1999, the company purchased $361 million or 9.9 million
shares under a $500 million stock repurchase program authorized in
fiscal 1999. The 1999 buyback was in addition to a $500 million
1998 stock repurchase program totaling 12.5 million shares and a
$300 million 1997 stock repurchase program totaling 9.6 million
shares. In February 2000, the company announced plans to repurchase
up to an additional $650 million of May shares.
Preference Stock
The company is authorized to issue up to 25 million shares of $.50
par value preference stock. As of January 29, 2000, 800,000 ESOP
preference shares were authorized and 622,197 were outstanding.
The ESOP preference shares are shown outside of shareowners' equity
in the consolidated balance sheet because the shares are redeemable
by the holder or by the company in certain situations.
Shareowner Rights Plan
The company has a shareowner rights plan under which a right is
attached to each share of the company's common stock. The rights
become exercisable only under certain circumstances involving
actual or potential acquisitions of May's common stock by a person
or by affiliated persons. Depending upon the circumstances the
holder may be entitled to purchase units of the company's
preference stock, shares of the company's common stock, or shares
of common stock of the acquiring person. The rights will remain in
existence until August 31, 2004, unless they are terminated,
extended, exercised, or redeemed.
<PAGE>
<TABLE>
<CAPTION>
Eleven-Year Financial Summary
(in millions, except per share
and operating statistics) 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net retail sales $13,869 $13,048 $12,265 $11,465 $10,347 $9,643 $8,905 $8,291 $7,748 $7,378 $6,907
Total percent increase 6.3% 6.4% 7.0% 10.8% 7.3% 8.3% 7.4% 7.0% 5.0% 6.8% 14.0%
Store-for-store percent increase 2.6% 3.5% 3.6% 4.3% 2.5% 5.4% 5.4% 4.5% (0.6%) 0.6% 6.4%
Operations
Revenues $13,866 $13,090 $12,390 $11,727 $10,708 $9,886 $9,353 $9,154 $8,864 $8,497 $8,169
Cost of sales 9,370 8,901 8,437 7,953 7,217 6,658 6,328 6,251 6,071 5,844 5,547
Selling, general,
and administrative expenses 2,686 2,516 2,375 2,265 2,081 1,916 1,824 1,859 1,861 1,772 1,735
Interest expense, net 287 278 299 277 250 233 244 279 315 278 231
Earnings before income taxes 1,523 1,395 1,279 1,232 1,160 1,079 957 579* 617 603 656
Provision for income taxes 596 546 500 483 460 429 379 107* 213 199 231
Net earnings (1) 927 849 779 749 700 650 578 472 404 404 425
Percent of revenues 6.7% 6.5% 6.3% 6.4% 6.5% 6.6% 6.2% 5.2% 4.6% 4.8% 5.2%
LIFO provision (credit) $ (30)$ (28)$ (5)$ (20)$ (53)$ (46)$ 7 $ 10 $ 26 $ 39 $ (22)
Per share
Net earnings (1) $ 2.60 $ 2.30 $ 2.07 $ 1.87 $ 1.75 $ 1.62 $ 1.43 $ 1.18 $ 1.02 $ 1.01 $ 1.00
Dividends paid (2) .89 .85 .80 .77 .74 .67 .60 .55 .54 .51 .46
Book value 12.53 11.46 10.99 10.27 12.28 11.10 9.77 8.55 7.51 6.69 6.22
Market price - high 45.38 47.25 38.08 34.83 30.83 30.08 31.00 24.83 20.13 19.71 17.54
Market price - low 29.19 33.17 29.08 27.00 22.33 21.50 22.29 17.33 15.08 12.46 11.54
Market price - year-end close 31.25 40.25 35.04 29.67 29.25 23.42 26.50 23.46 18.29 15.17 15.25
Financial statistics
Return on equity 24.1% 22.2% 21.2% 19.4% 20.8% 21.3% 22.1% 21.5% 20.7% 21.8% 18.0%
Return on net assets 20.7 19.8 18.5 18.8 20.1 20.1 19.0 15.4** 14.5 15.8 16.9
Operating statistics
Stores open at year-end 408 393 369 365 346 314 301 303 318 324 288
Gross retail square footage
(in millions) 69.1 66.7 62.8 62.1 57.6 52.0 49.4 49.5 51.9 52.4 48.4
Sales per square foot (3) $ 210 $ 209 $ 204 $ 201 $ 201 $ 200 $ 191 $ 179 $ 171 $ 172 $ 168
Cash flows and financial position
Cash flows from operations (4) $ 1,396 $ 1,288 $ 1,191 $ 1,123 $ 1,033 $ 947 $ 859 $ 755 $ 677 $ 657 $ 659
Percent of revenues 10.1% 9.8% 9.6% 9.6% 9.6% 9.6% 9.2% 8.3% 7.6% 7.7% 8.1%
Depreciation and amortization $ 469 $ 439 $ 412 $ 374 $ 333 $ 297 $ 281 $ 283 $ 273 $ 253 $ 234
Capital expenditures 703 630 496 632 801 682 560 284 366 466 470
Dividends on common stock 295 290 279 287 277 251 223 204 198 191 186
Working capital 2,700 2,928 3,012 3,156 3,536 3,069 2,960 2,730 3,089 2,672 2,094
Long-term debt and preference stock 3,875 4,152 3,849 4,196 3,701 3,240 3,192 3,256 4,299 3,948 3,387
Shareowners' equity 4,077 3,836 3,809 3,650 4,585 4,135 3,639 3,181 2,781 2,467 2,319
Total assets 10,935 10,533 9,930 10,059 10,122 9,237 8,614 8,376 8,566 8,083 7,570
Average diluted shares outstanding
and equivalents 355.6 367.4 373.6 396.2 397.3 397.3 398.2 397.0 394.3 397.1 419.3
All years included 52 weeks, except 1995 and 1989, which included 53 weeks. Net retail sales for 1995 and 1989 are shown
on a 52-week basis for comparability.
