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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-K/A (Mark one)þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
January 29, 2005
ORo
    
    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
(State or other jurisdiction of
incorporation or organization)
    
    43-1104396
(I.R.S. Employer
Identification Number)
 611 Olive Street, St. Louis, Missouri
(Address of principal executive offices)
    
    63101
(Zip Code)
 Registrants
telephone number, including area code: (314) 342-6300 Securities registered pursuant to Section 12(b) of the Act: Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $.50 per share
    
    New York Stock ExchangePreferred stock purchase rights
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or15(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. YesþNoo Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to thisForm 10-K.þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). YesþNoo Aggregate market value of the registrants common stock held by non-affiliates as of March 1, 2005:$10,581,435,122 Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date:294,143,303 shares of common
stock. $.50 par value, as of March 1,
2005. EXPLANATORY NOTE This Form 10-K/A
amends the Form 10-K filed on March 25, 2005, for the fiscal
year ended January 29, 2005. We are filing this Form 10-K/A
to correct the classifications of the components of property and equipment in the
January 29, 2005, consolidated balance sheet in Part I
Item 8. Except to the extent affected by the correction of this
error, all other portions of our original Form 10-K filing
remain unchanged. For the convenience of the
reader, this Form 10-K/A sets forth the original Form 10-K filing in
its entirety.




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TABLE OF CONTENTS  Part IItems 1 and 2. Business and PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPart IIItem 5. Market for Mays Common Equity, Related Shareowner Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationPart IIIItems 10, 11, 13, 14. Directors and Executive Officers of May, Executive Compensation, Certain Relationships and Related Transactions, Principal Accounting Fees and ServicesItem 12. Security Ownership of Certain Beneficial Owners and Management Equity Compensation Plan InformationPart IVItem 15. Exhibits, Financial Statement SchedulesSignaturesComputation of Ratio of Earnings to Fixed ChargesSubsidiaries of MayConsent of Independent Registered Public Accounting Firm302 Certification302 Certification906 Certification    Table of Contents  2      The May Department Stores Company 
 Part I 
 Items 1 and 2. Business
and Properties The May Department Stores Company (May), a corporation organized under the laws of the State
of Delaware in 1976, became the successor to The May Department Stores Company, a New York
corporation (May NY) in a reincorporation from New York to Delaware pursuant to a statutory share
exchange accomplished in 1996. As a result of the share exchange, May NY became a wholly-owned
subsidiary of May. May NY was organized under the laws of the State of New York in 1910, as the
successor to a business founded by David May, who opened his first store in Leadville, Colorado, in
1877. 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 per share of cash and 0.3115 shares of Federated 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. Information required by this item is also included in Item 7, Managements Discussion and
Analysis of Financial Condition and Results of Operations, which is incorporated herein by
reference. Department Stores May operates seven quality regional department store divisions nationwide under 12
long-standing and widely recognized trade names. Each department store division holds a leading
market position in its region. Effective July 31, 2004, May acquired the Marshall Fields
department store group, which operates 62 department stores primarily in the Chicago, Detroit, and
Minneapolis metropolitan areas. At fiscal year-end 2004, May operated 491 department stores in 39
states and the District of Columbia. The department store divisions and the markets served are
shown in the table below.  Store Company
    
    
    Markets ServedLord & Taylor
    
    
    21 markets, including New York/New Jersey Metro; Chicago;
Boston; Philadelphia Metro; Washington, D.C., Metro; and
DetroitMarshall Fields
    
    
    26 markets, including Chicago, Detroit, and MinneapolisFilenes and
Kaufmanns
    
    
    40 markets, including Boston Metro, Pittsburgh, Cleveland,
Southern Connecticut, Providence Metro, Hartford, Buffalo,
Rochester, and ColumbusRobinsons-May and Meier
& Frank
    
    
    16 markets, including Los Angeles/Orange County,
Riverside/San Bernardino, Phoenix, San Diego, Las Vegas,
Portland/Vancouver Metro, and Salt Lake CityHechts and
Strawbridges
    
    
    21 markets, including Washington, D.C., Metro; Philadelphia
Metro; Baltimore; Norfolk; Nashville; Richmond; Charlotte;
Greensboro; and Raleigh-DurhamFoleys
    
    
    22 markets, including Houston, Dallas/Fort Worth, Denver,
San Antonio, Austin, and Oklahoma CityFamous-Barr, L.S. Ayres,
and The Jones Store
    
    
    23 markets, including St. Louis Metro, Kansas City Metro,
and Indianapolis
 We plan to open eight department stores in 2005 in the following cities:  Kaufmanns
    
    
    Columbus, Ohio
Pittsburgh, Pa.Robinsons-May
    
    

El Centro, Calif.
Simi Valley, Calif.Hechts
    
    
    N. Charlotte, N.C.Foleys
    
    

Dallas/Fort Worth, Texas
San Antonio, Texas
Loveland, Colo.
 Bridal Group Davids Bridal, Inc. is the nations largest retailer of bridal gowns and bridal-related
merchandise and offers a variety of special occasion dresses and accessories. At fiscal year-end
2004, Davids Bridal operated 239 stores in 45 states and Puerto Rico. After Hours Formalwear, Inc. is the largest tuxedo rental and sales retailer in the United
States. During 2003, After Hours acquired 225 stores, including 125 Gingiss Formalwear and Garys
Tux Shop stores, 64 Desmonds Formalwear stores, and 25 Modern Tuxedo stores. At fiscal year-end
2004, After Hours operated 449 stores in 31 states. Priscilla of Boston, Inc. is one of the most highly recognized upscale bridal retailers in
the United States. At fiscal year-end 2004, Priscilla of Boston operated 11 stores in nine
states. We plan to open 18 Davids Bridal stores and 20 After Hours stores in 2005. A. Associates May employs approximately 70,000 full-time and 62,000 part-time associates in 46 states,
the District of Columbia, Puerto Rico and 10 offices overseas. B. Property Ownership The following summarizes the property ownership of department stores and the Bridal Group at
January 29, 2005: % of GrossNumber of Stores*

 
    

    Building Sq. FootageDepartment
    
    
    
    Bridal
    
    
    
    Department
    
    
    
    BridalStores
    
    
    
    Group
    
    
    
    Stores
    
    
    
    GroupEntirely or mostly owned
    
    
    308
    
    
    
    
    2
    
    
    
    
    66
    %
    
    
    
    1
    %Entirely or mostly leased
    
    
    118
    
    
    
    
    697
    
    
    
    
    23
    
    
    
    
    99Owned on leased land
    
    
    65
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    0491
    
    
    
    
    699
    
    
    
    
    100
    %
    
    
    
    100
    %
   *Includes two department stores subject to financing.




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The May Department Stores Company   3 C. Credit Sales Sales at Mays stores are made for cash or credit, including Mays 30-day charge accounts and
open-end credit plans for department store divisions, which include revolving charge accounts and
revolving installment accounts. During the fiscal year ended January 29, 2005, 34.8% of net sales
were made through Mays department store credit plans. May National Bank of Ohio (MBO) is an
indirectly wholly-owned and consolidated subsidiary of May. MBO extends credit to customers of
Mays seven department store divisions. In 2003, May received approval from the Office of the
Comptroller of the Currency and completed its merger of May National Bank of Arizona into MBO. D. Competition in Retail Merchandising May conducts its retail merchandising business under highly competitive conditions. Although
May is one of the nations largest department store retailers, it has numerous competitors at the
national and local level which compete with Mays individual department stores and the Bridal
Group. Competitors include department stores, specialty, off-price, discount, Internet, and
mail-order retailers. Competition is characterized by many factors including location, reputation,
assortment, advertising, price, quality, service, and credit availability. May believes that it is
in a strong competitive position with regard to each of these factors. E. May Merchandising Company/May Department Stores International, Inc. May Merchandising Company (MMC), an indirectly wholly-owned and consolidated subsidiary of
May, identifies emerging fashion trends in both domestic brands and our exclusive proprietary brand
merchandise. MMC works closely with our department store divisions and our merchandise vendors to
communicate emerging fashion trends, to develop meaningful merchandise assortments and negotiate
the best overall terms for delivery of merchandise in a timely manner to our stores. May Department Stores International, Inc. (MDSI), a wholly-owned and consolidated subsidiary
of May, is primarily a design and sourcing company. MDSI owns all trade names and marks associated
with proprietary brand merchandise and develops, designs, sources, imports, and distributes the
proprietary brand merchandise bearing those trade names and marks for May. MDSI has approximately
40-50 private labels in use at the department store divisions and employs approximately 880 people
worldwide. In addition to its corporate office in St. Louis, MDSI operates offices in New York City
and 10 countries. F. Executive Officers of May The names and ages (as of March 25, 2005) of all executive officers of May, and the positions
and offices held with May by each such person are as follows: Name
    
    
    Age
    
    
    Positions and OfficesJohn L. Dunham
    
    
    
    58
    
    
    
    Chairman, President, and Chief Executive OfficerWilliam P. McNamara
    
    
    
    54
    
    
    
    Vice ChairmanR. Dean Wolfe
    
    
    
    60
    
    
    
    Executive Vice PresidentThomas D. Fingleton
    
    
    
    57
    
    
    
    Executive Vice President and Chief Financial OfficerJay H. Levitt
    
    
    
    47
    
    
    
    Chief Executive Officer and President, May Merchandising Company and May Department Stores InternationalAlan E. Charlson
    
    
    
    56
    
    
    
    Senior Vice President and General CounselMartin M. Doerr
    
    
    
    50
    
    
    
    Senior Vice PresidentLonny J. Jay
    
    
    
    62
    
    
    
    Senior Vice PresidentJan R. Kniffen
    
    
    
    56
    
    
    
    Senior Vice PresidentGregory A. Ott
    
    
    
    45
    
    
    
    Senior Vice PresidentRichard A. Brickson
    
    
    
    57
    
    
    
    Secretary and Senior CounselJ. Per Brodin
    
    
    
    43
    
    
    
    Vice President
 Each of the above named executive officers shall remain in office until the annual meeting
of directors following the next annual meeting of shareowners of May and until the officers
successor shall have been elected and shall qualify. Messrs. Dunham and Wolfe are also directors of
May. All of the executive officers have held their current position and have been an officer of
May for at least the last five years, with the following exceptions:  
    Mr. Dunham served as chairman of May Merchandising
Company from 1993 to 1996 when he became executive vice president and
chief financial officer and an executive officer of May. He assumed
the position of president in April 2001 and chairman and chief
executive officer in January 2005.
    Mr. Fingleton served as chairman of Hechts from
1991 to May 2000 when he became executive vice president and an executive officer of
May. He assumed his current position in April 2001.
    Mr. Levitt served as vice president and general merchandising
manager of Robinsons-May from 1991 to 1999 when he was named
president and chief executive officer. He became president of May
Merchandising Company and May Department Stores International
and an executive officer of May in July 2001. He assumed his current
position in July 2002.




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4     The May Department Stores Company  
    Mr. Charlson served as senior counsel for May from 1988 to 1998
when he became senior vice president and chief counsel and an executive officer of May. He assumed his current position in January 2001.
    Mr. Ott served as a senior engagement manager with McKinsey &
Company from 1987 to 1993 when he joined Macys West as senior
vice president of planning and systems. In 2000, he joined
Homewarehouse.com, an online home improvement site, as vice
president of product management and marketing, until becoming
president of See Change Services, a division of APL Logistics. He
assumed his current position in October 2003.
    Mr. Brodin was associated with a public accounting firm from 1989
to 2002. He served as director of Mays corporate accounting and
reporting from March 2002 to June 2002 when he became vice
president and an executive officer of May. G. Web Site Access to Reports and Code of Ethics We make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and amendments to those reports, filed or furnished pursuant to section 13(a) or 15(d) of the
Securities Exchange Act of 1934 available free of charge on or through the Investor Relations page
on our internet Web site, www.mayco.com, as soon as reasonably practicable after we electronically
file such material with, or furnish it to, the SEC. In addition, the Governance page on our Web site provides our Policy on Business Conduct,
Statement of Corporate Responsibility,and information on corporate governance, including the board
of directors governance guidelines and the charters for our board committees. We intend to disclose
any amendments to the Policy on Business Conduct and any waivers that are required to be disclosed
by the rules of either the Securities and Exchange Commission or The New York Stock Exchange on the
Governance page on our Web site. 
 Item 3. Legal Proceedings On February 28, 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 the directors of May. The complaint generally alleges that the directors of May
breached their fiduciary duties to May shareowners in approving the merger agreement with Federated
Department Stores, Inc. and the merger consideration, including by not obtaining the highest
possible price for May. The complaint generally seeks to preliminarily and permanently enjoin the
merger, as well as other relief. May and the directors of May believe the allegations contained in
the complaint are without merit and intend to contest the allegations 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 4. Submission of
Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the 13 weeks ended January 29,
2005. 
 Part II 
 Item 5. Market for
Mays Common Equity, Related Shareowner Matters and Issuer
Purchases of Equity Securities Common Stock Dividends and Market Prices information included in Item 7 Managements
Discussion and Analysis of Financial Condition and Results of Operations is incorporated herein by
reference. In the fourth quarter 2004, the company did not repurchase any of its common stock.




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The May Department Stores Company     5 
 Item 6. Selected
Financial Data Five-year Financial
Summary (dollars in millions, except per share and operating statistics)
    
    2004
    
    
    
    2003
    
    
    
    2002
    
    
    
    2001
    
    
    
    2000OperationsNet sales
    
    $
    14,441
    
    
    
    $
    13,343
    
    
    
    $
    13,491
    
    
    
    $
    13,883
    
    
    
    $
    14,210Total percent increase (decrease)
    
    
    8.2
    %
    
    
    
    (1.1
    )%
    
    
    
    (2.8
    )%
    
    
    
    (2.3
    )%
    
    
    
    4.8
    %Store-for-store percent increase (decrease)
    
    
    (2.4
    )
    
    
    
    (2.8
    )
    
    
    
    (5.3
    )
    
    
    
    (4.4
    )
    
    
    
    0.0Cost of sales
    
    
    10,212
    (2)
    
    
    
    9,378
    (3)
    
    
    
    9,463
    (4)
    
    
    
    9,632
    
    
    
    
    9,798Selling, general, and administrative expenses
    
    
    3,040
    (2)
    
    
    
    3,008
    (3)
    
    
    
    2,863
    (4)
    
    
    
    2,758
    
    
    
    
    2,665Interest expense, net
    
    
    386
    
    
    
    
    318
    
    
    
    
    345
    
    
    
    
    354
    
    
    
    
    345Earnings before income taxes
    
    
    803
    (2)
    
    
    
    639
    (3)
    
    
    
    820
    (4)
    
    
    
    1,139
    
    
    
    
    1,402Provision for income taxes
    
    
    279
    
    
    
    
    205
    
    
    
    
    278
    
    
    
    
    436
    
    
    
    
    544Net earnings
    
    
    524
    (2)
    
    
    
    434
    (3)
    
    
    
    542
    (4)
    
    
    
    703
    
    
    
    
    858Percent of net sales
    
    
    3.6
    %
    
    
    
    3.3
    %
    
    
    
    4.0
    %
    
    
    
    5.1
    %
    
    
    
    6.0
    %LIFO credit
    
    $
    
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    (30
    )
    
    
    $
    (29
    )Per shareBasic earnings per share
    
    $
    1.74
    (2)
    
    
    $
    1.44
    (3)
    
    
    $
    1.82
    (4)
    
    
    $
    2.31
    
    
    
    $
    2.74Diluted earnings per share
    
    
    1.70
    (2)
    
    
    
    1.41
    (3)
    
    
    
    1.76
    (4)
    
    
    
    2.21
    
    
    
    
    2.62Dividends paid (1)
    
    
    0.97
    
    
    
    
    0.96
    
    
    
    
    0.95
    
    
    
    
    0.94
    
    
    
    
    0.93Book value
    
    
    15.27
    
    
    
    
    14.51
    
    
    
    
    14.00
    
    
    
    
    13.37
    
    
    
    
    12.93Market price
 high
    
    
    36.48
    
    
    
    
    34.06
    
    
    
    
    37.75
    
    
    
    
    41.25
    
    
    
    
    39.50Market price
 low
    
    
    23.04
    
    
    
    
    17.81
    
    
    
    
    20.08
    
    
    
    
    27.00
    
    
    
    
    19.19Market price
 year-end close
    
    
    33.40
    
    
    
    
    32.90
    
    
    
    
    20.50
    
    
    
    
    36.07
    
    
    
    
    37.30Financial statisticsReturn on equity
    
    
    12.5
    %(5)
    
    
    
    10.7
    % (5)
    
    
    
    14.1
    % (5)
    
    
    
    18.2
    %
    
    
    
    21.0
    %Return on net assets
    
    
    12.1
    (6)
    
    
    
    9.8
    (6)
    
    
    
    12.0
    (6)
    
    
    
    15.5
    
    
    
    
    19.5Operating statisticsStores open at year-end:Department stores (7)
    
    
    491
    
    
    
    
    444
    
    
    
    
    443
    
    
    
    
    439
    
    
    
    
    427Bridal Group (8)
    
    
    699
    
    
    
    
    680
    
    
    
    
    425
    
    
    
    
    400
    
    
    
    
    123Gross retail square footage (in millions):Department stores (7)
    
    
    90.8
    
    
    
    
    77.5
    
    
    
    
    76.5
    
    
    
    
    75.3
    
    
    
    
    72.0Bridal Group (8)
    
    
    3.2
    
    
    
    
    2.9
    
    
    
    
    2.2
    
    
    
    
    1.9
    
    
    
    
    1.3Net sales per square foot (9)
    
    $
    165
    
    
    
    $
    167
    
    
    
    $
    174
    
    
    
    $
    185
    
    
    
    $
    198Cash flows and financial positionCash flows from operations
    
    $
    1,351
    
    
    
    $
    1,675
    
    
    
    $
    1,460

    
    
    
    $
    1,644
    
    
    
    $
    1,346Depreciation and amortization
    
    
    640
    
    
    
    
    564
    
    
    
    
    557
    
    
    
    
    559
    
    
    
    
    511Capital expenditures
    
    
    643
    
    
    
    
    600
    
    
    
    
    798
    
    
    
    
    797

    
    
    
    
    598Dividends on common stock
    
    
    281
    
    
    
    
    277
    
    
    
    
    273
    
    
    
    
    278
    
    
    
    
    286Working capital
    
    
    2,108
    
    
    
    
    2,397
    
    
    
    
    2,057
    
    
    
    
    2,403
    
    
    
    
    3,056Long-term debt and preference stock
    
    
    5,873
    
    
    
    
    4,032
    
    
    
    
    4,300
    
    
    
    
    4,689
    
    
    
    
    4,833Shareowners equity
    
    
    4,475
    
    
    
    
    4,191
    
    
    
    
    4,035
    
    
    
    
    3,841
    
    
    
    
    3,855Total assets
    
    
    15,163
    
    
    
    
    12,122
    
    
    
    
    12,030
    
    
    
    
    11,964
    
    
    
    
    11,574Shares outstandingAverage basic shares outstanding
    
    
    292.2
    
    
    
    
    289.9
    
    
    
    
    288.2
    
    
    
    
    296.0
    
    
    
    
    306.4Average diluted shares outstanding and
equivalents
    
    
    308.0
    
    
    
    
    307.0
    
    
    
    
    307.9
    
    
    
    
    317.6
    
    
    
    
    327.7
 All years included 52 weeks, except 2000, which included 53 weeks. Amounts for all years conform to
the 2004 presentation.   (1)
    
    The annual dividend was increased to $0.98 per share effective with the March 15,
2005, dividend payment.(2)
    
    Earnings include restructuring charges for divested stores of $48 million (pretax),
or $0.11 per basic share and $0.10 per diluted share, which consist of $29 million as cost of sales and $19 million as selling, general, and
administrative expenses.(3)
    
    Earnings include restructuring charges for
divested stores of $328 million (pretax), or $0.71 per basic share and $0.67 per diluted
share, which consist of $6 million as cost of sales and $322 million as selling, general, and administrative
expenses.(4)
    
    Earnings include restructuring charges for division combinations
of $114 million (pretax), or $0.26 per basic share and $0.24 per diluted share, which
consist of $23 million as cost of sales and $91 million as
selling, general, and administrative expenses.(5)
    
    Restructuring charges reduced return on
equity by 0.7% in 2004, 5.1% in 2003, and 2.0% in 2002.(6)
    
    Restructuring charges reduced return on net
assets by 0.5% in 2004, 3.3% in 2003, and 1.1% in 2002.(7)
    
    Marshall Fields joined the company in 2004.(8)
    
    After Hours Formalwear and Priscilla of Boston joined
the company in 2001. Davids Bridal joined the company in 2000.(9)
    
    Net sales per square foot is calculated from net sales
and average gross retail square footage.




