-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, RZbZJlt5bC5QpcwE2ewjg3pJcsXzDf/dDIKVgjyovjaQBtTpycsk+TZYoYQ35Jg1 lb+ZPDHmJHug7LhA3Rvxug== 0000064923-95-000002.txt : 19950421 0000064923-95-000002.hdr.sgml : 19950421 ACCESSION NUMBER: 0000064923-95-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950420 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCANTILE STORES CO INC CENTRAL INDEX KEY: 0000064923 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 510032941 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03339 FILM NUMBER: 95530026 BUSINESS ADDRESS: STREET 1: 1100 N MARKET ST CITY: WILMINGTON STATE: DE ZIP: 19801 BUSINESS PHONE: 3025751816 MAIL ADDRESS: STREET 1: 9450 SEWARD ROAD CITY: FAIRFIELD STATE: OH ZIP: 45014 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 28, 1995 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 1-3339 MERCANTILE STORES COMPANY, INC. (Exact name of registrant as specified in its charter) Delaware 51-0032941 (State or other (I.R.S. Employer jurisdiction of incorporation) Identification No.) 9450 Seward Road, Fairfield, Ohio 45014 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (513) 881-8000 Securities registered pursuant to Section 12(b) of the Act: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED Common stock $.14 2/3 The New York Stock par value Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 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 this Form 10-K. [ ] The aggregate market value of the Company's voting stock held by non-affiliates based on the closing price on the New York Stock Exchange at April 17, 1995 was $972,888,800. The number of shares outstanding of the registrant's common stock, $.14 2/3 par value was 36,844,050 at April 17, 1995. DOCUMENTS INCORPORATED BY REFERENCE: 1. Portions of Registrant's 1994 Annual Report to Stockholders are incorporated into Parts I and II. 2. Portions of Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 24, 1995 (to be filed pursuant to Regulation 14A within 120 days after the close of the fiscal year covered by this report on Form 10-K) are incorporated by reference in to Parts I and III of this Form 10-K. PART I Item 1. Business. Mercantile Stores Company, Inc. ("Company" or "Registrant") was incorporated under the laws of the State of Delaware on January 10, 1919. The Company is listed on the New York Stock Exchange (NYSE designation of MST) and is engaged in general merchandise department store retailing. The Company's business is highly competitive. Its stores compete with other national, regional and local retail establishments, including department stores, specialty stores, and discount stores, which carry similar lines of merchandise. The Company's competitive methodology focuses on customer service, value, fashion, selection, advertising and store location. The Company regularly employs on a full or part-time basis an average of approximately 30,500 persons, of which approximately 19,000 are considered full-time equivalents. The following portions from the Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995 are incorporated herein by reference: Inside Front Cover; Financial Highlights (page 1); Management's Discussion and Analysis (pages 9-12); Note 1 (page 19) and Note 2 (page 20) of Notes to Consolidated Financial Statements; Ten-Year Selected Financial Data (pages 28-29). Item 2. Properties. The following table summarizes the property ownership and accompanying square footage of the one hundred department stores and three specialty stores operated by Mercantile Stores Company, Inc., as of January 28, 1995: Number of Square Stores Footage Owned Stores 60 8,954,971 Leased Stores 43 7,529,418 Total 103 16,484,389 Store Divisions and Locations (pages 30-31) from the Registrant's Annual Report to Stockholders for fiscal year ended January 28, 1995 is incorporated herein by reference. Item 3. Legal Proceedings. Information required by Item 3 is incorporated by reference to Note 9 (page 26) from the Registrant's Annual Report to Stockholders for fiscal year ended January 28, 1995 and to the information set forth under the caption "Litigation" to be included in the Registrant's definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 24, 1995 and to be filed pursuant to Regulation 14A within 120 days after the close of the fiscal year covered by this report on Form 10-K. Item 4. Submission of Matters to a Vote of Security Holders. Not applicable PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. Market and Dividend Information (page 13) and Stockholder Information (page 33) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995 are incorporated herein by reference. Item 6. Selected Financial Data. The Ten-Year Selected Financial Data (pages 28-29) and Notes to Consolidated Financial Statements (pages 19-26) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995 are incorporated herein by reference. