-----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, CGK0gFLEUsGSCBBTyxEaa5GNACSIb60EKKd1tLPOsIHOJ26ZNZj/59wihHIwMC73 DGlQ9jOYtun7IWJemmBxGw== 0000063416-05-000088.txt : 20050611 0000063416-05-000088.hdr.sgml : 20050611 20050527163652 ACCESSION NUMBER: 0000063416-05-000088 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20050527 FILED AS OF DATE: 20050527 DATE AS OF CHANGE: 20050527 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00079 FILM NUMBER: 05864366 BUSINESS ADDRESS: STREET 1: 611 OLIVE ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3143426300 10-Q 1 tenq.txt FORM 10Q, DATED MAY 27, 2005 UNITED STATES 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, 2005 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). 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. 298,429,203 shares of common stock, $.50 par value, as of April 30, 2005. PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (millions) Apr. 30, May 1, Jan. 29, 2005 2004 2005 ASSETS Current assets: Cash and cash equivalents $ 75 $ 438 $ 62 Accounts receivable, net 2,018 1,561 2,294 Merchandise inventories 3,410 3,005 3,092 Other current assets 121 117 129 Total current assets 5,624 5,121 5,577 Property and equipment, at cost 10,280 9,154 10,178 Accumulated depreciation (4,124) (4,054) (3,988) Property and equipment, net 6,156 5,100 6,190 Goodwill 2,635 1,504 2,634 Intangible assets, net 600 166 602 Other assets 158 126 160 Total assets $ 15,173 $ 12,017 $ 15,163 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt $ 304 $ - $ 368 Current maturities of long-term debt 248 147 145 Accounts payable 1,649 1,293 1,529 Accrued expenses 1,273 937 1,269 Income taxes payable 15 185 158 Total current liabilities 3,489 2,562 3,469 Long-term debt 5,551 3,788 5,662 Deferred income taxes 825 717 818 Other liabilities 524 504 528 ESOP preference shares 192 228 211 Shareowners' equity 4,592 4,218 4,475 Total liabilities and shareowners' equity $ 15,173 $ 12,017 $ 15,163
The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets. 2 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (millions, except per share) 13 Weeks Ended Apr. 30, May 1, 2005 2004 Net sales $ 3,369 $ 2,963 Cost of sales: Recurring 2,435 2,120 Restructuring markdowns 6 5 Selling, general, and administrative expenses 777 639 Restructuring costs 3 2 Interest expense, net 106 76 Earnings before income taxes 42 121 Provision for income taxes 1 45 Net earnings $ 41 $ 76 Basic earnings per share $ .13 $ .25 Diluted earnings per share $ .13 $ .24 Dividends paid per common share $.24-1/2 $.24-1/4 Weighted average shares outstanding: Basic 296.5 291.4 Diluted 298.4 308.3
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. 3 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (millions) 13 Weeks Ended Apr. 30, May 1, 2005 2004 Operating Activities: Net earnings $ 41 $ 76 Adjustment for noncash items included in earnings: Depreciation 161 138 Intangible and other amortization 4 2 Working capital changes: Accounts receivable, net 276 227 Merchandise inventories (318) (277) Other current assets 8 (29) Accounts payable 131 102 Accrued expenses (7) (73) Income taxes payable (143) (140) Other, net 27 5 Cash flows from operations 180 31 Investing Activities: Net additions to property and equipment (129) (95) Cash flows used for investing activities (129) (95) Financing Activities: Net short-term debt repayments (64) - Net long-term debt repayments (8) (9) Net issuances of common stock 110 21 Dividend payments (76) (74) Cash flows used for financing activities (38) (62) Increase (decrease) in cash and cash equivalents 13 (126) Cash and cash equivalents, beginning of period 62 564 Cash and cash equivalents, end of period $ 75 $ 438 Cash paid during the period: Interest $ 73 $ 84 Income taxes 129 175
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. 4 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Interim Results The 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 18-26) in the 2004 Annual Report on Form 10-K/A. 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. Operating results of periods, which exclude the Christmas season, may not be indicative of the operating results that may be expected for the fiscal year. Reclassifications Certain prior period amounts have been reclassified to conform with current year presentation. Merger Agreement On February 28, 2005, May and Federated Department Stores, Inc. (Federated) announced that they have entered into a merger agreement. Pursuant to the agreement, each share of May will be converted into the right to receive $17.75 in cash and 0.3115 shares of Federated common stock. In addition, Federated will assume approximately $6 billion of May debt. Completion of the merger is contingent on regulatory review and approval by the shareowners of both companies. The transaction is expected to close in the third quarter of 2005. Business Combinations Effective July 31, 2004, the company acquired the Marshall Field's department store group. Marshall Field's operates 62 department stores primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. 