-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RylxlB+R2spoJENKWsuE45AUb3+GC3j90yikok0zjGxcPFDaPJHuU1iDfajphSUe jq+cUSgR1A8cf8ecBpS4hg== 0000063416-05-000018.txt : 20050210 0000063416-05-000018.hdr.sgml : 20050210 20050210121424 ACCESSION NUMBER: 0000063416-05-000018 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050210 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050210 DATE AS OF CHANGE: 20050210 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAY DEPARTMENT STORES CO CENTRAL INDEX KEY: 0000063416 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 431104396 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00079 FILM NUMBER: 05591611 BUSINESS ADDRESS: STREET 1: 611 OLIVE ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3143426300 8-K 1 earningseightk.txt FORM 8K, DATED FEBRUARY 10, 2005 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported) - February 10, 2005 THE MAY DEPARTMENT STORES COMPANY (Exact name of Registrant as specified in its charter) Delaware I-79 43-1104396 (State or other (Commission (IRS Employer jurisdiction of File Number) Identification No.) incorporation) 611 Olive Street, St. Louis, Missouri 63101 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (314) 342-6300 Item 2.02 Results of Operations and Financial Condition. On February 10, 2005, the registrant issued a press release announcing its financial results for the 13 and 52 weeks ending January 29, 2005. A copy of the press release is furnished herewith as Exhibit 99.1. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. The following document is furnished as an Exhibit. Exhibit No. Exhibit 99.1 Press Release, dated February 10, 2005 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. THE MAY DEPARTMENT STORES COMPANY Dated: February 10, 2005 By: /s/ Richard A. Brickson Richard A. Brickson Secretary and Senior Counsel EX-99.1 2 exhibit991.txt PRESS RELEASE, DATED FEBRUARY 10, 2005 EXHIBIT 99.1 MAYNEWS THE MAY DEPARTMENT STORES COMPANY REPORTS UNAUDITED RESULTS FOR FOURTH QUARTER AND 2004 FISCAL YEAR; INCREASES DIVIDEND TO 98 CENTS PER SHARE ST. LOUIS, Feb. 10, 2005 - The May Department Stores Company [NYSE: MAY] today announced results for the fourth quarter 2004 and 2004 fiscal year, which ended Jan. 29, 2005. Fourth quarter 2004 earnings per share were $1.10, compared with earnings per share of $1.38 in 2003. Net earnings were $339 million versus $425 million a year ago. Fourth quarter 2004 includes store divestiture costs of $25 million, or 5 cents per share. Excluding the store divestiture costs, 2004 fourth quarter earnings were $356 million, or $1.15 per share. Fourth quarter 2004 also includes a $42 million, or 9 cents per share, charge for lease accounting, $36 million of which corrects prior years. Fourth quarter 2003 earnings included store divestiture costs of $4 million, or 1 cent per share. Excluding those costs, fourth quarter 2003 earnings were $427 million, or $1.39 per share. The integration of Marshall Field's continues on schedule, with the majority of merchandise and financial systems converted successfully during the first week of February. The remaining system conversions primarily relate to store point of sale equipment and will occur through early April. The Marshall Field's acquisition had a positive effect on fourth quarter earnings of 5 cents per share, including start-up integration costs of 2 cents per share. Net sales for the 2004 fourth quarter were $5.04 billion, an increase of 12.1%, compared with $4.49 billion in the similar period last year. Store- for-store sales decreased 5.2% for the quarter. Excluding the remaining seven stores May previously announced it will divest, store-for-store sales for the fourth quarter decreased 5.0%. "While our 2004 results fell short of our expectations, we have implemented a number of strategic and tactical initiatives that are designed to increase our sales and earnings in the present year," said John L. Dunham, May's president and acting chairman and chief executive officer. "Our inventory levels, which are down 1% store-for-store, are now in line as a result of additional markdowns and ensure that May is well-positioned for receipt of spring merchandise." For fiscal 2004, diluted earnings per share were $1.70, compared with $1.41 in fiscal 2003. Net earnings were $524 million, compared with net earnings of $434 million in the prior year. Earnings for 2004 include store divestiture costs of $48 