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Management's Discussion and Analysis (pages 9-12) and Notes to Consolidated Financial Statements (pages 19-26) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995 are incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. The Consolidated Financial Statements (pages 15-18), Notes to Consolidated Financial Statements (pages 19-26), Report of Independent Public Accountants, which includes an explanatory paragraph that describes the change in the methods of accounting for postemployment benefits discussed in Note 6, accounting for income taxes discussed in Note 5 and accounting for postretirement benefits other than pensions discussed in Note 6 of Notes to Consolidated Financial Statements (page 14), and Quarterly Results (page 27) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995 are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None. PART III Item 10. Directors and Executive Officers of the Registrant. The information set forth under the captions "Election of Directors", "Other Executive Officers", and "Compliance with Section 16(a) of the Exchange Act" to be included in the Registrant's definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on may 24, 1995 and to be filed pursuant to Regulation 14A within 120 days after the close of the fiscal year covered by this report on Form 10-K, is incorporated herein by reference. Item 11. Executive Compensation. The information set forth under the captions "Management Remuneration", "Compensation Committee Interlocks and Insider Participation", "Pension Plans", and "Directors' Compensation" to be included in the Registrant's definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on may 24, 1995 and to be filed pursuant to Regulation 14A within 120 days after the close of the fiscal year covered by this report on Form 10-K, is incorporated herein by reference. Notwithstanding the foregoing, (i) the information set forth in said Proxy Statement under the caption "Report of the Compensation Committee" and (ii) the information set forth under the caption "Performance Graph" in said Proxy Statement, is not incorporated herein by reference or in any other filing of the Registrant. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information set forth under the captions "Stock Ownership of Management" and "Stock Ownership of Certain Beneficial Owners" to be included in the Registrant's definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 24, 1995 and to be filed pursuant to Regulation 14A within 120 days after the close of the fiscal year covered by this report on Form 10-K, is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. The information set forth under the caption "Transactions with Management and Others" to be included in the Registrant's definitive Proxy Statement relating to the Annual Meeting of Stockholders to be held on May 24,1 995 and to be file pursuant to Regulation 14A within 120 days after the close of the fiscal year covered by this report on Form 10-K, is incorporated herein by reference. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. A. 1. The following Consolidated Financial Statements of Mercantile Stores Company, Inc., Notes to Consolidated Financial Statements and Report of Independent Public Accountants, from the Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995 are incorporated herein by reference: (a) Statements of Consolidated Income and Retained Earnings for the fiscal years ended January 28, 1995, January 29, 1994 and January 31, 1993 - page 15. (b) Consolidated Balance Sheets as of January 28, 1995 and January 29, 1994 - pages 16 and 17. (c) Statements of Consolidated Cash Flows for the fiscal years ended January 28, 1995, January 29, 1994 and January 31, 1993 - page 18. (d) Notes to Consolidated Financial Statements - pages 19-26. (e) Report of Independent Public Accountants, which includes an explanatory paragraph that describes the change in the methods of accounting for postemployment benefits discussed in Note 6, accounting for income taxes discussed in Note 5 and accounting for postretirement benefits other than pensions discussed in Note 6 of Notes to Consolidated Financial Statements - page 14. 2. Financial Statement Schedules of the Registrant and Consolidated Subsidiaries included herein: (a) Report of Independent Public Accountants, which includes an explanatory paragraph that describes the change in the methods of accounting for postemployment benefits discussed in Note 6, accounting for income taxes discussed in Note 5 and accounting for postretirement benefits other than pensions discussed in Note 6 of Notes to Consolidated Financial Statements, on the schedule listed below. (b) Schedule II - Valuation and Qualifying Accounts All other schedules have been omitted as they are inapplicable or the information required is shown in the Consolidated Financial Statements or the Notes thereto. 3. Exhibits: (3a)- The Restated Certificate of Incorporation of Mercantile Stores Company, Inc., as amended, is incorporated herein by reference from the Registrant's Form 10-K for the fiscal year ended January 31, 1989. (3b)- The Registrant's Bylaws, as amended, are incorporated herein by reference from the Registrant's Form 10-K for the fiscal year ended January 31, 1989. (4)- The Indenture agreement between Mercantile Stores Company, Inc. and The Fifth Third Bank, as Trustee, dated as of July 1, 1992, is incorporated herein by reference from Registration No. 33-50604, Exhibit 4.1. (10)- The Agreement, dated as of February 10, 1992, among Mercantile Stores Company, Inc., MST Acquisition Co., New MB, Inc., Maison Blanche, Inc. and all of the Owners and Registered Holders of All of the Issued and Outstanding Capital Stock of Maison Blanche, Inc. and the Agreement of Purchase and Sale, dated as of February 10, 1992, by and between G/MB Leasing Company, Limited Partnership and Maison Blanche, Inc., is incorporated herein by reference from the Current Report on Form 8-K of the Company dated February 10, 1992, as amended by Amendment No. 1 dated April 24, 1992 and Amendment No. 2 dated May 12, 1992. (13)- The Registrant's Annual Report to Stockholders for the fiscal year ended January 28, 1995. (21)- A listing of the subsidiaries of the Registrant. (23)- Consent of Independent Public Accountants. (24)- Power of Attorney. (27)- Financial Data Schedule. (99)- Litigation Summary B. No reports on Form 8-K have been filed during the fourth quarter of the fiscal year ended January 28, 1995. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MERCANTILE STORES COMPANY, INC. (Registrant) BY: s/ David L. Nichols David L. Nichols Chairman of the Board Date: April 20, 1995. Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: s/ David L. Nichols ______________________ ______________________ David L. Nichols * Thomas J. Malone (Chairman of the Board) (Director) As Principal Executive Officer s/ James M. McVicker ______________________ ______________________ James M. McVicker * Rene C. McPherson (Senior Vice President and (Director) Chief Financial Officer) ______________________ ______________________ * John A. Herdeg * Gerrish H. Milliken (Director) (Director) _______________________ ________________________ * Roger K. Smith * Minot K. Milliken (Director) (Director) _______________________ _______________________ * George S. Moore * Roger Milliken (Director) (Director) _______________________ _______________________ * Francis G. Rodgers * H. Keith H. Brodie, MD (Director) (Director) * BY: s/ David L. Nichols David L. Nichols Date: April 20, 1995 An original Power of Attorney authorizing David L. Nichols, James M. McVicker and William A. Carr and each of them to sign this report hereto as Attorneys for Directors of the Registrant is being filed concurrently with the Securities and Exchange Commission. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and Board of Directors of Mercantile Stores Company, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Mercantile Stores Company, Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated April 1, 1995. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in the method of accounting for postemployment benefits in 1994, income taxes in 1993 and postretirement benefits other than pensions in 1992 as discussed in Notes 5 and 6 to the consolidated financial statements. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14(A)(2)(b) is the responsibility of the Company's management and is presented for the purpose of complying with the securities and Exchange Commission's rules and is not a port of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Cincinnati, Ohio April 1, 1995
MERCANTILE STORES COMPANY, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS (in thousands) Column A Column B Column C - Additions Column D Column E Balance at Charged to Charged to Deductions Balance at beginning costs and other write offs end of Description of period expenses accounts of recoveries period Allowance for Doubtful Accounts: Year Ended January 28, 1995 $0 $ 1,462 $ 3,130 (A) $ 1,492 $ 3,100 Year Ended Janaury 29, 1994 Not Required Year Ended Janaury 31, 1993 Not Required Note: (A) - Prior to November 1993, the Company sold all Maison Blanche customer receivables to MB Funding Trust, an unaffiliated company. This agreement was terminated during fiscal 1994 (see Note 3 of Notes to Consolidated Financial Statements). Upon completion of the termination process, the customer receivables, net of an allowance for doubtful accounts, were transferred to the Company from MB Funding Trust.
EX-13 2 REGISTRANTS ANNUAL REPORT
Financial Highlights 1994 1993 Year Ending Year Ending % January 28, 1995 January 29, 1994 Change For the year: Net Sales $2,819,837,000 $2,729,928,000 3.3 Income: Net Operating Income - Excluding Consolidation $107,517,000 $ 86,639,000 24.1 Consolidation Provision $(3,000,000) - Net Operating Income 104,517,000 86,639,000 20.6 Accounting Changes (1,100,000) 3,100,000 Net Income $103,417,000 $89,739,000 15.2 Per Share Data: Net Income - Excluding Consolidation $2.92 $2.35 Consolidation Provision (.08) - Net Operating Income 2.84 2.35 Accounting Changes (.03) .09 Net Income $2.81 $2.44 Working Capital $957,030,000 $902,268,000 6.1 Ratio 4.7 3.5 Long-Term Debt* $266,397,000 $387,452,000 (31.2) Debt to Capitalization Ratio 16.0% 22.5% Stockholders' Equity $1,400,551,000 $1,334,715,000 4.9 Book Value Per Share $38.01 $36.23 4.9 Stock Price $44-1/8 $39 13.1 * Includes current maturities
Management's Discussion and Analysis Results of Operations Net Sales percentage changes on a total and comparable store basis for the last three years were as follows: 1994 1993 1992 Total 3.3% (1.1%) 11.9% Comparable 1.7% (1.9%) (2.6%) In 1994, each of the Company's five operating retail groups reported a sales increase. The 1992 percentage increase in total sales reflects the non-comparable influence of the Maison Blanche (MB) acquisition which was consummated at the start of that year. Net Income for 1994, before a special consolidation provision and the impact of accounting changes, increased 24.1% to $107.5 million, or $2.92 per share, from the $86.6 million, or $2.35 per share, earned in the prior year. Net income for the past three years has been affected by non-recurring items and/or the effect of accounting changes. In 1994, net income was reduced by a total of $4.1 million due to a provision for a divisional consolidation and the adoption of an accounting standard covering postemployment benefits. In 1993, the adoption of an accounting standard with respect to income taxes increased net income by $3.1 million and, in 1992, net income was reduced by a total of $28.2 million due to charges recorded 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. As discussed in more detail in the following sections, net income for 1994 was also impacted by a continued reduction in selling, general and administrative expenses and a reduction in interest expense. In addition, net income for 1994 was also affected by a charge of $1.1 million related to the closing of a store in Colorado, while net income for 1993 included a gain of $3.2 million related to a sale of land not used in the business. The summary which follows presents a tabular analysis of the components of net income for the past three years:
