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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