<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended July 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-79
THE MAY DEPARTMENT STORES COMPANY
(Exact name of registrant as specified in its charter)
Delaware 43-1104396
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
611 Olive Street, St. Louis, Missouri 63101
(Address of principal executive offices) (Zip Code)
(314) 342-6300
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
297,506,875 shares of common stock, $0.50 par value, as of July 29,
2000.
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Millions)
July 29, July 31, Jan. 29,
ASSETS 2000 1999 2000
Current Assets:
Cash and cash equivalents $ 44 $ 178 $ 41
Accounts receivable, net 1,777 1,790 2,173
Merchandise inventories 2,983 2,718 2,817
Other current assets 77 65 84
Total Current Assets 4,881 4,751 5,115
Property and Equipment, at cost 8,092 7,545 7,797
Accumulated Depreciation (3,247) (2,953) (3,028)
Net Property and Equipment 4,845 4,592 4,769
Goodwill and Other Assets 1,050 1,005 1,051
Total Assets $ 10,776 $ 10,348 $ 10,935
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Notes payable $ 77 $ - $ -
Current maturities of
long-term debt 61 292 259
Accounts payable 1,020 946 1,030
Accrued expenses 882 841 892
Income taxes 62 64 234
Total Current Liabilities 2,102 2,143 2,415
Long-term Debt 4,357 3,549 3,560
Deferred Income Taxes 558 499 540
Other Liabilities 315 304 314
ESOP Preference Shares 307 321 315
Unearned Compensation (248) (280) (286)
Shareowners' Equity 3,385 3,812 4,077
Total Liabilities and
Shareowners' Equity $ 10,776 $ 10,348 $ 10,935
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.
2
<PAGE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Millions, except per share) 13 Weeks Ended 26 Weeks Ended
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
Net retail sales $ 3,141 $ 3,062 $ 6,182 $ 6,001
Revenues $ 3,131 $ 3,067 $ 6,181 $ 6,056
Cost of sales 2,154 2,098 4,295 4,184
Selling, general and
administrative expenses 670 640 1,308 1,269
Interest expense, net 82 72 153 143
Earnings before income taxes 225 257 425 460
Provision for income taxes 90 103 170 184
Net earnings $ 135 $ 154 $ 255 $ 276
Basic earnings per share $ .42 $ .45 $ .78 $ .80
Diluted earnings per share $ .41 $ .43 $ .76 $ .77
Dividends paid per
common share $ .23-1/4 $ .22-1/4 $ .46-1/2 $ .44-1/2
Weighted average shares
outstanding:
Basic 307.6 333.0 315.0 333.8
Diluted 329.2 356.8 336.7 357.7
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
3
<PAGE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions) 26 Weeks Ended
July 29, July 31,
2000 1999
Operating Activities:
Net earnings $ 255 $ 276
Depreciation and amortization 239 225
Decrease in working capital 39 190
Other, net 12 37
545 728
Investing Activities:
Net additions to property and equipment (303) (323)
(303) (323)
Financing Activities:
Net issuances of notes payable 77 -
Net issuances (repayments) of long-term debt 639 (33)
Net purchases of common stock (797) (148)
Dividend payments, net of tax benefit (158) (158)
(239) (339)
Increase in Cash and Cash Equivalents $ 3 $ 66
Cash paid during the period:
Interest $ 143 $ 143
Income Taxes 315 281
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
4
<PAGE>
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Interim Results. These unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-Q of The Securities and Exchange Commission and should
be read in conjunction with the Notes to Consolidated Financial
Statements (pages 26-31) in the 1999 Annual Report. In the opinion
of management, this information is fairly presented and all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the results for the interim
periods have been included; however, certain items are included in
these statements based on estimates for the entire year. Also,
operating results of periods which exclude the Christmas season may
not be indicative of the operating results that may be expected for
the full fiscal year.