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, seven of which have been disposed. Marshall Field's results of operations have been included in the company's consolidated financial statements since acquisition. The company's April 30, 2005, consolidated balance sheet includes the assets acquired and the liabilities assumed using a preliminary purchase price allocation. The purchase price allocation is subject to finalization of certain acquisition-related liabilities. The following summarizes the preliminary purchase price allocation at acquisition (millions): Cash $ 3 Accounts receivable 571 Merchandise inventories 384 Property and equipment 1,115 Goodwill and other intangibles 1,568 Assumed liabilities/other (401) Net purchase price $ 3,240 Goodwill and 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. Assumed liabilities/other includes $22 million of transaction fees. 5 The following pro forma information presents the company's net sales, net earnings and diluted earnings per share as if the Marshall Field's acquisition had occurred on February 1, 2004 (millions, except per share): 13 Weeks Ended Apr. 30, May 1, 2005 2004 Actual Pro Forma Net sales $ 3,369 $ 3,547 Net earnings $ 41 $ 71 Diluted earnings per share $ 0.13 $ 0.22 Pro forma adjustments have been made to reflect depreciation and amortization using the asset values recognized after applying purchase accounting adjustments and interest expense on borrowings used to finance the acquisition. This pro forma information is presented for informational purposes only and is not necessarily indicative of actual results had the acquisition been effected at the beginning of the respective periods presented, is not necessarily indicative of future results, and does not reflect potential synergies, integration costs, or other such costs or savings. Restructuring Costs In July 2003, the company announced its intention to divest 34 underperforming department stores. The company expects total charges of $380 million. To date, $385 million has been recognized. Future costs are expected to be offset by net gains on the disposal of remaining properties. The company recognized $9 million in the 2005 first quarter and $7 million in the 2004 first quarter. The significant components of the store divestiture costs and status of the related liability are summarized below: (millions) Total | Balance at Charges | 2005 Payments Non-cash Apr. 30, to Date | Charges (Proceeds) Uses 2005 Asset impairments $ 331 | $ 2 $ - $ 2 $ - Disposal (gains) losses (29)| (4) (5) 1 - Inventory liquidation markdowns 41 | 6 6 - - Severance benefits 19 | 3 3 - - Other 23 | 2 2 - - Total $ 385 | $ 9 $ 6 $ 3 $ - Through the end of the 2005 first quarter, 29 stores have been closed. Severance benefits are recognized as each store is closed. As of April 30, 2005, severance benefits have been paid to approximately 2,200 associates. The remaining amounts will be recognized as each remaining store is closed in 2005. Income Taxes First quarter 2005 income taxes include a $14 million provision reduction recorded upon the resolution of various federal and state tax issues. The company's 2005 estimated effective tax rate is 36.0% excluding that reduction. The company may have additional provision adjustments in the future. Inventories Merchandise inventories are principally valued at the lower of LIFO (last-in, first-out) cost basis or market using the retail method. There was no LIFO provision or credit in the first quarter of 2005 or 2004. 6 Pension Benefits The components of net periodic benefit costs for the company's pension plans for the first quarter 2005 and 2004 were: (millions) Qualified Plan Nonqualified Plans Apr. 30, May 1, Apr. 30, May 1, 2005 2004 2005 2004 Service cost $ 18 $ 14 $ 2 $ 1 Interest cost 12 12 3 3 Expected return on assets (11) (10) - - Net amortization (1) 6 3 2 2 Net periodic benefit cost $ 25 $ 19 $ 7 $ 6 (1) Prior service cost and actuarial gains and losses are amortized over the remaining estimated service period. The company did not make any contributions to its pension plans in the first quarter of 2005. A contribution of approximately $100 million to the qualified plan is expected in the fourth quarter of 2005. Earnings per Share The following tables reconcile net earnings and weighted average shares outstanding to amounts used to calculate basic and diluted earnings per share ("EPS") for the periods shown. (millions, except per share) 13 Weeks Ended April 30, 2005 May 1, 2004 Earnings Shares EPS Earnings Shares EPS Net earnings $ 41 $ 76 ESOP preference share dividends (3) (4) Basic EPS 38 296.5 $ .13 72 291.4 $ .25 ESOP preference shares - 0.0 3 15.4 Assumed exercise of options (treasury stock method) - 1.9 - 1.5 Diluted EPS $ 38 298.4 $ .13 $ 75 308.3 $ .24
Diluted EPS excludes 13 million ESOP preference shares and $3 million of earnings adjustments for the 2005 first quarter because of their antidilutive effect. Stock Compensation Plans Effective February 2, 2003, the company adopted the fair value recognition provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." The company adopted SFAS No. 123 using the prospective transition method, under which all stock-based compensation granted after February 2, 2003 is expensed using the fair value method. Stock option expense is recorded over each option grant's vesting period, usually four years. Accordingly, the cost related to stock-based employee compensation included in net earnings, using the prospective method of transition, is less than it would have been had the fair value method been applied retroactively to all outstanding grants. The following table illustrates the pro forma effect on net earnings and earnings per share for the first quarter of 2005 and 2004 if the fair value-based method had been applied retroactively rather than prospectively to all outstanding unvested grants. 