(1) Represents net earnings and diluted earnings per share from continuing operations.
(2) The annual dividend was increased to $.93 per share effective with the March 15, 2000, dividend payment.
(3) Sales per square foot are calculated from net retail sales plus finance charge revenues and average gross retail square
footage.
(4) Cash flows from operations represents net earnings plus depreciation/amortization. It is different from cash flows from
operating activities as shown on the statement of cash flows.
* Pretax earnings include a net special and nonrecurring charge of $187 million, and the provision for income taxes
includes a nonrecurring tax benefit of $187 million.
** Based on pretax earnings before special and nonrecurring items.
</TABLE>
<PAGE>
REPORTS OF MANAGEMENT AND INDEPENDENT PUBLIC ACCOUNTANTS
Report of Management
Management is responsible for the preparation, integrity, and
objectivity of the financial information included in this annual
report. The financial statements have been prepared in conformity
with generally accepted accounting principles applied on a
consistent basis. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts. Although the financial statements reflect all
available information and management's judgment and estimates of
current conditions and circumstances, prepared with the assistance
of specialists within and outside the company, actual results could
differ from those estimates.
Management has established and maintains an internal control
structure to provide reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition, that
the accounting records provide a reliable basis for the preparation
of financial statements, and that such financial statements are not
misstated due to material fraud or error. Internal controls include
the careful selection of associates, the proper segregation of
duties, and the communication and application of formal policies
and procedures that are consistent with high standards of
accounting and administrative practices. An important element of
this structure is a comprehensive internal audit program.
Management continually reviews, modifies, and improves its systems
of accounting and controls in response to changes in business
conditions and operations, and in response to recommendations in
the reports prepared by the independent public accountants and
internal auditors.
Management believes that it is essential for the company to conduct
its business affairs in accordance with the highest ethical
standards and in conformity with the law. This standard is
described in the company's policies on business conduct, which are
publicized throughout the company.
To the Board of Directors and Shareowners of The May Department
Stores Company:
We have audited the accompanying consolidated balance sheet of The
May Department Stores Company (a Delaware corporation) and
subsidiaries as of January 29, 2000, and January 30, 1999, and the
related consolidated statements of earnings, shareowners' equity
and cash flows for each of the three fiscal years in the period
ended January 29, 2000. These financial statements are the
responsibility of the company's management. Our responsibility is
to express an opinion on these Financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of The May
Department Stores Company and subsidiaries as of January 29, 2000,
and January 30, 1999, and the results of their operations and their
cash Flows for each of the three fiscal years in the period ended
January 29, 2000, in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen LLP
1010 Market Street
St. Louis, Missouri 63101-2089
February 9, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet, statement of earnings, and notes to consolidated
financial statements on pages 22, 23 and 26-31, respectively, of The May
Department Stores Company 1999 Annual Report and is qualified in its entirety to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-END> JAN-29-2000
<CASH> 16
<SECURITIES> 25
<RECEIVABLES> 2,249
<ALLOWANCES> 76
<INVENTORY> 2,817
<CURRENT-ASSETS> 5,115
<PP&E> 7,797
<DEPRECIATION> 3,028
<TOTAL-ASSETS> 10,935
<CURRENT-LIABILITIES> 2,415
<BONDS> 3,560
0
0
<COMMON> 163
<OTHER-SE> 3,914
<TOTAL-LIABILITY-AND-EQUITY> 10,935
<SALES> 13,869
<TOTAL-REVENUES> 13,866
<CGS> 9,370
<TOTAL-COSTS> 9,370
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 287
<INCOME-PRETAX> 1,523
<INCOME-TAX> 596
<INCOME-CONTINUING> 927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 927
<EPS-BASIC> 2.73
<EPS-DILUTED> 2.60
</TABLE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Year Ended December 31, 1999
A. Full title of the plan if different from that of the issuer
named below:
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
B. Name of issuer of securities held pursuant to the plan and the
address of its principal executive office:
THE MAY DEPARTMENT STORES COMPANY
611 Olive Street
St. Louis, MO 63101
Commission File Number 1-79
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
FINANCIAL STATEMENTS AND EXHIBIT
Listed below are all financial statements and exhibit filed as part of this
annual report on Form 11-K:
Page of this
Financial Statements Form 11-K
Report of Independent Public Accountants 3
Financial Statements of the Plan:
Statement of Net Assets Available for
Benefits - December 31, 1999 4
Statement of Net Assets Available for
Benefits - December 31, 1998 7
Statement of Changes in Net Assets
Available for Benefits for the Year
Ended December 31, 1999 10
Notes to Financial Statements -
December 31, 1999 and 1998 12
Schedule I - Item 27(a): Schedule of Assets
Held for Investment Purposes -
December 31, 1999 18
Schedule II - Item 27(d): Schedule of
Reportable Transactions for the Year
Ended December 31, 1999 22
Exhibit
Consent of Independent Public Accountants 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed by the
undersigned, thereunto duly authorized.