Inventories. Merchandise inventories are stated on the LIFO (last-
in, first-out) cost basis. The LIFO provision for the second
quarter was $8 million in 2000 and 1999. The year-to-date LIFO
provision was $16 million in 2000 and 1999.
Long-term Debt. Through the end of the second quarter of 2000, the
company has issued a total of $850 million in new debt: $200
million of 7.875% debentures due March 1, 2030; $250 million of
8.75% debentures due May 15, 2029; $200 million of 8.5% debentures
due June 1, 2019; and $200 million of 8% debentures due July 15,
2012. The company uses the net proceeds from the sale of
debentures for stock repurchases, capital expenditures, working
capital needs, and other general corporate purposes including
acquisitions.
Acquisition. In August 2000, the company completed the acquisition
of David's Bridal, Inc. for $20 per share or approximately $436
million. David's Bridal sells bridal gowns and other bridal
merchandise and currently operates 113 stores in 36 states and
Puerto Rico. This acquisition will be accounted for as a purchase
and will not be material to the company's financial statements.
Common Stock Repurchase Program. During the first half of 2000,
the company repurchased $789 million or 28.4 million shares of May
common stock at an average price of $28 per share. These
repurchases completed the remaining $139 million of stock
repurchases related to the 1999 stock repurchase program and the
$650 million common stock repurchase program authorized by May's
board of directors in 2000.
5
<PAGE>
Summarized Financial Information - The May Department Stores
Company, New York. Summarized financial information for The May
Department Stores Company, New York, is set forth below for 2000
and 1999.
(Millions)
July 29, January 29,
2000 2000
Financial Position
Current assets $ 4,866 $ 5,104
Noncurrent assets 6,781 5,818
Current liabilities 2,117 2,425
Noncurrent liabilities 8,869 8,043
13 Weeks Ended 26 Weeks Ended
July 29, July 31, July 29, July 31,
2000 1999 2000 1999
Operating Results
Revenues $ 3,131 $ 3,067 $ 6,181 $ 6,056
Cost of sales 2,154 2,098 4,295 4,184
Net earnings 83 107 151 182
Earnings per Share. The following tables reconcile net earnings
and weighted average shares outstanding to amounts used to
calculate basic and diluted earnings per share ("EPS") for the
periods shown (millions, except per share).
13 Weeks Ended
July 29, 2000 July 31, 1999
Earnings Shares EPS Earnings Shares EPS
Net earnings $ 135 $ 154
ESOP preference
shares' dividends (4) (4)
Basic EPS 131 307.6 $ 0.42 150 333.0 $ 0.45
ESOP preference
shares 4 20.6 4 21.5
Assumed exercise of
options (treasury
stock method) - 1.0 - 2.3
Diluted EPS $ 135 329.2 $ 0.41 $ 154 356.8 $ 0.43
26 Weeks Ended
July 29, 2000 July 31, 1999
Earnings Shares EPS Earnings Shares EPS
Net earnings $ 255 $ 276
ESOP preference
shares' dividends (9) (9)
Basic EPS 246 315.0 $ 0.78 267 333.8 $ 0.80
ESOP preference
shares 8 20.8 8 21.6
Assumed exercise of
options (treasury
stock method) - 0.9 - 2.3
Diluted EPS $ 254 336.7 $ 0.76 $ 275 357.7 $ 0.77
6
<PAGE>
Reclassifications. Certain prior period amounts have been
reclassified to conform with current year presentation.
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Net retail sales (sales) represent the sales of stores operating at
the end of the latest period including lease department sales and
excluding finance charge revenues and the sales of stores that have
been closed and not replaced. Store-for-store sales represent
sales of those stores open during both periods. Sales percent
increases (decreases) are as follows:
Second Quarter First Six Months
Store-for- Store-for-
Total Store Total Store
2.6% (0.6)% 3.0% (0.3)%
The following table presents the components of costs and expenses,
as a percent of revenues. Revenues include sales from all stores
operating during the period, finance charge revenues and lease
department income.