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##### Table of Contents



6  The May Department Stores Company 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations Overview Operating results for fiscal 2004 were not in line with our expectations. However, during the
year, we made several key investments and implemented initiatives that will benefit future
results. Among our significant 2004 achievements are:  
    Acquired Marshall Fields department store group.
    Generated $1.4 billion of operating cash flows. Our strong cash flow
enables us to build new stores, remodel and expand existing stores,
and reduce debt.
    Invested in new stores and expanded or remodeled many existing
stores.
    Continued the repositioning of Lord & Taylor as an upscale
fashion retailer.
    Focused on key initiatives to improve future operating performance. In July 2004, we completed our acquisition of the Marshall Fields department store group.
Marshall Fields is a traditional department store that emphasizes fashion leadership, quality
merchandise, and superior service. Marshall Fields operates 62 department stores primarily in the
Chicago, Detroit, and Minneapolis metropolitan areas. The Marshall Fields acquisition gives us a
leading position in those three large upper-Midwest markets. In addition, we anticipate that the
addition of Marshall Fields to our department store portfolio will improve our buying power,
expand our distribution network, and produce economies of scale. The acquisition was financed
through $2.2 billion of long-term debt and $1.0 billion of short-term borrowings and cash on hand. Our operating cash flow was $1.4 billion in 2004. May is committed to using our strong cash
flow to reduce the debt associated with the Marshall Fields acquisition. We expect to fully repay
the short-term debt used to fund the acquisition by the end of 2005 and repay $1 billion of the
long-term debt within five years. In 2004, we also opened eight department stores totaling 1.3 million square feet of retail
space. Filenes
    
    
    
    
    Meier & FrankDartmouth, Mass.
    
    Dartmouth Mall
    
    
    Portland, Ore.
    
    The Streets at TanasbourneFoleys
    
    
    
    
    Robinsons-MayEl Paso, Texas
    
    Sunland Park Mall
    
    
    Rancho Cucamonga,Houston, Texas
    
    Baybrook Mall
    
    
    Calif.
    
    Victoria GardensHechts
    
    
    
    
    The Jones StoreWilmington, N.C.
    
    Mayfaire Town Center
    
    
    Kansas City, Kan.
    
    Town Center PlazaNashville, Tenn.
    
    The Mall at Green Hills
 We also remodeled 1.0 million square feet of retail space in 12 department stores in 2004,
including the expansion of four stores by 214,000 square feet. At fiscal year-end, we operated 491
department stores in 39 states and the District of Columbia. In 2004, our Bridal Group opened 30 Davids Bridal stores and 16 After Hours Formalwear
stores. At fiscal year-end, our Bridal Group operated 239 Davids Bridal stores in 45 states and
Puerto Rico, 449 After Hours Formalwear stores in 31 states, and 11 Priscilla of Boston stores in
nine states. Our planned capital expenditures for 2005 are approximately $640 million. This plan includes
opening eight new department stores totaling 1.2 million square feet of retail space; remodeling or
expanding 10 stores totaling 946,000 square feet of retail space; and the Bridal Groups addition
of 18 Davids Bridal stores and 20 After Hours stores, totaling 182,000 square feet of retail
space. Lord & Taylor continues to make strides in its strategy to reposition itself as an upscale
fashion retailer. Lord & Taylor is committed to offering better and more distinctive merchandise in
response to customers desire for more prestige and luxury. We also have made solid progress in our
plan to divest 32 underperforming Lord & Taylor stores. To date, we have closed 25 stores and
continue active negotiations for the remaining seven stores. On February 28, 2005, May and Federated Department Stores, Inc. 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 per share of cash and 0.3115 shares of Federated 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. (dollars In millions, except per share)
    
    2004
    
    
    
    2003
    
    
    
    2002$
    
    
    
    %
    
    
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %Net sales
    
    $
    14,441
    
    
    
    
    100.0
    %
    
    
    $
    13,343
    
    
    
    
    100.0
    %
    
    
    $
    13,491
    
    
    
    
    100.0
    %Cost of sales:Recurring
    
    
    10,183
    
    
    
    
    70.5
    
    
    
    
    9,372
    
    
    
    
    70.3
    
    
    
    
    9,440
    
    
    
    
    70.0Restructuring markdowns
    
    
    29
    
    
    
    
    0.2
    
    
    
    
    6
    
    
    
    
    0.0
    
    
    
    
    23
    
    
    
    
    0.2Selling, general, and administrative expenses
    
    
    3,021
    
    
    
    
    20.9
    
    
    
    
    2,686
    
    
    
    
    20.1
    
    
    
    
    2,772
    
    
    
    
    20.5Restructuring costs
    
    
    19
    
    
    
    
    0.1
    
    
    
    
    322
    
    
    
    
    2.4
    
    
    
    
    91
    
    
    
    
    0.7Interest expense, net
    
    
    386
    
    
    
    
    2.7
    
    
    
    
    318
    
    
    
    
    2.4
    
    
    
    
    345
    
    
    
    
    2.5Earnings before income taxes
    
    
    803
    
    
    
    
    5.6
    
    
    
    
    639
    
    
    
    
    4.8
    
    
    
    
    820
    
    
    
    
    6.1Provision for income taxes (1)
    
    
    279
    
    
    
    
    34.8
    
    
    
    
    205
    
    
    
    
    32.1
    
    
    
    
    278
    
    
    
    
    33.9Net earnings
    
    $
    524
    
    
    
    
    3.6
    %
    
    
    $
    434
    
    
    
    
    3.3
    %
    
    
    $
    542
    
    
    
    
    4.0
    %Earnings per share
    
    $
    1.70
    
    
    
    
    
    
    
    
    $
    1.41
    
    
    
    
    
    
    
    
    $
    1.76
   (1)
    
    Percents represent effective income tax rates.




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##### Table of Contents



The May Department Stores Company     7 Results of Operations Earnings per share were $1.70 in 2004, compared with $1.41 in 2003 and $1.76 in 2002. Net
earnings totaled $524 million in 2004, compared with $434 million in 2003 and $542 million in 2002.
In 2004, earnings include restructuring costs of $48 million, or $0.10 per share. Earnings include
restructuring costs of $328 million, or $0.67 per share, in 2003 and $114 million, or $0.24 per
share, in 2002. Marshall Fields results of operations are included beginning August 1, 2004. Net SalesNet sales include merchandise sales and lease department income. Store-for-store sales
compare sales of stores open during both years beginning the first day a new store has prior-year
sales and exclude sales of stores closed during both years. Net sales increases (decreases) for
2004 and 2003 were: 2004
    
    
    
    2003Store-
    
    
    
    
    
    
    
    
    Store-Quarter
    
    Total
    
    
    
    for-Store
    
    
    
    Total
    
    
    
    for-StoreFirst
    
    
    3.1
    %
    
    
    
    1.7
    %
    
    
    
    (7.2
    )%
    
    
    
    (8.6
    )%Second
    
    
    (1.5
    )
    
    
    
    (2.2
    )
    
    
    
    (1.0
    )
    
    
    
    (2.9
    )Third
    
    
    17.0
    
    
    
    
    (3.4
    )
    
    
    
    (0.5
    )
    
    
    
    (2.3
    )Fourth
    
    
    12.1
    
    
    
    
    (5.2
    )
    
    
    
    2.7
    
    
    
    
    0.8Year
    
    
    8.2
    %
    
    
    
    (2.4
    )%
    
    
    
    (1.1
    )%
    
    
    
    (2.8
    )%
 The 8.2% increase in total net sales from $13.3 billion in 2003 to $14.4 billion in 2004
was due primarily to a $1.6 billion increase from new store sales, including Marshall Fields,
offset by a $286 million decrease in store-for-store sales and a $206 million decrease related to
divested store sales. The total net sales decrease in 2003 was primarily due to a $378 million
decrease in store-for-store sales, offset by $284 million of new store sales. The 2004 decrease in store-for-store sales was characterized by a decrease in the number of
department store transactions, partially offset by an increase in the average selling price per
item. The 2003 decrease in store-for-store sales was characterized by a decrease in both the number
of department store transactions and the average selling price per item. Overall, 2004 sales for
womens apparel, home furnishings, and furniture lagged, partially offset by stronger sales of
fashion accessories and mens apparel. Cost of SalesRecurring cost of sales includes the cost of merchandise, inbound freight,
distribution expenses, buying, and occupancy costs. In 2004 and 2003, restructuring markdowns were
incurred to liquidate inventory as stores to be divested were closed. In 2002, restructuring
markdowns were incurred to conform merchandise assortments and synchronize pricing and promotional
strategies during the division combinations. Cost of sales and the related percent of net sales
were: 2004
    
    
    
    2003
    
    
    
    2002(dollars in millions)
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %Recurring cost of sales
    
    $
    10,183
    
    
    
    
    70.5
    %
    
    
    $
    9,372
    
    
    
    
    70.3
    %
    
    
    $
    9,440
    
    
    
    
    70.0
    %Restructuring markdowns
    
    
    29
    
    
    
    
    0.2
    
    
    
    
    6
    
    
    
    
    0.0
    
    
    
    
    23
    
    
    
    
    0.2
 Recurring cost of sales as a percent of net sales increased 0.2% in 2004. Like many
companies in the retail industry, we recently reviewed our lease accounting policies. After
completing this review, we concluded we should synchronize the
assumptions used to calculate our straightline rent expense and to
estimate useful lives for leased assets. Our 2004 fourth quarter results include a $42 million
lease expense adjustment to synchronize these assumptions, of which $36 million represents
cumulative prior-year corrections. Our prior calculation for determining lease and depreciation
expense was not materially different from our annual expense using the new calculation. This
adjustment plus other occupancy cost increases of 0.2% were partially offset by a 0.4% decrease in
the cost of merchandise. Recurring cost of sales as a percent of net sales increased 0.3% in 2003, compared with 2002,
because of a 0.3% increase in occupancy costs. Selling, General, and Administrative ExpensesSelling, general, and administrative expenses and the
related percent of net sales were: 2004
    
    
    
    2003
    
    

    
    2002(dollars in millions)
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %Selling, general, and
administrative expenses
    
    $
    3,021
    
    
    
    
    20.9
    %
    
    
    $
    2,686
    
    
    
    
    20.1
    %
    
    
    $
    2,772
    
    
    
    
    20.5
    %
 Selling, general, and administrative expenses as a percent of net sales increased 0.8% in
2004. The expense structure at Marshall Fields and start-up
integration costs accounted for 0.2%
of the increase. The remaining 0.6% increase was primarily due to decreased sales leverage. The 0.4% decrease in selling, general, and administrative expenses as a percent of net sales
in 2003 was due to a 0.3% decrease in payroll costs, a 0.3% decrease in net credit expense, and a
0.2% decrease in advertising costs, offset by a 0.4% increase in pension and other costs. Selling, general, and administrative expenses included advertising and sales promotion costs
of $688 million, $628 million, and $669 million in 2004, 2003, and 2002, respectively. As a percent
of net sales, advertising and sales promotion costs were 4.8% in 2004, 4.7% in 2003, and 4.9% in
2002. In 2004, we continued the shift in our media mix to increase the use of electronic media and
reduce the use of print media, which began in 2003. Finance charge revenues are included as a reduction of selling, general, and administrative
expenses. Finance charge revenues were $285 million in 2004, $244 million in 2003, and $261 million
in 2002. Business CombinationsEffective July 31, 2004, we acquired the Marshall Fields department store
group for $3.2 billion, plus transaction fees. Marshall Fields operates 62 department stores
primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. We acquired substantially
all of Marshall Fields operating assets, including stores, inventory, customer receivables, and
distribution centers, and assumed certain liabilities, including accounts payable and accrued
expenses. The acquisition was financed through $2.2 billion of long-term debt and $1.0 billion of
short-term borrowings and cash on hand. We also acquired nine Mervyns store locations in the Twin
Cities area, six of which have been disposed. Marshall Fields results of operations have been
included in our consolidated financial statements since acquisition.




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##### Table of Contents



8     The May Department Stores Company Division Net Sales, Net Sales per Square Foot, and Retail Square Footage Gross RetailNet Sales in
    
    
    
    Net Sales per
    
    
    
    Square Footage inMillions of Dollars
    
    
    
    Square Foot
    
    
    
    Thousands
    
    
    
    
    
    
    
    
    
    
    
    
    
    Number of StoresNew/Store Company: Headquarters
    
    2004
    
    
    
    2003
    
    
    
    2004
    
    
    
    2003
    
    
    
    2004
    
    
    
    2003
    
    
    
    2004
    
    
    
    Acquired
    
    
    
    Closed
    
    
    
    2003Lord & Taylor: New York City
    
    $
    1,566
    
    
    
    $
    1,823
    
    
    
    $
    163
    
    
    
    $
    163
    
    
    
    
    8,375
    
    
    
    
    10,475
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    78Marshall Fields: Minneapolis (1)
    
    
    1,375
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    
    
    15,152
    
    
    
    
    
    
    
    
    
    62
    
    
    
    
    62
    
    
    
    
    
    
    
    
    
    Filenes, Kaufmanns: Boston
    
    
    2,954
    
    
    
    
    3,020
    
    
    
    
    170
    
    
    
    
    178
    
    
    
    
    17,416
    
    
    
    
    17,221
    
    
    
    
    101
    
    
    
    
    1
    
    
    
    
    1
    
    
    
    
    101Robinsons-May,
Meier & Frank:
Los Angeles
    
    
    2,481
    
    
    
    
    2,446
    
    
    
    
    175
    
    
    
    
    176
    
    
    
    
    14,406
    
    
    
    
    14,066
    
    
    
    
    75
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    73Hechts, Strawbridges: Washington, D.C.
    
    
    2,351
    
    
    
    
    2,363
    
    
    
    
    162
    
    
    
    
    166
    
    
    
    
    14,465
    
    
    
    
    14,380
    
    
    
    
    81
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    80Foleys: Houston
    
    
    1,940
    
    
    
    
    1,977
    
    
    
    
    144
    
    
    
    
    149
    
    
    
    
    13,475
    
    
    
    
    13,461
    
    
    
    
    69
    
    
    
    
    1
    
    
    
    
    1
    
    
    
    
    69Famous-Barr,
L.S. Ayres,
The Jones Store: St. Louis
    
    
    1,070
    
    
    
    
    1,106
    
    
    
    
    138
    
    
    
    
    141
    
    
    
    
    7,532
    
    
    
    
    7,882
    
    
    
    
    42
    
    
    
    
    1
    
    
    
    
    2
    
    
    
    
    43Total Department Stores
    
    $
    13,737
    
    
    
    $
    12,735
    
    
    
    $
    163
    
    
    
    $
    164
    
    
    
    
    90,821
    
    
    
    
    77,485
    
    
    
    
    491
    
    
    
    
    68
    
    
    
    
    21
    
    
    
    
    444Bridal Group: Philadelphia
    
    
    704
    
    
    
    
    608
    
    
    
    
    235
    
    
    
    
    250
    
    
    
    
    3,173
    
    
    
    
    2,861
    
    
    
    
    699
    
    
    
    
    47
    
    
    
    
    28
    
    
    
    
    680The May Department Stores Company
    
    $
    14,441
    
    
    
    $
    13,343
    
    
    
    $
    165
    
    
    
    $
    167
    
    
    
    
    93,994
    
    
    
    
    80,346
    
    
    
    
    1,190
    
    
    
    
    115
    
    
    
    
    49
    
    
    
    
    1,124
  (1)
    
    Marshall Fields reflects net sales beginning August 1, 2004.    In 2003, our Bridal Group acquired 225 tuxedo rental and retail locations,
primarily in the midwestern and western United States. These purchases include certain assets of
Gingiss Formalwear, Desmonds Formalwear, and Modern Tuxedo. These transactions did not have a
material effect on our results of operations or financial position. Restructuring ChargesIn July 2003, we announced our intention to divest 34 underperforming
department stores. These divestitures will result in total estimated charges of $380 million,
consisting of asset impairments of $330 million, inventory liquidation markdowns of $45 million,
and severance benefits of $20 million. Other charges are offset by net gains on the disposal of
property. Approximately $50 million of the $380 million represents the cash cost of the store
divestitures, not including the benefit from future tax credits. Of the $380 million in expected
total charges, $48 million was recognized in 2004, of which $29 million was included in cost of
sales, and $328 million was recognized in 2003, of which $6 million was included in cost of sales.
The remaining costs are expected to be recognized in 2005 and 2006. Asset impairment charges were recorded to reduce store assets to their estimated fair value
because of the shorter period over which they will be used. Estimated fair values were based on
estimated market values for similar assets. Disposal gains or losses are recognized as each store
is divested. Inventory liquidation markdowns are incurred to liquidate inventory as stores to be
divested are closed. The company is negotiating agreements with landlords and developers for each
store divestiture. Through the end of fiscal 2004, 27 stores have been closed. Severance benefits
are recognized as each store is closed. Severance
benefits of $16 million for approximately 2,100 associates and inventory liquidation markdowns and
other costs of $31 million have been incurred to date. Remaining amounts will be recognized as
each store is divested. In 2002, we recorded restructuring charges of $102 million for the Filenes/Kaufmanns and
Robinsons-May/Meier & Frank division combinations and $12 million for the closure of the Arizona
Credit Center and realignment of the companys data centers. Of the $114 million in total charges,
$23 million was included as cost of sales. Severance and relocation benefits were given to
approximately 2,000 associates. Interest ExpenseComponents of net interest expense were: (dollars in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Interest expense
    
    $
    401
    
    
    
    $
    337
    
    
    
    $
    378Interest income
    
    
    (8
    )
    
    
    
    (3
    )
    
    
    
    (10
    )Capitalized interest
    
    
    (7
    )
    
    
    
    (16
    )
    
    
    
    (23
    )Net interest expense
    
    $
    386
    
    
    
    $
    318
    
    
    
    $
    345Percent of net sales
    
    
    2.7
    %
    
    
    
    2.4
    %
    
    
    
    2.5
    %
 On July 20, 2004, we issued $2.2 billion of long-term debt maturing over three to 30 years
at a weighted average interest rate, including amortized hedge and financing costs, of 5.71% to
partially fund the Marshall Fields acquisition. The increase in interest expense in 2004 was due primarily to higher long-term borrowings as a
result of new debt and a $10 million increase in early debt redemption costs. The decrease in
interest expense in 2003 was due primarily to lower long-term borrowings and a $10 million decrease
in early debt redemption costs, partially offset by a $7 million decrease in capitalized interest.




