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Mercantile Stores Co Inc · 10-K · For 1/29/94 · EX-13

Filed On 4/26/94   ·   Accession Number 64923-94-4   ·   SEC File 1-03339

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  As Of                Filer                Filing    For/On/As Docs:Size

 4/26/94  Mercantile Stores Co Inc          10-K        1/29/94    5:96K

Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         12     53K 
 5: EX-13       Annual or Quarterly Report to Security Holders        26    156K 
 2: EX-21       Subsidiaries of the Registrant                         1      8K 
 3: EX-23       Consent of Experts or Counsel                          1      5K 
 4: EX-24       Power of Attorney                                      1      7K 


EX-13   —   Annual or Quarterly Report to Security Holders

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The Corporation Mercantile Stores Company, Inc. is a traditional department store retailer operating 101 stores at year-end. The stores are operated under 13 different names and vary in size, with the average store approximating 180,000 square feet. They cater to middle to upper-middle income customers and are widely known for service and value. They offer a wide selection of quality merchandise with special emphasis placed on fashion apparel, accessories and fashion home furnishings. In addition to its department store operations, the Company maintains a partnership position in five operating shopping center ventures.
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[Download Table] Financial Highlights For the fiscal year (in millions, except per share data) 1993 1992 1991 (Year Ended (Year Ended (Year Ended January 29, 1994) January 31, 1993) January 31, 1992) Per Per Per Amount Share Amount Share Amount Share Net Sales $2,729.9 $2,732.0 $2,442.4 Operating Income, Net of Income Taxes: Excluding relocation $2,186.6 $ 2.35 $21,97.3 $ 2.64 $ 114.0 $ 3.10 Relocation provision (10.5) (.28) Net Income from Operations 86.6 2.35 86.8 2.36 114.0 3.10 Nonrecurring Income (Charges): Income taxes 3.1 . 09 Postretirement benefits (12.2) (.33) Early retirement of debt (5.5) (.15) 3.1 .09 (17.7) (.48) Net Income $ 89.7 $ 2.44 $ 69.1 $ 1.88 $ 114.0 $ 3.10 Cash Dividends Declared and Paid $ 37.6 $ 1.02 $ 37.6 $ 1.02 $ 37.1 $1.003/4 Stockholders' Equity $1,334.7 $36.23 $1,282.6 $34.81 $1,251.0 $33.96 [Download Table] MARKET AND DIVIDEND INFORMATION For the fiscal year 1993 1992 Market Dividends Market Dividends Quarter High Low Declared Paid High Low Declared Paid First $371/4 $325/8 $ .51 $ .251/2 $421/8 $321/8 $ .51 $ .251/2 Second $357/8 $301/4 $ .251/2 $351/2 $317/8 $ .251/2 Third $361/8 $297/8 $ .51 $ .251/2 $341/8 $293/8 $ .51 $ .251/2 Fourth $391/2 $341/2 $ .251/2 $361/2 $301/2 $ .251/2 $1.02 $1.02 $1.02 $1.02 <FN> The Company's common stock is traded on the New York Stock Exchange (NYSE symbol - MST). The number of stockholders at January 29, 1994 was 10,197.
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Management's Discussion and Analysis Results of Operations Sales - Sales for 1993 were $2.7 billion or approximately even with 1992. Sales in the fourth quarter decreased .8% to $888 million. Sales in comparable units declined 1.9% in the current year and 2.6% in the quarter. Sales in 1992, due to the addition of the 16-store Maison Blanche (MB) unit, increased 11.9% as comparable store sales declined 2.6%. In 1991, total and comparable sales increased 3.2% and 1.5%, respectively. The Company's sales performance for the periods under review has been disappointing and, certainly, below target. To a significant degree, these results can be attributed to the downside effect of the prolonged learning curve required by the substantial number of our merchandise associates whose job responsibilities have been changed because of the recent relocation and consolidations. Net Income - Net income in 1993, before LIFO and nonrecurring items, was $89 million, a decline of 8.1% from the $97 million of net income reported on the same basis in 1992. The last-in, first-out (LIFO) method of inventory valuation had differing impacts on income for the past three fiscal years. Earnings for 1993 and 1992 were also affected by extraordinary and nonrecurring items. Net income for fiscal 1993 reflects a first quarter credit of $3.1 million due to a reduction in income tax expense attributable to the adoption of a new accounting standard. Net income for 1992 was reduced by a total of $28.2 million due to charges recorded in that year's first quarter for the adoption of a new accounting standard covering postretirement benefits, the relocation of the corporate buying office and other divisional functions, and costs associated with the early retirement of debt. The following summary depicts the influences which LIFO and the nonrecurring items have had on net income for both the full year and the fourth quarter for the last three years: [Download Table] 1993 1992 1991 Fiscal Year (in thousands, except per share data) Per Per Per Amount Share Amount Share Amount Share Net sales $2,729,928 $2,732,041 $2,442,425 % (decrease) increase (.1) 11.9 3.2 Net income before LIFO and nonrecurring items $ 88,946 $2.41 $21,96,837 $2.63 $2,119,539 $3.25 LIFO impact (2,307) (.06) 500 .01 (5,500) (.15) Income taxes 3,100 .09 Postretirement benefits (12,200) (.33) Relocation provision (10,500) (.28) Early retirement of debt (5,550) (.15) Net income $21,89,739 $2.44 $21,69,087 $1.88 $2,114,039 $3.10 Fourth Quarter Net sales $ 888,060 $ 894,928 $ 795,733 % (decrease) increase (.8) 12.5 1.1 Net income before LIFO $ 54,011 $1.47 $ 50,018 $1.36 $ 42,173 $1.15 LIFO impact 1,945 .05 4,800 .13 (1,100) (.03) Net income $ 55,956 $1.52 $ 54,818 $1.49 $ 41,073 $1.12
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The 8% improvement in 1993 fourth quarter pre-LIFO net income was primarily attributable to a 6.2% reduction in operating expenses which mostly resulted from expense reduction initiatives that were implemented at the beginning of the third quarter. Also contributing to this fourth quarter improvement was a $1.8 million reduction in interest expense due, primarily, to the pay down of high interest mortgage notes which were outstanding during last year's fourth quarter and a $3.2 million increase in other income attributable to the combination of a sale of land not used in operations and a sale of the Company's position in a relatively insignificant joint venture. In the 1992 fourth quarter, pre-LIFO net income improved 18% from the prior year's comparable period. This improvement was primarily the result of better merchandise margins due to fewer regular markdowns. The 1991 fourth quarter, pre-LIFO net income declined 7.5% from the 1990 fourth quarter. This profit reduction was attributable approximately equally to a reduction in merchandise margins resulting from heightened promotional activity and an increase in occupancy and general expenses due to a flat sales trend. Cost of Goods Sold - The Company classifies certain occupancy and buying costs as cost of goods sold. Occupancy expenses so classified are rent, depreciation, real estate taxes and utilities. Buying costs classified as cost of goods sold include payroll and travel-related expenses associated with the corporate buying function. In 1993, cost of goods sold on a FIFO basis increased 1.2%, as a percent to sales, over the prior year. Approximately two-thirds of this increase was due to an invasion of merchandise margins which resulted from intensified promotional activity. In 1992, FIFO costs of goods sold increased .5%, as a percent to sales, from the prior year. The 1992 year witnessed an improvement in merchandising results due primarily to better inventory control; however, this positive result was more than offset by an .8% increase in occupancy expenses most of which was attributable to the lower sales productivity generated by the MB unit. In 1991, FIFO costs of goods sold increased .3% over the prior year. Merchandise margins were relatively flat during 1991 while occupancy costs, primarily depreciation, increased. The Company uses the last-in, first-out (LIFO) method of inventory valuation to value substantially all of its inventories. This method matches current cost with current revenue and serves to offset inflationary profits in inventory. It impacted cost of goods sold, as a percent to sales, as follows: [Download Table] 1993 1992 1991 Cost of goods sold 71.9% 70.5% 70.4% LIFO charge .2 .4 Cost of goods sold (FIFO) 71.7% 70.5% 70.0% Operating Expenses, Interest Expense, and Other Income - Selling, general, and administrative expenses (SG&A), as a percent to net sales, decreased to 22.9% in 1993 from 23.5% in 1992. The 1991 SG&A expenses were 22.4%. The 1993 decrease is due to improvements in various expense categories resulting from cost reduction initiatives that were implemented at the start of the third quarter. Reductions in associate benefit related expenses and advertising expenses constituted approximately two-thirds of the $15 million decrease in SG&A expenses for 1993. The 1992 increase is due, primarily, to increases in two expense categories: payroll and payroll-related expenses, and advertising. These expense categories increased, as a percent to sales, by .7% and .3%, respectively, over the prior year. Approximately half of this increase was attributable to the 16-store MB unit in which a lower sales productivity produced higher expense ratios. The slight 1991 increase in SG&A expense is due to increases in payroll and payroll-related expenses offset by declines in other operating expense categories. During the first quarter of 1992, the Company provided $17 million, before income taxes, for the relocation of the corporate buying office from New York City to Greater Cincinnati and to consolidate divisional functions. The provision was made to cover the costs of severance pay, associate relocation, lease cost absorption, and other restructuring related expenses. Interest expense, net, decreased $1.4 million during 1993. An interest income increase of $2.2 million has been partially offset by an increase of $.8 million in interest expense. The net decrease was due to a combination of having larger sums of cash available for short-term investments than in the prior year reduced by the servicing of higher average outstanding debt levels in 1993 as a result of the placement of $200 million of long-term debt in September 1992. As detailed in Note 5 of Notes to Consolidated Financial Statements, the Company prepaid structured debt of $25 million in 1993. The Company also prepaid structured debt of $124 million in 1992.