7 (millions, except per share) 13 Weeks Ended Apr. 30, May 1, 2005 2004 Net earnings, as reported $ 41 $ 76 Add: Compensation expense for employee stock options included in net earnings, net of tax 2 1 Deduct: Total compensation expense for employee stock options determined under retroactive fair value-based method, net of tax (5) (5) Pro forma net earnings $ 38 $ 72 Earnings per share: Basic - as reported (prospective) $ 0.13 $ 0.25 Basic - pro forma (retroactive) $ 0.11 $ 0.23 Diluted - as reported (prospective) $ 0.13 $ 0.24 Diluted - pro forma (retroactive) $ 0.11 $ 0.23 In December 2004, the Financial Accounting Standards Board (FASB) issued 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 2006 first quarter, with early adoption permitted. The company has not concluded which method it will adopt under SFAS No. 123(revised 2004). The company's stock incentive plan contains a provision under which all unvested stock options and restricted stock issued prior to February 28, 2005 become fully vested upon shareowner approval of a company merger. If the company shareowners approve the merger with Federated Department Stores, Inc., in the 2005 second quarter, approximately 7.5 million shares will vest, resulting in a corresponding stock compensation charge of approximately $55 million. If all prior years' grants are vested, there will be no incremental earnings effect when the company adopts SFAS No. 123 (revised 2004). Lease Obligations The company is a guarantor with respect to certain lease obligations of previously divested businesses. The leases, two of which include potential extensions to 2087, have future minimum lease payments aggregating approximately $781 million, and are offset by payments from existing tenants and subtenants. In addition, the company is liable for other expenses related to the above leases, such as property taxes and common area maintenance, which are also payable by the current tenants and subtenants. Potential liabilities related to these guarantees are subject to certain defenses by the company. The company believes that the risk of significant loss from these lease obligations is remote. 8 Impact of New Accounting Pronouncements In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for Conditional Asset Retirement Obligations." FIN No. 47 clarifies the timing of liability recognition for retirement obligations associated with tangible long-lived assets that are conditional on a future event. FIN No. 47 is effective as of the end of the fiscal year ending after December 31, 2005, with early adoption permitted. The company is in the process of evaluating the potential impact of FIN No. 47. 9 CONDENSED CONSOLIDATING FINANCIAL INFORMATION The company ("Parent") has fully and unconditionally guaranteed certain long- term debt obligations of its wholly-owned subsidiary, The May Department Stores Company, New York ("Subsidiary Issuer"). Other subsidiaries of the Parent include May Department Stores International, Inc. (MDSI), Leadville Insurance Company, Snowdin Insurance Company, Priscilla of Boston, and David's Bridal, Inc. and subsidiaries, including After Hours Formalwear, Inc. Condensed consolidating balance sheets as of April 30, 2005, May 1, 2004, and January 29, 2005, and the related condensed consolidating statements of earnings and cash flows for the thirteen-week periods ended April 30, 2005 and May 1, 2004 are presented below. Condensed Consolidating Balance Sheet As of April 30, 2005 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ - $ 58 $ 17 $ - $ 75 Accounts receivable, net - 2,004 48 (34) 2,018 Merchandise inventories - 3,304 106 - 3,410 Other current assets - 131 50 (60) 121 Total current assets - 5,497 221 (94) 5,624 Property and equipment, at cost - 9,953 327 - 10,280 Accumulated depreciation - (4,015) (109) - (4,124) Property and equipment, net - 5,938 218 - 6,156 Goodwill - 2,257 378 - 2,635 Intangible assets, net - 440 160 - 600 Other assets - 150 8 - 158 Intercompany (payable) receivable (360) (164) 3,764 (3,240) - Investment in subsidiaries 5,144 - - (5,144) - Total assets $ 4,784 $14,118 $ 4,749 $ (8,478) $ 15,173
LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt $ - $ 304 $ - $ - $ 304 Current maturities of long-term debt - 248 - - 248 Accounts payable - 1,588 61 - 1,649 Accrued expenses - 1,163 167 (57) 1,273 Income taxes payable - - 52 (37) 15 Total current liabilities - 3,303 280 (94) 3,489 Long-term debt - 5,551 - - 5,551 Intercompany note payable - 3,240 - (3,240) - Deferred income taxes - 751 74 - 825 Other liabilities - 1,016 14 (506) 524 ESOP preference shares 192 - - - 192 Shareowners' equity 4,592 257 4,381 (4,638) 4,592 Total liabilities and shareowners' equity $ 4,784 $14,118 $ 4,749 $ (8,478) $ 15,173
10 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) - Condensed Consolidating Statement of Earnings For the Thirteen Weeks Ended April 30, 2005 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated Net sales $ - $ 3,149 $ 439 $ (219) $ 3,369 Cost of sales: Recurring - 2,337 311 (213) 2,435 Restructuring markdowns - 6 - - 6 Selling, general, and administrative expenses - 689 99 (11) 777 Restructuring costs - 3 - - 3 Interest expense (income), net: External - 106 - - 106 Intercompany - 71 (72) 1 - Equity in earnings of subsidiaries (41) - - 41 - Earnings (loss) before income taxes 41 (63) 101 (37) 42 Provision (credit) for income taxes - (35) 36 - 1 Net earnings (loss) $ 41 $ (28) $ 65 $ (37) $ 41
Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended April 30, 2005 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated Operating activities: Net earnings (loss) $ 41 $ (28) $ 65 $ (37) $ 41 Equity in earnings of subsidiaries (41) - - 41 - Depreciation and other amortization - 151 10 - 161 Intangible asset amortization - 2 2 - 4 (Increase) decrease in working capital (5) (58) 6 4 (53) Other, net (71) 115 (11) (6) 27 Cash flows from (used for) operations (76) 182 72 2 180 Investing activities: Net additions to property and equipment - (110) (19) - (129) Cash flows used for investing activities - (110) (19) - (129) Financing activities: Net short-term debt issuances - (64) - - (64) Net long-term debt repayments - (8) - - (8) Net issuances of common stock 105 5 - - 110 Dividend payments (76) - - - (76) Intercompany activity, net 47 - (48) 1 - Cash flow from (used for) financing activities 76 (67) (48) 1 (38) Increase in cash and cash equivalents - 5 5 3 13 Cash and cash equivalents, beginning of period - 53 12 (3) 62 Cash and cash equivalents, end of period $ - $ 58 $ 17 $ - $ 75
11 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) - Condensed Consolidating Balance Sheet As of May 1, 2004 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ - $ 420 $ 18 $ - $ 438 Accounts receivable, net - 1,544 48 (31) 1,561 Merchandise inventories - 2,900 105 - 3,005 Other current assets - 106 32 (21) 117 Total current assets - 4,970 203 (52) 5,121 Property and equipment, at cost - 8,886 268 - 9,154 Accumulated depreciation - (3,972) (82) - (4,054) Property and equipment, net - 4,914 186 - 5,100 Goodwill - 1,129 375 - 1,504 Intangible assets, net - 4 162 - 166 Other assets - 117 9 - 126 Intercompany (payable) receivable (659) 186 3,698 (3,225) - Investment in subsidiaries 5,105 - - (5,105) - Total assets $ 4,446 $11,320 $ 4,633 $ (8,382) $ 12,017 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt $ - $ - $ - $ - $ - Current maturities of long-term debt - 147 - - 147 Accounts payable - 1,221 67 5 1,293 Accrued expenses - 868 126 (57) 937 Income taxes payable - 137 48 - 185 Total current liabilities - 2,373 241 (52) 2,562 Long-term debt - 3,788 - - 3,788 Intercompany note payable - 3,225 - (3,225) - Deferred income taxes - 650 67 - 717 Other liabilities - 987 9 (492) 504 ESOP preference shares 228 - - - 228 Shareowners' equity 4,218 297 4,316 (4,613) 4,218 Total liabilities and shareowners' equity $ 4,446 $11,320 $ 4,633 $ (8,382) $12,017
12 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) - Condensed Consolidating Statement of Earnings For the Thirteen Weeks Ended May 1, 2004 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated Net sales $ - $ 2,756 $ 415 $ (208) $ 2,963 Cost of sales: Recurring - 2,035 298 (213) 2,120 Restructuring markdowns - 5 - - 5 Selling, general, and administrative expenses - 555 84 - 639 Restructuring costs - 2 - - 2 Interest expense (income), net: External - 76 - - 76 Intercompany - 71 (71) - - Equity in earnings of subsidiaries (76) - - 76 - Earnings before income taxes 76 12 104 (71) 121 Provision for income taxes - 7 38 - 45 Net earnings $ 76 $ 5 $ 66 $ (71) $ 76
Condensed Consolidating Statement of Cash Flows For the Thirteen Weeks Ended May 1, 2004 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated Operating activities: Net earnings $ 76 $ 5 $ 66 $ (71) $ 76 Equity in earnings of subsidiaries (76) - - 76 - Depreciation and other amortization - 128 10 - 138 Intangible asset amortization - - 2 - 2 Increase in working capital (4) (180) (6) - (190) Other, net 19 (15) 6 (5) 5 Cash flows from (used for) operations 15 (62) 78 - 31 Investing activities: Net additions to property and equipment - (69) (26) - (95) Cash flows used for investing activities - (69) (26) - (95) Financing activities: Net short-term debt issuances - - - - - Net long-term debt repayments - (9) - - (9) Net issuances of common stock 12 9 - - 21 Dividend payments (74) - - - (74) Intercompany activity, net 47 - (47) - - Cash flow used for financing activities (15) - (47) - (62) Increase (decrease) in cash and cash equivalents - (131) 5 - (126) Cash and cash equivalents, beginning of period - 551 13 - 564 Cash and cash equivalents, end of period $ - $ 420 $ 18 $ - $ 438
13 CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued) - Condensed Consolidating Balance Sheet As of January 29, 2005 (Unaudited) (millions) Subsidiary Other Parent Issuer Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ - $ 53 $ 12 $ (3) $ 62 Accounts receivable, net - 2,283 46 (35) 2,294 Merchandise inventories - 2,993 99 - 3,092 Other current assets - 101 49 (21) 129 Total current assets - 5,430 206 (59) 5,577 Property and equipment, at cost - 9,868 310 - 10,178 Accumulated depreciation - (3,889) (99) - (3,988) Property and equipment, net - 5,979 211 - 6,190 Goodwill - 2,257 377 - 2,634 Intangible assets, net - 440 162 - 602 Other assets - 152 8 - 160 Intercompany (payable) receivable (437) (77) 3,754 (3,240) - Investment in subsidiaries 5,127 - - (5,127) - Total assets $ 4,690 $14,181 $ 4,718 $ (8,426) $15,163 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt $ - $ 368 $ - $ - $ 368 Current maturities of long-term debt - 145 - - 145 Accounts payable - 1,442 90 (3) 1,529 Accrued expenses 4 1,189 133 (57) 1,269 Income taxes payable - 114 44 - 158 Total current liabilities 4 3,258 267 (60) 3,469 Long-term debt - 5,661 1 - 5,662 Intercompany note payable - 3,240 - (3,240) - Deferred income taxes - 745 73 - 818 Other liabilities - 1,014 14 (500) 528 ESOP preference shares 211 - - - 211 Shareowners' equity 4,475 263 4,363 (4,626) 4,475 Total liabilities and shareowners' equity $ 4,690 $14,181 $ 4,718 $ (8,426) $15,163