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
By: The May Department Stores Company
Date: April 19, 2000 By: /s/ John L. Dunham
John L. Dunham
Executive Vice President and Chief
Financial Officer
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The May Department Stores Company
Profit Sharing Plan:
We have audited the accompanying statements of net assets available for benefits
of The May Department Stores Company Profit Sharing Plan as of December 31, 1999
and 1998, and the related statement of changes in net assets available for
benefits for the year ended December 31, 1999. These financial statements and
the schedules referred to below are the responsibility of the Plan
Administrator. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the year ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for
the purpose of additional analysis and are not a required part of the basic
financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The Fund Information in
the statements of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
are fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ Arthur Andersen LLP
St. Louis, Missouri,
March 24, 2000
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999
(Thousands, except per unit information)
Nonparticipant Directed
Investment Funds
--------------------------------
ESOP Preference
---------------------- May
Member Common
ASSETS Unallocated Allocated Stock
INVESTMENTS, at fair value:
The May Department Stores Company-
Convertible preferred stock $384,040 $294,220 $ -
Common stock - - 123,490
Commingled equity index fund - - -
Short-term investments - - 397
U.S. government securities - - -
Fixed income investments - - -
-------- -------- --------
Total investments 384,040 294,220 123,887
OTHER ASSETS:
Receivable (payable) for
allocation to member accounts (44,275) 44,275 8,546
Dividends and interest receivable - - 3
Receivable - withholdings of member
contributions - - -
Member interfund transfers - (286) (420)
-------- -------- --------
Total assets 339,765 338,209 132,016
-------- -------- --------
LIABILITIES
LIABILITIES:
Notes payable 285,826 - -
Accrued interest payable 4,021 - -
Net amount (receivable) payable for
investment securities transactions
and other - - -
Amounts payable for administrative
expenses - - 111
-------- -------- --------
Total liabilities 289,847 - 111
-------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS $ 49,918 $338,209 $131,905
======== ======== ========
NUMBER OF UNITS AT DECEMBER 31, 1999 2,589
========
VALUE PER UNIT AT DECEMBER 31, 1999 $ 50.95
========
(Continued on following page)
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999
(Thousands, except per unit information)
Participant Directed
Investment Funds
------------------------------------
May Common Fixed
Common Stock Money Income
ASSETS Stock Index Market Index
INVESTMENTS, at fair value:
The May Department Stores Company-
Convertible preferred stock $ - $ - $ - $ -
Common stock 367,330 - - -
Commingled equity index fund - 221,180 - -
Short-term investments 1,182 479 60,039 298
U.S. government securities - - - 27,859
Fixed income investments - - - 14,486
-------- -------- ------- -------
Total investments 368,512 221,659 60,039 42,643
OTHER ASSETS:
Receivable (payable) for
allocation to member accounts - - - -
Dividends and interest receivable 10 9 306 693
Receivable - withholdings of
member contributions 1,302 805 231 174
Member interfund transfers (1,219) 1,991 208 (274)
-------- -------- ------- -------
Total assets 368,605 224,464 60,784 43,236
-------- -------- ------- -------
LIABILITIES
LIABILITIES:
Notes payable - - - -
Accrued interest payable - - - -
Net amount (receivable) payable for
investment securities transactions
and other - (1,250) - -
Amounts payable for administrative
expenses 330 253 132 125
-------- -------- ------- -------
Total liabilities 330 (997) 132 125
-------- -------- ------- -------
NET ASSETS AVAILABLE FOR BENEFITS $368,275 $225,461 $60,652 $43,111
======== ======== ======= =======
NUMBER OF UNITS AT DECEMBER 31, 1999 7,228 35,562 34,074 21,237
======== ======== ======= =======
VALUE PER UNIT AT DECEMBER 31, 1999 $ 50.95 $ 6.34 $ 1.78 $ 2.03
======== ======== ======= =======
(Continued on following page)
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1999
(Thousands, except per unit information)
Distribution
ASSETS Account Total
INVESTMENTS, at fair value:
The May Department Stores Company-
Convertible preferred stock $ - $ 678,260
Common stock - 490,820
Commingled equity index fund - 221,180
Short-term investments 4,206 66,601
U.S. government securities - 27,859
Fixed income investments - 14,486
------ ----------
Total investments 4,206 1,499,206
OTHER ASSETS:
Receivable (payable) for
allocation to member accounts - 8,546
Dividends and interest receivable - 1,021
Receivable - withholdings of
member contributions - 2,512
Member interfund transfers - -
------ ----------
Total assets 4,206 1,511,285
------ ----------
LIABILITIES
LIABILITIES:
Notes payable - 285,826
Accrued interest payable - 4,021
Net amount (receivable) payable for
investment securities transactions
and other 4,206 2,956
Amounts payable for administrative
expenses - 951
------ ----------
Total liabilities 4,206 293,754
------ ----------
NET ASSETS AVAILABLE FOR BENEFITS $ - $1,217,531
====== ==========
The accompanying notes are an integral part of this statement.
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
(Thousands, except per unit information)
Nonparticipant Directed
Investment Funds
--------------------------------
ESOP Preference
---------------------- May
Member Common
ASSETS Unallocated Allocated Stock
INVESTMENTS, at fair value:
The May Department Stores Company-
Convertible preferred stock $558,434 $322,703 $ -
Common stock - - 165,401
Commingled equity index fund - - -
Short-term investments - - 443
U.S. government securities - - -
Fixed income investments - - -
-------- -------- --------
Total investments 558,434 322,703 165,844
OTHER ASSETS:
Receivable (payable) for
allocation to member accounts (53,934) 53,934 -
Dividends and interest receivable - - 3
Receivable - withholdings of
member contributions - - -
Member interfund transfers - (314) (379)
-------- -------- --------
Total assets 504,500 376,323 165,468
-------- -------- --------
LIABILITIES
LIABILITIES:
Notes payable 316,944 - -
Accrued interest payable 4,453 - -
Net amount (receivable) payable for
investment securities transactions
and other - - -
Amounts payable for administrative
expenses - - 172
-------- -------- --------
