-----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, Up4g/4fuptkNiQ5EN4zwQhYPuXrUuas6OsDzKqv8BKxo3pDM5bPXRHqQnv0YRzqP YQ4CO6jk4Ow/5uZlVmW3lQ== 0000063416-97-000021.txt : 19970912 0000063416-97-000021.hdr.sgml : 19970912 ACCESSION NUMBER: 0000063416-97-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970909 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: 431104396 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00079 FILM NUMBER: 97677502 BUSINESS ADDRESS: STREET 1: 611 OLIVE ST CITY: ST LOUIS STATE: MO ZIP: 63101 BUSINESS PHONE: 3143426300 10-Q 1 2ND QUARTER FORM 10-Q DATED AUGUST 2, 1997 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 August 2, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number 1-79 THE MAY DEPARTMENT STORES COMPANY (Exact name of registrant as specified in its charter) Delaware 43-1104396 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 611 Olive Street, St. Louis, Missouri 63101 (Address of principal executive offices) (Zip Code) (314) 342-6300 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 231,290,545 shares of common stock, $0.50 par value, as of August 2, 1997. 1 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) (Millions) August 2, August 3, Feb. 1, ASSETS 1997 1996 1997 Current Assets: Cash and cash equivalents $ 26 $ 268 $ 102 Accounts receivable, net 1,901 2,142 2,425 Merchandise inventories 2,553 2,314 2,380 Other current assets 131 174 128 Total Current Assets 4,611 4,898 5,035 Property and Equipment, at cost 6,600 6,119 6,372 Accumulated Depreciation (2,398) (2,043) (2,213) Net Property and Equipment 4,202 4,076 4,159 Goodwill 773 761 776 Other Assets 86 83 89 Total Assets $ 9,672 $ 9,818 $ 10,059 LIABILITIES AND SHAREOWNERS' EQUITY Current Liabilities: Notes payable and current maturities of long-term debt $ 394 $ 225 $ 256 Accounts payable 959 843 872 Accrued expenses 684 713 658 Income taxes 24 - 137 Total Current Liabilities 2,061 1,781 1,923 Long-term Debt 3,521 3,430 3,849 Deferred Income Taxes 417 390 401 Other Liabilities 222 211 223 ESOP Preference Shares 343 354 347 Unearned Compensation (317) (331) (334) Shareowners' Equity 3,425 3,983 3,650 Total Liabilities and Shareowners' Equity $ 9,672 $ 9,818 $ 10,059 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 26 Weeks Ended Aug. 2, Aug. 3, Aug. 2, Aug. 3, 1997 1996 1997 1996 Net Retail Sales $ 2,667 $ 2,419 $ 5,244 $ 4,812 Revenues $ 2,749 $ 2,533 $ 5,424 $ 5,044 Cost of sales 1,921 1,773 3,802 3,528 Selling, general and administrative expenses 559 511 1,114 1,039 Interest expense, net 76 64 152 128 Earnings from continuing operations before income taxes 193 185 356 349 Provision for income taxes 77 75 142 141 Net earnings from: Continuing operations 116 110 214 208 Discontinued operation - - - 11 Net earnings before extraordinary loss 116 110 214 219 Extraordinary loss related to early extinguishment of debt - - (4) - Net Earnings $ 116 $ 110 $ 210 $ 219 Primary earnings per share: Continuing operations .48 .42 .87 .79 Discontinued operation - - - .05 Extraordinary loss - - (.01) - Primary Earnings per Share $ .48 $ .42 $ .86 $ .84 Fully diluted earnings per share: Continuing operations .46 .41 .84 .77 Discontinued operation - - - .04 Extraordinary loss - - (.01) - Fully Diluted Earnings per Share $ .46 $ .41 $ .83 $ .81 Dividends Paid per Common Share $ .30 $ .29 $ .60 $ .57-1/2 Primary Average Shares Outstanding and Equivalents 232.8 251.4 234.7 251.2 Fully Diluted Average Shares Outstanding and Equivalents 248.9 265.7 251.0 265.7 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) 26 Weeks Ended Aug. 2, Aug. 3, 1997 1996 Operating Activities: Net earnings and depreciation/amortization $ 407 $ 385 Decrease in working capital (excluding cash, cash equivalents and short-term debt) 347 280 Other assets