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##### Table of Contents



The May Department Stores Company     9 Short-term borrowings were: (dollars in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Average balance outstanding
    
    $
    428
    
    
    
    $
    226
    
    
    
    $
    235Average interest rate on average balance
    
    
    2.0
    %
    
    
    
    1.3
    %
    
    
    
    1.7
    %
 Income TaxesThe effective income tax rate for 2004 was 34.8%, compared with 32.1% in 2003 and
33.9% in 2002. The 2004, 2003, and 2002 effective tax rates included the effect of provision
reductions recorded on the resolution of various federal and state income tax issues: $18 million
in 2004, $31 million in 2003, and $25 million in 2002. We do not expect the recently enacted tax
legislation to have a significant effect on our effective tax rate. Impact of InflationInflation did not have a material impact on our 2004, 2003, or 2002 net sales
or earnings. We value inventory principally on a LIFO basis, and as a result, the current cost of
merchandise is reflected in current operating results. Financial Condition Return on EquityReturn on equity is our principal measure for evaluating our performance for
shareowners and our ability to invest shareowners funds profitably. Return on beginning equity
was 12.5% in 2004, compared with 10.7% in 2003 and 14.1% in 2002. Restructuring charges reduced
return on equity by 0.7% in 2004, 5.1% in 2003, and 2.0% in 2002. Return on Net AssetsReturn on net assets measures performance independent of capital structure.
Return on net assets is pretax earnings before net interest expense and the interest component of
operating leases, divided by beginning-of-year net assets (including present value of operating
leases). Return on net assets was 12.1% in 2004, compared with 9.8% in 2003 and 12.0% in 2002.
Restructuring charges reduced return on net assets by 0.5% in 2004, 3.3% in 2003, and 1.1% in 2002. Cash FlowsCash flows from operations were $1.4 billion in 2004, compared with $1.7 billion in 2003
and $1.5 billion in 2002. The decrease in cash flows from operations in 2004 was due primarily to
an increase in cash paid for income taxes and the effect of accounts receivable and accounts
payable balance changes. The increase in cash flows from operations in 2003 was due primarily to a
decrease in cash paid for income taxes and the effect of inventory and accounts payable balance
changes. Sources (uses) of cash flows were: (in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Net earnings
    
    $
    524
    
    
    
    $
    434
    
    
    
    $
    542Depreciation and amortization
    
    
    640
    
    
    
    
    564
    
    
    
    
    557Store divestiture asset impairments
    
    
    12
    
    
    
    
    317
    
    
    
    
    Working capital decreases
    
    
    23
    
    
    
    
    442
    
    
    
    
    211Other operating activities
    
    
    152
    
    
    
    
    (82
    )
    
    
    
    150Cash flows from operations
    
    
    1,351
    
    
    
    
    1,675
    
    
    
    
    1,460Capital expenditures
    
    
    (643
    )
    
    
    
    (600
    )
    
    
    
    (798
    )Proceeds from dispositions of
property and equipment
    
    
    116
    
    
    
    
    51
    
    
    
    
    8Business combinations
    
    
    (3,242
    )
    
    
    
    (70
    )
    
    
    
    Cash flows used for investing activities
    
    
    (3,769
    )
    
    
    
    (619
    )
    
    
    
    (790
    )Net short-term debt issuances (repayments)
    
    
    368
    
    
    
    
    (150
    )
    
    
    
    72Net long-term debt issuances (repayments)

    
    
    1,802
    
    
    
    
    (78
    )
    
    
    
    (434
    )Net issuances (purchases) of common stock
    
    
    43
    
    
    
    
    (26
    )
    
    
    
    (14
    )Dividend payments
    
    
    (297
    )
    
    
    
    (293
    )
    
    
    
    (291
    )Cash flows from (used for) financing activities
    
    
    1,916
    
    
    
    
    (547
    )
    
    
    
    (667
    )Increase (decrease) in cash and
cash equivalents
    
    $
    (502
    )
    
    
    $
    509
    
    
    
    $
    3
 See Consolidated Statements of Cash Flows on page 16. Investing ActivitiesIn 2004, investing activities consisted primarily of the Marshall Fields
acquisition, which was financed with a combination of short-term and long-term debt and cash on
hand. In 2003, business combinations included the purchase of certain assets of Gingiss Formalwear,
Desmonds Formalwear, and Modern Tuxedo. Capital expenditures were made primarily for new stores, remodels, and expansions. The operating
measures we emphasize when we invest in new stores and remodel or expand existing stores include
return on net assets, internal rate of return, and net sales per square foot. Liquidity and Available CreditWe 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 credit agreement expiring August 24, 2009. This credit
agreement supports our commercial paper borrowings. Financial covenants under the credit agreement
include a minimum fixed-charge coverage ratio and a maximum debt-to-capitalization ratio. We also
maintain a $30 million credit facility with a group of minority-owned banks. In addition, we have
filed a shelf registration statement with the Securities and Exchange Commission that enables us to
issue up to $525 million of debt securities. On July 20, 2004, we issued $2.2 billion of long-term debt maturing over three to 30 years at
a weighted average interest rate, including amortized hedge and financing costs, of 5.71% to
partially fund the Marshall Fields acquisition. Annual maturities of long-term debt, including sinking fund requirements and capital lease
obligations, are $145 million, $119 million, $651 million, $169 million, and $625 million for 2005
through 2009. These maturities include $400 million in 2007 and $600 million in 2009 related to the
debt incurred to acquire Marshall Fields. Maturities of long-term debt




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##### Table of Contents



10     The May Department Stores Company are scheduled over the next 32 years, with the largest single-year principal repayment
being $651 million in 2007. Interest payments on long-term debt are typically paid on a semi-annual
basis. In the second quarter of 2004, we announced the suspension of our $500 million special share
repurchase program and the suspension of our common stock repurchase program used to repurchase
shares issued through our employee benefit plans. On August 1, 2004, we redeemed $200 million 8.375% debentures due in 2024, resulting in
early debt redemption costs of $10 million, or $0.02 per share. Off-balance-sheet FinancingWe do not sell or securitize customer accounts receivable. We have not
entered into off-balance-sheet financing or other arrangements with any special-purpose entity. Our
existing operating leases do not contain any significant termination payments if lease options are
not exercised. The present value of operating leases (minimum rents), including option periods
where failure to exercise would result in an economic penalty, was $844 million as of January 29,
2005. Financial RatiosIn previous years, our debt-to-capitalization and fixed-charge coverage ratios
have been consistent with our capital structure objective. Although the financing of the Marshall
Fields acquisition negatively impacted our financial ratios, we expect to restore our
debt-to-capitalization ratio to historical levels by the end of 2006. Our capital structure
provides us with financial and operational flexibility. Our debt-to-capitalization ratios were 55%, 46%, and 48% for 2004, 2003, and 2002,
respectively. For purposes of the debt-to-capitalization ratio, we define total debt as short-term
and long-term debt (including the Employee Stock Ownership Plan [ESOP] debt reduced by unearned
compensation) and the capitalized value of all leases, including operating leases. We define
capitalization as total debt, noncurrent deferred taxes, ESOP preference shares, and shareowners
equity. See Profit Sharing on page 21 for discussion of the ESOP. Our fixed-charge coverage ratios were 2.8x in 2004, 2.6x in 2003, and 2.8x in 2002.
Restructuring charges reduced the fixed-charge coverage ratio by 0.1x in 2004, 0.9x in 2003, and
0.3x in 2002. Employee Stock OptionsEffective February 2, 2003, we began expensing the fair value of all
stock-based compensation granted after February 2, 2003. We adopted the fair value method
prospectively. The expense associated with stock options was $9 million, or $0.02 per share, and $3
million, or $0.01 per share, in 2004 and 2003, respectively. Common Stock Dividends and Market PricesOur dividend policy is based on earnings growth and
capital investment requirements. We increased the annual dividend by $0.01 to $0.98 per share
effective with the March 2005 dividend. This is our 30th consecutive annual dividend increase. We
have paid consecutive quarterly dividends since 1911. The quarterly price ranges of the common stock and dividends per share in 2004 and 2003 were: 2004
    
    
    
    2003Market Price
    
    
    
    Dividends
    
    
    
    Market Price
    
    
    
    DividendsQuarter
    
    High
    
    
    
    Low
    
    
    
    per share
    
    
    
    High
    
    
    
    Low
    
    
    
    per shareFirst
    
    $
    36.48
    
    
    
    $
    29.84
    
    
    
    $
    0.2425
    
    
    
    $
    21.72
    
    
    
    $
    17.81
    
    
    
    $
    0.24Second
    
    
    30.80
    
    
    
    
    24.62
    
    
    
    
    0.2425
    
    
    
    
    25.34
    
    
    
    
    20.02
    
    
    
    
    0.24Third
    
    
    26.79
    
    
    
    
    23.04
    
    
    
    
    0.2425
    
    
    
    
    28.20
    
    
    
    
    23.70
    
    
    
    
    0.24Fourth
    
    
    36.45
    
    
    
    
    25.63
    
    
    
    
    0.2425
    
    
    
    
    34.06
    
    
    
    
    26.37
    
    
    
    
    0.24Year
    
    $
    36.48
    
    
    
    $
    23.04
    
    
    
    $
    0.9700
    
    
    
    $
    34.06
    
    
    
    $
    17.81
    
    
    
    $
    0.96
 The approximate number of common shareowners as of March 1, 2005, was 37,000. Contractual ObligationsThe following table summarizes our contractual cash obligations as of
January 29, 2005: Less
    
    
    
    
    
    
    
    
    
    
    
    
    
    Morethan 1
    
    
    
    2-3
    
    
    
    4-5
    
    
    
    than 5(in millions)
    
    Total
    
    
    
    Year
    
    
    
    Years
    
    
    
    Years
    
    
    
    YearsLong-term debt:Principal
    
    $
    5,746
    
    
    
    $
    142
    
    
    
    $
    763
    
    
    
    $
    780
    
    
    
    $
    4,061Interest
    
    
    5,604
    
    
    
    
    402
    
    
    
    
    755
    
    
    
    
    668
    
    
    
    
    3,779Capital lease obligations:Principal
    
    
    61
    
    
    
    
    3
    
    
    
    
    7
    
    
    
    
    14
    
    
    
    
    37Interest
    
    
    41
    
    
    
    
    5
    
    
    
    
    10
    
    
    
    
    10
    
    
    
    
    16Operating lease
obligations
    
    
    1,524
    
    
    
    
    123
    
    
    
    
    226
    
    
    
    
    197
    
    
    
    
    978Total
    
    $
    12,976
    
    
    
    $
    675
    
    
    
    $
    1,761
    
    
    
    $
    1,669
    
    
    
    $
    8,871
 In the ordinary course of business, we enter into arrangements with vendors to purchase
merchandise up to 12 months in advance of expected delivery. These purchase orders do not contain
any significant termination payments or other penalties if cancelled. In 2005, we expect to make a cash contribution of approximately $100 million to the qualified
pension plan and cash payments of $18 million for the nonqualified pension plan. Funding
projections beyond 2005 for the qualified pension plan and all other retirement, profit sharing,
and other associate benefit plans are not included in this table of contractual obligations
because they are not reasonably estimable. Critical Accounting
Policies Accounts Receivable AllowanceIn 2004, approximately 35% of our net sales were made under our
department store credit programs, which resulted in customer accounts receivable balances of
approximately $2.2 billion at January 29, 2005. We have significant experience in managing our
credit programs. Our allowance for doubtful accounts is based upon a number of factors including
account write-off experience, account aging, and year-end balances. We do not expect actual
experience to vary significantly from our estimate. Retail Inventory MethodUnder the retail inventory method, we record markdowns to value merchandise
inventories at net realizable value. We closely monitor actual and forecasted sales trends, current
inventory levels, and aging information by merchandise categories. If forecasted sales are not
achieved, additional markdowns may be needed in future periods to clear excess or slow-moving
merchandise, which could result in lower gross margins.




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The May Department Stores Company     11 Asset ImpairmentsWhen a store experiences unfavorable operating performance, we
evaluate whether an impairment charge should be recorded. A stores assets are evaluated for
impairment by comparing its estimated undiscounted cash flows with its carrying value. If the cash
flows are not sufficient to recover the carrying value, the assets are written down to fair value.
In 2003, we recorded an asset impairment loss of $317 million because of the planned divestiture of
34 department stores. In 2004, an additional $12 million of asset impairments was recognized
related to the planned store divestitures. Prior to 2003, impairment losses associated with these
reviews were not significant. In addition, we complete our annual goodwill and other intangible
asset impairment tests in the fourth quarter of each year. No significant intangible asset
impairments were identified in 2004, 2003, or 2002. In the future, if store-for-store sales
continue to decline and general economic conditions are negative, impairment losses could be
significant. Self-insurance ReservesWe self-insure a portion of the exposure for costs related primarily to
workers compensation, general liability, and medical insurance. Expenses are recorded based on
actuarial estimates for reported and incurred but not reported claims considering a number of
factors, including historical claims experience, severity factors, litigation costs, inflation, and
other actuarial assumptions. Although we do not expect the amount we will ultimately pay to differ
significantly from our estimates, self-insurance reserves could be affected if future claims
experience differs significantly from the historical trends and our assumptions. Pension PlansWe use various assumptions and estimates to measure the expense and funded status of
our pension plans. Those assumptions and estimates include discount rates, rates of return on plan
assets, rates of future compensation increases, employee turnover rates, and anticipated mortality
rates. The use of different assumptions and estimates in our pension plans could result in a
significantly different funded status and plan expense. Based on current estimates and assumptions,
we believe our 2005 pension expense will be approximately $126 million. Impact of New Accounting
Pronouncements In December 2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment. SFAS No. 123 (revised
2004) establishes standards that require companies to record the cost resulting from all
share-based payment transactions using the fair value method. Transition under SFAS No. 123
(revised 2004) requires using a modified version of prospective application under which
compensation costs are recorded for all unvested share-based payments outstanding or a modified
retrospective method under which all prior periods impacted by SFAS No. 123 are restated. SFAS No.
123 (revised 2004) is effective as of the first quarter that begins after June 15, 2005, with early
adoption permitted. Quantitative and
Qualitative Disclosures About Market Risk Our exposure to market risk arises primarily 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 is
also used to temporarily finance a portion of an acquisition, such as the Marshall Fields
acquisition in 2004, 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. In 2004, we entered into treasury lock agreements to hedge interest
rate fluctuations in anticipation of the issuance of long-term debt. The results of the hedges did
not have a material impact on our results of operations or financial position. We were not a party
to any other derivative financial instruments during 2004, 2003, and 2002. 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 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 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 7A. Quantitative and Qualitative Disclosures About Market Risk Information required by this item is included in Quantitative and Qualitative Disclosures About
Market Risk in Item 7 Managements Discussion and Analysis of Financial Condition and Results of
Operations, which is incorporated herein by reference.




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##### Table of Contents



12     The May Department Stores Company 
 Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareowners of The May Department Stores Company We have audited the accompanying consolidated balance sheets of The May Department Stores Company
and subsidiaries (the Company) as of January 29,
2005 (as restated) and January 31, 2004, and the related
consolidated statements of earnings, shareowners equity, and cash flows for each of the three
years in the period ended January 29, 2005. Our audits also included the financial statement
schedules listed in the index at Item 15. These financial statements and financial statement
schedules are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on our audits. We
conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of January 29, 2005 and January 31, 2004, and
the results of its operations and its cash flows for each of the three years in the period ended
January 29, 2005 in conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such consolidated financial statement schedules, when considered
in relation to the basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of the Companys internal control over financial
reporting as of January 29, 2005, based on the criteria
established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission
and our report dated March 23, 2005 expressed an unqualified opinion on managements assessment of
the effectiveness of the Companys internal control over financial reporting and an unqualified
opinion on the effectiveness of the Companys internal control over financial reporting. /s/ Deloitte & Touche LLP St. Louis, Missouri
March 23, 2005 (May 6, 2005 as to the effects of the restatement discussed in the
Consolidated Balance Sheet Restatement footnote)  Report of Management Management is responsible for the preparation, integrity, and objectivity of the financial
information included in this annual report. The financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent basis. The
preparation of financial statements in conformity with accounting principles generally accepted in
the United States requires management to make estimates and assumptions that affect the reported
amounts. Although the financial statements reflect all available information and managements
judgment and estimates of current conditions and circumstances, prepared with the assistance of
specialists within and outside the company, actual results could differ from those estimates. Management is responsible for establishing and maintaining internal controls over financial
reporting to provide reasonable assurance that assets are safeguarded against loss from
unauthorized use or disposition, that the accounting records provide a reliable basis for the
financial information included in this annual report, and that such financial information is
presented fairly in conformity with generally accepted accounting principles and is not misstated
due to material fraud or error. Internal controls over financial reporting include the careful
selection of associates, the proper segregation of duties, and the communication and application of
formal polices and procedures that are consistent with high standards of accounting and
administrative practices. An important element of this system is a comprehensive internal audit
program. Management continually reviews, modifies, and improves its internal controls in response
to changes in business conditions and operations, and in response to recommendations in the reports
prepared by the independent public accountants and internal auditors. Management evaluated the
internal controls over financial reporting using the framework prescribed by the Committee of
Sponsoring Organizations of the Treadway Commission in Internal
Control  Integrated Framework and
believes it is designed and operating effectively as of January 29, 2005, and provides a reasonable
basis for the financial information included in this annual report. In July 2004, the company
acquired substantially all the operating assets of the Marshall Fields department store group. As
permitted under Section 404 of the Sarbanes-Oxley Act, the company excluded Marshall Fields from
the scope of the internal control evaluation. Marshall Fields represented 10% of the companys
consolidated net sales and 24% of the companys consolidated assets as of and for the year ended
January 29, 2005. The companys independent registered public accounting firm, Deloitte & Touche
LLP, has issued an attestation report, contained herein, on managements assessment of internal
controls over financial reporting. Management believes that it is essential for the company to conduct its business affairs in
accordance with the highest ethical standards and in conformity with the law. These standards are
described in the companys policies on business conduct, which are publicized throughout the
company.