Second Quarter First Six Months
2000 1999 2000 1999
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of sales 68.8 68.4 69.5 69.1
Selling, general and
administrative expenses 21.4 20.9 21.1 20.9
Interest expense, net 2.6 2.3 2.5 2.4
Earnings before income taxes 7.2 8.4 6.9 7.6
Provision for income taxes 40.0* 40.0* 40.0* 40.0*
Net earnings 4.3% 5.0% 4.1% 4.6%
*-Percent represents effective income tax rate.
Cost of sales was $2,154 million in the 2000 second quarter, up
2.7% from $2,098 million in the 1999 second quarter. For the first
six months of 2000, cost of sales was $4,295 million, a 2.7%
increase from $4,184 million in the 1999 period. The overall
increases are primarily related to higher sales. As a percent of
revenues, cost of sales increased 0.4% in the second quarter and in
the first six months compared with the same periods of 1999 due to
a higher level of clearance markdowns, mainly in women's apparel.
Selling, general and administrative expenses were $670 million in
the 2000 second quarter, compared with $640 million in the 1999
second quarter, a 4.5% increase. For the first six months of 2000,
selling, general and administrative expenses were $1,308 million
compared with $1,269 million in the 1999 period, a 3.0% increase.
The increases are primarily related to higher sales volume.
7
<PAGE>
Selling, general and administrative expenses as a percent of
revenues increased 0.5% for the second quarter of 2000 as compared
with 1999 mainly due to increases in payroll and advertising
expenses in excess of sales growth. Selling, general and
administrative expenses as a percent of revenues increased 0.2% in
the first six months of 2000 compared with the first six months of
1999 due to increases in payroll and advertising expenses which
were partially offset by lower employee benefit expenses.
Components of net interest expense for the second quarter and first
six months of 2000 and 1999 were as follows (millions):
Second Quarter First Six Months
2000 1999 2000 1999
Interest expense $ 89 $ 78 $168 $ 156
Interest income (3) (2) (7) (7)
Capitalized interest (4) (4) (8) (6)
Net Interest Expense $ 82 $ 72 $153 $ 143
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
July 29, July 31,
2000 1999
Net retail sales $ 14,050 $ 13,525
Revenues 13,991 13,560
Net earnings 906 884
Diluted earnings per share 2.59 2.43
Financial Condition
Key financial ratios for the periods indicated are as follows:
July 29, July 31, Jan. 29,
2000 1999 2000
Current Ratio 2.3 2.2 2.1
Debt-Capitalization Ratio 52% 45% 44%
Fixed Charge Coverage* 4.6x 4.6x 4.8x
* Fixed charge coverage, which is presented for the 52 weeks ended
July 29, 2000, July 31, 1999, and January 29, 2000, is defined
as earnings before gross interest expense, the expense portion
of interest on the ESOP debt, rent expense and income taxes
divided by gross interest expense, interest expense on the ESOP
debt, and total rent expense.
Recent Developments
Sales for the four-week period ending August 26, 2000 were $1.02
billion, a 1.7% increase over $1.0 billion in the similar period
last year. Store-for-store sales decreased 3.6%. In addition to slow
back-to-school sales, clearance of spring and summer apparel
merchandise has been much more difficult than expected. On
September 7, 2000 the company announced that it is taking aggressive
steps to clear poor performing spring and summer goods to be properly
8
<PAGE>
positioned in the fourth quarter. Early selling on fall
merchandise is encouraging, and the company expects sales to be
close to plan levels in September and October. The company expects
third quarter earnings to be in the range of $.23 to $.26 per
share. This is below last year's third quarter results of $.38 per
share.
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:
successful completion of the inventory clearance, September and
October sales being close to plan levels, 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.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
registrant or any of its subsidiaries is a party or of which any
of their property is the subject.
Item 2 - Changes in Securities - None.
