SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended April 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-79
THE MAY DEPARTMENT STORES COMPANY
(Exact name of registrant as specified in its charter)
New York 43-0398035
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
611 Olive Street, St. Louis, Missouri 63101
(Address of principal executive offices) (Zip Code)
(314) 342-6300
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
248,580,892 shares of common stock, $.50 par value, as of April 30,
1994.
1
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Millions)
April 30, May 1, Jan. 29,
ASSETS 1994 1993 1994
Current Assets:
Cash and cash equivalents $ 109 $ 320 $ 46
Accounts receivable, net 2,142 2,086 2,394
Merchandise inventories 2,215 1,981 2,020
Other current assets 224 308 219
Total Current Assets 4,690 4,695 4,679
Property and Equipment, at cost 5,185 4,798 5,047
Accumulated Depreciation (1,701) (1,628) (1,636)
Net Property and Equipment 3,484 3,170 3,411
Goodwill 614 632 619
Other Assets 87 93 91
Total Assets $ 8,875 $ 8,590 $ 8,800
LIABILITIES AND SHAREOWNERS' EQUITY
Current Liabilities:
Current maturities of
long-term debt $ 47 $ 261 $ 113
Accounts payable 1,008 866 870
Accrued expenses 753 853 740
Income taxes 11 41 48
Total Current Liabilities 1,819 2,021 1,771
Long-term Debt 2,809 2,826 2,822
Deferred Income Taxes 366 340 373
Other Liabilities 169 165 182
ESOP Preference Shares 379 387 380
Unearned Compensation (359) (371) (367)
Shareowners' Equity 3,692 3,222 3,639
Total Liabilities and
Shareowners' Equity $ 8,875 $ 8,590 $ 8,800
The accompanying notes to condensed consolidated financial
statements are an integral part of this balance sheet.
2
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Millions, except per share) 13 Weeks Ended
April 30, May 1,
1994 1993
Net Retail Sales:
Department stores $ 2,013 $ 1,815
Payless ShoeSource 517 457
Total Net Retail Sales $ 2,530 $ 2,272
Revenues $ 2,622 $ 2,422
Cost of sales 1,817 1,683
Selling, general and
administrative expenses 558 517
Interest expense, net 59 63
Earnings before income taxes 188 159
Provision for income taxes 76 63
Net Earnings $ 112 $ 96
Primary Earnings per Share $ .43 $ .37
Fully Diluted Earnings
per Share $ .41 $ .35
Dividends Paid per
Common Share $ .23 $ .20-3/4
Primary Average Shares
Outstanding and Equivalents 250.0 249.8
Fully Diluted Average Shares
Outstanding and Equivalents 265.3 265.5
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
3
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions) 13 Weeks Ended
April 30, May 1,
1994 1993
Operating Activities:
Net earnings and depreciation/
amortization $ 197 $ 176
Decrease in working capital (excluding
cash, cash equivalents and short-term
debt) 166 145
Other assets and liabilities, net (19) 13
344 334
Investing Activities:
Net additions to property and equipment (154) (87)
Other 4 (1)
(150) (88)
Financing Activities:
Net repayments of long-term debt (72) (40)
Net issuances (purchases) of
treasury stock 3 (2)
Dividend payments, net of tax benefit (62) (56)
(131) (98)
Increase in Cash and Cash Equivalents $ 63 $ 148
Cash paid during the period:
Interest $ 57 $ 58
Income Taxes 116 44
The accompanying notes to condensed consolidated financial
statements are an integral part of this statement.
4
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Interim Results. These unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-Q of The Securities and Exchange Commission and should
be read in conjunction with the Summary of Significant Accounting
Policies (page 18) and the Notes to Consolidated Financial
Statements (pages 23-29) in the 1993 Annual Report. In the opinion
of management, this information is fairly presented and all
adjustments (consisting only of normal recurring adjustments)
necessary for a fair statement of the results for the interim
periods have been included; however, certain items are included in
these statements based on estimates for the entire year. Also,
operating results of periods which exclude the Christmas season may
not be indicative of the operating results that may be expected for
the full fiscal year.
Inventories. Department store merchandise inventories are stated
on the LIFO (last-in, first-out) cost basis. The LIFO provision
for the first quarter was $8 million in 1994 and 1993.
5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
A summary of key financial information for the periods indicated is
as follows:
April 30, May 1, Jan. 29,
1994 1993 1994
Current Ratio 2.6 2.3 2.6
Debt-Capitalization Ratio 44% 48% 45%
Fixed Charge Coverage* 3.2x 2.4x 3.1x
Fixed Charge Coverage before
Special and Nonrecurring Items* 3.2x 2.8x 3.1x
* Fixed charge coverage, which is presented for the trailing 52
weeks in each period ended above, is defined as earnings
before gross interest expense (excluding one-half of the
interest expense related to the MCAC sale/leaseback debt (MCAC
loans) prior to MCA partnership dissolution), the expense
portion of interest on the ESOP debt, rent expense and income
taxes divided by gross interest expense (excluding one-half of
the interest expense related to the MCAC loans prior to MCA
partnership dissolution), interest expense on the ESOP debt,
total rent expense and the pretax equivalent of dividends on
redeemable stock.