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##### Table of Contents



The May Department Stores Company     13 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareowners of The May Department Stores Company We have audited managements assessment, included in the accompanying Report of Management,
that The May Department Stores Company and subsidiaries (the Company) maintained effective
internal control over financial reporting as of January 29, 2005, based on criteria established in
Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. As described in the accompanying Report of Management, management excluded
from their assessment the internal control over financial reporting at its Marshall Fields
division, which was acquired on July 31, 2004, and whose financial statements reflect total assets
and net sales constituting 24 and 10 percent, respectively, of the related consolidated financial
statement amounts as of and for the year ended January 29, 2005. Accordingly, our audit did not
include the internal control over financial reporting at the Marshall Fields division. The
Companys management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting.
Our responsibility is to express an opinion on managements assessment and an opinion on the
effectiveness of the Companys internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating managements assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinions. A companys internal control over financial reporting is a process designed by, or under the
supervision of, the companys principal executive and principal financial officers, or persons
performing similar functions, and effected by the companys board of directors, management, and
other personnel 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. A companys internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements. Because of the inherent limitations of internal control over financial reporting, including
the possibility of collusion or improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any
evaluation of the effectiveness of the internal control over financial reporting to future periods
are subject to the risk that the controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, managements assessment that the Company maintained effective internal control
over financial reporting as of January 29, 2005, is fairly stated, in all material respects, based
on the criteria established in Internal Control  Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of January 29,
2005, based on the criteria established in Internal Control  Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission. We have also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated financial statements and financial statement
schedules as of and for the year ended January 29, 2005, of the
Company and our report dated March 23, 2005 (May 6, 2005 as
to the effects of the restatement discussed in the Consolidated
Balance Sheet Restatement footnote), expressed an unqualified opinion on those financial statements and financial statement
schedules. We do not express an opinion or any other form of assurance on the first and third paragraphs
in the Report of Management. /s/ Deloitte & Touche LLP St. Louis, Missouri
March 23, 2005




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##### Table of Contents



14    The May Department Stores Company Consolidated Statements of
Earnings (in millions, except per share)
    
    2004
    
    
    
    2003
    
    
    
    2002Net sales
    
    $
    14,441
    
    
    
    $
    13,343
    
    
    
    $
    13,491Cost of sales:Recurring
    
    
    10,183
    
    
    
    
    9,372
    
    
    
    
    9,440Restructuring markdowns
    
    
    29
    
    
    
    
    6
    
    
    
    
    23Selling, general, and administrative expenses
    
    
    3,021
    
    
    
    
    2,686
    
    
    
    
    2,772Restructuring costs
    
    
    19
    
    
    
    
    322
    
    
    
    
    91Interest expense, net
    
    
    386
    
    
    
    
    318
    
    
    
    
    345Earnings before income taxes
    
    
    803
    
    
    
    
    639
    
    
    
    
    820Provision for income taxes
    
    
    279
    
    
    
    
    205
    
    
    
    
    278Net earnings
    
    $
    524
    
    
    
    $
    434
    
    
    
    $
    542Basic earnings per share
    
    $
    1.74
    
    
    
    $
    1.44
    
    
    
    $
    1.82Diluted earnings per share
    
    $
    1.70
    
    
    
    $
    1.41
    
    
    
    $
    1.76
 See Notes to Consolidated Financial Statements.




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##### Table of Contents



The May Department Stores
Company   15 Consolidated Balance Sheets January 29,
    
    
    
    January 31,(in millions, except per share)
    
    2005(as restated)
    
    
    
    2004AssetsCurrent assets:Cash and cash equivalents:Cash
    
    $
    22
    
    
    
    $
    20Cash equivalents
    
    
    40
    
    
    
    
    544Total cash and cash equivalents
    
    
    62
    
    
    
    
    564Accounts receivable, net of allowance for doubtful accounts of $82 and $72
    
    
    2,294
    
    
    
    
    1,788Merchandise inventories
    
    
    3,092
    
    
    
    
    2,728Other current assets
    
    
    129
    
    
    
    
    88Total current assets
    
    
    5,577
    
    
    
    
    5,168Property and equipment:Land
    
    
    631
    
    
    
    
    351Buildings and improvements
    
    
    5,318
    
    
    
    
    4,648Furniture, fixtures, equipment, and other
    
    
    4,160
    
    
    
    
    4,047Property under capital leases
    
    
    69
    
    
    
    
    57Total property and equipment
    
    
    10,178
    
    
    
    
    9,103Accumulated depreciation
    
    
    (3,988
    )
    
    
    
    (3,954
    )Property and equipment, net
    
    
    6,190
    
    
    
    
    5,149Goodwill
    
    
    2,634
    
    
    
    
    1,504Intangible assets, net of accumulated amortization of $34 and $27
    
    
    602
    
    
    
    
    168Other assets
    
    
    160
    
    
    
    
    133Total assets
    
    $
    15,163
    
    
    
    $
    12,122Liabilities and shareowners equityCurrent liabilities:Short-term debt
    
    $
    368
    
    
    
    $
    Current maturities of long-term debt
    
    
    145
    
    
    
    
    239Accounts payable
    
    
    1,529
    
    
    
    
    1,191Accrued expenses
    
    
    1,269
    
    
    
    
    1,016Income taxes payable
    
    
    158
    
    
    
    
    325Total current liabilities
    
    
    3,469
    
    
    
    
    2,771Long-term debt
    
    
    5,662
    
    
    
    
    3,797Deferred income taxes
    
    
    818
    
    
    
    
    712Other liabilities
    
    
    528
    
    
    
    
    507ESOP preference shares
    
    
    211
    
    
    
    
    235Unearned compensation
    
    
    
    
    
    
    
    (91
    )Shareowners equity:Common stock
    
    
    146
    
    
    
    
    144Additional paid-in capital
    
    
    97
    
    
    
    
    16Retained earnings
    
    
    4,325
    
    
    
    
    4,098Accumulated other comprehensive loss
    
    
    (93
    )
    
    
    
    (67
    )Total shareowners equity
    
    
    4,475
    
    
    
    
    4,191Total liabilities and shareowners equity
    
    $
    15,163
    
    
    
    $
    12,122
 Common stock has a par value of $0.50 per share; 1 billion shares are authorized. At
January 29, 2005, 320.5 million shares were issued, with 293.1 million shares outstanding
and 27.4 million shares held in treasury. At January 31, 2004, 320.5 million shares were
issued, with 288.8 million shares outstanding and 31.7 million shares held in treasury. ESOP preference shares have a par value of $0.50 per share and a stated value of $507 per share;
800,000 shares are authorized.
At January 29, 2005, 415,451 shares (convertible into 14.0 million shares of common stock) were
issued and outstanding. At January 31, 2004,
462,846 shares (convertible into 15.6 million shares of common stock) were issued and
outstanding. See Notes to Consolidated Financial Statements.




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##### Table of Contents



16   The May Department Stores Company Consolidated Statements of Cash Flows (in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Operating activitiesNet earnings
    
    $
    524
    
    
    
    $
    434
    
    
    
    $
    542Adjustments for noncash items included in earnings:Depreciation
    
    
    627
    
    
    
    
    553
    
    
    
    
    543Intangible and other amortization
    
    
    13
    
    
    
    
    11
    
    
    
    
    14Store divestiture asset impairments
    
    
    12
    
    
    
    
    317
    
    
    
    
    Deferred income taxes
    
    
    136
    
    
    
    
    (64
    )
    
    
    
    34Working capital changes:Accounts receivable, net
    
    
    69
    
    
    
    
    23
    
    
    
    
    178Merchandise inventories
    
    
    20
    
    
    
    
    124
    
    
    
    
    20Other current assets
    
    
    5
    
    
    
    
    
    
    
    
    
    24Accounts payable
    
    
    94
    
    
    
    
    90
    
    
    
    
    79Accrued expenses
    
    
    (44
    )
    
    
    
    20
    
    
    
    
    (82
    )Income taxes payable
    
    
    (121
    )
    
    
    
    185
    
    
    
    
    (8
    )Other assets and liabilities, net
    
    
    16
    
    
    
    
    (18
    )
    
    
    
    116Cash flows from operations
    
    
    1,351
    
    
    
    
    1,675
    
    
    
    
    1,460Investing activitiesCapital expenditures
    
    
    (643
    )
    
    
    
    (600
    )
    
    
    
    (798
    )Proceeds from dispositions of property and equipment
    
    
    116
    
    
    
    
    51
    
    
    
    
    8Business combinations
    
    
    (3,242
    )
    
    
    
    (70
    )
    
    
    
    Cash flows used for investing activities
    
    
    (3,769
    )
    
    
    
    (619
    )
    
    
    
    (790
    )Financing activitiesNet issuances (repayments) of short-term debt
    
    
    368
    
    
    
    
    (150
    )
    
    
    
    72Issuances of long-term debt
    
    
    2,156
    
    
    
    
    
    
    
    
    
    Repayments of long-term debt
    
    
    (354
    )
    
    
    
    (78
    )
    
    
    
    (434
    )Purchases of common stock
    
    
    (21
    )
    
    
    
    (52
    )
    
    
    
    (45
    )Issuances of common stock
    
    
    64
    
    
    
    
    26
    
    
    
    
    31Dividend payments
    
    
    (297
    )
    
    
    
    (293
    )
    
    
    
    (291
    )Cash flows from (used for) financing activities
    
    
    1,916
    
    
    
    
    (547
    )
    
    
    
    (667
    )Increase (decrease) in cash and cash equivalents
    
    
    (502
    )
    
    
    
    509
    
    
    
    
    3Cash and cash equivalents, beginning of year
    
    
    564
    
    
    
    
    55
    
    
    
    
    52Cash and cash equivalents, end of year
    
    $
    62
    
    
    
    $
    564
    
    
    
    $
    55Cash paid during the year:Interest
    
    $
    399
    
    
    
    $
    329
    
    
    
    $
    369Income taxes
    
    
    247
    
    
    
    
    80
    
    
    
    
    217
 See Notes to Consolidated Financial Statements.




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##### Table of Contents



The May Department Stores
Company   17 Consolidated Statements of
Shareowners Equity AccumulatedAdditional
    
    
    
    
    
    
    
    
    Other
    
    
    
    Total(dollars in millions,
    

Outstanding Common Stock
    
    
    
    Paid-in
    
    
    
    Retained
    
    
    
    Comprehensive
    
    
    
    Shareownersexcept per share; shares in thousands)
    
    Shares
    
    
    
    $
    
    
    
    Capital
    
    
    
    Earnings
    
    
    
    Income (Loss)
    
    
    
    EquityBalance at February 2, 2002
    
    
    287,173
    
    
    
    $
    144
    
    
    
    $
    
    
    
    
    $
    3,709
    
    
    
    $
    (12
    )
    
    
    $
    3,841Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    
    
    
    
    
    
    542Minimum pension liability, net of tax of $41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (63
    )
    
    
    
    (63
    )Comprehensive earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    479Dividends paid:Common stock ($0.95 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (273
    )
    
    
    
    
    
    
    
    
    (273
    )ESOP preference shares, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    (18
    )Common stock issued
    
    
    2,723
    
    
    
    
    1
    
    
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52Common stock purchased
    
    
    (1,645
    )
    
    
    
    (1
    )
    
    
    
    (42
    )
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    (46
    )Balance at February 1, 2003
    
    
    288,251
    
    
    
    
    144
    
    
    
    
    9
    
    
    
    
    3,957
    
    
    
    
    (75
    )
    
    
    
    4,035Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    434
    
    
    
    
    
    
    
    
    
    434Minimum pension liability, net of tax of $2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    (3
    )Unrealized
gains on marketable securities,
net of tax of $7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11
    
    
    
    
    11Comprehensive earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    442Dividends paid:Common stock ($0.96 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (277
    )
    
    
    
    
    
    
    
    
    (277
    )ESOP preference shares, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    (16
    )Common stock issued
    
    
    2,631
    
    
    
    
    1
    
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59Common stock purchased
    
    
    (2,091
    )
    
    
    
    (1
    )
    
    
    
    (51
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52
    )Balance at January 31, 2004
    
    
    288,791
    
    
    
    
    144
    
    
    
    
    16
    
    
    
    
    4,098
    
    
    
    
    (67
    )
    
    
    
    4,191Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    524
    
    
    
    
    
    
    
    
    
    524Minimum pension liability, net of tax of $6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9
    )
    
    
    
    (9
    )Unamortized
loss on interest rate hedge,
net of tax of $11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )
    
    
    
    (16
    )Unrealized
loss on marketable securities,
net of tax of $0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    
    (1
    )Comprehensive earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    498Dividends paid:Common stock ($0.97 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    
    
    (282
    )ESOP preference shares, net of tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    (15
    )Common stock issued
    
    
    4,883
    
    
    
    
    2
    
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104Common stock purchased
    
    
    (600
    )
    
    
    
    
    
    
    
    
    (21
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21
    )Balance at January 29, 2005
    
    
    293,074
    
    
    
    $
    146
    
    
    
    $
    97
    
    
    
    $
    4,325
    
    
    
    $
    (93
    )
    
    
    $
    4,475
 Treasury Shares(in thousands)
    
    2004
    
    
    
    2003
    
    
    
    2002Balance, beginning of year
    
    
    31,664
    
    
    
    
    32,204
    
    
    
    
    183,282Common stock issued:Exercise of stock options
    
    
    (2,310
    )
    
    
    
    (484
    )
    
    
    
    (935
    )Deferred compensation plan
    
    
    (232
    )
    
    
    
    (281
    )
    
    
    
    (151
    )Restricted stock grants, net of forfeitures
    
    
    (740
    )
    
    
    
    153
    
    
    
    
    (236
    )Conversion of ESOP preference shares
    
    
    (1,601
    )
    
    
    
    (2,019
    )
    
    
    
    (1,401
    )(4,883
    )
    
    
    
    (2,631
    )
    
    
    
    (2,723
    )Common stock purchased
    
    
    600
    
    
    
    
    2,091
    
    
    
    
    1,645Common stock retired
    
    
    
    
    
    
    
    
    
    
    
    
    (150,000
    )Balance, end of year
    
    
    27,381
    
    
    
    
    31,664
    
    
    
    
    32,204
 Outstanding common stock excludes shares held in treasury.
See Notes to Consolidated Financial Statements.




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##### Table of Contents



18   The May Department Stores Company Notes to Consolidated Financial Statements Summary of Significant Accounting Policies Fiscal YearThe companys fiscal year ends on the Saturday closest to January 31.
Fiscal years 2004, 2003, and 2002 ended on January 29, 2005, January 31, 2004, and February 1,
2003, respectively. References to years in this annual report relate to fiscal years or year-ends
rather than calendar years. Basis of ReportingThe consolidated financial statements include the accounts of The May
Department Stores Company (May or the company), a Delaware corporation, and all subsidiaries. All
intercompany transactions are eliminated. The company operates as one reportable segment. The
companys 491 quality department stores are operated by seven regional department store divisions
across the United States under 12 long-standing and widely recognized trade names. The company
aggregates its seven department store divisions into a single reportable segment because they have
similar economic and operating characteristics. In addition, the Bridal Group operates 239 Davids
Bridal stores, 449 After Hours Formalwear stores, and 11 Priscilla of Boston stores. Use of EstimatesManagement makes estimates and assumptions that affect the amounts reported in
the consolidated financial statements. Actual results could differ from these estimates. Net SalesNet sales include merchandise sales and lease department income. Merchandise sales are
recognized at the time the sale is made to the customer, are net of estimated returns and
promotional coupons, and exclude sales tax. Lease department income is recognized based on a
percentage of lease department sales, net of estimated returns. Cost of SalesRecurring cost of sales includes the cost of merchandise, inbound freight,
distribution expenses, buying, and occupancy costs. In 2004 and 2003, restructuring markdowns were
incurred to liquidate inventory as stores to be divested were closed. In 2002, restructuring
markdowns were incurred to conform merchandise assortments and synchronize pricing and promotional
strategies during the division combinations. Vendor AllowancesThe company has arrangements with some vendors under which it receives cash or
allowances when merchandise does not achieve anticipated rates of sale. The amounts recorded for
these arrangements are recognized as reductions of cost of sales. Preopening ExpensesPreopening expenses of new stores are expensed as incurred. Advertising CostsAdvertising and sales promotion costs are expensed at the time the
advertising occurs. These costs are net of cooperative advertising reimbursements and are
included in selling, general, and administrative expenses. Advertising and sales promotion costs
were $688 million, $628 million, and $669 million in 2004, 2003, and 2002, respectively. Finance Charge RevenuesFinance charge revenues are recognized in accordance with the
contractual provisions of customer agreements and are included as a reduction of selling, general,
and administrative expenses. Finance charge revenues were $285 million, $244 million, and $261
million in 2004, 2003, and 2002, respectively. Income TaxesIncome taxes are accounted for using the liability method.
The liability method
applies statutory tax rates in effect at the date of the balance sheet to differences between the
book basis and the tax basis of assets and liabilities. Earnings per ShareReferences to earnings per share relate to diluted earnings per share. Stock-based CompensationEffective 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.
The expense associated with stock options was $9 million and $3 million in
2004 and 2003, respectively. The company accounts for stock-based compensation on stock options granted prior to February
2, 2003, by applying Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, as allowed under SFAS No. 123. Accordingly, no compensation expense was recognized
for these stock options because the option exercise price was fixed at the market price on the date
of grant. 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 2004, 2003, and 2002 if the fair value-based method had been applied retroactively
rather than prospectively to all outstanding unvested grants. (in millions, except per share)
    
    2004
    
    
    
    2003
    
    
    
    2002Net earnings, as reported
    
    $
    524
    
    
    
    $
    434
    
    
    
    $
    542Add: Compensation expense for employee
stock options included in net earnings,
net of tax
    
    
    5
    
    
    
    
    2
    
    
    
    
    Deduct: Total compensation expense
for employee stock options determined
under retroactive fair value-based
method, net of tax
    
    
    19
    
    
    
    
    22
    
    
    
    
    23Pro forma net earnings
    
    $
    510
    
    
    
    $
    414
    
    
    
    $
    519Earnings per share:Basic  as reported (prospective)
    
    $
    1.74
    
    
    
    $
    1.44
    
    
    
    $
    1.82Basic  pro forma (retroactive)
    
    $
    1.69
    
    
    
    $
    1.37
    
    
    
    $
    1.74Diluted  as reported (prospective)
    
    $
    1.70
    
    
    
    $
    1.41
    
    
    
    $
    1.76Diluted  pro forma (retroactive)
    
    $
    1.65
    
    
    
    $
    1.34
    
    
    
    $
    1.69
 Cash EquivalentsCash equivalents consist primarily of commercial paper with original maturities
of less than three months. Cash equivalents are stated at cost, which approximates fair value.