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Other income increased $3.9 million in the current year compared to a $1.3 million decrease in 1992 and a $1.3 million increase in 1991. The current year increase is primarily due to gains on sales of land not used or needed in the business and the divestiture of a relatively insignificant shopping center joint venture. The most significant remaining elements of this line item are the Company's portion of finance charge income on customer accounts (other than MB) which it shares under the terms of a service agreement with Citibank; the net finance charges earned on the MB receivables; and the Company's share of income from shopping center joint ventures. The Company's share of finance income under the service arrangement with Citibank was approximately $14 million in 1993, $16 million in 1992, and $23.5 million in 1991. The $2 million decrease in 1993 was due primarily to a reduction in the customer receivable portfolio (other than MB) because of a combination of lower private label credit sales (41.2% of total sales in 1993 against 41.8% in 1992) and a faster paydown of credit card balances by our customers than in the prior year. The $7.5 million 1992 decrease was attributable primarily to a $5.4 million penalty accruing from a downward adjustment in the revenue sharing formula because of the termination notice served on Citibank by the Company on February 1, 1992. This matter is further discussed in Note 4 of Notes to Consolidated Financial Statements. The remaining approximately $2 million decline in 1992 revenue sharing was also related to a reduction in the customer receivable portfolio (other than MB) because of a combination of lower private label credit sales and our customers payment of credit card balances more rapidly than in the prior year. Prior to November 1993, the Company sold all of its MB customer receivables to an unaffiliated company. Under the terms of the Sale and Servicing Agreement, customer receivables were sold at a discount, without recourse, on a daily basis. The income generated by the MB credit program was approximately $6 million for both the 1993 and 1992 fiscal years. The costs associated with servicing these receivables, which were $3.2 million for each of the 1993 and 1992 fiscal years, are reflected as SG&A expenses. In November 1993, the Company served notice of its intent to terminate this arrangement and began phasing out the program. The phase-out is projected to be completed by the end of the first half of 1994. It is not expected that terminating this arrangement will have a material effect on the Company's consolidated financial statements. This matter is further discussed in Note 4 of Notes to Consolidated Financial Statements. Income Taxes, Accounting Changes and Extraordinary Items - Changes in Federal tax laws enacted in August 1993 increased the statutory income tax rate for corporations from 34% to 35%, retroactive to January 1, 1993. The Company reflected this change in income tax expense and the required revaluation of net deferred tax assets in the third quarter of the current year. For the 1993 fiscal year, the 1% tax rate change, net of the tax benefit for revaluation of deferred tax assets, served to reduce earnings by approximately $1 million, or $.03 per share. During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The cumulative effect of this accounting change resulted in a credit to net income of $3.1 million, or $.09 per share. On February 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The cumulative effect of this accounting change resulted in an after tax charge of $12.2 million, or $.33 per share. During the first quarter of 1992, the Company tendered for its 12.5% Sinking Fund Debentures ($50 million) and 11.75% Sinking Fund Debentures ($44 million). The premium paid and other costs related to this redemption resulted in an after tax, extraordinary charge of $5.5 million, or $.15 per share. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires the Company to recognize an obligation for postemployment benefits provided to former and inactive employees after employment but before retirement. The standard will be adopted in the first quarter of 1994 and the one-time, after tax cost of the cumulative effect of this accounting change is approximately $1.1 million, or $.03 per share. Liquidity and Capital Resources - The 1993 year-end cash position of the Company decreased $23 million to $195 million. The operating, investing, and financing factors which collectively accounted for this net cash decrease are detailed in the Statements of Consolidated Cash Flows. Net cash provided by operations was $138 million compared with $231 million in 1992 and $199 million in 1991. The $21 million increase in net income for 1993 was more than offset by decreases in noncash charges and increases in working capital requirements. In 1992, the Company had noncash charges for relocation and an accounting change of $17 million and $12 million, respectively. Prior to November of 1993, the Company sold substantially all its MB customer receivables to an unaffiliated company. The Company served notice of its intent to terminate this arrangement in November 1993 and began phasing out the program. The increase in customer accounts receivable as a result of the termination of the MB Sale and Servicing Agreement approximated $50 million at the end of 1993 fiscal year. This increase was partially offset by a decrease of approximately $29 million in the Company's receivable portfolio (other than MB). The change in accounts payable is directly related to the timing of merchandise purchases and subsequent payments.
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Net cash used for investing was $96 million in 1993, $108 million in 1992, and $81 million in 1991. In 1993, cash used for investing was primarily comprised of capital expenditures for property and equipment net of proceeds from property sales. The $27 million increase in investing for 1992 was attributable to increased cash outlays of $31 million for property and equipment purchases and $24 million for the purchase of Maison Blanche, Inc. These expenditures were partially offset by a $20 million cash distribution from the Company's joint venture interests. Financing activities required $64 million of cash in 1993, an increase of $37 million over the prior year. This increase was primarily due to prepayments of $19 million in Mortgage Notes with an average maturity of 10 years and bearing interest rates ranging from 8.4% to 9.6% and $6 million of 10.5% Industrial Development Revenue Bonds. In 1992, financing activities included an increase in long-term debt payments of $187 million of which $124 million represented prepayments of notes and debentures bearing interest rates ranging from 8.4% to 12.5% and the issuance of $200 million of notes and debentures. Current maturities of long-term debt increased significantly at the end of fiscal 1993 and reflect the reclassification of approximately $110 million of structured debt which is payable in July of 1994. This debt was assumed as part of the MB acquisition and consists of Mortgage Notes and Senior Notes which carry an annual interest rate of approximately 10.4%. The Company anticipates satisfying these debt payment requirements with currently available cash plus funds generated from operations. When paid, substantially all of the debt assumed in the MB transaction will have been liquidated. The Company satisfies its short-term financing needs primarily through internally generated funds. In addition, the Company has available to it a $175 million revolving credit facility and other discretionary lines of credit which total $60 million. The Company maintained significant cash balances throughout fiscal 1993 and it was not necessary to use any of these credit facilities. Maximum short-term borrowings under these facilities were $51 million in 1992 and $15 million in 1991. At fiscal year-ends 1993 and 1992, there were no outstanding borrowings under any of these lines of credit. Prior to November 1993, the Company sold all of its MB receivables to an unaffiliated company. The Company served notice of its intent to terminate this arrangement in November 1993 and, at the same time, began financing MB customer receivables from internally generated funds. At the end of the 1993 fiscal year, customer receivables on the Company's balance sheet include a $50 million receivable from the unaffiliated company. It is projected that the phase-out program will have been completed by the end of first half of 1994 and that an additional $35 million of cash will be needed to finance the remaining MB customer receivables held by the unaffiliated company. In September 1992, the Company issued $100 million of notes due in 2002 and $100 million of debentures due in 2022 at interest rates of 6.7% and 8.2%, respectively. The Notes have a mandatory sinking fund requirement of $20 million, commencing in 1997 and the debentures have a similar $5 million requirement, commencing in 2003. Both issues were offered under a registration statement filed in August 1992 pursuant to rule 415 of the Securities Act of 1933 in the aggregate amount of $250 million. Expansion and Capital Expenditures - Capital expenditures for 1994 are estimated at $103 million. It is anticipated that 1994 expenditures will be financed through internally generated cash. For the next several years, the Company is allocating more than half of its capital expenditures to remodelings and upgrading merchandise presentations in existing stores. During 1993, the Company opened a new 175,000 square foot store in Lexington, Kentucky and another 200,000 square foot store in Toledo, Ohio. At the time the Toledo store opened, an existing store was closed, downsized from 200,000 square foot and reopened as a 130,000 square foot home fashion store. During March of 1994, the Company opened a new 160,000 square foot Maison Blanche store in New Orleans, Louisiana and, at the same time, closed an older 150,000 square foot store located in the same general area. The Company will open two additional units in 1994; in October a new 115,000 square foot Gayfer's store will be opened in Hattiesburg, Mississippi and a new 170,000 square foot Joslin's store will be opened in Denver, Colorado.