Total liabilities 321,397 - 172
-------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS $183,103 $376,323 $165,296
======== ======== ========
NUMBER OF UNITS AT DECEMBER 31, 1998 2,652
========
VALUE PER UNIT AT DECEMBER 31, 1998 $ 62.34
========
(Continued on following page)
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
(Thousands, except per unit information)
Participant Directed
Investment Funds
------------------------------------
May Common Fixed
Common Stock Money Income
ASSETS Stock Index Market Index
INVESTMENTS, at fair value:
The May Department Stores Company-
Convertible preferred stock $ - $ - $ - $ -
Common stock 465,418 - - -
Commingled equity index fund - 171,212 - -
Short-term investments 1,248 1,039 60,591 878
U.S. government securities - - - 32,801
Fixed income investments - - - 11,731
-------- -------- ------- -------
Total investments 466,666 172,251 60,591 45,410
OTHER ASSETS:
Receivable (payable) for
allocation to member accounts - 6 (4) (2)
Dividends and interest receivable 9 4 275 781
Receivable - withholdings of
member contributions 1,307 582 224 182
Member interfund transfers (1,069) 599 821 342
-------- -------- ------- -------
Total assets 466,913 173,442 61,907 46,713
-------- -------- ------- -------
LIABILITIES
LIABILITIES:
Notes payable - - - -
Accrued interest payable - - - -
Net amount (receivable) payable for
investment securities transactions
and other - (454) - 533
Amounts payable for administrative
expenses 484 345 238 200
-------- -------- ------- -------
Total liabilities 484 (109) 238 733
-------- -------- ------- -------
NET ASSETS AVAILABLE FOR BENEFITS $466,429 $173,551 $61,669 $45,980
======== ======== ======= =======
NUMBER OF UNITS AT DECEMBER 31, 1998 7,482 32,932 36,276 22,429
======== ======== ======= =======
VALUE PER UNIT AT DECEMBER 31, 1998 $ 62.34 $ 5.27 $ 1.70 $ 2.05
======== ======== ======= =======
(Continued on following page)
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998
(Thousands, except per unit information)
Distribution
ASSETS Account Total
INVESTMENTS, at fair value:
The May Department Stores Company-
Convertible preferred stock $ - $ 881,137
Common stock - 630,819
Commingled equity index fund - 171,212
Short-term investments 4,217 68,416
U.S. government securities - 32,801
Fixed income investments - 11,731
------ ----------
Total investments 4,217 1,796,116
OTHER ASSETS:
Receivable (payable) for
allocation to member accounts - -
Dividends and interest receivable - 1,072
Receivable - withholdings of
member contributions - 2,295
Member interfund transfers - -
------ ----------
Total assets 4,217 1,799,483
------ ----------
LIABILITIES
LIABILITIES:
Notes payable - 316,944
Accrued interest payable - 4,453
Net amount (receivable) payable for
investment securities transactions
and other 4,217 4,296
Amounts payable for administrative
expenses - 1,439
------ ----------
Total liabilities 4,217 327,132
------ ----------
NET ASSETS AVAILABLE FOR BENEFITS $ - $1,472,351
====== ==========
The accompanying notes are an integral part of this statement.
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
(Thousands)
Nonparticipant Directed
Investment Funds
--------------------------------
ESOP Preference
---------------------- May
Member Common
Unallocated Allocated Stock
NET (DEPRECIATION) APPRECIATION IN FAIR
VALUE OF INVESTMENTS $(110,999) $(58,645) $(29,220)
--------- -------- --------
INVESTMENT INCOME:
Dividends 14,690 9,404 3,516
Interest - - 32
--------- -------- --------
14,690 9,404 3,548
--------- -------- --------
CONTRIBUTIONS:
Member - - -
Employer allocation (44,332) 44,332 -
Employer ESOP contribution 32,446 - 8,546
Member interfund transfers - (4,046) (3,577)
--------- -------- --------
(11,886) 40,286 4,969
--------- -------- --------
DEDUCTIONS:
Member terminations and
withdrawals - 29,159 12,068
Interest expense 24,990 - -
Administrative expenses - - 620
--------- -------- --------
24,990 29,159 12,688
--------- -------- --------
(DECREASE) INCREASE IN NET ASSETS AVAILABLE
FOR BENEFITS (133,185) (38,114) (33,391)
NET ASSETS AVAILABLE FOR BENEFITS AT
DECEMBER 31, 1998 183,103 376,323 165,296
--------- -------- --------
NET ASSETS AVAILABLE FOR BENEFITS AT
DECEMBER 31, 1999 $ 49,918 $338,209 $131,905
========= ======== ========
(Continued on following page)
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 1999
(Thousands)
Participant Directed
Investment Funds
------------------------------------
May Common Fixed
Common Stock Money Income
Stock Index Market Index Total
NET (DEPRECIATION)
APPRECIATION IN FAIR
VALUE OF INVESTMENTS $(91,796) $ 36,061 $ - $(2,674) $ (257,273)
-------- -------- ------- ------- ----------
INVESTMENT INCOME:
Dividends 10,209 1,172 - - 38,991
Interest 95 118 3,286 2,767 6,298
-------- -------- ------- ------- ----------
10,304 1,290 3,286 2,767 45,289
-------- -------- ------- ------- ----------
CONTRIBUTIONS:
Member 48,680 26,188 7,802 6,598 89,268
Employer allocation - - - - -
Employer ESOP contribution - - - - 40,992
Member interfund transfers (15,724) 10,593 15,033 (2,279) -
-------- -------- ------- ------- ----------
32,956 36,781 22,835 4,319 130,260
-------- -------- ------- ------- ----------
DEDUCTIONS:
Member terminations and
withdrawals 47,793 21,132 26,510 6,733 143,395
Interest expense - - - - 24,990
Administrative expenses 1,825 1,090 628 548 4,711
-------- -------- ------- ------- ----------
49,618 22,222 27,138 7,281 173,096
-------- -------- ------- ------- ----------
(DECREASE) INCREASE IN NET
ASSETS AVAILABLE FOR
BENEFITS (98,154) 51,910 (1,017) (2,869) (254,820)
NET ASSETS AVAILABLE FOR
BENEFITS AT DECEMBER 31,
1998 466,429 173,551 61,669 45,980 1,472,351
-------- -------- ------- ------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS AT DECEMBER 31,
1999 $368,275 $225,461 $60,652 $43,111 $1,217,531
======== ======== ======= ======= ==========
The accompanying notes are an integral part of this statement.
<PAGE>
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. DESCRIPTION OF THE PLAN:
The following description of The May Department Stores Company Profit Sharing
Plan (the "Plan") is provided for financial statement purposes only. Members
should refer to the Plan document and the Summary Plan Description dated July
1999 for more complete information.
General
The Plan is a defined contribution profit sharing plan. The Plan covers
eligible associates of The May Department Stores Company, a Delaware
corporation ("May"), and its subsidiaries and affiliates who are members of
The May Department Stores Company Retirement Plan. Participation is
voluntary.