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##### Table of Contents



The May Department Stores
Company   19 Merchandise InventoriesMerchandise inventories are valued principally at the lower of LIFO
(last-in, first-out) cost basis or market using the retail method. Merchandise inventories on a
FIFO (first-in, first-out) cost basis approximate LIFO. There was no LIFO provision or credit in
2004 or 2003. Property and EquipmentProperty and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives. Properties under capital leases and
leasehold improvements are amortized over the shorter of their useful lives or related lease terms.
Software development costs are capitalized and amortized over their expected useful life.
Capitalized interest was $7 million, $16 million, and $23 million in 2004, 2003, and 2002,
respectively. The estimated useful life for each major class of long-lived assets is as follows: Buildings and improvements:Buildings and improvements
    
    10-50 yearsLeasehold interests
    
    5-30 yearsFurniture, fixtures, equipment, and other:Furniture, fixtures, and equipment
    
    3-15 yearsSoftware development costs
    
    2-7 yearsRental formalwear
    
    2-4 yearsProperty under capital leases
    
    16-50 years
 Goodwill and Other Intangible AssetsGoodwill represents the excess of cost over the fair value of net
tangible and separately recognized intangible assets acquired at the dates of acquisition. The
Marshall Fields acquisition added $1.1 billion of goodwill in 2004, and Bridal Group acquisitions added $63
million of goodwill in 2003. The company completes its annual goodwill and other intangible asset
impairment tests in the fourth quarter. No impairment was identified in 2004, 2003, or 2002. In the
future, if store-for-store sales continue to decline and general economic conditions are negative,
impairment losses could be significant. Other intangible assets include trade names and customer relationships. Certain trade names
have an indefinite life and are not amortizable. Other trade names and customer relationships are
amortized over a period of three to 40 years. Impairment of Long-lived AssetsLong-lived assets and certain identifiable intangibles are reviewed
when events or circumstances indicate that their net book values may not be recoverable. The
estimated future undiscounted cash flows associated with the asset are compared with the assets
carrying amount to determine if a writedown to fair value is required. In 2003, the company
recorded $317 million of asset impairments for the planned divestiture of 34 department stores. In
2004, an additional $12 million of asset impairments was recognized related to the planned store
divestitures. Prior to 2003, impairment losses resulting from these reviews were not significant.
In the future, if store-for-store sales continue to decline and general economic conditions are
negative, impairment losses could be significant. Financial DerivativesIn 2004, the company entered into treasury lock agreements to hedge interest
rate fluctuations in anticipation of the issuance of long-term debt to finance the Marshall Fields
acquisition. The results of the hedges did not have a material impact on our results of operations
or financial position. The company was not a party to any other derivative financial instrument
during 2004, 2003, and 2002. Accumulated Other Comprehensive IncomeAccumulated other comprehensive income includes gains and
losses on the fluctuation of the minimum pension liability, unrealized gains and losses on
marketable securities, and the unamortized portion of realized gains and losses on interest rate
hedges entered into in anticipation of long-term debt issuances. Self-insurance ReservesThe company self-insures a portion of the exposure for costs related
primarily to workers compensation, general liability, and medical insurance. Expenses are recorded
based on actuarial estimates for reported and incurred but not reported claims considering a number
of factors, including historical claims experience, severity factors, litigation costs, inflation,
and other actuarial assumptions. Impact of New Accounting PronouncementsIn December 2004, the
Financial Accounting Standards Board 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 first quarter that begins
after June 15, 2005, with early adoption permitted. ReclassificationCertain prior-year amounts have
been reclassified to conform with the current-year presentation. Consolidated Balance Sheet Restatement Subsequent to the issuance of the companys 2004 financial
statements, the company
discovered a misclassification of
the components of property and equipment on the January 29, 2005,
consolidated balance sheet. As a result, the accompanying balance sheet has been restated to correct those
misclassifications. There was no change to the total reported for property and equipment and no
change to depreciation expense,
net earnings, or earnings per share reported. The following is a
summary of the changes made to the January 29, 2005, consolidated balance sheet: As Previously(in millions)
    
    Reported
    
    
    
    Adjustments
    
    
    

As
RestatedProperty and equipment:Land
    
    $
    382
    
    
    
    $
    249
    
    
    
    $
    631Buildings and improvements
    
    
    4,721
    
    
    
    
    597
    
    
    
    
    5,318Furniture, fixtures,
equipment, and other
    
    
    5,006
    
    
    
    
    (846
    )
    
    
    
    4,160Property under capital leases
    
    
    69
    
    
    
    
    
    
    
    
    
    69Total property and equipment
    
    $
    10,178
    
    
    
    $
    
    
    
    
    $
    10,178




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##### Table of Contents



20   The May Department Stores Company Business Combinations Effective July 31, 2004, the company acquired the Marshall Fields department store group for a
purchase price of $3.2 billion, plus transaction fees. Marshall Fields operates 62 department
stores primarily in the Chicago, Detroit, and Minneapolis metropolitan areas. The company acquired
substantially all of Marshall Fields operating assets, including stores, inventory, customer
receivables, and distribution centers, and assumed certain liabilities, including accounts payable
and accrued expenses. The acquisition was financed through $2.2 billion of long-term debt and $1.0
billion of short-term borrowings and cash on hand. The company also acquired nine Mervyns store
locations in the Twin Cities area, six of which have been disposed. Marshall Fields results of
operations have been included in the companys consolidated
financial statements since acquisition. The companys January 29, 2005, consolidated balance sheet
includes the assets acquired and the liabilities assumed using a preliminary purchase price
allocation. The purchase price allocation is subject to finalization of certain acquisition-related
liabilities. The following summarizes the preliminary purchase price allocation at acquisition: (in millions)Cash
    
    $
    3Accounts receivable
    
    
    571Merchandise inventories
    
    
    384Property and equipment
    
    
    1,117Goodwill
    
    
    1,128Other intangible assets
    
    
    439Assumed liabilities/other
    
    
    (402
    )Net purchase price
    
    $
    3,240
 Other intangible assets
include $419 million of trade names and $20 million of customer
relationships. The trade names have an indefinite useful life and are not amortizable. The customer
relationships are being amortized over an estimated useful life of 15 years. Assumed
liabilities/other includes $22 million of transaction fees. 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 2, 2003: (in millions, except per share)
    
    2004
    
    
    
    2003Net sales
    
    $
    15,582
    
    
    
    $
    15,802Net earnings
    
    $
    513
    
    
    
    $
    444Diluted earnings per share
    
    $
    1.67
    
    
    
    $
    1.44
 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 years
presented. This information is also not indicative of future results and does not reflect potential
synergies, integration costs, or other such costs or savings. In 2003, the company acquired 225 tuxedo rental and retail locations, primarily in the
midwestern and western United States. These purchases include certain assets of Gingiss
Formalwear, Desmonds Formalwear, and Modern Tuxedo. The aggregate purchase price for these
acquisitions was $70 million. These transactions did not have a material effect on results of
operations or financial position. Restructuring Costs Store DivestituresIn
July 2003, the company announced its intention to divest 34 underperforming department
stores. These divestitures will result in total estimated charges of $380 million, consisting of
asset impairments of $330 million, inventory liquidation markdowns of $45 million, and severance
benefits of $20 million. Other charges are offset by net gains on the disposal of property.
Approximately $50 million of the $380 million represents the cash cost of the store divestitures,
not including the benefit from future tax credits. Of the $380 million of expected total charges,
$48 million was recognized in 2004, of which $29 million was included in cost of sales, and $328
million was recognized in 2003, of which $6 million was included in cost of sales. The remaining
costs are expected to be recognized in 2005 and 2006. The significant components of the store divestiture costs and status of the related liability
are summarized below: Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    BalanceCharges
    
    
    
    2004
    
    
    
    Payments
    
    
    
    Non-cash
    
    
    
    Jan. 29,(in millions)
    
    to Date
    
    
    
    Charges
    
    
    
    (Proceeds)
    
    
    
    Uses
    
    
    
    2005Asset impairments
    
    $
    329
    
    
    
    $
    12
    
    
    
    $
    
    
    
    
    $
    12
    
    
    
    $
    Disposal (gains) losses
    
    
    (25
    )
    
    
    
    (16
    )
    
    
    
    (67
    )
    
    
    
    51
    
    
    
    
    Inventory liquidation
markdowns
    
    
    35
    
    
    
    
    29
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    Severance benefits
    
    
    16
    
    
    
    
    8
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    Other
    
    
    21
    
    
    
    
    15
    
    
    
    
    15
    
    
    
    
    
    
    
    
    
    Total
    
    $
    376
    
    
    
    $
    48
    
    
    
    $
    (15
    )
    
    
    $
    63
    
    
    
    $
    
 Asset impairment charges were recorded to reduce store assets to their estimated fair
value because of the shorter period over which they will be used. Estimated fair values were based
on estimated market values for similar assets. Disposal gains or losses are recognized as each
store is divested. Inventory liquidation markdowns are incurred to liquidate inventory as stores to
be divested are closed. The company is negotiating agreements with landlords and developers for
each store divestiture. Through the end of 2004, 27 stores have been closed. Severance benefits are recognized as each store is closed. As of January 29, 2005, severance
benefits have been paid to approximately 2,100 associates. The remaining amounts will be recognized
as each store is closed.




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##### Table of Contents



The May Department Stores Company  21 Division CombinationsIn 2002, the company recorded restructuring charges of $102 million for the
Filenes/Kaufmanns and Robinsons-May/ Meier & Frank division combinations and $12 million for the
closure of the Arizona Credit Center and realignment of the companys data centers. Of the $114
million in total charges, $23 million was included as cost of sales. Restructuring charges related to the division combinations consisted of $59 million of
severance benefits for approximately 2,000 associates and the costs to relocate certain associates,
$23 million of inventory markdowns incurred to conform merchandise assortments and to synchronize
pricing and promotional strategies, $15 million of accelerated depreciation of fixed assets in the
closed central offices, and $17 million of other costs. All remaining payments were made in 2004,
and there is no additional liability related to this restructuring. Profit Sharing The company has a qualified profit sharing plan that covers most associates who work 1,000 hours or
more in a year and have attained age 21. The plan is a defined-contribution program that permits
associates to make contributions to the plan and provides discretionary matching contributions at a
variable matching rate generally based upon changes in the companys annual earnings per share, as
defined in the plan. The plans matching contribution value totaled $60 million for 2004, a match
rate of 94%, which includes an allocation to participant accounts of all remaining unallocated
Employee Stock Ownership Plan (ESOP) shares held by the plan. The matching contribution values were
$53 million in 2003 and $28 million in 2002. The plan has an ESOP, under which the plan borrowed $400 million in 1989, guaranteed by the
company, at an average rate of 8.5%. The proceeds were used to purchase $400 million (788,955
shares) of convertible preference stock of the company (ESOP preference shares).
Each share is
convertible into 33.787 shares of common stock and has a guaranteed minimum value of $15.01 per
common share equivalent.
The annual dividend rate on the ESOP preference shares is 7.5%. The companys contributions to the ESOP and the dividends on the ESOP preference shares were
used to repay the loan principal and interest. Interest expense associated with the ESOP debt was
$2 million in 2004, $9 million in 2003, and $14 million in 2002. Dividends on ESOP preference
shares were $16 million in 2004, $18 million in 2003, and $20 million in 2002. The release of ESOP preference shares was based upon debt-service payments. In April 2004, the
company funded the remaining debt service on the guaranteed ESOP debt and released the remaining
ESOP preference shares. No additional debt service liability exists as of January 29, 2005. Unearned compensation, initially an equal offsetting amount to the $400 million
guaranteed ESOP debt, has been adjusted for the difference between the expense related to the ESOP
and cash payments to the ESOP. It was reduced as principal was repaid. The companys profit sharing expense was $48 million in 2004, $46 million in 2003, and $40
million in 2002. At January 29, 2005, the plan beneficially owned 11.6 million shares of the companys common
stock and 100% of the companys ESOP preference shares, representing 8.4% of the companys common
stock. Pension and Other
Postretirement Benefits The company has a qualified defined-benefit plan that covers most associates who work 1,000
hours or more in a year and have attained age 21. The company also maintains two nonqualified,
supplementary defined-benefit plans for certain associates. All plans are noncontributory and
provide benefits based upon years of service and pay during employment. Pension expense is based on information provided by an outside actuarial firm that uses
assumptions to estimate the total benefits ultimately payable to associates and allocates this cost
to service periods. The actuarial assumptions used to calculate pension costs are reviewed
annually. The components of net periodic benefit costs and actuarial assumptions for the benefit plans
were: (in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Components of pension expense (all plans)Service cost
    
    $
    63
    
    
    
    $
    51
    
    
    
    $
    43Interest cost
    
    
    59
    
    
    
    
    59
    
    
    
    
    55Expected return on assets
    
    
    (39
    )
    
    
    
    (31
    )
    
    
    
    (38
    )Amortization of prior service cost (1)
    
    
    11
    
    
    
    
    12
    
    
    
    
    11Net actuarial losses (1)
    
    
    3
    
    
    
    
    17
    
    
    
    
    1Total
    
    $
    97
    
    
    
    $
    108
    
    
    
    $
    72
   (1)
    Prior service cost and actuarial gains and losses are amortized over the
remaining estimated service period. (as of January 1 measurement date)
    
    2005
    
    
    
    2004
    
    
    
    2003Actuarial assumptionsDiscount rate
    
    
    5.75
    %
    
    
    
    6.00
    %
    
    
    
    6.75
    %Expected return on plan assets
    
    
    7.00
    
    
    
    
    7.00
    
    
    
    
    7.00Salary increase
    
    
    3.50
    
    
    
    
    3.50
    
    
    
    
    4.00
 The expected return on plan assets represents the weighted expected return for each
asset category using the target allocation and actual returns in prior periods. Target asset allocations and actual asset allocations by asset category were: Target
    
    
    
    Percentage of ActualAllocation
    
    
    
    Plan AssetsAsset Category
    
    2004
    
    
    
    2004
    
    
    
    2003Equity securities
    
    
    55-65
    %
    
    
    
    60
    %
    
    
    
    61
    %Debt securities
    
    
    35-45
    
    
    
    
    40
    
    
    
    
    39100
    %
    
    
    
    100
    %




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##### Table of Contents



22  The May Department Stores Company The accumulated benefit obligations (ABO), change in projected benefit obligations (PBO),
change in net plan assets, and funded status of the benefit plans were: Qualified Plan
    
    
    
    Nonqualified Plans(in millions)
    
    2004
    
    
    
    2003
    
    
    
    2004
    
    
    
    2003Change in PBO(1)PBO at beginning of year
    
    $
    821
    
    
    
    $
    727
    
    
    
    $
    228
    
    
    
    $
    175Service cost
    
    
    58
    
    
    
    
    46
    
    
    
    
    5
    
    
    
    
    5Interest cost
    
    
    46
    
    
    
    
    46
    
    
    
    
    13
    
    
    
    
    13Actuarial loss (2)
    
    
    22
    
    
    
    
    72
    
    
    
    
    (1
    )
    
    
    
    43Plan amendments
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    2Benefits paid
    
    
    (67
    )
    
    
    
    (69
    )
    
    
    
    (11
    )
    
    
    
    (10
    )PBO at end of year
    
    $
    880
    
    
    
    $
    821
    
    
    
    $
    234
    
    
    
    $
    228ABO at end of year(3)
    
    $
    776
    
    
    
    $
    715
    
    
    
    $
    197
    
    
    
    $
    187Change in net plan assetsFair value of net plan assets
at beginning of year
    
    $
    597
    
    
    
    $
    494
    
    
    
    $
    
    
    
    
    $
    Actual return on plan assets
    
    
    48
    
    
    
    
    88
    
    
    
    
    
    
    
    
    
    Employer contribution
    
    
    74
    
    
    
    
    84
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (67
    )
    
    
    
    (69
    )
    
    
    
    
    
    
    
    
    Fair value of net plan assets at
end of year
    
    $
    652
    
    
    
    $
    597
    
    
    
    $
    
    
    
    
    $
    Funded status (PBO less
plan assets)
    
    $
    (228
    )
    
    
    $
    (224
    )
    
    
    $
    (234
    )
    
    
    $
    (228
    )Unrecognized net
actuarial loss
    
    
    208
    
    
    

    
    194
    
    
    
    
    73
    
    
    
    
    78Unrecognized prior
service cost
    
    
    39
    
    
    
    
    49
    
    
    
    
    10
    
    
    
    
    11Net prepaid (accrued)
benefit cost
    
    $
    19
    
    
    
    $
    19
    
    
    
    $
    (151
    )
    
    
    $
    (139
    )Plan assets (less than) ABO
    
    $
    (124
    )
    
    
    $
    (118
    )
    
    
    $
    (197
    )
    
    
    $
    (187
    )Amounts recognized in the
balance sheets(4)Accrued benefit liability
    
    $
    (124
    )
    
    
    $
    (118
    )
    
    
    $
    (197
    )
    
    
    $
    (187
    )Intangible asset
    
    
    39
    
    
    
    
    49
    
    
    
    
    10
    
    
    
    
    10Accumulated other
comprehensive loss
    
    
    104
    
    
    
    
    88
    
    
    
    
    36
    
    
    
    
    38Net amount recognized
    
    $
    19
    
    
    
    $
    19
    
    
    
    $
    (151
    )
    
    
    $
    (139
    )
   (1)
    PBO is the actuarial present value of benefits attributed by the pension
benefit formula to prior associate service; it takes into consideration future salary
increases. (2)
    Actuarial loss is the change in benefit obligations or plan assets resulting
from changes in actuarial assumptions or from experience different than assumed. (3)
    ABO is the actuarial present value of benefits attributed by the pension benefit
formula to prior associate service based on current and past compensation levels. (4)
    Accrued benefit liability is included in accrued expenses and other liabilities. Intangible
pension assets are included in other assets. Accumulated other comprehensive loss, net of tax
benefit, is included in equity. Estimated future benefit payments to plan participants at January 29, 2005, are: (in millions)
    
    Qualified Plan
    
    
    
    Nonqualified Plans2005
    
    $
    128
    
    
    
    $
    182006
    
    
    84
    
    
    
    
    162007
    
    
    87
    
    
    
    
    132008
    
    
    91
    
    
    
    
    212009
    
    
    93
    
    
    
    
    302010-2014
    
    
    478
    
    
    
    
    142
 The companys practice is to make annual plan contributions equal to qualified plan
expense. In 2005, the company expects to make a cash contribution of approximately $100 million to
the qualified pension plan and cash payments of $18 million for the non-qualified plans. The company also provides postretirement life and/or health benefits for certain
associates. As of January 29, 2005, the companys estimated PBO (at a discount rate of 5.75%) for
postretirement benefits was $75 million, of which $53 million was accrued in other liabilities. As
of January 31, 2004, the companys estimated PBO (at a discount rate of 6.00%) for postretirement
benefits was $67 million, of which $50 million was accrued in other liabilities. The postretirement
plan is unfunded. The postretirement benefit expense was $6 million in 2004, $6 million in 2003,
and $4 million in 2002. The estimated future obligations for postretirement medical benefits are based upon assumed
annual healthcare cost increases of 10% for 2005, decreasing by 1% annually to 5% for 2010 and
future years. A 1% increase or decrease in the assumed annual healthcare cost would increase or
decrease the present value of estimated future obligations for postretirement benefits by
approximately $5 million. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 did not have a
material impact on the companys postretirement health benefits. Income Taxes The provision for income taxes and the related percent of pretax earnings for the last three years
were: 2004
    
    
    
    2003
    
    
    
    2002(dollars in millions)
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %
    
    
    
    $
    
    
    
    %Federal
    
    $
    128
    
    
    
    
    
    
    
    
    $
    231
    
    
    
    
    
    
    
    
    $
    211State and local
    
    
    15
    
    
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    
    
    33Current taxes
    
    
    143
    
    
    
    
    17.8
    %
    
    
    
    269
    
    
    
    
    42.1
    %
    
    
    
    244
    
    
    
    
    29.7
    %Federal
    
    
    115
    
    
    
    
    
    
    
    
    
    (59
    )
    
    
    
    
    
    
    
    
    62State and local
    
    
    21
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    (28
    )Deferred taxes
    
    
    136
    
    
    
    
    17.0
    
    
    
    
    (64
    )
    
    
    
    (10.0
    )
    
    
    
    34
    
    
    
    
    4.2Total
    
    $
    279
    
    
    
    
    34.8
    %
    
    
    $
    205
    
    
    
    
    32.1
    %
    
    
    $
    278
    
    
    
    
    33.9
    %
 The reconciliation between the statutory federal income tax rate and the
effective income tax rate for the last three years follows: (percent of pretax earnings)
    
    2004
    
    
    
    2003
    
    
    
    2002Statutory federal income tax
rate
    
    
    35.0
    %
    
    
    