Item 3 - Defaults Upon Senior Securities - None.
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareowners of registrant was held on
May 19, 2000.
(b) At the annual meeting of shareowners of registrant held on
May 19, 2000, the registrant's voting securities carried
341,059,653 votes. Action was taken with respect to:
(i) the election of five directors of registrant;
Authority
For Withheld
John L. Dunham 293,949,943 1,271,865
Jerome T. Loeb 293,940,798 1,281,010
Russell E. Palmer 293,901,537 1,320,271
Michael R. Quinlan 293,945,995 1,275,813
William P. Stiritz 291,493,097 3,728,711
9
<PAGE>
(ii) a ratification of the appointment of Arthur Andersen
LLP as independent auditors (292,942,149 votes in
favor, 1,078,770 votes against and 1,200,889 votes
abstained);
(iii) reapproval of May's Executive Incentive Compensation
Plan for Corporate Executives (282,086,227 votes in
favor, 10,552,417 votes against and 2,583,158 votes
abstained);
(iv) a proposal relating to a classified board of
directors (138,806,334 votes in favor, 124,736,516
votes against, 3,238,865 votes abstained and
28,440,093 not voted).
(v) a proposal related to May's shareowner rights plan
(125,396,052 votes in favor, 137,992,995 votes
against, 3,393,122 votes abstained and 28,439,639 not
voted).
All such proposals were set forth and described in detail
in the Notice of Annual Meeting and Proxy Statement of
registrant dated April 19, 2000, filed with the Commission
pursuant to Rule 12b-23 (b).
The board of directors of registrant considers the
shareowner vote on the classified board proposal at the
May 19, 2000 annual meeting of shareowners a significant
expression of shareowners' opinion. The board of directors
has reviewed the recommendation of counsel and other
advisors on this matter. Following such review, the board of
directors concluded that the classified board is an
important component of the registrant's system of
governance and continues to be in the best interests of the
shareowners. Accordingly, the board has decided to take no
further action with respect to this matter at the present
time, but it has concluded that it will be subject to
future review and reconsideration on a periodic basis.
Item 5 - Other Information - None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(12) - Computation of Ratio of Earnings to Fixed Charges
(15) - Letter Re: Unaudited Interim Financial Information
(27) - Financial Data Schedule
(b) Reports on Form 8-K
A report dated May 23, 2000, which contained information
concerning the registrant's sale of $250 million principal
amount of its 8-3/4% debentures due May 15, 2029.
A report dated June 5, 2000, which contained information
concerning the registrant's sale of $200 million principal
amount of its 8-1/2% debentures due June 1, 2019.
10
<PAGE>
A report dated July 14, 2000, which contained information
concerning the registrant's sale of $200 million principal
amount of its 8% debentures due July 15, 2012.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE MAY DEPARTMENT STORES COMPANY
(Registrant)
Date: September 12, 2000
/s/ John L. Dunham
John L. Dunham
Vice Chairman and
Chief Financial Officer
11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareowners of
The May Department Stores Company:
We have reviewed the accompanying condensed consolidated balance
sheet of The May Department Stores Company (a Delaware corporation)
and subsidiaries as of July 29, 2000, and July 31, 1999, and the
related condensed consolidated statements of earnings for the
thirteen week and twenty-six week periods ended July 29, 2000, and
July 31, 1999, and the condensed consolidated statement of cash
flows for the twenty-six week periods ended July 29, 2000, and July
31, 1999. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review
of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the financial statements referred to above
for them to be in conformity with accounting principles generally
accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the consolidated balance
sheet of The May Department Stores Company as of January 29, 2000,
and the related consolidated statements of earnings and cash flows
for the year then ended (not presented separately herein), and in
our report dated February 9, 2000, we expressed an unqualified
opinion on those financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of January 29, 2000, is fairly stated, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
/s/Arthur Andersen LLP
St. Louis, Missouri
September 12, 2000