million, or 10 cents per share. Excluding the store divestiture costs, 2004 earnings were $555 million, or $1.80 per share. Earnings for 2003 included store divestiture costs of $328 million, or 67 cents per share. Excluding the store divestiture costs, 2003 earnings were $641 million, or $2.08 per share. - more - 2 Net sales for fiscal 2004 were $14.44 billion, an 8.2% increase, compared with $13.34 billion in the similar 2003 period. Store-for-store sales decreased 2.4% for the year. Excluding the remaining seven Lord & Taylor stores to be divested, store-for-store sales decreased 2.2% for the year. Fiscal 2004 Highlights - May acquired Marshall Field's, adding 62 department stores in eight states, including its world-famous flagship store on State Street in the Chicago Loop and important flagship stores in Detroit and Minneapolis as well as key suburban Chicago locations. - May's operating cash flow was $1.3 billion, one of the strongest in the retail industry. This strength enables the company to make acquisitions, build new stores, remodel and expand existing stores, and reduce debt. - May's board of directors approved an increase in the annual dividend rate to 98 cents per share from 97 cents per share. The new quarterly rate of 24-1/2 cents per share will be payable March 15, 2005, to shareowners of record as of March 1, 2005. This is the 30th consecutive year of dividend increases and represents 94 years of uninterrupted cash dividends. - Eight new department stores opened in 2004: a Filene's store in Dartmouth, Mass.; two Foley's stores in El Paso and Houston, Texas; two Hecht's stores in Wilmington, N.C. and Nashville, Tenn.; a Meier & Frank store in Portland, Ore.; a Robinsons-May store in Rancho Cucamonga, Calif.; and The Jones Store in Kansas City, Kan. The new stores added almost 1.3 million square feet of retail space. May also remodeled an additional 1.2 million square feet of retail space in 14 of its department stores. - The company also plans to open eight new department stores in 2005: three Foley's stores in Loveland, Colo., and San Antonio and Garland, Texas; two Kaufmann's stores in Pittsburgh, Pa., and Columbus, Ohio; two Robinsons-May stores in El Centro and Simi Valley, Calif.; and a Hecht's store in N. Charlotte, N.C. The Foley's stores in San Antonio and Garland will be located in "off-mall" retail settings and the balance will be built as anchors in traditional malls. - May continued to improve the in-store shopping experience during 2004 by reducing inventory levels, making stores more open and easier to shop, and installing upgraded point-of-sale equipment, directional signage and price checkers. - The repositioning of Lord & Taylor as an upscale fashion retailer continued throughout 2004, including improved and distinctive selections of stylish merchandise. To date, May has closed 25 of the 32 underperforming Lord & Taylor stores as previously announced in 2003. - May also maintained its aggressive pursuit of the younger customer, while continuing to serve the needs of the baby boomer, its core customer. In addition, May focused on merchandising ladies' sportswear by occasion, with casual and tailored apparel displayed by age to appeal to both younger as well as mature customers. - Progress was made on May's objective to offer better segments of the business and more distinctive and exclusive proprietary brand merchandise, both of which broaden its department store customer base and differentiate the company from moderate chains and discounters. May's goal is to grow its proprietary merchandise to 20% of department store sales within five years. - more - 3 - May's Bridal Group opened 30 David's Bridal stores and 16 After Hours stores. May plans to open 18 David's Bridal stores and 20 After Hours stores in 2005. - David B. Rickard, executive vice president, chief financial officer and chief administrative officer of CVS Corporation, the largest retail pharmacy in the nation, joined May's board of directors. - Steven J. Nevill assumed the newly created position of senior vice president, inventory management, to lead the implementation of May's new merchandise planning and allocation initiative, which is designed to increase sales, reduce markdowns, and reduce inventory levels. At the end of the fiscal 2004, May operated 491 department stores under the names of Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, and The Jones Store, as well as 239 David's Bridal stores, 