Contributions
Plan members may contribute 1% to 15% of their annual pay as defined.
Contributions may be made prior to federal and certain other income taxes
pursuant to Section 401(k) of the Internal Revenue Code.
The employer allocation is variable and discretionary. Generally, the employer
allocation for each Plan year is determined by multiplying a base matching rate
times members' basic contributions (generally, contributions up to 5% of pay
each paycheck), reduced by forfeitures, one-third of annual dividends with
respect to the Employee Stock Ownership Plan ("ESOP") Preference Shares, as
defined, administrative expenses and excess ESOP allocations from prior Plan
years (to the extent such amounts have not been previously used to reduce
employer allocations for earlier Plan years).
The base matching rate is determined as follows: In the event May has earnings
per share ("EPS") of its common stock for its most recent fiscal year ("current
year") resulting in a 6.0% increase over the EPS for the fiscal year immediately
preceding the current year, the base matching rate will be 50%. For each
percentage point increase over 6.0% or decrease below 6.0%, there is a 1.25
percentage point increase in or decrease from the 50% base matching rate.
ESOP Preference Shares allocated to associates' accounts through application of
the base matching rate formula are allocated at their original cost to the Plan
of $15.01 per common share equivalent. Because the ESOP Preference Shares are
convertible into May common stock, the ESOP Preference Shares are worth more
than original cost when the market value of May common stock is higher than
$15.01 per share. This market value of the employer allocation (including any
supplemental contributions), divided by associates' matchable contributions,
is the effective matching rate.
If the effective matching rate for a Plan year exceeds 100%, only ESOP
Preference Shares are used for the employer allocation and no May common
shares are contributed as a supplemental contribution. The effective
matching rate is also limited to 2.5 times the base matching rate. The base
matching rate formula may be adjusted at any time for unusual events including
discontinued operations, accounting changes, or items of extraordinary gain or
loss.
<PAGE>
Investments
Members' contributions may be invested in any of four investment funds:
May Common Stock Fund - For investment of contributions in May common
stock.
Common Stock Index Fund - For investment of contributions in the
Collective Daily Stock Index Fund, a collective trust which invests in the
common stock of corporations that make up the Standard & Poor's 500
Composite Stock Price Index. Investment mix is determined based on the
relative market size of the 500 corporations, with larger corporations
making up a higher proportion of the fund than smaller corporations.
Money Market Fund - For investment of contributions in short-term (less
than one year) obligations of high-quality issuers including banks,
corporations, municipalities, the U.S. Treasury and other federal
agencies.
Fixed Income Index Fund - For investment of contributions in corporate,
U.S. Government, federal agency and certain foreign government securities
that make up the Lehman Intermediate Government/Corporate Bond Index. The
securities that comprise this index have maturities ranging from one to 10
years, with an average of four years. (The Lehman Intermediate
Government/Corporate Bond Index represents the composite performance of
intermediate-term, fixed income securities.)
At December 31, 1999, the nonparticipant directed May Common Stock and ESOP
Member Allocated Funds include approximately $51.8 million and $79.4 million,
respectively, attributable to participants over the age of 55. These amounts
can be transferred to other funds at the discretion of the participants.
Employer allocations and supplemental contribution are invested in the ESOP
Preference Fund and the May Common Stock Fund, respectively. The employer
allocation to the Plan for the year ended December 31, 1999, will be made in May
2000 and will be in the form of 40,633 ESOP Preference Shares and a supplemental
contribution from May of 313,316 shares of May Common Stock.
ESOP Feature
In 1989, the Plan was amended and restated to add an ESOP feature and acquired
788,955 shares of convertible preferred stock of May (the "ESOP Preference
Shares"). Each ESOP Preference Share costs $507, has a guaranteed minimum value
of $507, receives a fixed annual dividend of $38.03 and is convertible into
33.78747 shares of May common stock. The acquisition of the ESOP Preference
Shares was financed with the proceeds of a private placement to a group of
institutional investors of an aggregate $400 million principal amount (the "ESOP
Loans") (see Note 4).
The ESOP Loans are guaranteed by The May Department Stores Company. The excess
of the value of the unallocated ESOP Preference Shares over the principal amount
of guaranteed ESOP Loans and accrued interest payable is reflected as Net Assets
Available for Benefits in the Statement of Net Assets Available for Benefits as
of December 31, 1999 and 1998.
The ESOP Loans are repaid by the Plan from the following sources in the
following order: (a) dividends from May on ESOP Preference Shares previously
allocated tomembers; (b) dividends from May on unallocated ESOP Preference
Shares; and (c) contributions by May. During the term of the ESOP Loans, the
ESOP Preference Shares which have not been allocated to members' company
accounts serve as collateral for the ESOP Loans.
ESOP Preference Shares are initially held by the Plan in an Unallocated account.
As ESOP Loans are repaid, ESOP Preference Shares are released to a suspense
account pending release to the members' company accounts in satisfaction of the
employer allocation.
If the guaranteed minimum value of the ESOP Preference Shares allocated to
members' company accounts as a result of the ESOP Loan payments (principal and
interest) for a year is less than the employer allocation, then May makes
supplemental contributions to the Plan for the difference, subject to the 100%
effective matching rate limitations described above. Supplemental contributions
can be made in either shares of May common stock or cash.
<PAGE>
If the guaranteed minimum value of the ESOP Preference Shares released for
allocation to members' company accounts as a result of the ESOP Loan payments is
greater than the required employer allocation, any "excess" would be applied (in
accordance with applicable law) to satisfy required employer allocations in
future Plan years.
Vesting
The method of calculating vesting service is the elapsed time approach. Elapsed
time is measured by calculating the time which has elapsed between the member's
hire date and retirement date/termination date (excluding certain break-in-
service periods). Plan members are vested in company accounts in accordance
with the following schedule:
Years of Vesting Vesting
Service Percentage
Less than 3 years 0%
3 years 20%
4 years 40%
5 years 60%
6 years 80%
7 years or more 100%
Plan members are always fully vested in the value of their member accounts.