and liabilities, net 15 21 769 686 Investing Activities: Net additions to property and equipment (236) (287) Financing Activities: Net issuances of notes payable 136 - Net repayments of long-term debt (305) (41) Net acquisitions of treasury stock (290) (88) Dividend payments, net of tax benefit (150) (161) (609) (290) Increase (Decrease) in Cash and Cash Equivalents $ (76) $ 109 Noncash financing activities for the 26 weeks ended August 3, 1996 include the distribution of $764 million of equity in the spin-off of Payless ShoeSource, Inc. and the acquisition of the former Strawbridge & Clothier stores for shares of May valued at $292 million and the assumption of $255 million of debt and certain other liabilities. Cash paid during the period: Interest $ 150 $ 123 Income Taxes 238 249 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 1996 Annual Report. In the opinion of management, this information is fairly presented and all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods have been included; however, certain items are included in these statements based on estimates for the entire year. Also, operating results of periods which exclude the Christmas season may not be indicative of the operating results that may be expected for the full fiscal year. Inventories. Merchandise inventories are stated on the LIFO (last- in, first-out) cost basis. The LIFO provision for the second quarter was $8 million in 1997 and 1996. The year-to-date LIFO provision was $16 million in 1997 and 1996. Common Stock Repurchase Programs. During May, 1997, registrant completed a $300 million stock repurchase program, totaling 6.4 million shares of May common stock at an average price of $47 per share. This was in addition to a $600 million repurchase program, totaling 12.7 million shares at an average price of $47 per share, completed in the second half of 1996. Discontinued Operation. Registrant completed the spin off of Payless ShoeSource, Inc. ("Payless"), its chain of self-service family shoe stores, effective May 4, 1996, as a tax-free distribution to shareowners. Registrant's financial statements presented herein reflect Payless as a discontinued operation. Acquisition. On July 18, 1996, the company purchased 13 former Strawbridge & Clothier department stores in the greater Philadelphia area. The company delivered 4.5 million shares of May common stock and assumed $255 million of debt and certain other liabilities in exchange for the Strawbridge & Clothier department store assets. Extraordinary Item. During the first quarter of 1997, registrant recorded an after tax extraordinary loss of $4 million ($5 million pretax), or $.01 per share, due to the execution of a binding contract related to the call of $100 million of 9.875% debentures due to mature June 1, 2017. The debentures were called effective June 6, 1997. 5 Summarized Financial Information - 2nd Quarter; The May Department Stores Company, New York. Summarized financial information of The May Department Stores Company, New York, is set forth below. August 2, February 1, August 3, 1997 1997 1996 Balance Sheet Current assets $ 5,253 $ 5,415 $ 4,898 Noncurrent assets 5,052 5,008 4,920 Current liabilities 1,992 1,912 1,781 Noncurrent liabilities 7,360 7,673 4,031 August 2, 1997 August 3, 1996 13 Weeks 26 Weeks 13 Weeks 26 Weeks Ended Ended Ended Ended Statement of Earnings Revenues 2,749 5,424 2,533 5,044 Cost of sales 1,916 3,797 1,773 3,528 Earnings from continuing operations before extraordinary item 70 119 110 208 Net earnings 70 115 110 219 Impact of New Accounting Pronouncement. In February, 1997 Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share", was issued which will change the computation of earnings per share (EPS) as well as the disclosures required. This pronouncement is effective for