1994 1993 1992 (in millions, except Per Per Per per share data) Amount Share Amount Share Amount Share Net income before non-recurring items and accounting changes $107.5 $2.92 $86.6 $2.35 $97.3 $2.64 Consolidation/ relocation provisions (3.0) (.08) - - (10.5) (.28) Postemployment benefits (1.1) (.03) - - - - Income taxes - - 3.1 .09 - - Postretirement benefits - - - - (12.2) (.33) Early retirement of debt - - - - (5.5) (.15) Net income $103.4 $2.81 $89.7 $2.44 $69.1 $1.88
Cost of Goods Sold (COGS) in the retail industry traditionally includes certain occupancy and buying costs which are not directly associated with the cost of merchandise. Occupancy expenses so classified include depreciation, rent, utilities, and real estate taxes; buying costs, in this respect, include the payroll and travel expenses of the corporate central buying function. In 1994, COGS, as a percent of net sales on a first-in, first-out (FIFO) basis, increased 0.2% over the prior year. This increase was attributable to reasons which do not evolve from the cost and selling price of merchandise. The increase primarily resulted from the impact that significantly increased levels of leased department sales had on margins. Leased department sales increased 16% over the prior year and the substantially lower margins earned from these sales resulted in a 0.3% increase in COGS. Shrinkage, which was higher by 0.2%, also contributed to the increase. Offsetting these increases was a 0.2% decrease in pure merchandise costs (the original cost of merchandise plus the cost of subsequent markdowns) and a 0.1% decrease in the depreciation element of occupancy costs. In 1993, COGS on a FIFO basis increased 1.2% due primarily to a much more promotional environment, particularly during the holiday season. In 1992, this ratio increased approximately 0.5% due entirely to an increase in the occupancy expense elements of COGS, most of which was attributable to the lower sales productivity generated by the newly acquired MB stores. The Company uses the last-in, first-out (LIFO) method to value all of its retail inventories. The LIFO impact on 1994 COGS was unusual as several categories of apparel, which constitute a majority of the Company's inventories, actually experienced a year-to-year price deflation as that economic factor is measured by the Bureau of Labor Statistics. This served to produce a LIFO credit of $.11 per share in 1994 contrasted with a charge of $.06 per share in 1993 and a credit of $.01 per share in 1992.
The impact of LIFO on COGS, as a percent of sales, was: 1994 1993 1992 Cost of goods sold 71.7% 71.8% 70.5% LIFO credit/(charge) .2 (.1) - Cost of goods sold (FIFO) 71.9% 71.7% 70.5%
Operating Expenses - Selling, general and administrative expenses (SG&A) declined in terms of absolute dollars for the second consecutive year. Relative to sales, the 1994 decrease in this line item amounted to 0.8%. Almost two-thirds of this decline was directly identifiable with a reduction in payroll and payroll-related expenses. In 1993, SG&A declined approximately 0.5% from the prior year with payroll and payroll-related expenses again comprising better than 50% of this decline. In 1992, SG&A increased approximately 1.1% over the prior year. Increases experienced in payroll and payroll-related expenses as well as marketing expense accounted for the majority of this change. In addition, approximately one half of the 1992 increase was attributable to the lower sales productivity and consequent higher expense ratios experienced by the MB stores which were acquired at the start of that year. SG&A expense, as a percent to net sales, was reduced to 22.2% in 1994 from 23.0% in 1993 and 23.5% in 1992. This two-year decline was a direct result of expense management initiatives implemented in the third quarter of 1993. The 1994 fiscal year reflected the full benefit of that expense containment program and, while the Company anticipates a further reduction in this expense ratio in 1995, it will be more modest than that experienced over the past two years. During the first quarter of 1994, the Company recorded a $5 million pretax provision for the consolidation of the Joslins division, centered in Denver, Colorado with the Jones Store Company Division, headquartered in Kansas City, Missouri. The provision covered severance pay, early retirement costs and relocation costs. As a result of this consolidation, the Company will save approximately $3 million annually, primarily as a result of reduced payroll and payroll-related expenses. In 1992, the Company recorded a $17 million pretax provision for the relocation of the corporate buying office from New York City to the Greater Cincinnati area and to consolidate certain divisional functions. The provision covered severance pay, early retirement costs, vacated premises lease costs and other relocation related expenses. Interest Expense decreased $8 million in 1994, primarily as a result of the scheduled payment of $110 million of mortgages and senior notes which carried an average interest coupon of 10.4%. These payments were made in the second quarter of the year. Other Income decreased