14 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Overview During the first quarter of 2005, overall sales were disappointing. Expenses as a percent of net sales increased due to the decreased sales leverage resulting from negative store-for-store sales. Marshall Field's start-up integration costs and incremental markdowns taken to facilitate the clearance of seasonal proprietary apparel also negatively impacted our overall first quarter results. First quarter 2005 net sales of $3.37 billion increased 13.7% over the 2004 first quarter. However, store-for-store sales decreased 5.1% for the quarter. Sales of our proprietary ladies' and mens' apparel brands were among the weakest performing categories, and the home store continued to lag. Net earnings were $41 million, or $.13 per share for the quarter, compared with net earnings of $76 million, or $.24 per share, for the first quarter of 2004. First quarter 2005 earnings include restructuring costs of $9 million, or $.02 per share, and the benefit of a $14 million, or $.05 per share, income tax provision reduction recorded upon the resolution of various federal and state income tax issues. First quarter 2004 earnings included restructuring costs of $7 million, or $.02 per share. The integration of Marshall Field's continues on track and all system conversions were completed in April 2005. First quarter 2005 earnings include Marshall Field's start-up integration expenses of $21 million, or $.05 per share. During the first quarter, we opened one new department store: a Robinsons-May store in El Centro, California. Seven additional department stores are planned for 2005. During the quarter, we also closed two department stores we previously announced would be divested. Our Bridal Group opened two David's Bridal stores and six After Hours stores. The Bridal Group plans to open an additional 16 David's Bridal stores and 14 After Hours stores by year-end. At the end of the first quarter, we operated 490 department stores, 241 David's Bridal stores, 450 After Hours Formalwear stores, and 11 Priscilla of Boston stores in 46 states, the District of Columbia, and Puerto Rico. Results of Operations Net Sales 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. Net sales and related increases (decreases) were as follows: (dollars in millions) Percent Store-for-Store 2005 2004 Increase Decrease First quarter $3,369 $2,963 13.7% (5.1)% The total net sales increase of $406 million for the 2005 first quarter was primarily due to $519 million of new store sales, including Marshall Field's, offset by a $147 million decrease in store-for-store sales and a $28 million decrease related to divested store sales. 15 The following table presents the statements of earnings as a percent of net sales. First Quarter 2005 2004 Net sales 100.0% 100.0% Cost of sales: Recurring 72.3 71.6 Restructuring markdowns 0.2 0.1 Selling, general, and administrative expenses 23.0 21.5 Restructuring costs 0.1 0.1 Interest expense, net 3.1 2.6 Earnings before income taxes 1.3 4.1 Provision for income taxes 3.1* 37.0* Net earnings 1.2% 2.6% * - Percent represents effective income tax rate. Cost of Sales Recurring cost of sales includes the cost of merchandise, inbound freight, distribution expenses, buying, and occupancy costs. Restructuring markdowns were incurred to liquidate inventory as stores to be divested are closed. For the 13 weeks ended April 30, 2005, recurring cost of sales as a percent of net sales increased 0.7% principally because of an increase in occupancy costs caused by the decline in store-for-store sales. During the quarter we took incremental markdowns to facilitate the seasonal clearance of proprietary apparel and keep our inventories current. The negative effect of the $18 million incremental proprietary product markdowns was offset by other improvements in merchandise margin. Selling, General, and Administrative Expenses Selling, general, and administrative expenses (SG&A) as a percent of net sales increased from 21.5% in the first quarter of 2004 to 23.0% in the first quarter of 2005. The increase was largely driven by decreased sales leverage resulting in a 0.9% increase in costs such as payroll and advertising. Marshall Field's start-up integration expenses negatively impacted SG&A by an additional 0.6% in the quarter. Merger Agreement On February 28, 2005, May and Federated Department Stores, Inc. (Federated) announced that they have entered into a merger agreement. Pursuant to the agreement, each share of May will be converted into the right to receive $17.75 in cash and 0.3115 shares of Federated common stock. In addition, Federated will assume approximately $6 billion of May debt. Completion of the merger is contingent on regulatory review and approval by the shareowners of both companies. The transaction is expected to close in the third quarter of 2005. Business Combinations Effective July 31, 2004, we acquired the Marshall Field's department store group. Marshall Field's operates 62 department stores primarily in the Chicago, Detroit and Minneapolis metropolitan areas. The acquisition was financed through $2.2 billion of long-term debt and $1.0 billion of short-term borrowings and cash on hand. We also acquired nine Mervyn's store locations in the Twin Cities area, seven of which have been disposed. 16 Marshall Field's results of operations have been included in our consolidated financial statements since acquisition. Our April 30, 2005 consolidated balance sheet includes the assets acquired and liabilities assumed using a preliminary purchase price allocation. The purchase price allocation is subject to finalization of certain acquisition-related liabilities. Restructuring Costs In July 2003, we announced our intention to divest 34 underperforming department stores. We expect total charges of approximately $380 million. To date, $385 million has been recognized. Future costs are expected to be offset by net gains on the disposal of remaining properties. We recognized $9 million in the 2005 first quarter and $7 million in the 2004 first quarter. Through the end of the 2005 first quarter, 29 stores have been closed. Severance benefits are recognized as each