Registrant's first quarter 1994 current ratio increased as compared
with first quarter 1993 due to net reductions in total current
liabilities, whereas total current assets was relatively unchanged.
The increase in merchandise inventories was substantially offset by
the decrease in cash equivalents. The increase in accounts
payable, primarily related to the increase in inventories, was more
than offset by decreases in the current maturities of long-term
debt, and accrued expenses principally related to consolidations
and store closings.
The decrease in registrant's first quarter 1994 debt-capitalization
ratio as compared with first quarter 1993 is primarily due to net
reductions in debt during 1993 funded primarily from 1993 cash
flows, and growth in retained earnings.
The increase in registrant's first quarter 1994 fixed charge
coverage ratio as compared with first quarter 1993 is primarily due
to increased level of earnings, as lower gross interest expense due
to net reductions in debt was substantially offset by higher rent
expense.
Results of Operations
Net retail sales represent the sales of stores operating at the end
of the latest period. They exclude finance charge revenue and the
sales of stores which have been closed and not replaced. Sales
percent increases by business segment are as follows:
Store-for-
Total Store
Department stores 10.9% 8.2%
Payless ShoeSource 13.1 6.0
Total Net Retail Sales 11.4% 7.7%
6
Store-for-store sales represent sales of those stores open during
both periods.
The following table presents the components of costs and expenses,
as a percent of revenues, for the first quarter of 1994 and 1993.
1994 1993
Cost of Sales 69.3% 69.5%
Selling, general and
administrative expenses 21.3 21.3
Interest expense, net 2.2 2.6
Earnings before income taxes 7.2% 6.6%
Effective income tax rate 40.5% 39.4%
Net Earnings 4.3% 4.0%
Cost of sales was $1,817 million in the 1994 first quarter, up 8.0%
from $1,683 million in the 1993 first quarter. The overall
increase is primarily related to higher sales volume. As a percent
of revenues, cost of sales decreased 0.2% from the first quarter of
1993 primarily due to lower buying and occupancy expenses,
partially offset by a small decline in merchandise gross margin.
LIFO was a charge of $8 million in the first quarter of 1994 and
1993. There were no significant changes in the other components of
cost of sales.
Selling, general and administrative expenses were $558 million in
the 1994 first quarter, compared with $517 million in the 1993
first quarter, a 7.9% increase. The overall increase is primarily
related to higher sales volume. Selling, general and
administrative expenses, as a percent of revenues, remained
constant for the first quarter of 1994 as compared with 1993.
Net interest expense for the first quarter 1994 and 1993 was as
follows (millions):
1994 1993
Interest expense $ 62 $ 67
Interest income (1) (3)
Capitalized interest (2) (1)
Net Interest Expense $ 59 $ 63
The decrease in 1994 net interest expense for the first quarter is
the result of net reductions of debt in 1993. As a percent of
revenues, interest expense for the first quarter of 1994 decreased
0.4% from the first quarter of 1993.
The effective income tax rate for the first quarter of 1994
increased as compared with 1993 primarily due to an increase in the
tax rate resulting from the 1993 tax law change and slightly higher
state income tax rates.
7
Operating results for the trailing years were as follows (millions,
except per share):
52 Weeks Ended
April 30, May 1,
1994 1993
Net retail sales $ 11,213 $ 10,289
Revenues $ 11,729 $ 11,184
Net earnings $ 727 $ 618
Fully diluted earnings per share $ 2.71 $ 2.31
8
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no material developments in the legal proceeding
identified in response to Item 3 to registrant's Annual Report
on Form 10-K for the fiscal year ended January 29, 1994.
Item 2 - Changes in Securities - None.
Item 3 - Defaults Upon Senior Securities - None.
Item 4 - Submission of Matters to a Vote
of Security Holders - None.
Item 5 - Other Information - None.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(11) - Computation of Net Earnings Per Share
(12) - Computation of Ratio of Earnings to Fixed Charges
(b) Reports on Form 8-K
A report dated April 20, 1994, which contained information
concerning debt ratings and incorporated by reference
registrant's Annual Report on Form 10-K for the fiscal year
ended January 29, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE MAY DEPARTMENT STORES COMPANY
(Registrant)
Date: June 7, 1994 /s/ Jerome T. Loeb
Jerome T. Loeb
President and
Chief Financial Officer
9