interim and annual reporting periods ending after December 15, 1997. Early application is not permitted. Registrant, however, does not expect this pronouncement to have a material effect on its earnings per share amounts when it is adopted. Application of SFAS No. 128 to the second quarter of 1997 and year-to-date 1997 would have resulted in basic EPS and diluted EPS amounts equal to the primary and fully diluted earnings per share amounts computed under APB Opinion No. 15, the current standard. Reclassifications. Certain prior period amounts have been reclassified to conform with current year presentation. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition A summary of key financial information reflecting the completion of the spin-off of Payless in all periods indicated is as follows: 6 Financial Condition (cont.) Aug. 2, Aug. 3, Feb. 1, 1997 1996 1997 Current Ratio 2.2 2.8 2.6 Debt-Capitalization Ratio 48% 43% 48% Fixed Charge Coverage* 3.9x 4.1x 4.1x * Fixed charge coverage, which is presented for the trailing 52 weeks ended August 2, 1997, February 1, 1997, and August 3, 1996, 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 second quarter 1997 current ratio decreased as compared with year-end 1996 primarily due to a decrease in accounts receivable resulting from both the seasonal nature of registrant's business and decreased use of its proprietary credit cards and an increase in notes payable, both of which were partially offset by a decrease in income taxes payable. The impact of the increase in merchandise inventories was offset by a corresponding increase in accounts payable. In addition to the reasons discussed above, the second quarter 1997 current ratio decreased as compared with the second quarter 1996 due to a decrease in cash equivalents. The year-end 1996 debt-capitalization ratio increased over the second quarter 1996 because of the $600 million 1996 common stock repurchase program (impacted by both the borrowings to effect the repurchase and the equity reduction upon repurchase). The second quarter 1997 debt-capitalization ratio remained constant compared to year-end 1996 as the impact of the 1997 common stock repurchase program was offset by a reduction in debt balances. Both the 1997 common stock repurchase program and debt retirements were funded from operations including the decrease in accounts receivable as discussed above. The registrants' fixed charge coverage ratio for the 52 weeks ended August 2, 1997 decreased slightly as compared with the 52 week periods ended August 3, 1996 and February 1, 1997 due primarily to an increase in interest expense, partially offset by an increased level of earnings. The increase in interest expense for the 52 weeks ended August 2, 1997 was a result of higher average debt balances related to funding of the $600 million common stock repurchase program in fall 1996. 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: Second Quarter First Six Months Store-for- Store-for- Total Store Total Store 10.2% 4.7% 9.0% 3.3% Store-for-store sales represent sales of those stores open during both periods. 7 The following table presents the components of costs and expenses, as a percent of revenues. Revenues include finance charge revenues and all sales from all stores operating during the period. Second Quarter First Six Months 1997 1996 1997 1996 Cost of sales 69.9% 70.0% 70.1% 70.0% Selling, general and administrative expenses 20.3 20.2 20.5 20.6 Interest expense, net 2.8 2.5 2.8 2.5 Earnings before income taxes 7.0% 7.3% 6.6% 6.9% Effective income tax rate 40.0% 40.6%% 40.0% 40.6% Net Earnings 4.2% 4.3% 3.9% 4.1% Cost of sales was $1,921 million in the 1997 second quarter, up 8.3% from $1,773 million in the 1996 second quarter. For the first six months of 1997, cost of sales was $3,802 million, a 