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Benefit Program The Company maintains a comprehensive benefit program for its eligible associates which includes pension and profit sharing as well as health and term life insurance plans. The Pension Plan was established in 1945 and is funded entirely by Company contributions. All associates who meet the eligibility requirements specified in the Plan (one year of service and attainment of age 21) are enrolled in the Plan. Members are 100% vested in their accrued benefits upon completing five years of service after age 18. There were approximately 26,350 Pension Plan members, including retirees, on January 31, 1994. The market value of Plan assets on January 31, 1994, amounted to $311 million. All associates who are enrolled in the Pension Plan are also eligible to participate in the Savings, Profit Sharing and Supplemental Retirement Plan, which was established in 1954. During 1993, members in this Plan had the option to have the Company deposit up to 14% of their earnings on a before-tax basis, to the extent permitted by IRS Code Section 401(k). Prior to the 1994 fiscal year, associates could elect to have their deposits invested in bonds guaranteed by the U.S. government, equities, or insurance company contracts, or any combination of these funds. Effective February 1, 1994, the U.S. government bond fund was replaced by a Balanced Fund option. As explained in Note 7 of Notes to Consolidated Financial Statements, the Company makes an annual contribution to the Plan, based upon its pre-tax income. For this latest year, the Company's contribution amounted to $7.0 million, or approximately $.42 for each $1.00 deposited, before tax, by a member up to 6% of compensation. All members employed as of February 1, 1993 are 100% vested in the Company's contribution as soon as it is credited to their accounts for the year. All members employed after February 1, 1993 will vest in Company contributions according to a 3-7 year vesting schedule. Prior to the 1994 fiscal year, members could elect to invest the Company's annual contribution in bonds guaranteed by the U.S. government, equities, insurance company contracts or Mercantile Stores common stock. Effective February 1, 1994, the U.S. government bond fund was replaced by a Balanced Fund option. Members who have an investment in Mercantile Stores common stock at year-end may, in confidence, direct the Trustee, The Northern Trust Company, to vote their shares at the Annual Meeting of Stockholders. At January 31, 1994, the Trustee was holding 1,658,888 shares of Mercantile Stores stock for the benefit of Plan members. On February 1, 1994, members in the Plan represented approximately 92% of those eligible. Plan assets at year-end totalled $400 million, at market value. The Company pays a substantial portion of the costs of several group medical and dental plans which are offered to eligible associates. The Company also offers disability and term life insurance coverage to eligible associates. Paid vacation and holiday time, discounts on merchandise, and a highly successful policy of training and promoting from within complete the comprehensive benefit program available to associates.
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Management's and Auditors' Reports Statement of Management's Responsibility for Financial Statements The management of Mercantile Stores Company, Inc. has prepared the consolidated financial statements and related financial information contained in this Annual Report. Management has the primary responsibility for the integrity of the financial statements and other financial information included and for ascertaining that the data accurately reflect the financial position and results of operations of the Company. Financial statements are prepared in conformity with generally accepted accounting principles, applying certain informed estimates and judgments as required. The Company maintains a system of internal accounting controls designed to provide reasonable assurance that transactions are executed in accordance with proper authorization; that all such transactions are properly recorded and summarized to produce reliable financial records and reports; that assets are safeguarded; and that the accountability for assets is maintained. Management believes its system of internal accounting controls, augmented by its internal auditing function, assures the adequacy and quality of financial reporting. Independent public accountants provide an objective, independent review of management's discharge of its responsibilities insofar as they relate to the fairness of reported operating results and financial condition. They review the system of internal accounting controls in order to provide a basis for reliance on such controls and perform such tests and other procedures they deem necessary to reach and express an opinion on the fairness of the financial statements. The Board of Directors pursues its responsibility for the Company's financial statements through its Audit Committee which is comprised solely of directors who are not officers or employees of the Company. The Audit Committee meets regularly with the independent public accountants, management, and the internal auditors. The independent public accountants have direct access to the Audit Committee, with or without the presence of management representatives, to discuss the scope and results of their audit work and their comments on the adequacy of internal accounting controls and the quality of financial reporting. Based on the controls described, we believe the financial statements and related financial information in this report are accurate in all material respects and that they were prepared in accordance with appropriate and generally accepted accounting principles. David L. Nichols James M. McVicker Chairman of the Board Vice President and Chief Financial Officer Report of Independent Public Accountants To the Stockholders and Board of Directors of Mercantile Stores Company, Inc.: We have audited the accompanying consolidated balance sheets of Mercantile Stores Company, Inc. (a Delaware corporation) and subsidiaries as of January 29, 1994 and January 31, 1993, and the related statements of consolidated income and retained earnings and cash flows for each of the three years in the period ended January 29, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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, the financial statements referred to above present fairly, in all material respects, the financial position of Mercantile Stores Company, Inc. and subsidiaries as of January 29, 1994 and January 31, 1993, and the results of their operations and their cash flows for each of the three years in the period ended January 29, 1994 in conformity with generally accepted accounting principles. As explained in Notes 6 and 7 to the Consolidated Financial Statements, the Company changed its method of accounting for income taxes effective February 1, 1993 and accounting for postretirement benefits other than pensions effective February 1, 1992. Cincinnati, Ohio, Arthur Andersen & Co. April 1, 1994.
