-----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, T5AC/jGrMVZRDQrKS5+xwW3wJ5mQDb8PDyM3RSO8ity60McjwZBqWriTGz5E5Lee th8SYjZpQIr1S8q54s9MZQ== 0000063416-96-000021.txt : 19960613 0000063416-96-000021.hdr.sgml : 19960613 ACCESSION NUMBER: 0000063416-96-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960504 FILED AS OF DATE: 19960611 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAY DEPARTMENT STORES CO CENTRAL INDEX KEY: 0000063416 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 431742586 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: 96579362 BUSINESS ADDRESS: STREET 1: 611 OLIVE ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3143426300 10-Q 1 1996 1ST QUARTER FORM 10-Q 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 May 4, 1996 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. 249,812,872 shares of common stock, $.50 par value, as of May 4, 1996. 1 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Millions)
May 4, April 29, Feb. 3, ASSETS 1996 1995 1996 Current Assets: Cash and cash equivalents $ 171 $ 110 $ 159 Accounts receivable, net 2,150 2,134 2,403 Merchandise inventories 2,390 2,054 2,134 Other current assets 177 172 169 Net current assets of discontinued operation - 280 232 Total Current Assets 4,888 4,750 5,097 Property and Equipment, at cost 5,744 5,041 5,617 Accumulated Depreciation (1,952) (1,734) (1,873) Net Property and Equipment 3,792 3,307 3,744 Goodwill 666 595 671 Other Assets 94 93 89 Net Noncurrent Assets of Discontinued Operation - 545 521 Total Assets $ 9,440 $ 9,290 $ 10,122 LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 25 $ 171 $ 132 Accounts payable 948 882 692 Accrued expenses 622 602 650 Income taxes 57 50 128 Total Current Liabilities 1,652 1,705 1,602 Long-term Debt 3,313 2,847 3,333 Deferred Income Taxes 389 343 378 Other Liabilities 190 182 204 ESOP Preference Shares 356 372 366 Unearned Compensation (331) (346) (346) Shareowners' Equity 3,871 4,187 4,585 Total Liabilities and Shareowners' Equity $ 9,440 $ 9,290 $ 10,122 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 May 4, April 29, 1996 1995 Net Retail Sales $ 2,421 $ 2,125 Revenues $ 2,511 $ 2,218 Cost of sales 1,755 1,543 Selling, general and administrative expenses 528 470 Interest expense, net 64 58 Earnings from continuing operations before income taxes 164 147 Provision for income taxes 66 60 Net Earnings from: Continuing operations 98 87 Discontinued operation 11 27 Net Earnings $ 109 $ 114 Primary earnings per share: Continuing operations .37 .33 Discontinued operation .05 .11 Primary Earnings per Share $ .42 $ .44 Fully diluted earnings per share: Continuing operations .36 .32 Discontinued operation .05 .10 Fully Diluted Earnings per Share $ .41 $ .42 Dividends Paid per Common Share $ .28-1/2 $ .26 Primary Average Shares Outstanding and Equivalents 250.8 249.4 Fully Diluted Average Shares Outstanding and Equivalents 265.8 264.5 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 May 4, April 29, 1996 1995 Operating Activities: Net earnings from continuing operations and depreciation/amortization $ 183 $ 162 Decrease in working capital (excluding cash, cash equivalents and short-term debt) 136 79 Other assets and liabilities, net (9) (12) Net cash used in discontinued operation - (4) 310 225 Investing Activities: Net additions to property and equipment (128) (102) Other (1) (1) (129) (103) Financing Activities: Net issuances (repayments) of long-term debt (112) 2 Net issuances of treasury stock 23 11 Dividend payments, net of tax benefit (80) (74) (169) (61) Increase in Cash and Cash Equivalents $ 12 $ 61 Noncash financing activities include the distribution of $764 million of equity in the spin-off of Payless ShoeSource, Inc. Cash paid during the period: Interest $ 69 $ 55 Income Taxes 121 133 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 Notes to Consolidated Financial Statements (pages 21-27) in the 1995 Annual Report. In the opinion of management, this information is fairly presented and all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods have been included; however, certain items are