store is closed. Severance benefits of $19 million for approximately 2,200 associates and inventory liquidation and other costs of $35 million have been incurred to date. The remaining amounts will be recognized as each remaining store is divested. Interest Expense Components of net interest expense for the first quarter were (millions): 2005 2004 Interest expense $ 109 $ 82 Interest income (1) (5) Capitalized interest (2) (1) Net interest expense $ 106 $ 76 The $30 million increase in net interest expense in the 2005 first quarter was due primarily to higher long-term borrowings as a result of Marshall Field's acquisition-related debt. Short-term borrowings for the first quarter were (dollars in millions): 2005 2004 Average balance outstanding $282 $ - Average interest rate on average balance 2.8% -% Income Taxes First quarter 2005 income taxes include a $14 million provision reduction recorded upon the resolution of various federal and state tax issues. The company's 2005 estimated effective tax rate is 36.0% excluding that reduction. Stock Compensation In December 2004, the Financial Accounting Standards Board (FASB) 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 2006 first quarter, with early adoption permitted. We have not concluded which method we will adopt under SFAS No. 123 (revised 2004). The company's stock incentive plan contains a provision under which all unvested stock options and restricted stock issued prior to February 28, 2005 become fully vested upon shareowner approval of a company merger. If the 17 company shareowners approve the merger with Federated Department Stores, Inc., in the 2005 second quarter, approximately 7.5 million shares will vest, resulting in a corresponding stock compensation charge of approximately $55 million. If all prior years' grants are vested, there will be no incremental earnings effect when the company adopts SFAS No. 123 (revised 2004). Trailing Years' Results Operating results for the trailing years were as follows (millions, except per share): April 30, May 1, 2005 2004 Net sales $ 14,847 $ 13,433 Net earnings $ 489 $ 438 Diluted earnings per share $ 1.59 $ 1.42 Financial Condition Cash Flows Cash flows from operations were $180 million and $31 million in the first quarter of 2005 and 2004, respectively. Cash flows increased approximately $150 million during the period despite a $35 million decrease in net earnings because of lower income tax payments and the effect of accounts receivable and accrued expense balance changes. Liquidity and Available Credit We finance our activities primarily with cash flows from operations, borrowings under credit facilities and issuances of long-term debt. We can borrow up to $1.4 billion under an unsecured multi-year agreement expiring August 24, 2009. In addition, we have filed with the Securities and Exchange Commission shelf registration statements that enable us to issue up to $525 million of debt securities. Financial Ratios Key financial ratios as of and for the thirteen weeks ended April 30, 2005 and May 1, 2004 and as of and for the fifty-two weeks ended January 29, 2005 are as follows: Apr. 30, May 1, Jan. 29, 2005 2004 2005 Current Ratio 1.6 2.0 1.6 Debt-Capitalization Ratio 55% 46% 55% Fixed Charge Coverage 1.3x 2.2x 2.8x Impact of New Accounting Pronouncements In March 2005, the FASB issued FASB Interpretation (FIN) No. 47, "Accounting for Conditional Asset Retirement Obligations." FIN No. 47 clarifies the timing of liability recognition for retirement obligations associated with tangible long-lived assets that are conditional on a future event. FIN No. 47 is effective as of the end of the fiscal year ending after December 31, 2005, with early adoption permitted. We are in the process of evaluating the potential impact of FIN No. 47. 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 18 patterns, availability of adequate locations for building or acquiring new stores, our ability to hire and retain qualified associates, our ability to manage the business to minimize the disruption of sales and customer service as a result of the restructuring activities, and those risks generally associated with the integration of Marshall Field's with May. Additional factors related to the proposed business combination of May and Federated include the ability to obtain governmental approvals of the transaction on the proposed terms and schedule, the failure of May and Federated shareowners to approve the transaction, the risk that the businesses will not be integrated successfully, and the disruption from the transaction making it more difficult to maintain relationships with customers, employees, or suppliers. Because of these factors, actual performance could differ materially from that described in the forward-looking statements. Item 3 - Quantitative and Qualitative Disclosures About Market Risk. Our exposure to market risk primarily arises from changes in interest rates on short-term debt. Short-term debt has generally been used to finance seasonal working capital needs resulting in minimal exposure to interest rate fluctuations. Under certain circumstances, short-term debt may also be used to temporarily finance a portion of an acquisition, which may result in increased market risk from interest rate fluctuations. Long-term debt is at fixed interest rates. Our merchandise purchases are denominated in United States dollars. Operating expenses of our international offices are generally paid in local currency and are not material. During the first three months of 2005 or 2004, we were not a party to any derivative financial instruments. Item 4 - Controls and Procedures. As of the period covered