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[Download Table] Statements of Consolidated Income and Retained Earnings (in thousands) 1993 1992 1991 Net Sales $2,729,928 $2,732,041 $2,442,425 Costs, Expenses, and Other Income: Cost of goods sold (including occupancy and central buying expenses) 1,962,015 1,927,149 1,720,361 Selling, general and administrative expenses 626,305 641,573 547,268 Provision for relocation 17,000 Interest expense 36,236 35,464 23,390 Interest income (5,288) (3,099) (4,511) Other income (33,018) (29,145) (30,485) 2,586,250 2,588,942 2,256,023 Income before Provision for Income Taxes 143,678 143,099 186,402 Provision for Income Taxes: Current 54,456 59,830 71,468 Deferred 2,583 (3,568) 895 57,039 56,262 72,363 Income before extraordinary charge on early retirement of debt and cumulative effect of accounting changes 86,639 86,837 114,039 Extraordinary charge on early retirement of debt (net of income taxes of $3,550) (5,550) Cumulative effect of accounting changes: Income taxes 3,100 Postretirement benefits other than pensions (net of income taxes of $7,800) (12,200) Net Income $1,189,739 $1,169,087 $1,114,039 Retained Earnings at Beginning of Year 1,271,131 1,239,627 1,162,710 1,360,870 1,308,714 1,276,749 Dividends Declared and Paid 37,583 37,583 37,122 Retained Earnings at End of Year $1,323,287 $1,271,131 $1,239,627 Net Income Per Share: Income before extraordinary charge on early retirement of debt and cumulative effect of accounting changes $ 2.35 $ 2.36 $ 3.10 Extraordinary charge on early retirement of debt (0.15) Cumulative effect of accounting changes: Income taxes 0.09 Postretirement benefits other than pensions (0.33) Net Income Per Share $ 2.44 $ 1.88 $ 3.10 <FN> See Notes to Consolidated Financial Statements
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[Download Table] Consolidated Balance Sheets (in thousands) January 29, January 31, 1994 1993 Assets Current Assets: Cash and cash equivalents $ 194,544 $ 217,244 Receivables: Customer 587,859 566,223 Other 47,255 47,485 Inventories 425,492 422,819 Deferred income taxes 5,875 6,065 Other current assets 8,120 5,158 Total Current Assets 1,269,145 1,264,994 Investments and Other Noncurrent Assets 61,136 54,385 Deferred Income Taxes 10,199 7,556 Property and Equipment: Land 36,922 38,953 Buildings and improvements 649,108 596,758 Fixtures 310,102 302,448 Leased property 64,311 64,311 1,060,443 1,002,470 Less accumulated depreciation 368,941 321,537 Property and equipment, net 691,502 680,933 Total $2,031,982 $2,007,868 <FN> See Notes to Consolidated Financial Statements
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[Download Table] CAPTION
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Consolidated Balance Sheets (in thousands) January 29, January 31, 1994 1993 Liabilities and Stockholders' Equity
Current Liabilities: Current maturities of long-term debt $ 115,487 $ 123,934 Accounts payable 116,116 109,185 Taxes other than income 16,182 21,600 Accrued interest 11,687 14,369 Other current liabilities 45,765 51,928 Accrued income taxes 41,035 31,466 Accrued payroll 20,612 20,364 Total Current Liabilities 366,884 272,846 Long-term Debt 271,965 390,258 Due to Affiliated Companies 26,713 29,560 Other Long-term Liabilities 31,712 32,652 Stockholders' Equity: Common stock - $.14 2/3 par value, authorized and issued 36,887,475 shares, outstanding 36,844,050 (after deducting 43,425 treasury shares) 5,403 5,403 Additional paid-in capital 6,018 6,018 Retained earnings 1,323,287 1,271,131 Total Stockholders' Equity 1,334,708 1,282,552 Total $2,031,982 $2,007,868 <FN> See Notes to Consolidated Financial Statements
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Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies A. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and all of its subsidiaries including Maison Blanche, Inc. (MB) from date of acquisition (see Note 2). All material intercompany accounts and transactions have been eliminated. The Company uses the equity method to account for its 331/3% to 50% position in five shopping center joint ventures. B. Inventories - Substantially all retail inventories are valued by the retail method and stated on the last-in, first-out (LIFO) basis which is lower than market. At January 29, 1994 and January 31, 1993, inventories were $92 million and $88 million, respectively, lower than they would have been had the retail method been used without the application of the LIFO basis. C. Property and Equipment - Property and equipment is carried at cost. Depreciation is provided by using the straight-line method based on estimated useful lives of the assets for book purposes while accelerated depreciation, where permitted, is used for income tax purposes. Betterments, renewals, and repairs that extend the life of the asset are capitalized; other repairs and maintenance are expensed. Property and equipment, other than buildings, are written off in the year that they become fully depreciated. The Company computes depreciation for book purposes based on the following ranges of estimated useful lives: Buildings 15-50 years Building improvements 10-35 years Store fixtures 5-7 years Leased property Term of lease or life of property, if shorter The Company leases certain property, principally store locations, under capital leases as defined by the Statement of Financial Accounting Standards No. 13. Property meeting the criteria within the Statement is capitalized and accounted for as an asset, with the corresponding obligation carried as a liability. The provision for amortization of leased properties is included in depreciation and amortization expense. All other lease agreements are classified and accounted for as operating leases with payments expensed as incurred. D. Cost of Goods Sold - Cost of goods sold in the retail industry traditionally includes occupancy and buying costs which are not directly associated with the cost and eventual selling price of merchandise. Among the occupancy expenses so classified are depreciation, rent, utilities, and real estate taxes. Buying costs, in this respect, include the payroll and travel expenses associated with the corporate buying function. E. Change in Fiscal Year - In 1993, the Company changed its fiscal year to a 52-week reporting period which ends on the Saturday nearest to January 31. Previously, the Company's fiscal year entailed the 12 months February 1 through January 31. References to years relate to fiscal years rather than calendar years. F. Store Pre-opening Expenses - Store pre-opening expenses are not material and are charged to income in the year the expenses are incurred. These include interest costs during the construction period, advertising, occupancy, and payroll costs. G. Segment Reporting - The Company has one significant segment of business (general merchandise department store retailing). H. Cash and Cash Equivalents - For purposes of these statements, short-term investments which have a maturity of 90 days or less are considered cash equivalents. The carrying amount of cash equivalents is a reasonable estimate of fair value. I. Reclassifications - Certain reclassifications have been made to prior years' financial statements to conform with the classifications used in the 1993 financial statements. 2. Purchase of Maison Blanche, Inc. Effective February 10, 1992, the Company acquired all of the issued and outstanding shares of MB for $40 million, of which $30 million was paid at the closing date. MB operates 16 retail department stores in Louisiana and Florida. The acquisition was accounted for as a purchase and was financed through internally generated funds. MB's results of operations are included in the financial statements from the effective date of the acquisition.
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The following unaudited pro forma information reflects the combined operations of MB and the Company, assuming the acquisition had occurred at the beginning of fiscal 1991: (in thousands, except per share data) Net sales $2,769,470 Net income $ 108,779 Net income per share $ 2.95 The results of operations for MB for the period February 1 through February 10, 1992 were insignificant and, thus, pro forma results for fiscal 1992 are not presented. The above pro forma results do not necessarily represent results which would have occurred if the acquisition had taken place on the basis above, nor are they indicative of future combined operations. 3. Provision for Relocation During the first quarter of 1992, the Company recorded a provision of $17 million for the relocation of the corporate buying office from New York City to Fairfield, Ohio, and for the consolidation of certain divisional functions. The provision covered the costs of severance pay, employee relocation, lease abandonment, and other related expenses associated with the relocation. 4. Financing Arrangements The Company's wholly owned subsidiary, Mersco Finance Corporation (Mersco), has a revolving credit agreement with Citibank pursuant to which the bank will lend up to $175 million at a rate of interest no higher than the bank's prime rate. This revolving credit agreement has a five-year term but can be canceled by Mersco on 60 days written notice. The Company also has in place additional uncommitted lines of credit in the total amount of $60 million. The Company does not pay any fee for maintaining these discretionary lines and interest on any borrowing is charged at a floating rate. At January 29, 1994 and January 31, 1993, there were no borrowings outstanding under the revolving credit agreement or the discretionary lines. During fiscal 1993, there were no borrowings under these credit facilities. The maximum borrowings for fiscal 1992 were $51 million, at an average interest rate of 4.8%. A commitment fee of $.7 million in 1993, 1992, and 1991 was charged under the revolving credit agreement. This fee is calculated on the basis of the lesser of (a) the average daily unused portion of the bank's aggregate commitment or (b) the average daily net receivables. The Company sells its customer receivables (other than MB) to Mersco which assigns these receivables to Citibank, without recourse, as security for any borrowings under the revolving credit agreement. In addition, Mersco and the Company's operating divisions have an agreement pursuant to which an affiliate of Citibank (the Service Company) manages and services the private label credit card program of the Company. This service includes credit authorization, absorption of bad debts, and the collection of all receivables arising from the use of private label credit cards. Mersco pays the operating divisions for these receivables when Mersco receives payment from the Service Company or on demand by the operating divisions. When such a demand is made prior to payment by the Service Company, Mersco borrows the funds from Citibank under the revolving credit agreement. In this way, Mersco is capable of providing sizable levels of seasonal working capital funding to the Company. As part of this service arrangement with Citibank, Mersco shares revenue generated from the finance charges collected on customer accounts receivable. Mersco retains approximately 20% of this revenue as a management fee and allocates the remainder to the Company. On a consolidated basis, this shared finance charge income which is included in other income on the accompanying Statements of Consolidated Income and Retained Earnings was $14 million in 1993, $16 million in 1992, and $23.5 million in 1991. On February 1, 1992, the Company gave notice to Citibank of the Company's election to terminate the agreement effective July 31, 1995. During the termination period, from February 1, 1992 through July 31, 1995, the Service Company will continue to manage and service the private label credit card program of the Company, and the revenue sharing formula will be adjusted downward. For fiscal 1993 and 1992, revenue sharing income has been reduced by $5.3 million and $5.4 million, respectively, because of this formula adjustment.