449 After Hours Formalwear stores, and 11 Priscilla of Boston stores. May currently operates in 46 states, the District of Columbia, and Puerto Rico. # # # The company discloses earnings and earnings per share on both a GAAP basis and excluding restructuring costs because it believes these are important metrics, and they are presented to enhance comparability between years. These metrics are used internally to evaluate results from operations. This release also contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. While this release reflects all available information and management's judgment and estimates of current and anticipated conditions and circumstances and is 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, our ability to hire and retain qualified associates, and those risks generally associated with the integration of Marshall Field's with May. Because of these factors, actual performance could differ materially from that described in forward-looking statements. PLEASE NOTE: May's fourth quarter earnings conference call will be accessible in a listen-only format at 9 a.m. Central Time today at www.mayco.com at the "Webcast" link on the Investor Relations page. Those unable to access the Webcast may listen to the conference call by dialing 1-800-901-5241 and entering pass code #15525669. CONDENSED CONSOLIDATED FINANCIAL INFORMATION FOLLOWS 4 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED RESULTS OF OPERATIONS (Unaudited) 52 Weeks Ended 13 Weeks Ended Jan. 29, 2005 Jan. 31, 2004 Jan. 29, 2005 Jan. 31, 2004 % to % to % to % to (millions, except per share) $ Net Sales $ Net Sales $ Net Sales $ Net Sales Net sales $ 14,441 $ 13,343 $ 5,039 $ 4,494 Cost of sales: Recurring 10,183 70.5 % 9,372 70.3 % 3,478 69.0 % 3,006 66.9 % Restructuring markdowns 29 0.2 6 0.0 18 0.4 5 0.1 Selling, general, and administrative expenses 3,021 20.9 2,686 20.1 917 18.2 731 16.2 Restructuring costs 19 0.1 322 2.4 7 0.1 (1) 0.0 Interest expense, net 386 2.7 318 2.4 110 2.2 80 1.8 Earnings before income taxes 803 5.6 639 4.8 509 10.1 673 15.0 Provision for income taxes 279 34.8 * 205 32.1 * 170 33.5 * 248 37.0 * Net earnings $ 524 3.6 % $ 434 3.3 % $ 339 6.7 % $ 425 9.4 % Diluted earnings per share $ 1.70 $ 1.41 $ 1.10 $ 1.38 Excluding restructuring costs: Net earnings $ 555 3.8 % $ 641 4.8 % $ 356 7.0 % $ 427 9.5 % Diluted earnings per share $ 1.80 $ 2.08 $ 1.15 $ 1.39 Dividends paid per common share $ 0.97 $ 0.96 $ 0.24-1/4 $ 0.24 Diluted average shares and equivalents 308.0 307.0 308.3 307.0 * Percent represents effective income tax rate.
Net Sales - Percent Increase (Decrease) From Prior Year Net sales include merchandise sales and lease department income. Store-for-store sales compare sales of stores open during both periods beginning the first day a new store has prior year sales and exclude sales of stores closed during both periods. 52 Weeks Ended 13 Weeks Ended Jan. 29, 2005 Jan. 29, 2005 Store-for- Store-for- Total Store Total Store 8.2% (2.4)% 12.1% (5.2)% 5 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited and Subject to Reclassification) (millions) Jan. 29, Jan. 31, LIABILITIES AND Jan. 29, Jan. 31, ASSETS 2005 2004 SHAREOWNERS' EQUITY 2005 2004 Cash and cash equivalents $ 62 $ 564 Notes payable $ 368 $ - Accounts receivable, net 2,279 1,788 Current maturities of Merchandise inventories 3,092 2,728 long-term debt 145 239 Other current assets 118 88 Accounts payable and Total Current Assets 5,551 5,168 accrued expenses 2,907 2,532 Total Current Liabilities 3,420 2,771 Property and equipment, net 6,146 5,149 Goodwill and other intangibles 3,251 1,672 Long-term debt 5,662 3,797 Other assets 161 133 Deferred income taxes 817 712 Other liabilities 524 507 ESOP preference shares 211 235 Unearned compensation - (91) Shareowners' equity 4,475 4,191 Total Liabilities and Total Assets $ 15,109 $ 12,122 Shareowners' Equity $ 15,109 $ 12,122
THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited and Subject to Reclassification) (millions) 52 Weeks Ended Jan. 29, Jan. 31, 2005 2004 Operating activities: Net earnings $ 524 $ 434 Depreciation and amortization 640 564 Asset impairment 12 317 Decrease in working capital and other 169 360 Total operating activities 1,345 1,675 Investing activities: Capital expenditures (643) (600) Proceeds from dispositions of property and equipment 116 51 Business combinations (3,242) (70) Total investing activities (3,769) (619) Financing activities: Net issuances (repayments) of notes payable and long-term debt 2,176 (228) Net issuances (purchases) of common stock 43 (26) Dividend payments (297) (293) Total financing activities 1,922 (547) Increase (decrease) in cash and cash equivalents (502) 509 Cash and cash equivalents, beginning of period 564 55 Cash and cash equivalents, end of period $ 62 $ 564 6 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL INFORMATION Reclassifications Certain prior period amounts have been reclassified to conform with current year presentation. Cost of Sales For the 52 weeks ended January 29, 2005, recurring cost of sales as a percent of net sales increased 0.2%. Like many companies in the retail industry, we recently reviewed our lease accounting policies. This review revealed that we should synchronize the assumptions used to calculate our straight-line rent expense and to estimate useful lives for leased assets. This synchronization resulted in an earnings adjustment of $42 million in the 2004 fourth quarter, of which $36 million corrects prior years. This adjustment has no cash flow effect and includes $26 million for non-cash rent and $16 million for depreciation. This adjustment plus other occupancy cost increases of 0.2% were partially offset by a 0.4% decrease in the cost of merchandise. For the 13 weeks ended January 29, 2005, recurring cost of sales as a percent of net sales increased 2.1%, principally because of the $42 million lease adjustment, increases in buying and occupancy costs related to the decline in store-for-store sales, and a 0.7% increase in the cost of merchandise. In addition, $29 million of restructuring markdowns were incurred in 2004 to liquidate inventory as stores to be divested were closing, of which $18 million was incurred in the 2004 fourth quarter. Selling, General, and Administrative Expenses (SG&A) For the 52 weeks ended January 29, 2005, SG&A expenses as a percent of net sales increased 0.8%. The expense structure at Marshall Field's and start-up integration costs accounted for 0.5% of the increase. The remaining 0.3% increase was due to decreased sales leverage. For the 13 weeks ended January 29, 2005, SG&A expenses as a percent of net sales increased 2.0%. The increase was largely driven by decreased sales leverage resulting in a 1.2% increase in costs such as payroll and insurance. The expense structure at Marshall Field's and start-up integration costs caused an additional 0.8% increase in the quarter. Business Combinations Effective July 31, 2004, the company acquired the Marshall Field's department store group for $3.2 billion, plus transaction fees. Marshall Field's operates 62 department stores primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. The company acquired substantially all of Marshall Field's operating assets, including stores, inventory, customer receivables, and distribution centers, and assumed certain liabilities, including accounts payable and accrued expenses. The acquisition was financed through $2.2 billion of long-term debt and $1.0 billion of short-term borrowings and cash on hand. The company also acquired nine Mervyn's store locations in the Twin Cities area, six of which were disposed. Marshall Field's results of operations have been included in the company's consolidated financial statements since the acquisition. The company's January 29, 2005, consolidated balance sheet includes the assets acquired and the liabilities assumed using a preliminary purchase price allocation. The purchase price allocation is based on preliminary estimates and is subject to change for certain pre-acquisition contingencies. The following summarizes the preliminary purchase price allocation at acquisition (millions): Cash $ 3 Accounts receivable 556 Merchandise inventories 384 Property and equipment 1,117 Goodwill 1,143 Other intangible assets 439 Assumed liabilities/other (402) Net purchase price $ 3,240 Other intangible assets include $419 million of trade names and $20 million of customer relationships. The trade names have an indefinite useful life and are not amortizable. The customer relationships will be amortized over an estimated useful life of 15 years. Restructuring Costs In July 2003, the company announced its intention to divest 34 underperforming department stores. These divestitures will result in total estimated charges of $380 million, consisting of asset impairments of $330 million, inventory liquidation markdowns of $45 million, and severance benefits of $20 million. Other charges are offset by net gains on the disposal of property. Approximately $50 million of the $380 million represents the cash cost of the store divestitures, not including the benefit from future tax credits. Of the $380 million of expected total charges, $376 million has been recognized to date. The company recognized $25 million and $48 million in the fourth quarter and fiscal 2004, and $4 million and $328 million in the fourth quarter and fiscal 2003, respectively. The remaining costs are expected to be recognized in 2005 and 2006. 