approximately $5 million in 1994. The most significant components of this line item are the finance charges earned on the Company's two separate private label credit card programs, its share of equity earnings from the real estate joint ventures, and gains and losses on disposition of property. The latest year's decline resulted primarily from a $3 million decrease in the Company's share of finance charge income under the service arrangement with Citibank, offset by a $4 million increase in finance charge income earned on the MB credit program. In 1994, the Company also recorded a pretax charge of $2 million to other income to write down the asset value of a store in Colorado which was closed at the end of the year. Further impacting the year to year comparison of other income was the 1993 pretax gain of $5 million which resulted from selling land which was not used in the business. In 1994, the pretax profit from unused asset sales amounted to less than $1 million. The Company's share of finance charge income earned under the terms of the servicing arrangement with Citibank was $11 million in 1994, $14 million in 1993 and $16 million in 1992. The declines in this sharing of finance charge income over the past two years were due primarily to reductions in the customer receivable portfolio because of a combination of a continuing erosion of private label credit sales (39.3% of total sales in 1994, against 41.2% in 1993 and 41.8% in 1992) and a faster paydown of credit card balances by our customers. As discussed in Note 3 of Notes to Consolidated Financial Statements, the Company will terminate this service arrangement with Citibank in mid-1995 and will assume full responsibility for managing the private label credit program. It is anticipated that the impact of startup costs, including the establishment of a bad debt reserve, will render pretax income from the credit program in 1995 somewhat dilutive, but not materially so, to that earned in 1994. Prior to the fourth quarter of 1993, the Company sold all of its MB customer receivables to an unaffiliated company. In November 1993, the Company exercised its option to terminate this arrangement and began a phase out of the program. This phase out was completed in the second quarter of 1994. As a result of the termination of this agreement, the Company earned a greater share of finance charge income in 1994 and also incurred additional expenses. The finance charge income generated by the MB credit program (all of which is reflected as other income) was $10 million in 1994 and $6 million in both 1993 and 1992. The costs associated with servicing these receivables are reflected as SG&A expenses. The Effective Income Tax Rate has been relatively consistent for the last three years and was 39.5% in 1994 compared with 39.7% in 1993 and 39.3% in 1992. Liquidity and Capital Resources - The Company generated $169 million in cash from operating activities in 1994, compared with $138 million in 1993 and $231 million in 1992. The 1994 increase was primarily due to the increase in net income and non-cash charges which was partially offset by increases in working capital requirements, particularly those needed for inventory. In 1993, the decline of $93 million from the previous year was attributed to an increase in working capital requirements, particularly for receivables, as well as a decline in non-cash charges for relocation ($17 million) and an accounting change ($12 million) which more than offset the $21 million increase in net income. The level of inventories increased $43 million in 1994 over the prior year, with $6 million of this increase being identified with the reduction in the LIFO reserve, which has been explained previously. Approximately one third of the $37 million increase in FIFO inventory levels represented the requirements for the four new stores opened during the year net of the two smaller units which were closed. The remaining increase primarily resulted from earlier deliveries of spring merchandise. The funding required for accounts receivable declined $15 million in the year. Customer receivables were consistent between years as the decline in receivable balances from the Company's credit program (other than MB) was just about offset by the $29 million increase in MB receivables which resulted from the completion of the termination process discussed above. The decrease in other receivables in 1994 was substantially due to the collection of security deposits related to the termination of the MB credit program. Cash requirements related to capital expenditures were $94 million in 1994, $106 million in 1993 and $110 million in 1992. The 1994 expenditures were approximately $9 million lower than originally anticipated because of delays in construction on two proposed new stores which were precipitated by factors outside of the Company's control. Cash requirements for financing activities increased substantially in the year to $159 million, from $64 million in 1993 and $28 million in 1992. The 1994 increase was entirely due to satisfying the scheduled payback of $110 million of structured debt which the Company assumed in connection with the MB acquisition. The funding for this payment was accomplished entirely through the use of cash available from internal operations. During 1994, the Company also repurchased, in advance and at a discount, $5 million of its 6.7% notes due 2002. In 1993, financing activities included the prepayment of $19 million in Mortgage Notes bearing interest rates ranging from 8.4% to 9.6% and $6 million of 10.5% Industrial Revenue Bonds. In 