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[Download Table] The following are summary balance sheets for Mersco Finance Corporation: (in thousands) 1993 1992 Assets Customer receivables purchased from Mercantile Stores Company, Inc. $536,829 $565,031 Other receivables 16,794 15,808 Cash 3 3 Total Assets $553,626 $580,842 Liabilities and Stockholder's Equity Due to Mercantile Stores Company, Inc. $515,951 $544,814 Stockholder's Equity 37,675 36,028 Total Liabilities and Stockholder's Equity $553,626 $580,842 Prior to November of 1993, the Company sold all of its MB customer receivables to MB Funding Trust (MB Trust), an unaffiliated company. Under the terms of the Sale and Servicing Agreement, MB customer receivables were sold at a discount, without recourse, on a daily basis. The Company serviced these receivables and retained the income generated by them, net of costs associated with the program. The income generated by the MB Credit Program, net of discount, was approximately $6.2 million and $5.7 million in 1993 and 1992, respectively, and is reflected as other income on the accompanying Statements of Consolidated Income and Retained Earnings. Costs associated with servicing the receivables, which approximated $3.2 million in both 1993 and 1992, are reflected as selling, general and administrative expenses. In November 1993, the Company gave notice to the MB Trust of its election to terminate the Sale and Servicing Agreement and it is anticipated that the final termination process will be completed in the second quarter of 1994. During the termination preriod, the Company will continied to transfer MB customer receivables to the MB Trust and will retain a participation interest in such accounts. However, the MB Trust has no obligation to pay the Company for such accounts until the termination process is complete. The Company will finance MB customer receivables through internally generated funds. At January 29, 1994, the participation interest due from the MB Trust for customer receivables transferredduring the termination period totaled approximately $50 million, and is reflected as customer receivables on the accompanying Consolidated Balance Sheets. It is not anticipated that the termination of this arrangement will have a material effect on the Company's consolidated financial statements. During 1993 and 1992, MB customer receivable balances averaged $82 and $87 million, respectively. Total MB customer receivables of the MB Trust were $85 million (of which $50 million is reflected on the accompanying Consolidated Balance Sheets) and $89 million at January 29, 1994 and January 31, 1993, respectively. 5. Long-Term Debt [Download Table] The Company's long-term debt consisted of the following: (in thousands) 1993 1992 10.95% Senior Guaranteed Notes due 1994 $ 47,240 $ 47,240 10.07% Mortgage Notes due 1994 63,280 63,280 8.2% Sinking Fund Debentures due 2022 100,000 100,000 6.7% Notes due 2002 100,000 100,000 Industrial Revenue Bonds at rates ranging from 4.1% to 8.5%(a) 12,441 19,693 Variable Rate Mortgage Note at 1.5% over prime, payable in annual installments through February 1, 1996 (a) 1,080 19,898 Other Notes Payable 10,835 10,018 Total Debt 334,876 360,129 Capitalized Lease Obligations 52,576 54,063 387,452 414,192 Less - due within one year 115,487 23,934 Total Long-term Debt $271,965 $390,258 <FN> (a) During the year, the Company prepaid the entire $6 million principal balance due on the 10.5% Industrial Development Revenue Bonds due 2013. In addition, $19 million principal amount of certain Mortgage Notes, with interest rates ranging from 8.4% to 9.6%, was prepaid.
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[Download Table] Maturities of long-term debt, including capitalized leases, for the next five years are as follows: Fiscal year (in thousands) Amount 1994 $115,487 1995 $ 5,232 1996 $ 6,328 1997 $ 26,108 1998 $ 26,248 During fiscal 1992, the Company tendered for and redeemed the 12.5% ($50 million) and 11.75% ($44 million) Sinking Fund Debentures due 2014 and 2015,respectively. The premiums paid, along with ancillary costs of redemption, resulted in an extraordinary charge of $5.5 million, or $.15 per share, after tax benefits of $3.5 million. 6. Income Taxes During the first quarter of 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." This statement requires deferred tax recognition for all temporary differences in accordance with the liability method and requires adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates. Prior to the implementation of SFAS No. 109, the Company accounted for income taxes using Accounting Principles Board Opinion No. 11. The cumulative effect of this accounting change resulted in a credit to net income of $3.1 million, or $.09 per share. The components of taxes on income, excluding the extraordinary charge and cumulative effect of accounting change, consisted of the following: [Download Table] (in thousands) 1993 Federal State Total Current $45,989 $ 8,467 $54,456 Deferred 1,517 1,066 2,583 Total $47,506 $ 9,533 $57,039 1992 Federal State Total Current $48,396 $11,434 $59,830 Deferre (2,694) (874) (3,568) Total $45,702 $10,560 $56,262 1991 Federal State Total Current $58,810 $12,658 $71,468 Deferred 522 373 895 Total $59,332 $13,031 $72,363 Deferred income taxes result from timing differences in the recognition of revenue and expense for tax and financial statement purposes. The sources of these differences and the tax effect, excluding the cumulative effect of accounting change, of each were as follows: [Download Table] (in thousands) 1993 1992 1991 Depreciation $ (4,431) $ (1,102) $ 2,870 Associate Benefit Plans 4,410 2,061 792 Relocation 1,883 (3,670) 1,418 Other 721 (857) (4,185) Total $ 2,583 $ (3,568) $ 895 The provision for income taxes is different from the amount computed by applying the statutory Federal income tax rate. The differences are summarized as follows: [Download Table] (in thousands) 1993 1992 1991 Provision at statutory rate of 35% for 1993 and 34% in prior years $50,287 $48,654 $63,377 State and local income tax, less Federal income tax benefit 6,196 6,970 8,601 Other 556 638 385 Total income tax provision $57,039 $56,262 $72,363 Effective income tax rate 39.7% 39.3% 38.8% Changes in Federal tax laws enacted in August of 1993 increased the statutory income tax rate for corporations from 34% to 35%, retroactive to January 1,1993. The Company reflected this change in income tax expense and the required revaluation of net deferred tax assets in the third quarter of 1993. The retroactive effect of this change in the tax law did not have a material effect on the Company's financial position or results of operations. [Download Table] The tax effects of significant temporary differences representing deferred tax assets and liabilities are as follows: 1993 Assets: Inventory accounting $ 5,208 Postretirement benefits costs 10,836 Interest, taxes and real estate costs 10,490 Relocation costs 2,897 Capitalized leases 3,527 Other 6,934 Total deferred tax assets 39,892 Liabilities: Depreciation (3,597) Pension, savings and profit sharing costs (15,057) Other (5,164) Total deferred tax liabilities (23,818) Total Net Deferred Tax Assets $16,074