7 Asset impairment charges were recorded to reduce store assets to their estimated fair value because of the shorter period over which they will be used. Estimated fair values were based on estimated market values for similar assets. Disposal gains or losses are recognized as each store is divested. Inventory liquidation markdowns are incurred to liquidate inventory as stores to be divested are closed. The company is negotiating agreements with landlords and developers for each store divestiture. Through the end of 2004, 27 stores have been closed. Severance benefits are recognized as each store is closed. Severance benefits of $16 million for approximately 2,100 associates and inventory liquidation and other costs of $31 million have been incurred to date. Remaining amounts will be recognized as each store is divested. Income Taxes The 2004 effective tax rate includes $18 million of provision reductions recorded in the 2004 fourth quarter for the resolution of various federal and state income tax issues. This reduced the rate to 34.8%, compared with 32.1% in 2003. 2003 results included a $31 million tax credit recorded in the first quarter 2003 that reduced the effective rate 4.9% from 37.0%. We expect our 2005 tax rate to be approximately 36.0%. Interest Expense On July 20, 2004, the company issued $2.2 billion of long-term debt maturing over three to 30 years at a weighted average interest rate, including amortized hedge and financing costs, of 5.71% to partially fund the Marshall Field's acquisition. The $68 million increase in interest expense to $386 million in 2004 was due primarily to higher long-term borrowings as a result of new debt and a $10 million increase in early debt redemption costs. Impact of New Accounting Pronouncements In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), "Share-Based Payment." SFAS No. 123 (revised 2004) establishes standards that require companies to record the cost resulting from all share-based payment transactions using the fair value method. Transition under SFAS No. 123 (revised 2004) requires using a modified version of prospective application under which compensation costs are recorded for all unvested share-based payments outstanding or a modified retrospective method under which all prior periods impacted by SFAS No. 123 are restated. SFAS No. 123 (revised 2004) is effective as of the first quarter that begins after June 15, 2005, with early adoption permitted. 8 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES FINANCIAL HIGHLIGHTS (millions, except per share) 2004 * 2003 * 2002 * 2001 2000 1999 Net sales $ 14,441 $ 13,343 $ 13,491 $ 13,883 $ 14,210 $ 13,562 Operating earnings $ 1,189 $ 957 $ 1,165 $ 1,493 $ 1,747 $ 1,810 Memo: LIFO credit included in operating earnings - - - (30) (29) (30) Percent of sales 8.3 % 7.2 % 8.6 % 10.8 % 12.3 % 13.3 % Memo: LIFO credit 0.0 % 0.0 % 0.0 % (0.2)% (0.2)% (0.2)% Interest expense, net (386) (318) (345) (354) (345) (287) Earnings before income taxes 803 639 820 1,139 1,402 1,523 Provision for income taxes (279) (205) (278) (436) (544) (596) Net earnings $ 524 $ 434 $ 542 $ 703 $ 858 $ 927 Diluted earnings per share $ 1.70 $ 1.41 $ 1.76 $ 2.21 $ 2.62 $ 2.60 Net earnings as a percent of sales 3.6 % 3.3 % 4.0 % 5.1 % 6.0 % 6.8 % Return on beginning net assets 12.1 % 9.8 % 12.0 % 15.5 % 19.5 % 20.7 % Return on shareowners' beginning equity 12.5 % 10.7 % 14.1 % 18.2 % 21.0 % 24.1 % Dividends paid per common share $ 0.97 $ 0.96 $ 0.95 $ 0.94 $ 0.93 $ 0.89 Annual dividend rate per common share effective March 15, 2005 $ 0.98 All years are 52-week fiscal years except 2000, which included 53 weeks. * Amounts include restructuring costs of $48 million, or 10 cents per share in 2004; $328 million, or 67 cents per share in 2003; and $114 million, or 24 cents per share, in 2002.
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