1992, financing activities included the prepayment of $124 million of notes and debentures bearing interest rates ranging from 8.4% to 12.5% and the issuance of $200 million of notes and debentures. The Company traditionally satisfies its short-term financing requirements primarily through internally generated funds. In addition, it has in place a $175 million revolving credit facility and other discretionary lines of credit, totalling $85 million, with several banks. Maximum short-term borrowings under these facilities were $69 million in 1994 and $51 million in 1992. The Company did not find it necessary to engage in any short-term borrowing during 1993. At fiscal year-ends 1994, 1993 and 1992, no borrowings were outstanding under any of these credit arrangements. In 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 annual sinking fund requirement of $20 million commencing in 1997 and the debentures have a similar $5 million annual requirement commencing in 2003. Both issues were offered under a registration statement filed in 1992 pursuant to rule 415 of the Securities Act of 1933 in the aggregate amount of $250 million. The Company is committed to the importance of maintaining a strong balance sheet. The debt to capitalization ratio, considered to be a significant barometer of financial strength, is one of the lowest in the department store industry and was 16% and 22% at the end of 1994 and 1993, respectively. Our long-term debt ratings, A+ by Standard & Poor's Corporation and A1 by Moody's Investors Service, Inc., reflect an independent appraisal of this financial strength. Expansion and Capital Expenditures - Capital expenditures for 1995 are estimated at $110 million and it is anticipated that they will be financed through internally generated funds. Approximately 60% of 1995 expenditures are earmarked for remodeling and upgrading existing units; approximately 25% will be spent on new stores; and the remainder on support functions such as the new credit center. During 1994, the Company opened four new stores - one of which is dedicated strictly to home fashion merchandise. During the same period, two units were closed.New stores opened during 1994 were:
Operating Division Location Square Feet Maison Blanche New Orleans, Louisiana 157,000 Joslins Denver, Colorado 165,000 Gayfers Hattiesburg, Mississippi 122,000 McAlpin's - Signatures Home Store Crestview Hills, Kentucky 37,000
When the Maison Blanche store was opened in March 1994, an underperforming 150,000 square foot store located several miles away was closed. At the end of the year, a 150,000 square foot Joslins store in Denver, Colorado was closed. In 1995, the Company will open a new 50,000 square foot home fashions store in Cincinnati, Ohio. While some plans are still in the developmental stage, it would appear, presently, that the Company may open as many as five department stores in 1996. Benefit Program The Company maintains a comprehensive benefit program which includes pension and profit sharing plans as well as health and term life insurance plans for its eligible associates. The Pension Plan, established in 1945, is funded entirely by Company contributions. All associates who meet the eligibility requirements (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 27,544 Pension Plan members, including retirees, on January 28, 1995. The market value of Plan assets on January 31, 1995, amounted to $297 million. All associates who are enrolled in the Pension Plan are eligible to participate in the Savings, Profit Sharing and Supplemental Retirement Plan, which was established in 1954. During 1994, 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). Associates can elect to have their contributions deposited in a balanced fund, an equity fund, insurance company contracts or any combination of these funds. As explained in Note 6 of Notes to Consolidated Financial Statements, the Company makes an annual contribution to the Plan based upon its pretax income (as defined). For the latest year, the Company's contribution amounted to $8.1 million, or approximately $.47 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. Members can elect to invest the Company's annual contribution in a balanced fund, an equity fund, insurance company contracts or Mercantile Stores common stock. 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 28, 1995, the Trustee was holding 1,515,242 shares of Mercantile stock for the benefit of Plan members. On January 30, 1995, members in the Plan represented approximately 92% of those eligible. Plan assets at year-end totalled $408 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.
Market and Dividend Information For the fiscal year 1994 1993 Market Dividends Market Dividends Quarter High Low Declared Paid High Low Declared Paid First $41-1/8 $36 $.51 $.25-1/2 $37-1/4 $32-5/8 $.51 $.25-1/2 Second $38-1/2 $30-1/2 - $.25-1/2 $35-7/8 $30-1/4 - $.25-1/2 Third $57 $32-1/2 $.51 $.25-1/2 $36-1/8 $29-7/8 $.51 $.25-1/2 Fourth $46 $36-1/2 - $.25-1/2 $39-1/2 $34-1/2 - $.25-1/2 $1.02 $1.02 $1.02 $1.02