Payment of Benefits
Amounts in a member's account and the vested portion of a member's company
account may be distributed upon retirement, death, disability or termination of
employment. Distributions from the May Common Stock Fund and ESOP Preference
Fund are made in shares of May common stock if the combined distribution exceeds
100 shares. All other distributions are generally made in cash. Transfers are
made from the investment funds to the Distribution account to fund the Plan's
cash distributions.
Administration of Plan
The Plan is administered by a Committee consisting of at least five persons
appointed by May. An Administrative Subcommittee has the general responsibility
for administration of the Plan and an Investment Subcommittee establishes and
monitors investment policies and activities. The assets of the Plan are held in
a trust for which The Bank of New York is the Trustee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Investments
Except for the ESOP Preference Fund, the Plan's investments are stated at fair
value, as determined by the Trustee, based on publicly reported price
information.
Each ESOP Preference Share is valued at the greater of (a) the guaranteed
minimum value (original cost) of $507 per share or (b) a conversion value
equal to the market price of May common stock multiplied by the conversion
rate for each ESOP Preference Share. As of December 31, 1999 and 1998, the
ESOP Preference Shares were valued at their conversion values of $1,089.65
and $1,359.95, respectively.
Federal Income Taxes
The Trust established under the Plan to hold the Plan's assets is qualified
pursuant to Sections 401(a), 401(k) and 4975(e)(7) of the Internal Revenue Code
and accordingly, the Trust's net investment income is exempt from income taxes.
The Plan has received a favorable tax determination letter dated December 13,
1994. The Plan has been amended since receiving the determination letter. The
Plan administrators believe that the amendments do not affect the tax-exempt
status of the Plan.
<PAGE>
Employer allocations and contributions, member before-tax contributions and the
income of the Plan are not taxable to the members until distributions or
withdrawals are made.
Administrative Expenses
All administrative expenses (including the allocable portion of expenses for
data processing services, and salaries and benefits of employees providing
services to the Plan) are paid by the Plan.
Monthly Valuation of the Trust
The unit value of each investment fund is determined by dividing the month-end
market value of the particular investment fund by the total number of units
outstanding at month-end in all member accounts in such investment fund. As of
each succeeding monthly valuation date, the unit value of each fund is
redetermined and account balances in each fund are adjusted as follows:
(a) All payments made from an account (except for the ESOP Preference
Fund) are valued based on the unit value at the month-end valuation
date. Payments from the ESOP Preference Fund are valued at the
greater of the guaranteed minimum value (plus accrued dividends) or
conversion value, as of the distribution date.
(b) With respect to any dollar amount contributed during the month
(except for the ESOP Preference Fund), an equivalent number of
additional units are credited to the appropriate accounts in such
investment fund based on the unit value at the month-end valuation
date. Allocations of ESOP Preference Shares are valued at the
greater of the guaranteed minimum value (plus accrued dividends) or
conversion value, as of the distribution date.
(c) In the event that a member's employment is terminated and a portion
of such member's company account has been forfeited, the forfeited
units or ESOP Preference Shares shall be canceled as of the last day
of the Plan year. The dollar amount of such forfeited units or ESOP
Preference Shares is reallocated among the remaining members of the
Plan as of the last day of the Plan year in the same manner as the
employer allocation for such year.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of net assets available for
benefits and the reported amounts of additions to and deductions from net
assets available for benefits during the year. Actual results could differ from
those estimates.
<PAGE>
3. INVESTMENTS:
The fair market value of the Plan's investments that represent 5% or more of the
Plan's Net Assets Available for Benefits as of December 31, 1999 and 1998, are
as follows (dollars in thousands):
December 31, 1999 December 31, 1998
---------------------- ----------------------
Number of Number of
Shares or Shares or
Principal Fair Principal Fair
Amount Value Amount Value
The May Department
Stores Company ESOP
Preference Stock:
Unallocated 352,448 $ 384,040 410,629 $ 558,434
Member allocated 270,014 294,220 237,291 322,703
---------- ---------- ---------- ----------
622,462 678,260 647,920 881,137
========== ==========
The May Department
Stores Company
Common Stock 15,219,239 490,820 15,672,525 630,819
Northern Trust
Equity Index Fund 6,020,138 221,180 141,865 171,212
The Bank of New
York Short-Term
Investment Fund -
Master Notes 66,601 $66,601 68,416 $68,416
---------- ----------
Total $1,456,861 $1,751,584
========== ==========
4. NOTES PAYABLE:
Notes payable as of December 31 consisted of the following (in thousands):
1999 1998
ESOP Notes Payable:
Series A, 8.32%, due April 30, 2001 $ 81,862 $112,980
Series B, 8.49%, due April 30, 2004 203,964 203,964
-------- --------
$285,826 $316,944
======== ========
The scheduled principal payments for the Series A ESOP Note for the remaining
two years are as follows: 2000 - $37,354,000; and 2001 - $44,508,000.
Principal payments on the Series B ESOP Note begin in 2002 with the payments
as follows: 2002 - $52,317,000; 2003 - $60,787,000; and 2004 - $90,860,000.
As of December 31, 1999 and 1998, the total fair value of the ESOP Notes was
approximately $357,816,000 and $361,445,000, respectively.
<PAGE>
5. RECONCILIATION TO FORM 5500:
As of December 31, 1999 and 1998, the Plan had approximately $8,630,000 and
$15,929,000, respectively, of pending distributions to participants. These
amounts are included in Net Assets Available for Benefits. For reporting on the
Plan's Form 5500, these amounts will be classified as Benefit Claims Payable
with a corresponding reduction in Net Assets Available for Benefits. The
following table reconciles the financial statements to the Form 5500 which
will be filed by the Plan for the Plan year ended December 31, 1999 (dollars in
thousands):
Net Assets
Benefits Available
Payable to Benefits for
Participants Paid Benefits
Per financial statements $ - $143,395 $1,217,531
Pending benefit distributions -
December 31, 1999 8,630 8,630 (8,630)
Pending benefit distributions -
December 31, 1998 - (15,929) -
------ -------- ----------
Per Form 5500 $8,630 $136,096 $1,208,901
====== ======== ==========
6. DISTRIBUTION OF ASSETS UPON TERMINATION OF THE PLAN:
May reserves the right to terminate the Plan, in whole or in part, at any time.