7.8% increase from $3,528 million in the 1996 period. The overall increases are primarily related to higher sales. As a percent of revenues, cost of sales decreased 0.1% from the second quarter of 1996. A small improvement in gross margin was offset by the impact of a decrease in the finance charge component of revenues. The finance charge component of revenues decreased 3.0% with no corresponding decrease in cost of sales. For the first six months, cost of sales increased 0.1% due to the finance charge component of revenue decreasing 2.1% with no corresponding decrease in cost of sales. For the second quarter and first six months of each year, the LIFO charge was $8 million and $16 million, respectively. Selling, general and administrative expenses were $559 million in the 1997 second quarter, compared with $511 million in the 1996 second quarter, a 9.4% increase. For the first six months of 1997, selling, general and administrative expenses were $1,114 million compared with $1,039 million in the 1996 period, a 7.2% increase. The increases are primarily related to higher sales. Selling, general and administrative expenses, as a percent of revenues, increased 0.1% for the second quarter of 1997 as compared with 1996 due primarily to an increase in sales promotion and advertising costs. For the first six months of 1997, the selling, general, and administrative expense decrease of 0.1% of revenues was not concentrated in any single component. 8 Net interest expense for the second quarter and first six months of 1997 and 1996 was as follows (millions): Second Quarter First Six Months 1997 1996 1997 1996 Interest expense $ 81 $ 71 $ 165 $ 141 Interest income (2) (3) (6) (7) Capitalized interest (3) (4) (7) (6) Net Interest Expense $ 76 $ 64 $ 152 $ 128 Interest expense increased in the 1997 second quarter and first six months due to increased debt balances related to 1996 borrowings to finance registrants' common stock purchases, including the purchase of the number of shares issued to acquire certain assets of Strawbridge & Clothier and debt assumed in the Strawbridge & Clothier transaction. As a percent of revenues, net interest expense increased 0.3% for the second quarter and first six months. The 1997 second quarter and first six months effective income tax rates decreased as registrant realized a benefit from its 1996 second quarter reincorporation in the state of Delaware. Operating results for the trailing years were as follows (millions, except per share): 52 Weeks Ended Aug. 2, Aug 3, 1997 1996 Net retail sales $ 11,973 $ 10,876 Revenues $ 12,380 $ 11,343 Net earnings $ 755 $ 714 Fully diluted earnings per share $ 2.89 $ 2.66 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 Information required herein is incorporated by reference from Form 8-K, date of report (Date of earliest event reported) May 23, 1997, as filed June 9, 1997. 9 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 (Date of earliest event reported) May 23, 1997, as filed June 9, 1997, which contained the results of all matters submitted to a vote of security holders at the May 23, 1997 annual meeting of shareowners of registrant. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE MAY DEPARTMENT STORES COMPANY (Registrant) Date: September 9, 1997 John L. Dunham Executive Vice President and Chief Financial Officer 10 EX-11 2 2ND QUARTER EXHIBIT 11 08/02/97