included in these statements based on estimates for the entire year. Also, operating results of periods which exclude the Christmas season may not be indicative of the operating results that may be expected for the full fiscal year. Inventories. Merchandise inventories are stated on the LIFO (last- in, first-out) cost basis. The LIFO provision for the first quarter was $8 million in 1996 and 1995. Discontinued Operation. In January 1996, the registrant announced its intention to spin off Payless ShoeSource, Inc. ("Payless"), its chain of self-service family shoe stores. The spin-off was completed effective May 4, 1996, as a tax-free distribution to shareowners. The registrant's financial statements presented herein reflect Payless as a discontinued operation. As discussed in the 1995 Annual Report to Shareowners, and in accordance with generally accepted accounting principles, Payless 1996 pre-tax earnings were recorded in 1995 to the extent of spin- off costs and the Payless operating loss from January 17, 1996 through fiscal 1995 year-end. As a result, $21 million of 1996 Payless pre-tax earnings is not reported in the first quarter net earnings from discontinued operation. Acquisition. On April 4, 1996, the registrant announced it signed a definitive agreement to acquire 13 Strawbridge & Clothier department stores in the greater Philadelphia area in a transaction expected to close in July 1996, subject to customary conditions, including approval by Strawbridge & Clothier ("Strawbridge") shareowners. As required by the purchase agreement with Strawbridge, the registrant will deliver, at the July closing, subject to later adjustment, 4.2 million shares of May common stock and will assume approximately $264 million of debt and certain other liabilities in exchange for the Strawbridge department store assets. The registrant has also agreed to issue additional May common stock in exchange for any cash proceeds from Strawbridge's divestiture of its other assets including its Clover discount division, remaining after satisfaction of all Strawbridge liabilities and obligations. The acquisition will be accounted for as a purchase. Reclassifications. Certain prior period amounts have been reclassified to conform with current year presentation. 5 Subsequent Event. At the shareowners' annual meeting on May 24, 1996, the shareowners approved the change of the registrant's state of incorporation from New York to Delaware. This transaction did not result in any change in the business or the consolidated assets, liabilities or net worth of the reincorporated entity. In addition, the directors and officers of the reincorporated entity are the same as those of the registrant. Reincorporation in Delaware allows the registrant to take advantage of certain provisions of the corporate laws of Delaware and also allows the registrant to manage its state franchise tax and other affairs in ways that will result in significant savings each year beginning in 1996. The registrant's reincorporation in Delaware was accomplished by means of a statutory share exchange (Share Exchange) where each share of the registrant's common stock (and associated preferred stock purchase right) outstanding prior to the filing of a "Certificate of Exchange" by the Department of State of the State of New York was exchanged for one share of common stock of the reincorporated entity. As a result of the Share Exchange, the registrant became a wholly owned subsidiary of The May Department Stores Company, a holding company incorporated in Delaware. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition A summary of key financial information reflecting the completion of the spin-off of Payless in all periods indicated is as follows: May 4, April 29, Feb. 3, 1996 1995 1996 Current Ratio* 3.0 2.6 3.0 Debt-Capitalization Ratio** 41% 41% 42% Fixed Charge Coverage*** 4.2x 4.2x 4.2x * The current ratios including net current assets of the discontinued operation were 2.8 at April 29, 1995 and 3.2 at Feb. 3, 1996. ** The debt-to-capitalization ratios including the discontinued operation were 44% at April 29, 1995 and February 3, 1996. *** Fixed charge coverage including the discontinued operation was 3.1x at May 4, 1996, 3.4x at April 29, 1995 and 3.1x at February 3, 1996. Fixed charge coverage, which is presented for the trailing 53 weeks ended May 4, 1996 and February 3, 1996, and for the 52 weeks ended April 29, 1995, is defined as earnings before gross interest expense, the expense portion of interest on the ESOP debt, rent expense and income taxes divided by gross interest expense, interest expense on the ESOP debt, total rent expense and the pretax equivalent of dividends on redeemable stock. Registrant's first quarter 1996 current ratio increased compared with first quarter 1995 primarily due to an increase in merchandise inventory that was partially offset by an increase in accounts payable, and due to a decrease in current maturities of long-term debt. 6 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 are as follows: Store-for- Total Store 13 Weeks Ended May 4, 1996 13.9% 6.7% 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 1996 and 1995. Revenues include finance charge revenues and all sales from all stores operating during the period. 1996 1995 Cost of sales 69.9% 69.6% Selling, general and administrative expenses 21.1 21.2 Interest expense, net 2.5 2.6 Earnings before income taxes 6.5% 6.6% Effective income tax rate 40.5% 40.7% Net Earnings 3.9% 3.9% Cost of sales was $1,755 million in the 1996 first quarter, up 13.8% from $1,543 million in the 1995 first quarter. The overall increase is primarily related to higher sales volume. As a percent of revenues, cost of sales increased 0.3% from the first quarter of 1995 due to finance charge revenue remaining flat while the sales component of revenues grew 13.9%. In addition, a small deterioration in gross margin was offset by a decrease in buying expenses. LIFO was a charge of $8 million in the first quarter of 1996 and 1995. There were no significant changes in the other components of cost of sales. Selling, general and administrative expenses were $528 million in the 1996 first quarter, compared with $470 million in the 1995 first quarter, a 12.3% increase. The increase is primarily related to higher sales volume. Selling, general and administrative expenses, as a percent of revenues, decreased 0.1% for the first quarter of 1996 as compared with 1995 as an increase in bad debt expense was more than offset by decreases achieved across all remaining selling, general and administrative expense components. Net interest expense for the first quarter 1996 and 1995 was as follows (millions): 1996 1995 Interest expense $ 71 $ 65 Interest income (4) (3) Capitalized interest (3) (4) Net Interest Expense $ 64 $ 58 7 Interest expense increased in the 1996 first quarter due to increased debt balances related to 1995 borrowings to fund store growth, including the acquisition of certain assets of John Wanamaker and Woodward & Lothrop. The increase in first quarter 1996 interest income primarily resulted from an increase in average short term investments, partially offset by a decrease in short term interest rates. As a percent of revenues, net interest expense for the first quarter of 1996 decreased 0.1% from the first quarter of 1995. Operating results for the trailing years were as follows (millions, except per share): 52 Weeks Ended May 4, April 29, 1996 1995 Net retail sales $ 10,790 $ 9,866 Revenues $ 11,135 $ 10,220 Net earnings $ 711 $ 660 Fully diluted earnings per share $ 2.65 $ 2.47 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1 - Legal Proceedings There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which registrant or any of its subsidiaries is a party or of which any of their property is the subject. Item 2 - Changes in Securities - None. Item 3 - Defaults Upon Senior Securities - None. Item 4 - Submission of Matters to a Vote of Security Holders - 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 (27) - Financial Data Schedule (b) Reports on Form 8-K A report dated April 24, 1996, which contained information concerning debt ratings and incorporated by reference registrant's Annual Report on Form 10-K for the fiscal year ended February 3, 1996. 8 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 11, 1996 /s/ John L. Dunham John L. Dunham Executive Vice President and Chief Financial Officer 9 EX-11 2 1996 1ST QTR EXHIBIT 11 Exhibit 11