If an employer shall cease to be a participating employer in the Plan, the
accounts of the members of the withdrawing employer shall be revalued as if such
withdrawal date were a valuation date. The Plan Committee is then to direct the
Trustee either to distribute the accounts of the members of the withdrawing
employer as of the date of such withdrawal on the same basis as if the Plan had
been terminated, or to deposit in a trust established by the withdrawing
employer, pursuant to a plan substantially similar to the Plan, assets equal in
value to the assets allocable to the accounts of the members of the withdrawing
employer.
If the Plan is terminated at any time or contributions are completely
discontinued and May determines that the Trust shall be terminated, the members'
company accounts shall become fully vested and nonforfeitable, all accounts
shall be revalued as if the termination date were a valuation date and such
accounts shall be distributed to members.
If the Plan is terminated or contributions completely discontinued but May
determines that the Trust shall be continued pursuant to the terms of the Trust
agreement, no further contributions shall be made by members or the employer and
the members' company accounts shall become fully vested, but the Trust shall be
administered as though the Plan were otherwise in effect.
<PAGE>
SCHEDULE I
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
EMPLOYER #: 43-1104396
PLAN #: 003
ITEM 27(a): SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1999
(c)
Number of
Shares or (e)
(b) Principal (d) Fair
(a) Identity of Issue Amount Cost Value
(Thousands)
ESOP PREFERENCE FUND
* The May Department Stores Company ESOP
Preference Stock:
Unallocated 352,448 $178,689 $ 384,040
Allocated 270,014 136,897 294,220
-------- ----------
ESOP Preference Fund Total $315,586 $ 678,260
======== ==========
MAY COMMON STOCK FUND
* The May Department Stores Company
Common stock 15,219,239 $283,196 $ 490,820
* The Bank of New York Short-Term
Investment Fund- Master Notes $ 1,579,346 1,579 1,579
-------- ----------
May Common Stock Fund Total $284,775 $ 492,399
======== ==========
COMMON STOCK INDEX FUND
Northern Trust Equity Index Fund 6,020,138 $194,335 $ 221,180
* The Bank of New York Short-Term
Investment Fund- Master notes $ 478,573 479 479
-------- ----------
Common Stock Index Fund Total $194,814 $ 221,659
======== ==========
MONEY MARKET FUND
* The Bank of New York Short-Term
Investment Fund- Master Notes $60,038,938 $ 60,039 $ 60,039
======== ==========
FIXED INCOME INDEX FUND
* The Bank of New York Short-Term
Investment Fund- Master Notes $ 297,976 $ 298 $ 298
-------- ----------
* Also a party-in-interest.
<PAGE>
SCHEDULE I
(Continued)
(c) (e)
(b) Principal (d) Fair
(a) Identity of Issue Amount Cost Value
(Thousands)
FIXED INCOME INDEX FUND (Continued)
U.S. Government Securities
U.S. Treasury Notes:
6.5%, due 10/15/06 $1,500,000 $ 1,529 $ 1,496
6.3750%, due 8/15/02 $3,800,000 3,917 3,807
5.75%, due 08/15/03 $3,200,000 3,219 3,133
6.8750%, due 05/15/06 $1,900,000 2,040 1,933
5.6250%, due 05/15/08 $1,250,000 1,219 1,176
5.25%, due 01/31/01 $3,900,000 3,860 3,867
6.6250%, due 05/15/07 $1,200,000 1,253 1,205
8.750%, due 08/15/00 $ 450,000 500 458
13.750%, due 08/15/04 $ 525,000 810 675
6.125%, due 12/31/01 $2,550,000 2,587 2,544
5.25%, due 05/15/04 $1,900,000 1,838 1,820
-------- ----------
Total U.S. treasury notes 22,772 22,114
-------- ----------
U.S. Government Agency Securities:
Federal Home Loan Mortgage Corp.:
6.22%, due 3/24/03 $ 200,000 181 197
4.75%, due 12/14/01 $1,000,000 997 968
6.25%, due 7/15/04 $ 500,000 501 488
Federal National Mortgage Assoc.