The Company's common stock is traded on the New York Stock Exchange (NYSE symbol - MST). The number of stockholders at January 28, 1995 was 9,928. On April 5, 1995, the Board of Directors approved an increase in the quarterly dividend from $.25-1/2 to $.26-1/2 per share. This increase, payable on June 15, 1995 to holders of record on May 31, 1995, converts to an indicated annual dividend of $1.06 per share. 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 Senior 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 28, 1995 and January 29, 1994, and the related statements of consolidated income and retained earnings and cash flows for each of the three years in the period ended January 28, 1995. 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 28, 1995 and January 29, 1994, and the results of their operations and their cash flows for each of the three years in the period ended January 28, 1995 in conformity with generally accepted accounting principles.As explained in Notes 5 and 6 to the Consolidated Financial Statements, the Company changed its method of accounting for postemployment benefits effective January 30, 1994, its method of accounting for income taxes effective February 1, 1993 and its method of accounting for postretirement benefits other than pensions effective February 1, 1992. Cincinnati, Ohio Arthur Andersen LLP April 1, 1995
Statements of Consolidated Income and Retained Earnings (in thousands) 1994 1993 1992 Net Sales (including leased departments) $2,819,837 $2,729,928 $2,732,041 Costs, Expenses, and Other Income: Cost of goods sold (including occupancy and central buying expenses) 2,020,264 1,960,914 1,927,149 Selling, general and administrative expenses 625,726 627,391 641,573 Provision for consolidation/ relocation 5,000 - 17,000 Interest expense 28,118 36,236 35,464 Interest income (4,592) (5,288) (3,099) Other income (27,571) (33,003) (29,145) 2,646,945 2,586,250 2,588,942 Income before Provision for Income Taxes 172,892 143,678 143,099 Provision for Income Taxes: Current 65,848 54,456 59,830 Deferred 2,527 2,583 (3,568) 68,375 57,039 56,262 Income before extraordinary charge on early retirementof debt and cumulative effect of accounting changes 104,517 86,639 86,837 Extraordinary charge on early retirement of debt (net of income taxes of $3,550) - - (5,550) Cumulative effect of accounting changes: Postemployment benefits (net of income taxes of $700) (1,100) - - Income taxes - 3,100 - Postretirement benefits other than pensions (net of income taxes of $7,800) - - (12,200) Net Income $ 103,417 $ 89,739 $ 69,087 Retained Earnings at Beginning of Year 1,323,294 1,271,136 1,239,630 1,426,711 1,360,875 1,308,717 Dividends Declared and Paid 37,581 37,581 37,581 Retained Earnings at End of Year $1,389,130 $1,323,294 $1,271,136 Net Income Per Share: Income before extraordinary charge on early retirement of debt and cumulative effect of accounting changes $ 2.84 $ 2.35 $ 2.36 Extraordinary charge on early retirement of debt - - (0.15) Cumulative effect of accounting changes: Postemployment benefits (0.03) - - Income taxes - 0.09 - Postretirement benefits other than pensions - - (0.33) Net Income Per Share $ 2.81 $ 2.44 $ 1.88 See Notes to Consolidated Financial Statements
Consolidated Balance Sheets (in thousands) January 28, January 29, 1995 1994 Assets Current Assets: Cash and cash equivalents $ 114,237 $ 194,544 Receivables: Customer 592,402 587,859 Other 27,836 47,255 Inventories 468,782 425,492 Deferred income taxes 7,667 5,875 Other current assets 7,821 8,120 Total Current Assets 1,218,745 1,269,145 Investments and Other Noncurrent Assets 73,878 61,136 Deferred Income Taxes 300 10,199 Property and Equipment: Land 36,512 36,922 Buildings and improvements 675,187 649,108 Fixtures 310,671 310,102 Leased property 64,311 64,311 1,086,681 1,060,443 Less accumulated depreciation 397,875 368,941 Property and equipment, net 688,806 691,502 Total $1,981,729 $2,031,982 Liabilities and Stockholders' Equity Current Liabilities: Current maturities of long-term debt $ 5,210 $ 115,487 Accounts payable 121,667 116,116 Taxes other than income 17,101 16,182 Other current liabilities 61,132 57,445 Accrued income taxes 32,381 41,035 Accrued payroll 24,224 20,612 Total Current Liabilities 261,715 366,877 Long-term Debt 261,187 271,965 Due to Affiliated Companies 26,115 26,713 Other Long-term Liabilities 32,161 31,712 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 1,389,130 1,323,294 Total Stockholders' Equity 1,400,551 1,334,715 Total $1,981,729 $2,031,982 See Notes to Consolidated Financial Statements
Statement of Consolidated Cash Flows (in thousands) 1994 1993 1992 Cash Flows from Operating Activities: Net income $103,417 $ 89,739 $ 69,087 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 93,540 93,455 94,036 Deferred taxes 2,527 2,583 (3,568) Net loss (gain) on disposition of property 1,250 (3,904) - Provision for consolidation/relocation 5,000 - 17,000 Postretirement benefits costs 166 2,200 2,200 Gain on sale of joint venture - (1,610) - Cumulative effect of accounting changes, net of income taxes 1,100 (3,100) 12,200 Equity in unremitted earnings of affiliated companies (206) (1,141) (1,876) Net pension benefit (15,653) (13,788) (7,842) Changes in working capital, net of effect from the acquisition of Maison Blanche, Inc. in 1992: Change in inventories (43,290) (2,673) 17,489 Change in accounts receivable 14,876 (21,406) 49,313 Change in accounts payable 5,551 6,931 (4,216) Change in other working capital items 1,143 (9,180) (13,100) Net cash provided by operating activities 169,421 138,106 230,723 Cash Flows from Investing Activities: Cash payments for property and equipment (93,639) (106,210) (110,638) Proceeds from sale of property 1,550 6,095 - Purchase of Maison Blanche, Inc., net of cash acquired - - (23,591) Proceeds from sale of joint venture - 785 - Net change in other noncurrent assets and liabilities 997 2,845 6,302 Distribution from joint ventures - - 19,575 Net cash used in investing activities (91,092) (96,485) (108,352) Cash Flows from Financing Activities: Payments of long-term debt (121,055) (26,740) (190,004) Proceeds from issuance of long-term debt - - 200,000 Dividends paid (37,581) (37,581) (37,581) Net cash used in financing activities (158,636) (64,321) (27,585) Net (Decrease) Increase in Cash and Cash Equivalents (80,307) (22,700) 94,786 Cash and Cash Equivalents at Beginning of Year 194,544 217,244 122,458 Cash and Cash Equivalents at End of Year $114,237 $194,544 $217,244 Supplemental Cash Flow Information: Interest paid $ 29,532 $ 37,393 $ 37,922 Income taxes paid $ 68,227 $ 49,670 $ 51,841 See Notes to Consolidated Financial Statements