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7. Associate Benefit Plans The Company maintains a formal, qualified, non-contributory pension plan covering all associates who have met certain age and service requirements. Benefits under this plan generally are based on a career average formula. The Company funds this plan in accordance with ERISA requirements. As computed under the provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," components of the net pension benefit included in income before income taxes for the past three fiscal years were as follows: [Download Table] (in thousands) 1993 1992 1991 Service cost $ 6,524 $ 6,908 $ 6,475 Interest cost 10,351 9,788 9,020 Actual return on plan assets (39,586) (21,551) (50,529) Amortization of transition asset (5,043) (5,043) (5,043) Other amortization and deferral 13,966 2,056 35,821 Net pension benefit $(13,788) $ (7,842) $ (4,256) The expected long-term rate of return on assets used in determining net pension cost was 8.5% in 1993 and 1992. The actuarial present value of benefits was determined using a discount rate of 7.5% in 1993 and 1992. The rate of compensation increase used to measure the projected benefit obligation was 5.5% in 1993 and 1992. The funded status of the formal qualified pension plan at January 29, 1994 and January 31, 1993, based on actuarial and plan asset information as of October 31, 1993 and 1992, was as follows: [Download Table] (in thousands) 1993 1992 Actuarial present value of benefit obligations: Vested benefits $123,900 $107,100 Non-vested benefits 1,800 1,600 Accumulated benefits obligation 125,700 108,700 Impact of future salary increases 28,553 32,368 Projected benefit obligation 154,253 141,068 Plan assets at fair value 306,094 273,427 Plan assets in excess of projected benefit obligation 151,841 132,359 Items not yet recognized in income: Initial transition credit which is being amortized over 15 years (40,345) (45,388) Subsequent net gain (70,968) (60,231) Prepaid pension benefit $ 40,528 $ 26,740 No funding activity occurred between the plan and the Company during the fourth quarter of 1993 or 1992. The plan's assets include investments in common stocks, fixed income securities, real estate investments, short-term investments, and cash. The Company contributes to qualified and non-qualified savings, profit sharing and supplemental retirement plans, and non-qualified pension plans covering certain associates. The Company's total contribution to the qualified and non-qualified savings, profit sharing, and supplemental retirement plans is based on 5% of pre-federal income tax FIFO profits, before consideration of provision for profit sharing. The costs to the Company under these plans for the past three years were as follows: [Download Table] (in thousands) 1993 1992 1991 Savings and Profit Sharing $ 7,026 $ 5,295 $ 9,345 Pension 1,258 1,569 11,591 Total $ 8,284 $ 5,864 $ 9,936
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The Company provides certain health care benefits for retired associates on a contributory basis. Current retirees and active associates who retire on or after age 60, with five or more years of service, are eligible for these benefits if they had continuous medical coverage in the five years preceding retirement. The plan does not cover retirees after Medicare eligibility. The Company funds these benefits as claims are incurred. During the year, the plan was changed to provide for retiree contributions based on years of service. Further cost savings were achieved by increasing deductibles and introducing managed care. The Company reserves the right to modify or terminate this program at any time. The effects of these changes are included in the tables shown below. Effective February 1, 1992, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." This Statement requires that the expected cost of postretirement benefits other than pensions be charged to expense during the years that the associates render service. In 1991, the Company recognized these costs on a cash basis and they amounted to $1.3 million. The cumulative effect of this accounting change resulted in a charge to 1992 net income of $12.2 million, or $.33 per share, after tax benefits of $7.8 million. [Download Table] The components of net periodic postretirement benefit cost for 1993 and 1992 were as follows: (in thousands) 1993 1992 Service cost earned during the year $ 1,729 $ 2,100 Interest cost on projected benefit obligation 1,581 1,600 Net amortization and deferral (703) Net periodic postretirement benefit cost $ 2,607 $ 3,700 [Download Table] The following table sets forth the plans' combined funded status: (in thousands) 1993 1992 Accumulated Postretirement Benefit Obligation: Retirees $ 4,130 $ 1,821 Fully eligible active plan participants 189 3,562 Other active plan participants 5,990 12,040 10,309 17,423 Unrecognized net gain from changes in plan and assumptions 4,935 (2,724) Unrecognized prior service cost 8,527 7,501 Accrued postretirement benefit costs $23,771 $22,200 [Download Table] For measurement purposes, the following assumptions were used to project changes in the accumulated postretirement benefit obligation: 1993 1992 Discount rate 7.5% 8.5% Health care cost trend rate 10.25% to 5% 13% to 6.9% Years to ultimate trend 11 23 The health care cost trend rate affects the amounts reported. To illustrate, increasing the assumed health care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefit obligation by $.9 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by $.2 million. In November 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" (SFAS No. 112), which requires the Company to recognize an obligation for postemployment benefits provided to former or inactive employees after employment but before retirement. SFAS No. 112 will be adopted in the first quarter of 1994 and the after tax cost of the cumulative effect of this accounting change is a charge of approximately $1.1 million, or $.03 per share. 8. Fair Value of Financial Instruments In 1992, the Company adopted Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" which requires disclosure of the estimated fair value of certain financial instruments of the Company. This information does not purport to be a valuation of the Company as a whole. The fair value of long-term debt, including the current portion and excluding capital lease obligations, is approximately $335 million at January 29, 1994 and $375 million at January 31, 1993. The fair value is based on the present value of future cash flows. The discount rates used approximate the incremental borrowing costs for similar instruments. 9. Leases The Company leases some of its operating properties such as store and warehouse facilities and some equipment. The majority of these leases will expire within the next 20 years. The leases usually contain renewal options and provide for payment by the lessee of real estate taxes and other expenses, and, in certain instances, increased rentals based on percentages of sales. [Download Table] Future minimum lease payments under noncancelable leases as of January 29, 1994 are as follows: Fiscal year (in thousands) Capital Operating Total 1994 $ 6,346 $ 23,276 $ 29,622 1995 6,346 20,492 26,838 1996 6,346 20,163 26,509 1997 6,246 19,265 25,511 1998 6,118 17,496 23,614 Thereafter 183,171 128,181 211,352 Total minimum lease payments $114,573 $228,873 $343,446 Less: Executory costs (306) Interest (61,691) Present value of net minimum lease payments $ 52,576 [Download Table] Rent expense consisted of the following: (in thousands) 1993 1992 1991 Minimum rentals $ 23,509 $ 22,457 $ 17,175 Contingent rentals (based on % of sales) 4,503 7,416 8,970 $ 28,012 $ 29,873 $ 26,145 10. Contingencies The Company is involved in various legal actions arising in the normal course of business. After taking into consideration legal counsels' evaluation of such actions, management is of the opinion that their outcome will not have a significant effect on the Company's consolidated financial statements.