Securities-
5.1250%, due 2/13/04 $ 660,000 648 619
5.75%, due 6/15/05 $ 800,000 824 760
4.625%, due 10/15/01 $ 500,000 499 484
Debentures-
5.75%, due 7/15/03 $ 400,000 406 387
6.25%, due 8/13/04 $ 500,000 496 488
6.3750%, due 6/15/09 $1,000,000 982 953
Medium Term Notes-
6.69%, due 8/7/01 $ 400,000 402 401
-------- ----------
Total U.S. government agency
securities 5,936 5,745
-------- ----------
Total U.S. government
securities 28,708 27,859
-------- ----------
Fixed Income Investments
Bank Corporate Bonds:
Bank America Corp., 7.75%, due
7/15/02 $ 300,000 306 305
Republic NY Corp., 7.25%, due 7/15/02 $ 100,000 98 99
National Westminster, 7.375%, due
10/01/09 $ 400,000 398 391
Bayerische Landesbank, 5.875%, due
12/01/08 $ 450,000 450 403
Interamerican Development Bank,
5.75%, due 2/26/08 $ 400,000 398 367
-------- ----------
Total bank corporate bonds 1,650 1,565
-------- ----------
<PAGE>
SCHEDULE I
(Continued)
(c) (e)
(b) Principal (d) Fair
(a) Identity of Issue Amount Cost Value
(Thousands)
FIXED INCOME INDEX FUND (Continued)
Finance and Insurance Corporate Bonds:
American Express Co., 8.5%, due
8/15/01 $ 200,000 201 205
Corestates Cap. Corp., 5.75%, due
1/15/01 $ 400,000 388 395
Finovia Cap Corp., 5.875%, due
10/15/01 $ 450,000 450 441
ABN-AMRO Bank, 6.625%, due 10/31/01 $ 300,000 300 297
General Electric Capital Corp.,
8.85%, due 4/1/05 $ 300,000 364 319
Simon Debartolo Group, 6.875%, due
11/15/06 $ 500,000 498 459
Travelers/Aetna Property Casualty
Corp., 6.75%, due 4/15/01 $ 300,000 300 299
Toyota Motor Corp., 5.5%, due
12/15/08 $ 450,000 449 393
United Dominion Realty Tr. Inc.,
8.125%, due 11/15/00 $ 400,000 400 402
Associates Corp. North America, 5.50%,
due 2/15/04 $ 400,000 398 376
Marsh & McLennan Cos., Inc., 6.625%,
due 6/15/04 $ 400,000 398 391
-------- ----------
Total finance and insurance
corporate bonds 4,146 3,977
-------- ----------
Industrial Corporate Bonds:
Comcast Cable, 6.2%, due 11/15/08 $ 450,000 450 408
Eli Lilly & Co., 8.125%, due 12/1/01 $ 200,000 199 205
General Motors Corp., 7.10%, due
3/15/06 $ 300,000 303 294
Lockheed Martin Corp., 6.85%, due
5/15/01 $ 400,000 400 396
Hercules, Inc., 6.15%, due 8/1/00 $ 400,000 401 397
Nabisco, Inc. NT, 6.00%, due 2/15/11 $ 400,000 399 395
Atlantic Richfield Co., 5.9%, due
4/15/09 $ 450,000 448 408
Delphi Auto Systems, 6.1250%, due
5/01/04 $ 400,000 401 379
Electronic Data Systems Corp.,
7.125%, due 10/15 $ 400,000 400 390
Guidant Corp., 6.15%, due 2/15/06 $ 450,000 448 415
International Business Machine,
5.375%, due 2/01 $ 400,000 399 351
Wal-Mart Stores, 6.55%, due 8/10/04 $ 400,000 399 393
-------- ----------
Total industrial corporate
bonds 4,647 4,431
-------- ----------
Oil Corporate Bonds:
Tenneco, Inc., 7.875%, due 10/1/02 $ 250,000 248 251
El Paso Nat. Gas Co., 6.75%, due
11/15/03 $ 300,000 305 292
-------- ----------
Total oil corporate bonds 553 543
-------- ----------
<PAGE>
SCHEDULE I
(Continued)
(c) (e)
(b) Principal (d) Fair
(a) Identity of Issue Amount Cost Value
(Thousands)
FIXED INCOME INDEX FUND (Continued)
Utilities Corporate Bonds:
Duke Energy Co., 1st & Refunding
Mortgage Note, 7%, due 6/1/00 $ 195,000 $ 203 $ 195
Enron Corp., 9.5%, due 6/15/01 $ 100,000 110 103
Enron Corp., 6.50% due 8/1/02 $ 300,000 298 295
-------- ----------
Total utilities corporate
bonds 611 593
-------- ----------
Telephone Corporate Bonds:
Cable & Wireless Com. 6.625%, due
3/6/05 $ 400,000 399 396
Worldcom Inc. GA, 8.875%, due
1/15/06 $ 400,000 434 418
AT&T Corp., 6.0%, due 3/15/09 $ 500,000 499 456
-------- ----------
Total telephone corporate
bonds 1,332 1,270
-------- ----------
Asset Backed Securities:
California Infrastructure, 6.32%, due
9/25/05 $ 400,000 402 393
-------- ----------
402 393
-------- ----------
Foreign Obligations:
Finland Rep NT, 7.875%, due 7/28/04 $ 225,000 229 235
Hydro-Quebec Debenture, Series IF,
7.375%, due 2/1/03 $ 150,000 161 151
Province of Ontario, Canada
Debenture, 8%, due 10/17/01 $ 150,000 150 153
Province of Ontario, Canada
Debenture, 7.375%, due 1/27/03 $ 400,000 415 404
British Columbia Prov. Canada, 5.375%,
due 10/29/08 $ 450,000 448 396
Tyco International Grp. SA, 6.375%,
due 6/15/05 $ 400,000 398 375
-------- ----------
Total foreign obligations 1,801 1,714
-------- ----------
Total fixed income investments 15,142 14,486
-------- ----------
Fixed Income Index Fund Total $ 44,148 $ 42,643
======== ==========
DISTRIBUTION ACCOUNT
* The Bank of New York Short-Term
Investment Fund- Master Notes $4,205,982 $ 4,206 $ 4,206
======== ==========
TOTAL ASSETS HELD FOR INVESTMENT
PURPOSES AT DECEMBER 31, 1999 $903,568 $1,499,206
======== ==========
* Also a party-in-interest.
<PAGE>
SCHEDULE II
THE MAY DEPARTMENT STORES COMPANY
PROFIT SHARING PLAN
EMPLOYER #: 43-1104396
PLAN #: 003
ITEM 27(d): SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(Thousands, except number of transactions)
Purchases Sales
---------------- -----------------------------------
No. of No. of Sales Gain or
Trans. Cost Trans. Cost Price (Loss)
The Bank of New York
Short-Term Investment
Fund-Master Notes (1) 426 $127,846 265 $129,650 $129,650 $ -
The May Department
Stores Company
Common Stock (1) (2) 53 $ 46,192 46 $ 24,521 $ 21,432 $(3,089)
(1) Also a party-in-interest.
(2) Includes conversion of ESOP Preference Shares.
<PAGE>
EXHIBIT
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report on The May Department Stores Company Profit Sharing Plan financial
statements included in this Form 11-K, into the Company's previously filed
Registration Statement on Form S-8 Files No. 333-00957 and 333-76227.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
April 19, 2000