    35.0
    %
    
    
    
    35.0
    %State and local income taxes
    
    
    4.6
    
    
    
    
    5.2
    
    
    
    
    0.6Federal tax benefit of state and
local income taxes
    
    
    (1.6
    )
    
    
    
    (1.8
    )
    
    
    
    (0.2
    )Resolution of federal tax
matters
    
    
    (0.6
    )
    
    
    
    (4.9
    )
    
    
    
    0.0Other, net
    
    
    (2.6
    )
    
    
    
    (1.4
    )
    
    
    
    (1.5
    )Effective income tax rate
    
    
    34.8
    %
    
    
    
    32.1
    %
    
    
    
    33.9
    %
 Major components of deferred tax assets (liabilities) were: (in millions)
    
    2004
    
    
    
    2003Accrued expenses and reserves
    
    $
    92
    
    
    
    $
    108Deferred and other compensation
    
    
    219
    
    
    
    
    194Merchandise inventories
    
    
    (265
    )
    
    
    
    (224
    )Depreciation and amortization and basis
differences
    
    
    (1,011
    )
    
    
    
    (879
    )Other deferred income tax assets, net
    
    
    30
    
    
    
    
    40Net deferred income taxes
    
    
    (935
    )
    
    
    
    (761
    )Less: Net current deferred income tax
liabilities
    
    
    (117
    )
    
    
    
    (49
    )Noncurrent deferred income taxes
    
    $
    (818
    )
    
    
    $
    (712
    )




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##### Table of Contents



The May Department Stores Company      23 Earnings per Share All ESOP preference shares were issued in 1989, and earnings per share is computed in accordance
with the provisions of Statement of Position 76-3, Accounting Practices for Certain Employee Stock
Ownership Plans, and Emerging Issues Task Force 89-12, Earnings Per Share Issues Related to
Convertible Preferred Stock Held by an Employee Stock Ownership Plan. For basic earnings per share
purposes, the ESOP preference shares dividend, net of income tax benefit, is deducted from net
earnings to arrive at net earnings available for common shareowners. Diluted earnings per share is
computed by use of the if converted method, which assumes all ESOP preference shares were
converted as of the beginning of the year. Net earnings are adjusted to add back the ESOP
preference dividend deducted in computing basic earnings per share, less the amount of additional
ESOP contribution required to fund ESOP debt service in excess of the current common stock dividend
attributable to the ESOP preference shares. Diluted
earnings per share also include the effect of outstanding options. Options excluded
from the diluted earnings per share calculation because of their antidilutive effect totaled 17.6
million in 2004, 23.4 million in 2003, and 18.5 million in 2002. The following tables reconcile
net earnings and weighted average shares outstanding to amounts used to calculate basic and
diluted earnings per share for 2004, 2003, and 2002: (in millions, except per share)
    
    
    
    
    
    
    
    
    
    
    
    2004Net
    
    
    
    
    
    
    
    
    EarningsEarnings
    
    
    
    Shares
    
    
    
    per ShareNet earnings
    
    $
    524ESOP preference shares
dividends
    
    
    (15
    )Basic earnings per share
    
    $
    509
    
    
    
    
    292.2
    
    
    
    $
    1.74ESOP preference shares
    
    
    13
    
    
    
    
    14.8Assumed
exercise of options (treasury stock method)
    
    
    
    
    
    
    
    1.0Diluted earnings per share
    
    $
    522
    
    
    
    
    308.0
    
    
    
    $
    1.70
 (in millions, except per share)
    
    
    
    
    
    
    
    
    
    
    
    2003Net
    
    
    
    
    
    
    
    
    EarningsEarnings
    
    
    
    Shares
    
    
    
    per ShareNet earnings
    
    $
    434ESOP preference shares
dividends
    
    
    (16
    )Basic earnings per share
    
    $
    418
    
    
    
    
    289.9
    
    
    
    $
    1.44ESOP preference shares
    
    
    14
    
    
    
    
    16.6Assumed exercise of options
(treasury stock method)
    
    
    
    
    
    
    
    0.5Diluted earnings per share
    
    $
    432
    
    
    
    
    307.0
    
    
    
    $
    1.41
 (in millions, except per share)
    
    
    
    
    
    
    
    
    
    
    
    2002Net
    
    
    
    
    
    
    
    
    EarningsEarnings
    
    
    
    Shares
    
    
    
    per ShareNet earnings
    
    $
    542ESOP preference shares
dividends
    
    
    (18
    )Basic earnings per share
    
    $
    524
    
    
    
    
    288.2
    
    
    
    $
    1.82ESOP preference shares
    
    
    17
    
    
    
    
    18.5Assumed exercise of options
(treasury stock method)
    
    
    
    
    
    
    
    1.2Diluted earnings per share
    
    $
    541
    
    
    
    
    307.9
    
    
    
    $
    1.76
 Accounts Receivable Credit sales under department store credit programs as a percent of net sales were
34.8% in 2004. This compares with 35.3% in 2003 and 36.9% in 2002. Net accounts receivable
consisted of: (in millions)
    
    2004
    
    
    
    2003Customer accounts receivable
    
    $
    2,194
    
    
    
    $
    1,703Other receivables
    
    
    182
    
    
    
    
    157Total accounts receivable
    
    
    2,376
    
    
    
    
    1,860Allowance for doubtful accounts
    
    
    (82
    )
    
    
    
    (72
    )Accounts receivable, net
    
    $
    2,294
    
    
    
    $
    1,788
 The accounts receivable balance at Marshall Fields represents 28% of the 2004 balance. The fair value of customer accounts receivable approximates their carrying values at January
29, 2005, and January 31, 2004, because of the short-term nature of these accounts. We do not sell
or securitize customer accounts receivables. The allowance for doubtful accounts is based upon a
number of factors including account write-off experience, account aging, and month-end balances. Net sales made through third-party debit and credit cards as a percent of net sales were 45.3%
in 2004, 43.6% in 2003, and 41.1% in 2002. Other Current Assets Other current assets consisted primarily of prepaid expenses and supply inventories of $129 million
in 2004 and $88 million in 2003. Intangible Assets Intangible assets consisted of: (In millions)
    
    2004
    
    
    
    2003Amortizable trade names
    
    $
    188
    
    
    
    $
    183Amortizable customer relationships and other
    
    
    29
    
    
    
    
    12Accumulated amortization
    
    
    (34
    )
    
    
    
    (27
    )Marshall Fields trade names (nonamortizable)
    
    
    419
    
    
    
    
    Total
    
    $
    602
    
    
    
    $
    168
 Amortization expense was $9 million and $8 million in 2004 and 2003, respectively.
Estimated amortization expense is $10 million, $10 million, $9 million, $9 million, and $9 million
for 2005 through 2009. Other Assets Other assets consisted of: (in millions)
    
    2004
    
    
    
    2003Intangible pension asset
    
    $
    49
    
    
    
    $
    59Deferred debt expense
    
    
    47
    
    
    
    
    35Notes receivable
    
    
    25
    
    
    
    
    Other
    
    
    39
    
    
    
    
    39Total
    
    $
    160
    
    
    
    $
    133




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##### Table of Contents



24     The May Department Stores Company Accrued Expenses Accrued expenses consisted of: (in millions)
    
    2004
    
    
    
    2003Insurance costs
    
    $
    308
    
    
    
    $
    262Advertising and other operating expenses
    
    
    211
    
    
    
    
    153Salaries, wages, and employee benefits
    
    
    183
    
    
    
    
    190Sales, use, and other taxes
    
    
    167
    
    
    
    
    116Current deferred income taxes
    
    
    117
    
    
    
    
    49Interest expense
    
    
    81
    
    
    
    
    89Rent expense
    
    
    72
    
    
    
    
    46Construction costs
    
    
    52
    
    
    
    
    55Allowance for sales returns
    
    
    37
    
    
    
    
    33Other
    
    
    41
    
    
    
    
    23Total
    
    $
    1,269
    
    
    
    $
    1,016
 Adjustments to the allowance for sales returns were a credit of $1 million in 2004.
There was no change in the allowance for sales returns in 2003. Assumed liabilities for Marshall
Fields as of July 31, 2004, included an allowance for sales returns of $5 million. Short-term Debt and Lines of Credit Short-term debt for the last three years was: (dollars in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Balance outstanding at year-end
    
    $
    368
    
    
    
    $
    
    
    
    
    $
    150Average balance outstanding
    
    
    428
    
    
    
    
    226
    
    
    
    
    235Average interest rate:At year-end
    
    
    2.5
    %
    
    
    
    
    
    
    
    
    1.3
    %On average balance
    
    
    2.0
    %
    
    
    
    1.3
    %
    
    
    
    1.7
    %Maximum balance outstanding
    
    $
    1,324
    
    
    
    $
    473
    
    
    
    $
    825
 The average balance of short-term debt outstanding, primarily commercial paper, and the
respective weighted average interest rates are based on the number of days such short-term debt was
outstanding during the year. The maximum balance outstanding in 2004 consisted of $1.3 billion of
commercial paper and $30 million of short-term bank financing. The company has a $1.4 billion credit facility under an unsecured multi-year credit agreement
expiring August 24, 2009. This credit agreement supports the companys commercial paper borrowings.
Financial covenants under the credit agreement include a minimum fixed-charge coverage ratio and a
maximum debt-to-capitalization ratio. The company also maintains a $30 million credit facility with
a group of minority-owned banks. Long-term Debt Long-term debt and capital lease obligations were: (in mil/ions)
    
    2004
    
    
    
    2003Unsecured notes and sinking-fund debentures
due 2005-2036
    
    $
    5,734
    
    
    
    $
    3,970Mortgage notes and bonds due 2005-2020
    
    
    12
    
    
    
    
    18Capital lease obligations
    
    
    61
    
    
    
    
    48Total debt
    
    
    5,807
    
    
    
    
    4,036Less: Current maturities of long-term debt
    
    
    145
    
    
    
    
    239Long-term debt
    
    $
    5,662
    
    
    
    $
    3,797
 The weighted average interest rate of long-term debt was 7.0% at January 29, 2005, and
8.0% at January 31, 2004. The annual maturities of long-term debt, including sinking fund requirements and capital lease
obligations, are $145 million, $119 million, $651 million, $169 million, and $625 million for 2005
through 2009. Maturities of long-term debt are scheduled over the next 32 years, with the largest
principal repayment in any single year being the $651 million due in 2007. Interest payments on
long-term debt are typically paid on a semi-annual basis. The net book value of property encumbered under long-term debt agreements was $52 million at
January 29, 2005. The fair value of long-term debt (excluding capital lease obligations) was approximately $6.4
billion and $4.7 billion at January 29, 2005, and January 31, 2004, respectively. The fair value
was determined using borrowing rates for debt instruments with similar terms and maturities. On July 20, 2004, the company issued $2.2 billion of long-term debt maturing over three to 30
years at a weighted average interest rate, including amortized hedge and financing costs, of 5.71%
to partially fund the Marshall Fields acquisition. In anticipation of the issuance of debt related to the Marshall Fields acquisition, the
company entered into treasury lock agreements to hedge interest rate fluctuations. Upon issuance of
the debt, the company recorded a $27 million decrease to accumulated other comprehensive income.
This amount will be amortized into earnings through increases to interest expense over the life of
the debt, of which less than $1 million was amortized in 2004. Lease Obligations The company leases approximately 26% of its gross retail square footage. Rental expense for the
companys operating leases consisted of: (in millions)
    
    2004
    
    
    
    2003
    
    
    
    2002Minimum rentals
    
    $
    155
    
    
    
    $
    107
    
    
    
    $
    97Contingent rentals based on sales
    
    
    10
    
    
    
    
    12
    
    
    
    
    13Real property rentals
    
    
    165
    
    
    
    
    119
    
    
    
    
    110Equipment rentals
    
    
    2
    
    
    
    
    2
    
    
    
    
    3Total
    
    $
    167
    
    
    
    $
    121
    
    
    
    $
    113
 Like many in the retail industry, the company recently reviewed its lease
accounting policies. After completing this review, the company concluded it should synchronize the
assumptions used to calculate straight-line rent expense and to estimate useful lives for leased
assets. Fourth quarter 2004 results include a $42 million lease expense adjustment to synchronize
these assumptions, of which $36 million represents cumulative prior year corrections. The companys
prior calculation for determining lease and depreciation expense was not materially different from
its annual expense using the new calculation. Future minimum lease payments at January 29, 2005, were: Capital
    
    
    
    Operating(in millions)
    
    Leases
    
    
    
    Leases
    
    
    
    Total2005
    
    $
    8
    
    
    
    $
    123
    
    
    
    $
    1312006
    
    
    8
    
    
    
    
    116
    
    
    
    
    1242007
    
    
    9
    
    
    
    
    110
    
    
    
    
    1192008
    
    
    9
    
    
    
    
    103
    
    
    
    
    1122009
    
    
    15
    
    
    
    
    94
    
    
    
    
    109After 2009
    
    
    53
    
    
    
    
    978
    
    
    
    
    1,031Minimum lease payments
    
    $
    102
    
    
    
    $
    1,524
    
    
    
    $
    1,626




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##### Table of Contents



The May Department Stores Company      25 Future minimum lease payments include payments over the expected lease term, including
option periods where failure to exercise would result in an economic penalty. Many leases include
options that allow the company to extend the lease term beyond the initial commitment periods,
subject to terms agreed to at lease inception. For leases that contain predetermined escalations of
the minimum rentals, rent expense is recognized over the lease term on a straight-line basis. The present value of minimum lease payments under capital leases was $61 million at January
29, 2005, of which $3 million was included in current liabilities. The present value of operating
leases (minimum rents) was $844 million at January 29, 2005. Property under capital leases was: (in millions)
    
    2004
    
    
    
    2003Cost
    
    $
    69
    
    
    
    $
    57Accumulated amortization
    
    
    (35
    )
    
    
    
    (33
    )Total
    
    $
    34
    
    
    
    $
    24
 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 $788 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. Other Liabilities Other liabilities consisted of: (in millions)
    
    2004
    
    
    
    2003Pension:Qualified plan
    
    $
    124
    
    
    
    $
    118Nonqualified plans
    
    
    197
    
    
    
    
    187Deferred compensation plan
    
    
    141
    
    
    
    
    144Other postretirement benefits
    
    
    53
    
    
    
    
    50Other
    
    
    13
    
    
    
    
    8Total
    
    $
    528
    
    
    
    $
    507
 Under the companys deferred compensation plan, eligible associates may elect
to defer part of their compensation each year
into cash and/or stock unit alternatives. The
company issues shares to settle obligations with
participants who defer in stock units, and it
maintains shares in treasury sufficient to
settle all outstanding stock unit obligations. Litigation On February 28, 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 the directors of May. The complaint generally alleges that the directors of May
breached their fiduciary duties to May shareowners in approving the merger agreement with Federated
Department Stores, Inc. (Federated) and the merger consideration, including by not obtaining the
highest possible price for May. The complaint generally seeks to preliminarily and permanently
enjoin the merger, as well as other relief. May and the directors of May believe the allegations
contained in the complaint are without merit and intend to contest the allegations 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. Stock Option and Stock Related Plans Under the companys common stock option plans, options are granted at market price on the date of
grant. Options to purchase may extend for up to 10 years, may be exercised after stated intervals
of time, and are conditional upon continued active employment with the company. At the end of
2004, 13.2 million shares were available for grant under the plans, of which 5.1 million could be
issued as restricted stock. Effective February 2, 2003, the company adopted the fair value recognition provisions of 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 options granted prior to February 2, 2003, are accounted for as provided by APB Opinion
No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation cost has been
recognized related to these stock options because the option exercise price is fixed at the market
price on the date of grant. The company uses the Black-Scholes option pricing model to estimate the grant date fair
value of its 1996 and later option grants. The Black-Scholes assumptions used were: 2004
    
    
    
    2003
    
    
    
    2002Risk-free interest rate
    
    
    4.4
    %
    
    
    
    3.1
    %
    
    
    
    5.1
    %Expected dividend
    
    $
    0.97
    
    
    
    $
    0.96
    
    
    
    $
    0.95Expected option life (years)
    
    
    7
    
    
    
    
    7
    
    
    
    
    7Expected volatility
    
    
    32
    %
    
    
    
    32
    %
    
    
    
    32
    %
 A combined summary of the stock option plans at the end of 2004, 2003, and 2002 and of the
changes in outstanding shares within years is presented below: (shares in thousands)
    
  

  
  
    
  
    2004
  
    
  
  
  
  
    
  
    2003
  
    
  
  
  
  
    
  
    2002Average
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    
    
    ExerciseShares
    
    
    
    Price
    
    
    
    Shares
    
    
    
    Price
    
    
    
    Shares
    
    
    
    PriceBeginning of year
    
    
    26,123
    
    
    
    $
    33
    
    
    
    
    25,275
    
    
    
    $
    34
    
    
    
    
    22,474
    
    
    
    $
    34Granted
    
    
    4,319
    
    
    
    
    28
    
    
    
    
    4,237
    
    
    
    
    22
    
    
    
    
    5,131
    
    
    
    
    35Exercised
    
    
    (2,313
    )
    
    
    
    25
    
    
    
    
    (485
    )
    
    
    
    25
    
    
    

    
    (947
    )
    
    
    
    26Forfeited or expired
    
    
    (1,232
    )
    
    
    
    33
    
    
    
    
    (2,904
    )
    
    
    
    33
    
    
    
    
    (1,383
    )
    
    
    
    36End of year
    
    
    26,897
    
    
    
    $
    33
    
    
    
    
    26,123
    
    
    
    $
    33
    
    
    
    
    25,275
    
    
    
    $
    34Exercisable at end
of year
    
    
    17,001
    
    
    
    $
    35
    
    
    
    
    16,082
    
    
    
    $
    35
    
    
    
    
    14,431
    
    
    
    $
    35Fair value per share
of options granted
    
    
    
    
    
    
    $
    7
    
    
    
    
    
    
    
    
    $
    5
    
    
    
    
    
    
    
    
    $
    11




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##### Table of Contents



26     The May Department Stores Company The following table summarizes information about stock options outstanding at January 29,
2005: Options Outstanding
    
    
    
    Options ExercisableAverageExercise
    
    Number
    
    
    
    Remaining
    
    
    
    Average
    
    
    
    Number
    
    
    
    AveragePrice
    
    Outstanding
    
    
    
    Contractual
    
    
    
    Exercise
    
    
    
    Exercisable
    
    
    
    ExerciseRange
    
    (in thousands)
    
    
    
    Life(years)
    
    
    
    Price
    
    
    
    (in thousands)
    
    
    
    Price$22-30
    
    
    12,072
    
    
    
    
    7
    
    
    
    $
    26
    
    
    
    
    4,953
    
    
    
    $
    26$31-35
    
    
    5,616
    
    
    
    
    6
    
    
    
    
    34
    
    
    
    
    3,634
    
    
    
    
    34$36-45
    
    
    9,209
    
    
    
    
    5
    
    
    
    
    41
    
    
    
    
    8,414
    
    
    
    
    4126,897
    
    
    
    
    6
    
    
    
    $
    33
    
    
    
    
    17,001
    
    
    