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[Download Table] Quarterly Results unaudited (in thousands, except per share data) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1993 Net Sales $572,345 $615,380 $654,143 $888,060 $2,729,928 Costs, Expenses, and Other Income: Cost of goods sold (including occupancy and central buying expenses) 401,900 459,926 460,976 639,213 1,962,015 Selling, general, and administrative expenses 151,005 156,843 157,647 160,810 626,305 Interest expense, net 7,783 7,718 7,707 7,740 30,948 Other income (7,073) (7,212) (6,067) (12,666) (33,018) 553,615 617,275 620,263 795,097 2,586,250 Income (loss) before income taxes 18,730 (1,895) 33,880 92,963 143,678 Provision for income taxes 7,254 (562) 13,340 37,007 57,039 Income (loss) before cumulative effect of accounting change 11,476 (1,333) 20,540 55,956 86,639 Cumulative effect of accounting change for income taxes 3,100 3,100 Net income (loss) $ 14,576 $ (1.333) $ 20,540 $ 55,956 $ 89,739 Net income (loss) per share: Income (loss) before cumulative effect of accounting change $ .31 $ (.04) $ .56 $ 1.52 $ 2.35 Cumulative effect of accounting change .09 .09 Net income (loss) per share $ .40 $ (.04) $ .56 $ 1.52 $ 2.44 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1992 Net Sales $587,818 $601,784 $647,511 $894,928 $2,732,041 Costs, Expenses, and Other Income: Cost of goods sold (including occupancy and central buying expenses) 407,109 440,836 445,741 633,463 1,927,149 Selling, general, and administrative expenses 149,062 152,602 168,534 171,375 641,573 Provision for relocation 17,000 17,000 Interest expense, net 8,292 6,568 7,946 9,559 32,365 Other income (7,227) (7,285) (5,201) (9,432) (29,145) 574,236 592,721 617,020 804,965 2,588,942 Income before income taxes 13,582 9,063 30,491 89,963 143,099 Provision for income taxes 5,387 3,665 12,065 35,145 56,262 Income before extraordinary charge on early retirementof debt and cumulative effect of accounting change 8,195 5,398 18,426 54,818 86,837 Extraordinary charge on early retirement of debt (net of income taxes of $3,550) (5,550) (5,550) Cumulative effect of accounting change for postretirement benefits other than pensions (net of income taxes of $7,800) (12,200) (12,200) Net income (loss) $ (9,555) $ 5,398 $ 18,426 $ 54,818 $ 69,087 Net income (loss) per share: Income before extraordinary charge on early retirement of debt and cumulative effect of accounting change $ .22 $ .15 $ .50 $ 1.49 $ 2.36 Extraordinary charge on early retirement of debt (.15) (.15) Cumulative effect of accounting change (.33) (.33) Net income (loss) per share $ (.26) $ .15 $ .50 $ 1.49 $ 1.88
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[Download Table] Ten-Year Selected Financial Data (Dollars in thousands, except per share data) 1993 1992 1991 1990 Operating Results Net sales $2,729,928 $2,732,041 $2,442,425 $2,367,210 Cost of goods sold 1,962,015 1,927,149 1,720,361 1,670,555 Selling, general, and administrative expenses 626,305 641,573 547,268 527,467 Provision for relocation 17,000 Interest expense 36,236 35,464 23,390 23,422 Interest income (5,288) (3,099) (4,511) (4,160) Other income (33,018) (29,145) (30,485) (29,186) Income before provision for income taxes 143,678 143,099 186,402 179,112 Percent to sales 5.3 5.2 7.6 7.6 Provision for income taxes 57,039 56,262 72,363 55,498 Income before extraordinary charge and cumulative effect of accounting changes 86,639 86,837 114,039 123,614 Extraordinary charge, net (5,550) Accounting changes, net 3,100 (12,200) Net income 89,739 69,087 114,039 123,614 Percent to sales 3.3 2.5 4.7 5.2 Per common share $ 2.44 $ 1.88 $ 3.10 $ 3.36 Dividends declared 37,583 37,583 37,122 26,804 Per common share $ 1.02 $ 1.02 $ 1.003/4 $ .723/4 Dividends paid 37,583 37,583 37,122 35,278 Per common share $ 1.02 $ 1.02 $ 1.003/4 $ .953/4 Financial Position Working capital $ 902,301 $ 992,148 $ 988,783 $ 934,494 Ratio of current assets to current liabilities 3.46 4.64 6.44 6.13 Receivables 635,114 613,708 656,428 667,600 Inventories 425,492 422,819 381,406 393,304 Property and equipment, net (includes capitalized leases) 691,502 680,933 461,563 444,696 Total assets 2,031,982 2,007,868 1,673,099 1,596,630 Long-term debt 271,965 390,258 207,150 207,906 Retained earnings 1,323,287 1,271,131 1,239,627 1,162,710 Stockholders' equity 1,334,708 1,282,552 1,251,048 1,174,131 Per common share $ 36.23 $ 34.81 $ 33.96 $ 31.87 Return on stockholders' equity (1) 6.9% 5.5% 9.4% 11.0% Number of shares outstanding 36,844 36,844 36,844 36,844 Other Data Capital expenditures for property and equipment $ 106,210 $ 110,638 $ 79,931 $ 82,944 Depreciation 93,455 94,036 70,607 63,158 Stores opened during year 3 1 2 3 Stores acquired 16 Stores closed during year 1 1 1 1 Number of stores 101 99 83 82 Total square feet 16,212 15,820 13,145 12,683 Sales per square foot $ 168 $ 173 $ 186 $ 187 <FN> (1) Based on average stockholders' equity at beginning and end of year
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[Download Table] Ten-Year Selected Financial Data (Dollars in thousands, except per share data) 1989 1988 1987 1986 Operating Results Net sales $2,312,802 $2,265,500 $2,155,653 $2,028,202 Cost of goods sold 1,594,849 1,551,484 1,476,327 1,377,763 Selling, general, and administrative expenses 502,537 480,225 451,885 431,656 Provision for relocation 10,000 Interest expense 22,818 23,076 22,971 23,695 Interest income (4,289) (3,934) (3,268) (3,301) Other income (26,156) (22,021) (19,402) (17,811) Income before provision for income taxes 213,043 236,670 227,140 216,200 Percent to sales 9.2 10.4 10.5 10.7 Provision for income taxes 82,700 92,208 97,584 105,135 Income before extraordinary charge and cumulative effect of accounting changes 130,343 144,462 129,556 111,065 Extraordinary charge, net Accounting changes, net Net income 130,343 144,462 129,556 111,065 Percent to sales 5.6 6.4 6.0 5.5 Per common share $ 3.54 $ 3.92 $ 3.52 $ 3.01 Dividends declared 33,897 35,922 24,870 21,371 Per common share $ .92 $ .971/2 $ .671/2 $ .58 Dividends paid 32,792 28,553 24,870 21,371 Per common share $ .89 $ .771/2 $ .671/2 $ .58 Financial Position Working capital $ 873,612 $ 846,839 $ 817,449 $ 756,698 Ratio of current assets to current liabilities 4.65 4.63 4.88 4.52 Receivables 644,633 625,199 588,510 548,132 Inventories 393,319 362,037 332,175 306,516 Property and equipment, net (includes capitalized leases) 408,229 355,438 310,486 294,846 Total assets 1,548,438 1,451,752 1,353,357 1,279,112 Long-term debt 199,284 197,058 205,241 205,786 Retained earnings 1,065,900 969,454 860,914 756,228 Stockholders' equity 1,077,321 980,875 872,335 767,728 Per common share $ 29.24 $ 26.62 $ 23.68 $ 20.84 Return on stockholders' equity (1) 12.7% 15.6% 15.8% 15.4% Number of shares outstanding 36,844 36,844 36,844 36,845 Other Data Capital expenditures for property and equipment $1,197,230 $1,192,572 $1,157,797 $1,1164,436 Depreciation 54,478 47,541 47,141 46,833 Stores opened during year 1 2 1 2 Stores acquired Stores closed during year 1 1 4 Number of stores 80 80 79 82 Total square feet 12,077 11,791 11,124 11,105 Sales per square foot $ 192 $ 192 $ 194 $ 183 <FN> (1) Based on average stockholders' equity at beginning and end of year
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[Download Table] Ten-Year Selected Financial Data (Dollars in thousands, except per share data) 1985 1984 Operating Results Net sales $1,880,039 $1,706,904 Cost of goods sold 1,279,199 1,166,616 Selling, general, and administrative expenses 404,328 377,405 Provision for relocation Interest expense 21,571 18,566 Interest income (2,833) (4,234) Other income (18,674) (13,086) Income before provision for income taxes 196,448 161,637 Percent to sales 10.4 9.5 Provision for income taxes 94,000 76,868 Income before extraordinary charge and cumulative effect of accounting changes 102,448 84,769 Extraordinary charge, net Accounting changes, net Net income 102,448 84,769 Percent to sales 5.4 5.0 Per common share $ 2.78 $ 2.30 Dividends declared 18,791 16,950 Per common share $ .51 $ .46 Dividends paid 18,791 16,950 Per common share $ .51 $ .46 Financial Position Working capital $ 628,080 $ 510,227 Ratio of current assets to current liabilities 3.52 3.16 Receivables 514,759 420,387 Inventories 281,446 248,810 Property and equipmet, net (includes capitalized leases) 270,035 261,583 Total assets 1,163,264 1,025,459 Long-term debt 211,224 166,160 Retained earnings 666,534 582,877 Stockholders' equity 678,034 594,377 Per common share $ 18.40 $ 16.13 Return on stockholders' equity (1) 16.1% 15.1% Number of shares outstanding 36,845 36,845 Other Data Capital expenditures for property and equipment $1,149,639 $1,150,994 Depreciation 43,267 38,651 Stores opened during year 2 2 Stores acquire Stores closed during year 1 Number of stores 80 78 Total square feet 10,676 10,174 Sales per square foot $ 176 $ 168 <FN> (1) Based on average stockholders' equity at beginning and end of year