by this quarterly report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of the company's management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that our disclosure controls and procedures are effective. Other than described below, there have been no significant changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect those controls during the quarter. On July 31, 2004, we acquired the operating assets of the Marshall Field's department store group from Target Corporation. Target provided accounting and other systems support for Marshall Field's over a transition period through the 2005 first quarter. Accordingly, as permitted by Section 404 of the Sarbanes- Oxley Act, we excluded Marshall Field's from the scope of the company's 2004 internal control evaluation. During the 2004 third quarter, we converted proprietary credit operations and fixed asset and intangible accounting from Target to May systems, and converted payroll to May systems in the 2004 fourth quarter. The remaining accounting, merchant reporting, and store operating systems were converted in the 2005 first quarter. Marshall Field's now operates under a common set of controls and information technology systems with our other department store divisions. We will evaluate the effectiveness of the Marshall Field's controls in connection with our 2005 annual control assessment. 19 PART II - OTHER INFORMATION Item 1 - Legal Proceedings On March 1, 2005, Edward Decristofaro, an alleged May shareowner, filed a purported class action lawsuit on behalf of all May shareowners in the Circuit Court of St. Louis, Missouri, against May and all of the members of the board of directors of May. The complaint generally alleges that the directors of May breached their fiduciary duties of loyalty, due care, good faith and candor to May shareowners in connection with the proposed merger. On April 1, 2005, the defendants removed the lawsuit to the United States District Court for the Eastern District of Missouri and filed a motion to dismiss the lawsuit pursuant to the Securities Litigation Standards Act of 1998. On April 22, 2005, the plaintiffs filed a motion to remand the lawsuit to the Circuit Court of St. Louis, Missouri and opposition to the defendants' motion to dismiss. May believes the lawsuit is without merit and intends to contest it vigorously. The company is involved in other claims, proceedings, and litigation arising from the operation of its business. The company does not believe any such claim, proceeding, or litigation, either alone or in the aggregate, will have a material adverse effect on the company's consolidated financial statements taken as a whole. Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds In the first quarter 2005, the company did not repurchase any of its common stock. 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 Location 1.1 Purchase Agreement, dated July 13, 2004 Incorporated by Reference to Exhibit 1.1 to Current Report on Form 8-K, filed July 21, 2004. 3.1 Amended and Restated Certificate of Incorporation Incorporated of May, dated May 22, 1996 by Reference 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 Amended and Restated Incorporated by Certificate of Incorporation, dated May 21, 1999 Reference to Exhibit 3(b) of Form 10-Q filed June 8, 1999. 20 Item 6-Exhibits (continued) 3.3 By-Laws of May Incorporated by Reference to Exhibit 3.1 to Current Report on Form 8-K, filed March 23, 2005. 4.1 Amended and Restated Rights Agreement, dated Incorporated by August 31, 2004 Reference to Exhibit 4.1 to Current Report on Form 8-K filed September 3, 2004. 4.2 Amendment to Rights Agreement, dated Incorporated by February 27, 2005 Reference to Exhibit 4.1 to Current Report on Form 8-K, filed March 2, 2005. 4.3 Certificate of Designation, Preferences and Rights Incorporated by of the Junior Participating Preference Shares Reference to and ESOP Preference Shares Exhibit 4.4 of Form S-4 filed June 7, 1996. 4.4 Indenture, dated as of July 20, 2004 Incorporated by Reference to Exhibit 4.1 to Current Report on Form 8-K, filed July 21, 2004. 4.5 Indenture, dated as of June 17, 1996 Incorporated by Reference to Exhibit 4.1 of Form S-3, filed July 21, 2004. 4.6 Registration Rights Agreement, dated July 20, 2004 Incorporated by Reference to Exhibit 4.2 to Current Report on Form 8-K, filed July 21, 2004. 10.1 1994 Stock Incentive Plan Incorporated by Reference to Exhibit 10.1 to Current Report on Form 8-K, filed March 23, 2005. 21 Item 6-Exhibits (continued) 10.2 Deferred Compensation Plan Incorporated by Reference to Exhibit 10.2 to Current Report on Form 8-K, filed March 23, 2005. 10.3 Executive Incentive Compensation Plan for Incorporated by Corporate Executives Reference to the Definitive Proxy Statement for the 2004 Annual Meeting of Shareowners. 10.4 Form of Employment Agreement Incorporated by Reference to Exhibit 10.3 to Current Report on Form 8-K, filed March 23, 2005. 10.5 Amended and Restated Five-Year Credit Agreement Incorporated by dated August 24, 2004 Reference to Exhibit 10.1 to Current Report on Form 8-K, filed August 27, 2004. 10.6 Form of Restricted Stock Agreement Incorporated by Reference to Exhibit 10.4 to Current Report on Form 8-K, filed March 23, 2005. 10.7 Form of Performance Restricted Stock Agreement Incorporated by Reference to Exhibit 10.5 to Current Report on Form 8-K, filed March 23, 2005. 10.8 Form of Performance Restricted Stock Agreement Incorporated by (for Bridal Group) Reference to Exhibit 10.6 to Current Report on Form 8-K, filed March 23, 2005. 10.9 Form of Non-qualified Stock Option Agreement Incorporated by Reference to Exhibit 10.7 to Current Report on Form 8-K, filed March 23, 2005. 