    $
    35
 The company is authorized to grant restricted stock to management associates with or
without performance restrictions. No monetary consideration is paid by associates who receive
restricted stock. Restricted stock vests over periods of up to 10 years. In 2004 and 2003, the
company granted 958,000 and 125,000 shares of restricted stock, respectively. The aggregate
outstanding shares of restricted stock as of January 29, 2005, and January 31, 2004, were 1,527,000
and 904,000, respectively. For restricted stock grants, compensation expense is based upon the
grant date market price and is recorded over the vesting period. For performance-based restricted
stock, compensation expense is recorded over the performance period and is based on estimates of
performance levels. Common Stock Repurchase Programs In February 2004, the companys board of directors authorized a special common stock repurchase
program of $500 million. In July 2004, the company indefinitely suspended its $500 million
special common stock repurchase program and its common stock repurchase program used to
repurchase shares issued through its employee benefit plans. The special common stock repurchase
program has $482 million still available for repurchase. Preference Stock The company is authorized to issue up to 25 million shares of $0.50 par value preference stock. As
of January 29, 2005, there were 800,000 ESOP preference shares authorized and 415,451 shares
outstanding. Each ESOP preference share is convertible into shares of May common stock, at a
conversion rate of 33.787 shares of May common stock for each ESOP preference share. Each ESOP
preference share carries the number of votes equal to the number of shares of May common stock into
which the ESOP preference share could be converted. Dividends are cumulative and paid semiannually
at a rate of $38.025 per share per year. ESOP preference shares have a liquidation preference of
$507 per share plus accumulated and unpaid dividends. ESOP preference shares may be redeemed, in
whole or in part, at the option of May or an ESOP preference shareowner, at a redemption price of
$507 per share, plus accumulated and unpaid dividends. The redemption price may be satisfied in
cash or May common stock or a combination of both. The ESOP preference shares are shown outside of shareowners equity in the consolidated
balance sheet because the shares are redeemable by the holder or by the company in certain
situations. Shareowner Rights Plan The company has a shareowner rights plan under which a right is attached to
each share of the companys common stock. The rights become exercisable only under certain
circumstances involving actual
or potential acquisitions of Mays common stock by a person or by affiliated persons. Depending
upon the circumstances, the holder may be entitled to purchase units of the companys preference
stock, shares of the companys common stock, or shares of common stock of the acquiring person. The
rights will remain in existence until August 31, 2014, unless they are terminated, extended,
exercised, or redeemed. Quarterly Results (Unaudited) Quarterly results are determined in accordance with annual accounting policies. They include
certain items based upon estimates for the entire year. The quarterly information below is
presented using the same classifications as the annual financial statements. Summarized quarterly
results for the last two years were: (in millions, except per share)
    
    2004First
    
    
    
    Second
    
    
    
    Third
    
    
    
    Fourth
    
    
    
    YearNet sales
    
    $
    2,963
    
    
    
    $
    2,956
    
    
    
    $
    3,483
    
    
    
    $
    5,039
    
    
    
    $
    14,441Cost of sales:Recurring
    
    
    2,120
    
    
    
    
    2,065
    
    
    
    
    2,520
    
    
    
    
    3,478
    
    
    
    
    10,183Restructuring
markdowns
    
    
    5
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    29Selling, general, and
administrative expenses
    
    
    639
    
    
    
    
    634
    
    
    
    
    831
    
    
    
    
    917
    
    
    
    
    3,021Restructuring costs
    
    
    2
    
    
    
    
    9
    
    
    
    
    1
    
    
    
    
    7
    
    
    
    
    19Pretax earnings
    
    
    121
    
    
    
    
    160
    
    
    
    
    13
    
    
    
    
    509
    
    
    
    
    803Net earnings
    
    
    76
    
    
    
    
    101
    
    
    
    
    8
    
    
    
    
    339
    
    
    
    
    524Earnings per share:Basic
    
    $
    0.25
    
    
    
    $
    0.33
    
    
    
    $
    0.02
    
    
    
    $
    1.15
    
    
    
    $
    1.74Diluted
    
    
    0.24
    
    
    
    
    0.33
    
    
    
    
    0.02
    
    
    
    
    1.10
    
    
    
    
    1.70
 (in millions, except per share)
    
    2003First
    
    
    
    Second
    
    
    
    Third
    
    
    
    Fourth
    
    
    
    YearNet sales
    
    $
    2,873
    
    
    
    $
    3,000
    
    
    
    $
    2,976
    
    
    
    $
    4,494
    
    
    
    $
    13,343Cost of sales:Recurring
    
    
    2,088
    
    
    
    
    2,118
    
    
    
    
    2,160
    
    
    
    
    3,006
    
    
    
    
    9,372Restructuring
markdowns
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    5
    
    
    
    
    6Selling, general, and
administrative expenses
    
    
    640
    
    
    
    
    657
    
    
    
    
    658
    
    
    
    
    731
    
    
    
    
    2.686Restructuring costs
    
    
    
    
    
    
    
    318
    
    
    
    
    5
    
    
    
    
    (1
    )
    
    
    
    322Pretax earnings (loss)
    
    
    65
    
    
    
    
    (173
    )
    
    
    
    74
    
    
    
    
    673
    
    
    
    
    639Net earnings (loss)
    
    
    72
    
    
    
    
    (110
    )
    
    
    
    47
    
    
    
    
    425
    
    
    
    
    434Earnings (loss) per
share:Basic
    
    $
    0.23
    
    
    
    $
    (0.39
    )
    
    
    $
    0.15
    
    
    
    $
    1.45
    
    
    
    $
    1.44Diluted
    
    
    0.23
    
    
    
    
    (0.39
    )
    
    
    
    0.15
    
    
    
    
    1.38
    
    
    
    
    1.41
 Subsequent Events On February 28, 2005, May and 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 per share of cash and 0.3115 shares of Federated 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.




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##### Table of Contents



The May Department Stores Company     27 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 January 29, 2005, and January 31, 2004,
and the related condensed consolidating statements of earnings and cash flows for each of
the three fiscal years in the period ended January 29, 2005, are presented below. Condensed Consolidating Balance Sheet
As of January 29, 2005 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    
    $
    53
    
    
    
    $
    12
    
    
    
    $
    (3
    )
    
    
    $
    62Accounts receivable, net
    
    
    
    
    
    
    
    2,283
    
    
    
    
    46
    
    
    
    
    (35
    )
    
    
    
    2,294Merchandise inventories
    
    
    
    
    
    
    
    2,993
    
    
    
    
    99
    
    
    
    
    
    
    
    
    
    3,092Other current assets
    
    
    10
    
    
    
    
    101
    
    
    
    
    39
    
    
    
    
    (21
    )
    
    
    
    129Total current assets
    
    
    10
    
    
    
    
    5,430
    
    
    
    
    196
    
    
    
    
    (59
    )
    
    
    
    5,577Property and equipment, at cost
    
    
    
    
    
    
    
    9,868
    
    
    
    
    310
    
    
    
    
    
    
    
    
    
    10,178Accumulated depreciation
    
    
    
    
    
    
    
    (3,889
    )
    
    
    
    (99
    )
    
    
    
    
    
    
    
    
    (3,988
    )Property and equipment, net
    
    
    
    
    
    
    
    5,979
    
    
    
    
    211
    
    
    
    
    
    
    
    
    
    6,190Goodwill
    
    
    
    
    
    
    
    2,257
    
    
    
    
    377
    
    
    
    
    
    
    
    
    
    2,634Intangible assets, net
    
    
    
    
    
    
    
    440
    
    
    
    
    162
    
    
    
    
    
    
    
    
    
    602Other assets
    
    
    (1
    )
    
    
    
    152
    
    
    
    
    9
    
    
    
    
    
    
    
    
    
    160Intercompany (payable) receivable
    
    
    (437
    )
    
    
    
    (77
    )
    
    
    
    3,754
    
    
    
    
    (3,240
    )
    
    
    
    Investment in subsidiaries
    
    
    5,127
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,127
    )
    
    
    
    Total assets
    
    $
    4,699
    
    
    
    $
    14,181
    
    
    
    $
    4,709
    
    
    
    $
    (8,426
    )
    
    
    $
    15,163Liabilities and Shareowners EquityCurrent liabilities:Short-term debt
    
    $
    
    
    
    
    $
    368
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    368Current maturities of long-term debt
    
    
    
    
    
    
    
    145
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    145Accounts payable
    
    
    
    
    
    
    
    1,442
    
    
    
    
    90
    
    
    
    
    (3
    )
    
    
    
    1,529Accrued expenses
    
    
    9
    
    
    
    
    1,189
    
    
    
    
    128
    
    
    
    
    (57
    )
    
    
    
    1,269Income taxes payable
    
    
    
    
    
    
    
    114
    
    
    
    
    44
    
    
    
    
    
    
    
    
    
    158Total current liabilities
    
    
    9
    
    
    
    
    3,258
    
    
    
    
    262
    
    
    
    
    (60
    )
    
    
    
    3,469Long-term debt
    
    
    
    
    
    
    
    5,661
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    5,662Intercompany note payable (receivable)
    
    
    
    
    
    
    
    3,240
    
    
    
    
    
    
    
    
    
    (3,240
    )
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    
    745
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    818Other liabilities
    
    
    4
    
    
    
    
    1,014
    
    
    
    
    10
    
    
    
    
    (500
    )
    
    
    
    528ESOP preference shares
    
    
    211
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211Shareowners equity
    
    
    4,475
    
    
    
    
    263
    
    
    
    
    4,363
    
    
    
    
    (4,626
    )
    
    
    
    4,475Total liabilities and shareowners equity
    
    $
    4,699
    
    
    
    $
    14,181
    
    
    
    $
    4,709
    
    
    
    $
    (8,426
    )
    
    
    $
    15,163




---



##### Table of Contents



28     The May Department Stores Company Condensed Consolidating
Statement of Earnings
For the Fiscal Year Ended January 29, 2005 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    
    $
    13,737
    
    
    
    $
    1,911
    
    
    
    $
    (1,207
    )
    
    
    $
    14,441Cost of sales:Recurring
    
    
    
    
    
    
    
    9,918
    
    
    
    
    1,452
    
    
    
    
    (1,187
    )
    
    
    
    10,183Restructuring markdowns
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Selling, general, and administrative expenses
    
    
    
    
    
    
    
    2,697
    
    
    
    
    355
    
    
    
    
    (31
    )
    
    
    
    3,021Restructuring costs
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19Interest expense (income), net:External
    
    
    
    
    
    
    
    386
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    386Intercompany
    
    
    
    
    
    
    
    286
    
    
    
    
    (284
    )
    
    
    
    (2
    )
    
    
    
    Equity in earnings of subsidiaries
    
    
    (524
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    524
    
    
    
    
    Earnings before income taxes
    
    
    524
    
    
    
    
    402
    
    
    
    
    388
    
    
    
    
    (511
    )
    
    
    
    803Provision for income taxes
    
    
    
    
    
    
    
    140
    
    
    
    
    139
    
    
    
    
    
    
    
    
    
    279Net earnings
    
    $
    524
    
    
    
    $
    262
    
    
    

    $
    249
    
    
    
    $
    (511
    )
    
    
    $
    524
 Condensed Consolidating
Statement of Cash Flows
For the Fiscal Year Ended January 29, 2005 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedOperating activities:Net earnings
    
    $
    524
    
    
    
    $
    262
    
    
    
    $
    249
    
    
    
    $
    (511
    )
    
    
    $
    524Equity in earnings of subsidiaries
    
    
    (524
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    524
    
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    
    593
    
    
    
    
    47
    
    
    
    
    
    
    
    
    
    640Asset impairments
    
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12(Increase) decrease in working capital
    
    
    
    
    
    
    
    10
    
    
    
    
    14
    
    
    
    
    (1
    )
    
    
    
    23Other, net
    
    
    (194
    )
    
    
    
    394
    
    
    
    
    (31
    )
    
    
    
    (17
    )
    
    
    
    152Cash flows from (used for) operations
    
    
    (194
    )
    
    
    
    1,271
    
    
    
    
    279
    
    
    
    
    (5
    )
    
    
    
    1,351Investing activities:Net additions to property and equipment, and business combinations
    
    
    
    
    
    
    
    (3,686
    )
    
    
    
    (83
    )
    
    
    
    
    
    
    
    
    (3,769
    )Cash flows used for investing activities
    
    
    
    
    
    
    
    (3,686
    )
    
    
    
    (83
    )
    
    
    
    
    
    
    
    
    (3,769
    )Financing activities:Net short-term debt issuances
    
    
    
    
    
    
    
    368
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    368Net long-term debt issuances
    
    
    
    
    
    
    
    1,817
    
    
    
    
    (15
    )
    
    
    
    
    
    
    
    
    1,802Net issuances (repurchases) of common stock
    
    
    37
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43Dividend payments
    
    
    (298
    )
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (297
    )Intercompany activity, net
    
    
    455
    
    
    
    
    (275
    )
    
    
    
    (182
    )
    
    
    
    2
    
    
    
    
    Cash flows from (used for) financing activities
    
    
    194
    
    
    
    
    1,917
    
    
    
    
    (197
    )
    
    
    
    2
    
    
    
    
    1,916Decrease in cash and cash equivalents
    
    
    
    
    
    
    
    (498
    )
    
    
    
    (1
    )
    
    
    
    (3
    )
    
    
    
    (502
    )Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    
    551
    
    
    
    
    13
    
    
    
    
    
    
    
    
    
    564Cash and cash equivalents, end of year
    
    $
    
    
    
    
    $
    53
    
    
    
    $
    12
    
    
    
    $
    (3
    )
    
    
    $
    62




---



##### Table of Contents



The May Department Stores Company      29 Condensed Consolidating
Balance Sheet
As of January 31, 2004 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    
    $
    551
    
    
    
    $
    13
    
    
    
    $
    
    
    
    
    $
    564Accounts receivable, net
    
    
    
    
    
    
    
    1,773
    
    
    
    
    46
    
    
    
    
    (31
    )
    
    
    
    1,788Merchandise inventories
    
    
    
    
    
    
    
    2,633
    
    
    
    
    95
    
    
    
    
    
    
    
    
    
    2,728Other current assets
    
    
    
    
    
    
    
    76
    
    
    
    
    32
    
    
    
    
    (20
    )
    
    
    
    88Total current assets
    
    
    
    
    
    
    
    5,033
    
    
    
    
    186
    
    
    
    
    (51
    )
    
    
    
    5,168Property and equipment, at cost
    
    
    
    
    
    
    
    8,860
    
    
    
    
    243
    
    
    
    
    
    
    
    
    
    9,103Accumulated depreciation
    
    
    
    
    
    
    
    (3,882
    )
    
    
    
    (72
    )
    
    
    
    
    
    
    
    
    (3,954
    )Property and equipment, net
    
    
    
    
    
    
    
    4,978
    
    
    
    
    171
    
    
    
    
    
    
    
    
    
    5,149Goodwill
    
    
    
    
    
    
    
    1,129
    
    
    
    
    375
    
    
    
    
    
    
    
    
    
    1,504Intangible assets, net
    
    
    
    
    
    
    
    4
    
    
    
    
    164
    
    
    
    
    
    
    
    
    
    168Other assets
    
    
    
    
    
    
    
    125
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    133Intercompany (payable) receivable
    
    
    (642
    )
    
    
    
    161
    
    
    
    
    3,706
    
    
    
    
    (3,225
    )
    
    
    
    Investment in subsidiaries
    
    
    4,981
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,981
    )
    
    
    
    Total assets
    
    $
    4,339
    
    
    
    $
    11,430
    
    
    
    $
    4,610
    
    
    
    $
    (8,257
    )
    
    
    $
    12,122Liabilities and Shareowners EquityCurrent liabilities:Short-term debt
    
    $
    
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    
    
    
    
    $
    Current
maturities of long-term debt
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239Accounts payable
    
    
    
    
    
    
    
    1,095
    
    
    
    
    91
    
    
    
    
    5
    
    
    
    
    1,191Accrued expenses
    
    
    4
    
    
    
    
    963
    
    
    
    
    105
    
    
    
    
    (56
    )
    
    
    
    1,016Income taxes payable
    
    
    
    
    
    
    
    285
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    325Total current liabilities
    
    
    4
    
    
    
    
    2,582
    
    
    
    
    236
    
    
    
    
    (51
    )
    
    
    
    2,771Long-term debt
    
    
    
    
    
    
    
    3,796
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    3,797Intercompany note payable (receivable)
    
    
    
    
    
    
    
    3,225
    
    
    
    
    
    
    
    
    
    (3,225
    )
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    
    645
    
    
    
    
    67
    
    
    
    
    
    
    
    
    
    712Other liabilities
    
    
    
    
    
    
    
    985
    
    
    
    
    9
    
    
    
    
    (487
    )
    
    
    
    507ESOP preference shares
    
    
    235
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    235Unearned compensation
    
    
    (91
    )
    
    
    
    (91
    )
    
    
    
    
    
    
    
    
    91
    
    
    
    
    (91
    )Shareowners equity
    
    
    4,191
    
    
    
    
    288
    
    
    
    
    4,297
    
    
    
    
    (4,585
    )
    
    
    
    4,191Total
liabilities and shareowners equity
    
    $
    4,339
    
    
    
    $
    11,430
    
    
    
    $
    4,610
    
    
    
    $
    (8,257
    )
    
    
    $
    12,122




---



##### Table of Contents



30
    
    The May Department Stores Company
 Condensed Consolidating
Statement of Earnings
For the Fiscal Year Ended January 31, 2004 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    
    $
    12,735
    
    
    
    $
    1,918
    
    
    
    $
    (1,310
    )
    
    
    $
    13,343Cost of sales:Recurring
    
    
    
    
    
    
    
    9,185
    
    
    
    
    1,477
    
    
    
    
    (1,290
    )
    
    
    
    9,372Restructuring markdowns
    
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Selling, general, and administrative expenses
    
    
    
    
    
    
    
    2,434
    
    
    
    
    286
    
    
    
    
    (34
    )
    
    
    
    2,686Restructuring costs
    
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    322Interest expense (income), net:External
    
    
    
    
    
    
    
    318
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    318Intercompany
    
    
    
    
    
    
    
    285
    
    
    
    
    (285
    )
    
    
    
    
    
    
    
    
    Equity in earnings of subsidiaries
    
    
    (434
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    434
    
    
    
    
    Earnings before income taxes
    
    
    434
    
    
    
    
    185
    
    
    
    
    440
    
    
    
    
    (420
    )
    
    
    
    639Provision for income taxes
    
    
    
    
    
    
    
    48
    
    
    
    
    157
    
    
    
    
    
    
    
    
    
    205Net earnings
    
    $
    434
    
    
    
    $
    137
    
    
    
    $
    283
    
    
    
    $
    (420
    )
    
    
    $
    434
 Condensed Consolidating
Statement of Cash Flows
For the Fiscal Year Ended January 31, 2004 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedOperating activities:Net earnings
    
    $
    434
    
    
    
    $
    137
    
    
    
    $
    283
    
    
    
    $
    (420
    )
    
    
    $
    434Equity in earnings of subsidiaries
    
    
    (434
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    434
    
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    
    525
    
    
    
    
    39
    
    
    
    
    
    
    
    
    
    564Asset impairments
    
    
    
    
    
    
    
    317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    317(Increase) decrease in working capital
    
    
    (1
    )
    
    
    
    425
    
    
    
    
    15
    
    
    
    
    3
    
    
    
    
    442Other, net
    
    
    (27
    )
    
    
    
    27
    
    
    
    
    (65
    )
    
    
    
    (17
    )
    
    
    