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BACONS/McALPIN'S/LION/ROOT'S Store Locations Shopping Centers/Malls Louisville, KY Bashford Manor Mall (Bacons) Shively Center (Bacons) Louisville Galleria (Bacons) The Mall in St. Matthew's (Bacons) St. Matthew's Home Store (Bacons) Owensboro, KY Towne Square Mall (Bacons) Lexington, KY Lexington Mall (McAlpin's) Turfland Mall (McAlpin's) Fayette Mall (McAlpin's) Crestview Hills, KY Crestview Hills Mall (McAlpin's) Clarksville, IN River Falls Mall (Bacons) Terre Haute, IN Honey Creek Square (Root's) Cincinnati, OH Downtown (McAlpin's) Eastgate Mall (McAlpin's) Kenwood Towne Centre (McAlpin's) Northgate Mall (McAlpin's) Tri-County Mall (McAlpin's) Western Hills Plaza (McAlpin's) Middletown, OH Towne Mall (McAlpin's) Toledo, OH Westgate Village Shopping Center (Lion) Southwyck Shopping Center (Lion) North Towne Square (Lion) Franklin Park Mall (Lion) CASTNER KNOTT CO. Store Locations Shopping Centers/Malls Nashville, TN Galleria at Cool Springs Downtown The Mall at Green Hills Rivergate Mall Donelson Plaza Harding Mall Hickory Hollow Mall Bellevue Center Tullahoma, TN Northgate Mall Florence, AL Regency Square Mall Decatur, AL Riveroaks Center Huntsville, AL Madison Square Mall Bowling Green, KY Greenwood Mall GAYFERS/J.B. WHITE Store Locations Shopping Centers/Malls Montgomery, AL Montgomery Mall (Gayfers) Eastdale Mall (Gayfers) Auburn, AL Village Mall (Gayfers) Tuscaloosa, AL McFarland Mall (Gayfers) Albany, GA Albany Mall (Gayfers) Columbus, GA Peachtree Mall (Gayfers) Savannah, GA Savannah Mall (J.B. White) Augusta, GA Regency Mall (J.B. White) National Hills Shopping Center (J.B. White) Aiken, SC Heritage Square (J.B. White) Columbia, SC Dutch Square (J.B. White) Richland Mall (J.B. White) Greenville, SC Greenville Mall (J.B. White)
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GAYFERS/MAISON BLANCHE Store Locations Shopping Centers/Malls Mobile, AL Springdale Mall (Gayfers) Jubilee Mall (Gayfers) Dothan, AL Wiregrass Commons (Gayfers) Biloxi-Gulfport, MS Edgewater Mall (Gayfers) Jackson, MS Metrocenter (Gayfers) Northpark Mall (Gayfers) Baton Rouge, LA Main Street (Maison Blanche) Cortana Mall (Maison Blanche) Lafayette, LA Acadiana Mall (Maison Blanche) New Orleans, LA Canal Street (Maison Blanche) Clearview Shopping Center (Maison Blanche) Plaza Lake Forest (Maison Blanche) North Shore Square (Maison Blanche) Oakwood Shopping Center (Maison Blanche) Clearwater, FL Clearwater Mall (Gayfers) Pensacola, FL Town & Country Plaza (Gayfers) Cordova Mall (Gayfers) Ft. Walton Beach, FL Santa Rosa Mall (Gayfers) Panama City, FL Panama City Mall (Gayfers) Tallahassee, FL Tallahassee Mall (Gayfers) Jacksonville, FL Regency Square Mall (Maison Blanche) Roosevelt Mall (Maison Blanche) Orange Park Mall (Maison Blanche) The Avenues (Maison Blanche) Daytona Beach, FL Volusia Mall (Maison Blanche) Orlando, FL Orlando Fashion Square (Maison Blanche) Altamonte Mall (Maison Blanche) The Florida Mall (Maison Blanche) JONES/JOSLINS/HENNESSY'S/ de LENDRECIE'S/GLASS BLOCK Store Locations Shopping Centers/Malls Kansas City, MO Downtown (The Jones Store Co.) Blue Ridge Mall (The Jones Store Co.) Metro North Mall (The Jones Store Co.) Bannister Mall (The Jones Store Co.) Overland Park, KS Metcalf South Shopping Center (The Jones Store Co.) Prairie Village, KS Prairie Village Shopping Center (The Jones Store Co.) Independence, MO Independence Center (The Jones Store Co.) Topeka, KS West Ridge Mall (The Jones Store Co.) Denver, CO Downtown (Joslins) Cinderella City (Joslins) Buckingham Square (Joslins) Villa Italia Center (Joslins) Westminster Mall (Joslins) Southwest Plaza (Joslins) Greeley, CO Greeley Mall (Joslins) Longmont, CO Twin Peaks Mall (Joslins) Colorado Springs, CO Chapel Hills Mall (Joslins) Pueblo, CO Pueblo Mall (Joslins) Cheyenne, WY Frontier Mall (Joslins) Billings, MT Rimrock Mall (Hennessy's) Missoula, MT Southgate Mall (Hennessy's) Helena, MT Capital Hill Shopping Center (Hennessy's) Fargo, ND West Acres Shopping Center (de Lendrecie's) Duluth, MN Miller Hill Mall (Glass Block)
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Group Presidents Gregory A. Brandjord President of The Jones Store Co., Joslins, Glass Block, Hennessy's, and de Lendrecie's Twenty-four Stores in Missouri, Kansas, Colorado, Montana, Wyoming, Minnesota, and North Dakota Headquartered in Kansas City, Missouri Thomas N. Groh President of Bacons, McAlpin's, Root's, and Lion Twenty-three Stores in Kentucky, Ohio, and Indiana Headquartered in Louisville, Kentucky Philip W. Kaiser President of Gayfers and Maison Blanche Twenty-eight Stores in Florida, Louisiana, Alabama, and Mississippi Headquartered in Mobile, Alabama Edward A. Overbey, Jr. President of Castner Knott Co. Thirteen Stores in Tennessee, Kentucky, and Alabama Headquartered in Nashville, Tennessee Michael G. Shannon President of Gayfers and J.B. White Thirteen Stores in Alabama, Georgia, and South Carolina Headquartered in Montgomery, Alabama Corporate Officers David L. Nichols Chairman of the Board and Chief Executive Officer James M. McVicker Vice President and Chief Financial Officer James D. Cain Vice President Randolph L. Burnette Vice President Paul E. McLynch Vice President William A. Carr Treasurer Kathryn M. Muldowney Controller Dennis F. Murphy Secretary
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Directors s-H. Keith H. Brodie, M.D. President Emeritus of Duke University s-John A. Herdeg Attorney at Law and Chairman of the Board of Christiana Bank and Trust Company s-Thomas J. Malone President of Milliken & Company n-Rene C. McPherson Former Chairman of the Board of Dana Corporation and former Dean of Stanford University Graduate School of Business Gerrish H. Milliken Director of Milliken & Company n-Minot K. Milliken Vice President and a Director of Milliken & Company s,n-Roger Milliken Chairman of the Board and Chief Executive Officer of Milliken & Company s,n-George S. Moore International Financial Consultant David L. Nichols Chairman of the Board and Chief Executive Officer of Mercantile Stores Company, Inc. n-Francis G. Rodgers Former Vice President of IBM Corporation Roger K. Smith Strategic Marketing Manager of Analog Devices, Inc. s-Audit Committee n-Compensation Committee Stockholder Information Annual Meeting The Annual Meeting of Stockholders will be held at 11:30 a.m. on Wednesday, May 25, 1994 at 1100 North Market Street, Wilmington, Delaware. All stockholders are cordially invited to attend. Corporate Offices Mercantile Stores Company, Inc. 9450 Seward Road Fairfield, Ohio 45014 Telephone: 513-881-8000 Stock Transfer Agent, Registrar and Dividend Distributing Agent Harris Trust Company of New York 77 Water Street New York, NY 10005 Telephone: 212-701-7600 6.7% Notes and 8.2% Debentures Trustee Fifth Third Bank 38 Fountain Square Plaza Cincinnati, Ohio 45263 Telephone: 513-579-5300 Independent Accountants Arthur Andersen & Co. 425 Walnut Street Cincinnati, Ohio 45202 Telephone: 513-381-6900 General Counsel Curtis, Mallet-Prevost, Colt & Mosle 101 Park Avenue New York, NY 10178 Telephone: 212-696-6000 Form 10-K Annual Report A copy of Mercantile's 1993 Form 10-K Annual Report as filed with the Securities and Exchange Commission is available upon request by writing: Office of the Secretary Mercantile Stores Company, Inc. 1100 North Market Street Wilmington, Delaware 19801 Telephone: 302-575-1816

Dates Referenced Herein   and   Documents Incorporated By Reference

Referenced-On Page
This 10-K Filing   Date First   Last      Other Filings
1/31/922
2/1/92518
2/10/921314
10/31/9217
1/1/935
1/31/93218
2/1/9378
10/31/9317
For The Period Ended1/29/94218DEF 14A
1/31/947
2/1/947
4/1/948
Filed On / Filed As Of4/26/94DEF 14A
5/25/9426
7/31/9514
2/1/9615
 
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