12 Computation of Ratio of Earnings to Fixed Charges Filed herewith. 22 Item 6-Exhibits (continued) 15 Letter Regarding Unaudited Interim Filed herewith. Financial Information 31.1 Certification Pursuant to Exchange Act 13a-15 Filed herewith. and 15d-15(e) 31.2 Certification Pursuant to Exchange Act 13a-15 Filed herewith. and 15d-15(e) 32 Certification Pursuant to Section 906 of the Filed herewith. Sarbanes-Oxley Act of 2002(18 U.S.C. Section 1350, as adopted) 23 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: May 27, 2005 /s/ Thomas D. Fingleton Thomas D. Fingleton Executive Vice President and Chief Financial Officer REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareowners of The May Department Stores Company We have reviewed the accompanying condensed consolidated balance sheets of The May Department Stores Company and subsidiaries (the "Company") as of April 30, 2005 and May 1, 2004, and the related condensed consolidated statements of earnings and cash flows for the thirteen-week periods then ended. These interim financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), 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 reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America. We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of January 29, 2005, and the related consolidated statements of earnings, shareowners' equity, and cash flows for the year then ended (not presented herein); and in our report dated March 23, 2005 (May 6, 2005 as to the effects of the restatement discussed in the "Consolidated Balance Sheet Restatement" footnote), we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 29, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Deloitte & Touche LLP St. Louis, Missouri May 26, 2005 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, 2005 AND FOR THE THIRTEEN WEEKS ENDED APRIL 30, 2005 AND MAY 1, 2004 (dollars in millions) 13 Weeks Ended Fiscal Year Ended Apr. 30, May 1, Jan.29, Jan. 31, Feb. 1, Feb. 2, Feb. 3, 2005 2004 2005 2004 2003 2002 2001 Earnings Available for Fixed Charges: Pretax earnings $ 42 $ 121 $ 803 $ 639 $ 820 $1,139 $1,402 Fixed charges (excluding interest capitalized and pretax preferred stock dividend requirements) 118 92 433 367 405 411 406 Dividends on ESOP preference shares (4) (4) (16) (18) (20) (22) (23) Capitalized interest amortization 2 2 10 10 9 8 8 $ 158 $ 211 $1,230 $ 998 $1,214 $1,536 $1,793 Fixed Charges: Gross interest expense (a) $ 109 $ 84 $ 403 $ 345 $ 392 $ 401 $ 395 Interest factor attributable to rent expense 11 10 38 38 36 32 28 $ 120 $ 94 $ 441 $ 383 $ 428 $ 433 $ 423 Ratio of Earnings to Fixed Charges 1.3 2.2 2.8 2.6 2.8 3.5 4.2 (a) Represents interest expense on long-term and short-term debt, ESOP debt and amortization of debt discount and debt issue expense.
Exhibit 15 May 26, 2005 The May Department Stores Company St. Louis, Missouri We have made a review, in accordance with standards of the Public Company Accounting Oversight Board (United States), of the unaudited interim condensed consolidated financial information of The May Department Stores Company and subsidiaries (the "Company") for the thirteen week periods ended April 30, 2005 and May 1, 2004, as indicated in our reports dated May 26, 2005 and June 1, 2004; because we did not perform an audit, we expressed no opinion on that information. We are aware that our reports referred to above, which are included in your Quarterly Reports on Form 10-Q for the quarters ended April 30, 2005 and May 1, 2004, are incorporated by reference in the Company's Registration Statement Nos. 333-59792, 333-76227, 333-00957, 333-103352 and 333-111987 on Form S-8, Registration Statement Nos. 333-42940 and 333-42940-01 on Form S-3, Registration Statement No. 333-12007 on Form S-4, and Federated Department Stores, Inc.'s Registration Statement No. 333-123667 on Form S-4. We also are aware that the aforementioned reports, pursuant to Rule 436(c) under the Securities Act of 1933, are not considered a part of the Registration Statements prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Deloitte & Touche LLP St. Louis, Missouri Exhibit 31.1 CERTIFICATION I, John L. Dunham, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The May Department Stores Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 27, 2005 /s/ John L. Dunham John L. Dunham Chairman, President, and Chief Executive Officer Exhibit 31.2 CERTIFICATION I, Thomas D. Fingleton, certify that: 1. I have reviewed this quarterly report on Form 10-Q of The May Department Stores Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record,process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 27, 2005 /s/ Thomas D. Fingleton Thomas D. Fingleton Executive Vice President and Chief Financial Officer Exhibit 32 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. Section 1350, as adopted) In connection with the Quarterly Report of The May Department Stores Company (the "Company") on Form 10-Q for the period ended April 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, John L. Dunham, Chairman, President, and Chief Executive Officer, and Thomas D. Fingleton, Executive Vice President and Chief Financial Officer of the Company, each certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350, as adopted), that: 1. The Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934, and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 27, 2005 /s/ John L. Dunham /s/ Thomas D. Fingleton John L. Dunham Thomas D. Fingleton Chairman, President, and Executive Vice President and Chief Executive Officer Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----