    (82
    )Cash flows from (used for) operations
    
    
    (28
    )
    
    
    
    1,431
    
    
    
    
    272
    
    
    
    
    
    
    
    
    
    1,675Investing activities:Net additions to property and equipment, and business combinations
    
    
    
    
    
    
    
    (484
    )
    
    
    
    (135
    )
    
    
    
    
    
    
    
    
    (619
    )Cash flows used for investing activities
    
    
    
    
    
    
    
    (484
    )
    
    
    
    (135
    )
    
    
    
    
    
    
    
    
    (619
    )Financing activities:Net short-term debt repayments
    
    
    
    
    
    
    
    (150
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    (150
    )Net long-term debt repayments
    
    
    
    
    
    
    
    (53
    )
    
    
    
    (25
    )
    
    
    
    
    
    
    
    
    (78
    )Net issuances (repurchases) of common stock
    
    
    (39
    )
    
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26
    )Dividend payments
    
    
    (295
    )
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (293
    )Intercompany activity, net
    
    
    362
    
    
    
    
    (245
    )
    
    
    
    (117
    )
    
    
    
    
    
    
    
    
    Cash flows from (used for) financing activities
    
    
    28
    
    
    
    
    (433
    )
    
    
    
    (142
    )
    
    
    
    
    
    
    
    
    (547
    )Increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    
    514
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    509Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    
    37
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    55Cash and cash equivalents, end of year
    
    $
    
    
    
    
    $
    551
    
    
    
    $
    13
    
    
    
    $
    
    
    
    
    $
    564




---



##### Table of Contents



The May Department Stores Company
    
    
    31
 Condensed Consolidating
Statement of Earnings
For the Fiscal Year Ended February 1, 2003 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    
    $
    12,978
    
    
    
    $
    1,865
    
    
    
    $
    (1,352
    )
    
    
    $
    13,491Cost of sales:Recurring
    
    
    
    
    
    
    
    9,294
    
    
    
    
    1,477
    
    
    
    
    (1,331
    )
    
    
    
    9,440Restructuring markdowns
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Selling, general, and administrative expenses
    
    
    
    
    
    
    
    2,563
    
    
    
    
    245
    
    
    
    
    (36
    )
    
    
    
    2,772Restructuring costs
    
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91Interest expense (income), net:External
    
    
    
    
    
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345Intercompany
    
    
    
    
    
    
    
    284
    
    
    
    
    (284
    )
    
    
    
    
    
    
    
    
    Equity in earnings of subsidiaries
    
    
    (542
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    
    Earnings before income taxes
    
    
    542
    
    
    
    
    378
    
    
    
    
    427
    
    
    
    
    (527
    )
    
    
    
    820Provision for income taxes
    
    
    
    
    
    
    
    123
    
    
    
    
    155
    
    
    
    
    
    
    
    
    
    278Net earnings
    
    $
    542
    
    
    
    $
    255
    
    
    
    $
    272
    
    
    
    $
    (527
    )
    
    
    $
    542
 Condensed Consolidating
Statement of Cash Flows
For the Fiscal Year Ended February 1, 2003 Subsidiary
    
    
    
    Other(millions)
    
    Parent
    
    
    
    Issuer
    
    
    
    Subsidiaries
    
    
    
    Eliminations
    
    
    
    ConsolidatedOperating activities:Net earnings
    
    $
    542
    
    
    
    $
    255
    
    
    
    $
    272
    
    
    
    $
    (527
    )
    
    
    $
    542Equity in earnings of subsidiaries
    
    
    (542
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    542
    
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    
    522
    
    
    
    
    35
    
    
    
    
    
    
    
    
    
    557(Increase) decrease in working capital
    
    
    (1
    )
    
    
    
    191
    
    
    
    
    22
    
    
    
    
    (1
    )
    
    
    
    211Other, net
    
    
    (170
    )
    
    
    
    428
    
    
    
    
    (94
    )
    
    
    
    (14
    )
    
    
    
    150Cash flows from (used for) operations
    
    
    (171
    )
    
    
    
    1,396
    
    
    
    
    235
    
    
    
    
    
    
    
    
    
    1,460Investing activities:Net additions to property and equipment, and business combinations
    
    
    
    
    
    
    
    (745
    )
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    (790
    )Cash flows used for investing activities
    
    
    
    
    
    
    
    (745
    )
    
    
    
    (45
    )
    
    
    
    
    
    
    
    
    (790
    )Financing activities:Net short-term debt issuances
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    72Net long-term debt repayments
    
    
    
    
    
    
    
    (433
    )
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    (434
    )Net issuances (repurchases) of common stock
    
    
    (22
    )
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14
    )Dividend payments
    
    
    (294
    )
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291
    )Intercompany activity, net
    
    
    487
    
    
    
    
    (300
    )
    
    
    
    (187
    )
    
    
    
    
    
    
    
    
    Cash flows from (used for) financing activities
    
    
    171
    
    
    
    
    (650
    )
    
    
    
    (188
    )
    
    
    
    
    
    
    
    
    (667
    )Increase in cash and cash equivalents
    
    
    
    
    
    
    
    1
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    3Cash and cash equivalents, beginning of year
    
    
    
    
    
    
    
    36
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    52Cash and cash equivalents, end of year
    
    $
    
    
    
    
    $
    37
    
    
    
    $
    18
    
    
    
    $
    
    
    
    
    $
    55




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##### Table of Contents



32
    
    The May Department Stores Company
 Schedule II
The May Department Stores Company and Subsidiaries Valuation and
Qualifying Accounts For the Three Fiscal Years
Ended January 29, 2005 Charges to CostsBalance
    
    
    
    and ExpensesBeginning
    
    
    
    and Other
    
    
    
    
    
    
    
    
    Balance End(millions)
    
    of Period
    
    
    
    Adjustments
    
    
    
    Deductions(b)
    
    
    
    of PeriodFISCAL YEAR ENDED
January 29, 2005
Allowance for uncollectible accounts
    
    $
    72
    
    
    
    $
    112
    (a)
    
    
    $
    (102
    )
    
    
    $
    82FISCAL YEAR ENDED
January 31, 2004
Allowance for uncollectible accounts
    
    $
    74
    
    
    
    $
    91
    
    
    
    $
    (93
    )
    
    
    $
    72FISCAL YEAR ENDED
February 1, 2003
Allowance for uncollectible accounts
    
    $
    79
    
    
    
    $
    97
    
    
    
    $
    (102
    )
    
    
    $
    74
   (a)
    
    Includes $20 million of allowance for uncollectible
accounts acquired in the 2004 Marshall Fields
acquisition.(b)
    
    Writeoff of accounts determined to be uncollectible, net of recoveries of $30 million in 2004, $24 million in 2003, and $25 million in 2002. 
 Item 9. Changes in
and Disagreements with Accountants on Accounting and Financial
Disclosure The company had no disagreements with its accountants during the last three fiscal years. 
 Item 9A. Controls and
Procedures As of the period covered by this annual report on Form 10-K/A, 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. The Report of Management, including internal control over financial reporting, is on
page 12 of this annual report on Form 10-K/A. On May 9, 2005, the company
amended its 2004 Annual Report on Form 10-K filed March 25, 2005 to
restate the classification of certain amounts recorded in the
components of property and equipment in its consolidated balance
sheet as of January 29, 2005. This restatement did not change the
total amount reported for property and equipment and there was no
change to depreciation expense, net earnings, or earnings per share
reported. Management believes this is an immaterial restatement and
there is no related material weakness in internal control.
Accordingly, management has not changed its conclusion that the
companys internal controls over financial reporting are
designed and operating effectively as of January 29, 2005. Managements assessment of the effectiveness of internal control over financial reporting as of January 29, 2005, has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their report which is on
page 13 of this annual report on Form 10-K/A. Other than described below, there have been no changes in our internal controls or in other factors that could materially affect these controls subsequent to the
date the controls were evaluated. On
July 31, 2004, we acquired the operating assets of the Marshall Fields department store
group from Target Corporation. Target will continue to provide accounting and other systems support
for Marshall Fields over a transition period not to exceed eight months while we migrate Marshall
Fields to our information technology systems. During the 2004 third quarter, we converted
proprietary credit operations and fixed asset 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 February and March 2005. Target and its operating divisions generally operate under a common set of controls and
information technology systems. During the transition period, Marshall Fields was subject to the
same financial reporting controls historically provided by Target. Target has not disclosed any
material control weaknesses or material changes in its internal controls in previous public
filings. 
 Item 9B. Other
Information None.




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##### Table of Contents



The May Department Stores Company
    
    
    33
 
 Part III 
 Items 10, 11, 13, 14. Directors and Executive Officers of May, Executive Compensation,
Certain Relationships and Related Transactions, Principal Accounting
Fees and Services Pursuant to paragraph G (Information to be Incorporated by Reference) of the General
Instructions to Form 10-K, the information required by Items 10, 11, 13, and 14 (other than
information about executive officers of May and its Code of Ethics) is incorporated by reference
from the definitive proxy statement for the registrants 2005 Annual Meeting of Shareowners to be
filed with the commission pursuant to Regulation 14A. Information about executive officers of May
and Mays Code of Ethics is set forth in Part I of this Form 10-K/A, under the heading Items 1. and
2. Business and Properties. 
 Item 12. Security
Ownership of Certain Beneficial Owners and Management
Equity Compensation Plan Information The following table presents information as of the end of the fiscal year with respect to Mays equity compensation plans. (a)
    
    
    (b)
    
    
    (c)Number of SecuritiesRemaining Available forNumber of Securities to
    
    
    
    
    
    
    Future Issuance Underbe Issued Upon Exercise
    
    
    Weighted-Average Exercise
    
    
    Equity Compensationof Outstanding Options,
    
    
    Price of Outstanding Options,
    
    
    Plans (Excluding SecuritiesPlan Category
    
    Warrants, and Rights
    
    
    Warrants, and Rights
    
    
    Reflected in Column (a))Equity Compensation Plans
Approved bySecurity Holders
    
    
    28,474,806
    (1)
    
    $
    33
    
    
    
    13,425,014
    (2)Equity Compensation Plans Not
Approved bySecurity Holders
    
    
    0
    
    
    $
    0
    
    
    
    0Total
    
    
    28,474,806
    
    
    $
    33
    
    
    
    13,425,014
   (1)
    
    Consists of the 1994 Stock Incentive Plan (28,424,158 shares) and the Restricted
Stock Plan for Non-Management Directors (50,648 shares).(2)
    
    The number of shares shown includes 13,228,361 reserved for issuance under the
1994 Stock Incentive Plan and 196,653 reserved for issuance under the Restricted Stock
Plan for Non-Management Directors. Under the Terms of the 1994 Stock Incentive Plan, 5,051,731
of the shares remaining for issuance may be issued at the discretion of the
committee as restricted stock grants or Performance Restricted Stock grants.




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##### Table of Contents



34
    
    The May Department Stores Company
 
 Part IV 
 Item 15. Exhibits,
Financial Statement Schedules (a) Documents filed as part of this report: (1)
    
    Financial Statements
    
    Page in this ReportReport of Deloitte & Touche LLP, Independent Registered Public Accounting Firm
    
    
    12Consolidated Statements of Earnings for the three fiscal years ended January 29, 2005
    
    
    14Consolidated Balance Sheets as of January 29, 2005, and January 31, 2004
    
    
    15Consolidated Statements of Cash Flows for the three fiscal years ended January 29, 2005
    
    
    16Consolidated Statements of Shareowners Equity for the three fiscal years ended January 29, 2005
    
    
    17Notes to Consolidated Financial Statements
    
    
    18-26(2)
    
    Supplemental Financial Statement Schedule (for the three fiscal years ended January 29, 2005):Schedule II Valuation and Qualifying Accounts
    
    
    32
 (3)
    
    Exhibits:
    
    Location1.1
    
    Purchase Agreement, dated July 13, 2004
    
    Incorporated by Reference to
Exhibit 1.1 to Current Report on Form 8-K, filedJuly 21, 2004.3.1
    
    Amended and Restated Certificate of Incorporation of May, dated May 22, 1996
    
    Incorporated 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 Certificate of Incorporation, dated May 21, 1999
    
    Incorporated by Reference to Exhibit 3(b) of Form 10-Q filed June 8, 1999.3.3
    
    By-Laws of May
    
    Incorporated by Reference to
Exhibit 3.1 to Current Report on Form 8-K, filedMarch 23, 2005.4.1
    
    Amended and Restated Rights Agreement, dated August 31, 2004
    
    Incorporated by Reference to Exhibit 4.1 to Current Report on Form 8-K, filed September 3, 2004.4.2
    
    Amendment to Rights Agreement, dated February 27, 2005
    
    Incorporated by Reference to
Exhibit 4.1 to Current Report on Form 8-K, filedMarch 2, 2005.4.3
    
    Certificate of Designation,
Preferences and Rights of the Junior Participating Preference Shares
and ESOP Preference Shares
    
    Incorporated by Reference to 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, filedJuly 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.




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##### Table of Contents



The May Department Stores Company
    
    
    35
 Item 15. Exhibits, Financial Statement Schedules (continued) 4.6
    
    Registration Rights Agreement, dated July 20, 2004
    
    Incorporated by Reference
to Exhibit 4.2 to Current Report
on Form 8-K, filedJuly 21,
2004.10.1
    
    1994 Stock Incentive Plan
    
    Incorporated by Reference
to Exhibit 10.1 to Current
Report on Form 8-K, filedMarch
23, 2005.10.2
    
    Deferred Compensation Plan
    
    Incorporated by Reference
to Exhibit 10.2 to Current
Report on Form 8-K, filedMarch
23, 2005.10.3
    
    Executive Incentive Compensation Plan for Corporate Executives
    
    Incorporated by 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, filedMarch
23, 2005.10.5
    
    Amended and Restated Five-Year Credit Agreement, dated August 24, 2004
    
    Incorporated by Reference
to Exhibit 10.1 to Current
Report on Form 8-K, filedAugust
27, 2004.10.6
    
    Form of Restricted Stock Agreement
    
    Incorporated by Reference
to Exhibit 10.4 to Current
Report on Form 8-K, filedMarch
23, 2005.10.7
    
    Form of Performance Restricted Stock Agreement
    
    Incorporated by Reference
to Exhibit 10.5 to Current
Report on Form 8-K, filedMarch
23, 2005.10.8
    
    Form of Performance Restricted Stock Agreement (for Bridal Group)
    
    Incorporated by Reference
to Exhibit 10.6 to Current
Report on Form 8-K, filedMarch
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, filedMarch
23, 2005.12
    
    Computation of Ratio of Earnings to Fixed Charges
    
    Filed herewith.21
    
    Subsidiaries of May
    
    Filed herewith.23
    
    Consent of Independent Registered Public Accounting Firm
    
    Filed herewith.31.1
    
    Certification Pursuant to Exchange
Act 13a-15 and 15d-15(e)
    
    Filed herewith.31.2
    
    Certification Pursuant to Exchange Act 13a-15 and 15d-15(e)
    
    Filed herewith.32
    
    Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350, as adopted)
    
    Filed herewith.
 All other schedules and exhibits of May for which provision is made in the applicable
regulations of the Securities and Exchange Commission have been omitted, as they are not required
or are inapplicable or the information required thereby has been given otherwise.




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##### Table of Contents



36
    
    The May Department Stores Company
 
 Signatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
May has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized. THE MAY DEPARTMENT STORES COMPANYDate:
May 9, 2005
    
    By:
    
    /s/
    
    Thomas D. FingletonThomas D. FingletonExecutive Vice President andChief Financial Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of May and in the capacities and on the dates indicated. Date
    
    
    
    Signature
    
    TitlePrincipal Executive Officer:May 9, 2005
    
    /s/
    
    John L. Dunham
    
    Director, Chairman, President, andJohn L. Dunham
    
    Chief Executive OfficerPrincipal Financial and
Accounting Officer:May 9, 2005
    
    /s/
    
    Thomas D. Fingleton
    
    Executive Vice President and ChiefThomas D. Fingleton
    
    Financial OfficerDirectors:May 9, 2005
    
    /s/
    
    R. Dean Wolfe
    
    Director and Executive Vice PresidentR. Dean WolfeMay 9, 2005
    
    /s/
    
    Marsha J. Evans
    
    DirectorMarsha J. EvansMay 9, 2005
    
    /s/
    
    Russell E. Palmer
    
    DirectorRussell E. PalmerMay 9, 2005
    
    /s/
    
    Michael R. Quinlan
    
    DirectorMichael R. QuinlanMay 9, 2005
    
    /s/
    
    David B. Rickard
    
    DirectorDavid B. RickardMay 9, 2005
    
    /s/
    
    Joyce M. Roche
    
    DirectorJoyce M. Roche




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##### Table of Contents



The May Department Stores Company     43 Shareowner Information Corporate
Headquarters
The May Department Stores Company
611 Olive Street
St. Louis, Mo. 63101-1799
(314) 342-6300 2005 Annual
Meeting
Information regarding The May Department Stores Company Annual Meeting of Shareowners will be
provided in the proxy statement/prospectus that will be issued later this year. Information
Requests
Copies of our annual report on Form 10-K, proxy statement, and Form 10-Q quarterly reports to the
Securities and Exchange Commission, and recent press releases are available free of charge from the
following sources: Corporate Communications
      The May Department Stores Company
      611 Olive Street
      St. Louis, Mo. 63101-1799 Web site: www.mayco.com Our Policy on Business Conduct andthe Statement of Corporate Responsibilityalso are available
from the above sources. The Policy on Business Conductoutlines our business policies and ethics.
The Statement of Corporate Responsibilityincludes our policies on affirmative action and equal
employment opportunity, supplier diversity, sexual harassment, and vendor standards of conduct. Information on corporate governance, including the board of directors governance guidelines and the
charters for our board committees, can be found on our Web site in the Governance section. A summary of charitable contributions by The May Department Stores Company and our Foundation is
available on our Web site in the Community Involvement section. Security analysts, investment professionals, and shareowners may direct their inquiries to: Mr. Jan R. Kniffen
      Senior Vice President and Treasurer
      (314) 342-6413 Certifications
The most recent certifications by the companys Chief Executive Officer and Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to our Form 10-K.
The Chief Executive Officers most recent certification to the New York Stock Exchange was
submitted June 9, 2004. Common Stock
Shares of May common stock are listed and traded on the New York Stock Exchange under the symbol
MAY. The stock is quoted as MayDS in daily newspapers. Dividend Reinvestment
Plan
Shareowners can economically and conveniently reinvest dividends on May common stock through
participation in the Dividend Reinvestment Plan. Participating shareowners also may make optional
cash purchases of May common stock. For information, please contact The Bank of New York (see
below). Shareowner Inquiries
For assistance with the Dividend Reinvestment Plan, dividend payments, shareowner records, and
transfers, please contact our transfer agent and registrar as noted below: The Bank of New York
Toll-free within the United States: (800) 292-2301
Outside the United States: (610) 382-7833
Email: shareowner-svcs@bankofny.com
Web site: www.stockbny.com Certificate transfers and address changes:
The Bank of New York
P.O. Box 11002
Church Street Station
New York, N.Y. 10286-1002 Dividend Reinvestment Plan inquiries:
The Bank of New York
P.O. Box 11258
Church Street Station
New York, N.Y. 10286-1258 Other written inquiries:
The Bank of New York 
P.O. Box 11258
Church Street Station
New York, N.Y. 10286-1258