Exhibit 11 THE MAY DEPARTMENT STORES COMPANY COMPUTATION OF NET EARNINGS PER SHARE 13 Weeks Ended 26 Weeks Ended Aug. 2, Aug. 3, Aug. 2, Aug. 3, 1997 1996 1997 1996 (millions, except per share) Net earnings from continuing operations $ 116 $ 110 $ 214 $ 208 ESOP Preferred Dividends, net of tax benefit on unallocated shares (4) (4) (9) (9) Preferred Dividend requirements - - - - Net earnings available for common shareowners: Continuing operations 112 106 205 199 Discontinued operation - - - 11 Extraordinary loss - - (4) - Total net earnings available for common shareowners $ 112 $ 106 $ 201 $ 210 Average common shares outstanding 231.3 249.7 233.4 249.6 Net earnings per share: Continuing operations $ 0.48 $ 0.42 $ 0.87 $ 0.79 Discontinued operation - - - 0.05 Extraordinary loss - - (0.01) - Total net earnings per share $ 0.48 $ 0.42 $ 0.86 $ 0.84 Primary Computation Net earnings available from continuing operations $ 112 $ 106 $ 205 $ 199 Deferred comp. dividend adjustment - - - - Adjusted net earnings available: Continuing operations $ 112 $ 106 $ 205 $ 199 Discontinued operation - - - 11 Extraordinary loss - - (4) - Total adjusted net earnings available $ 112 $ 106 $ 201 $ 210 Average common shares outstanding 231.3 249.7 233.4 249.6 Common share equivalents (CSE's) 1.5 1.7 1.3 1.6 Average common stock and CSE's 232.8 251.4 234.7 251.2 Primary earnings per share: Continuing operations $ 0.48 $ 0.42 $ 0.87 $ 0.79 Discontinued operation - - - 0.05 Extraordinary loss - - (0.01) - Total Primary Earnings per share $ 0.48 $ 0.42 $ 0.86 $ 0.84
Exhibit 11 THE MAY DEPARTMENT STORES COMPANY COMPUTATION OF NET EARNINGS PER SHARE 13 Weeks Ended 26 Weeks Ended Aug. 2, Aug. 3, Aug. 2, Aug. 3, 1997 1996 1997 1996
(millions, except per share) Fully Diluted Computation: Adjusted net earnings available from continuing operations-PRIMARY $ 112 $ 106 $ 205 $ 199 Earnings impact of assumed conversion of ESOP Preference Shares, net of tax benefit on unallocated common shares 3 3 7 6 Adjusted net earnings available- FULLY DILUTED: Continuing operations 115 109 212 205 Discontinued operation - - - 11 Extraordinary loss - - (4) - Total adjusted net earnings available- FULLY DILUTED: $ 115 $ 109 $ 208 $ 216 Average common shares and CSE's 232.8 251.4 234.7 251.2 Additional CSE's attributable to treasury stock method .8 - .9 - ESOP Preference Shares 15.3 14.3 15.4 14.5 Average Common Shares Outstanding on fully diluted basis 248.9 265.7 251.0 265.7 Fully Diluted earnings per share: Continuing operations $ 0.46 $ 0.41 $ 0.84 $ 0.77 Discontinued operation - - - 0.04 Extraordinary loss - - (0.01) - Total Fully Diluted Earnings per share $ 0.46 $ 0.41 $ 0.83 $ 0.81
EX-12 3 2ND QUARTER EXHIBIT 12 08/02/97
Exhibit 12 THE MAY DEPARTMENT STORES COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES FOR THE FIVE FISCAL YEARS ENDED FEBRUARY 1, 1997, AND FOR THE TWENTY-SIX WEEKS ENDED AUGUST 2, 1997, AND AUGUST 3, 1996 26 Weeks Ended Fiscal Year Ended Aug. 2, Aug. 3, Feb. 1, Feb. 3, Jan. 28, Jan. 29, Jan. 30, 1997 1996 1997 1996 1995 1994 1993 Earnings Available for Fixed Charges: Pretax earnings from continuing operations $ 356 $ 349 $ 1,232 $ 1,160 $ 1,079 $ 957 $ 579 Fixed charges (excluding interest capitalized and pretax preferred stock dividend requirements) 185 161 346 317 293 305 361 Dividends on ESOP Preference Shares (13) (13) (26) (28) (28) (28) (29) Capitalized interest amortization 3 3 6 5 4 4 3 531 500 1,558 1,454 1,348 1,238 914 Fixed Charges: Gross interest expense (a) $ 179 $ 157 $ 341 $ 316 $ 289 $ 295 $ 338 Interest factor attributable to rent expense 12 11 22 20 19 20 24 Other (b) - - - - - - 5 191 168 363 336 308 315 367 Ratio of Earnings to Fixed Charges 2.8 3.0 4.3 4.3 4.4 3.9 2.5 (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 EXHIBIT 27 FINANCIAL DATA SCHEDULE 08/02/97
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MAY DEPARTMENT STORES COMPANY FORM 10-Q FOR THE QUARTER ENDED AUGUST 2, 1997 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS JAN-31-1998 AUG-2-1997 12 14 1,989 88 2,553 4,611 6,600 2,398 9,672 2,061 3,521 0 0 0 3,425 9,672 5,244 5,424 3,802 3,802 0 0 152 356 142 214 0 (4) 0 210 0.86 0.83
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