THE MAY DEPARTMENT STORES COMPANY COMPUTATION OF NET EARNINGS PER SHARE 13 Weeks Ended (millions, except per share) May 4, April 29, 1996 1995 Net earnings from continuing operations $ 97,613 $ 87,010 ESOP Preferred Dividends, net of tax benefit on unallocated shares (4,534) (4,771) Preferred Dividend requirements (38) (23) Net earnings available for common shareowners: Continuing operations 93,041 82,216 Discontinued operation 11,443 26,530 Total net earnings available for common shareowners $ 104,484 $ 108,746 Average common shares outstanding 249.4 248.5 Net earnings per share: Continuing operations $ 0.37 $ 0.33 Discontinued operation 0.05 0.11 Total net earnings per share $ 0.42 $ 0.44 Primary Computation: Net earnings available from continuing operations $ 93,041 $ 82,216 Deferred comp. dividend adjustment 322 301 Adjusted net earnings available: Continuing operations 93,363 82,517 Discontinued operation 11,443 26,530 Total adjusted net earnings available $ 104,806 $ 109,047 Average common shares outstanding 249.4 248.5 Common share equivalents (CSE's) 1.4 0.9 Average common stock and CSE's 250.8 249.4 Primary earnings per share: Continuing operations $ 0.37 $ 0.33 Discontinued operation 0.05 0.11 Total Primary Earnings per share $ 0.42 $ 0.44
Exhibit 11 THE MAY DEPARTMENT STORES COMPANY COMPUTATION OF NET EARNINGS PER SHARE 13 Weeks Ended (millions, except per share) May 4, April 29, 1996 1995 Fully Diluted Computation: Adjusted net earnings available from continuing operations-PRIMARY $ 93,363 $ 82,517 Earnings impact of assumed conversion of ESOP Preference Shares, net of tax benefit on unallocated common shares 2,896 2,662 Adjusted net earnings available-FULLY DILUTED: Continuing operations 96,259 85,179 Discontinued operation 11,443 26,530 Total adjusted net earnings available-FULLY DILUTED: $ 107,702 $ 111,709 Average common shares and CSE's 250.8 249.4 Additional CSE's attributable to treasury stock method 0.4 - ESOP Preference Shares 14.6 15.1 Average Common Shares Outstanding on fully diluted basis 265.8 264.5 Fully Diluted earnings per share: Continuing operations $ 0.36 $ 0.32 Discontinued operation 0.05 0.10 Total Fully Diluted Earnings per share $ 0.41 $ 0.42
EX-12 3 1996 1ST QTR EXHIBIT 12
Exhibit 12 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR THE FIVE FISCAL YEARS ENDED FEBRUARY 3, 1996, AND FOR THE THIRTEEN WEEKS ENDED MAY 4, 1996, AND APRIL 29, 1995 13 Weeks Ended Fiscal Year Ended May 4, April 29, Feb. 3, Jan. 28, Jan. 29, Jan. 30, Feb. 1, 1996 1995 1996 1995 1994 1993 1992 Earnings Available for Fixed Charges: Pretax earnings from continuing operations $ 164 $ 147 $ 1,160 $ 1,079 $ 957 $ 579 $ 617 Fixed charges (excluding interest capitalized and pretax preferred stock dividend requirements) 81 74 317 293 305 361 409 Dividends on ESOP Preference Shares (7) (7) (28) (28) (28) (29) (29) Capitalized interest amortization 2 1 5 4 4 3 3 240 215 1,454 1,348 1,238 914 1,000 Fixed Charges: Gross interest expense (a) $ 79 $ 73 $ 316 $ 289 $ 295 $ 338 $ 384 Interest factor attributable to rent expense 5 5 20 19 20 24 29 Other (b) - - - - - 5 8 84 78 336 308 315 367 421 Ratio of Earnings to Fixed Charges 2.9 2.8 4.3 4.4 3.9 2.5 2.4 (a) Represents interest expense on long-term and short-term debt, ESOP debt and amortization of debt discount and debt issue expense. (b) Represents the company's proportionate share of interest of unconsolidated 50% owned persons and pretax preferred stock dividend requirements.
EX-27 4 1996 1ST QTR EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MAY DEPARTMENT STORES COMPANY FORM 10-Q FOR THE QUARTER ENDED MAY 4, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS FEB-01-1997 MAY-04-1996 12 159 2,231 81 2,390 4,888 5,744 1,952 9,440 1,652 3,313 0 0 0 3,871 9,440 2,421 2,511 1,755 1,755 0 0 64 164 66 98 11 0 0 109 0.42 0.41
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