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. All material intercompany accounts and transactions have been eliminated. The Company uses the equity method to account for its 33 1/3% to 50% position in five shopping center joint ventures. B. Accounts Receivable - Customer accounts receivable are classified as current assets and include some amounts which are due after one year, consistent with industry practice. C. Inventories - 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 28, 1995 and January 29, 1994, inventories were $86 million and $92 million, respectively, lower than they would have been had the retail method been used without the application of the LIFO basis. D. 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. E. 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. F. 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. G. 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. H. Segment Reporting - The Company has one significant segment of business (general merchandise department store retailing). I. 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. J. Reclassifications - Certain reclassifications have been made to prior years' financial statements to conform with the classifications used in the 1994 financial statements. 2. Provisions for Consolidation/Relocation During the first quarter of 1994, the Company recorded a $5.0 million charge for the consolidation of the Joslins division, centered in Denver, Colorado, with the Jones Store Company division, headquartered in Kansas City, Missouri. The provision was made to cover severance pay for the displacement of approximately 175 associates, early retirement costs for certain qualifying associates and relocation costs. The consolidation of these operations was completed during the first quarter. During the first quarter of fiscal 1992, the Company recorded a provision of $17 million for the relocation of the corporate buying office from New York 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. 3. 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 $85 million. The Company does not pay any fee for maintaining these discretionary lines and interest on any borrowings thereunder is charged at a floating rate. At January 28, 1995 and January 29, 1994, there were no borrowings outstanding under the revolving credit agreement or the discretionary lines. Maximum borrowings under these credit facilities for fiscal 1994 were $69 million, at an average interest rate of 5.4%. During fiscal 1993, there were no borrowings under these credit facilities. A commitment fee of $.7 million in 1994, 1993, and 1992 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 those generated by Maison Blanche (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, other than MB, 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. 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 $11 million in 1994, $14 million in 1993 and $16 million in 1992. 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 1994, 1993 and 1992, revenue sharing income has been reduced $5.2 million, $5.3 million, and $5.4 million, respectively, because of this formula adjustment. In anticipation of taking over full responsibility for managing the private label credit program on August 1, 1995, the Company will begin servicing a portion of the receivables portfolio (including credit authorization, absorption of bad debts and collections) from its Credit Center in Baton Rouge, Louisiana at the beginning of the second quarter of 1995. Prior to November 1993, the Company sold all 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 at the Credit Center in Baton Rouge, Louisiana and retained the finance charge income generated by them, net of costs associated with the program. In November 1993, the Company gave notice to MB Trust of its election to terminate the agreement and the termination process was concluded in the second quarter of 1994. Finance charge income related to the MB customer receivables, which is reflected as Other income in the accompanying Statements of Consolidated Income and Retained Earnings, was $10.3 million in 1994 (reflecting the impact of the termination), $6.2 million in 1993 and $5.7 million in 1992. Costs associated with servicing the receivables are reflected as selling, general and administrative expenses. At January 28, 1995 and January 29, 1994, MB customer receivables totaled approximately $80 million and $50 million, respectively. 4. Long-Term Debt The Company's long-term debt consisted of the following: (in thousands) 1994 1993 10.95% Senior Guaranteed Notes due 1994 $ - $ 47,240 10.07% Mortgage Notes due 1994 - 63,280 8.2% Sinking Fund Debentures due 2022 100,000 100,000 6.7% Notes due 2002 (a) 95,000 100,000 Industrial Revenue Bonds at rates ranging from 5.8% to 8.0% 10,689 12,441 Mortgage Note payable (b) 1,080 1,080 Other Notes Payable 8,669 10,835 Total Debt 215,438 334,876 Capitalized Lease Obligations 50,959 52,576 266,397 387,452 Less - due within one year 5,210 115,487 Total Long-term Debt $261,187 $271,965 (a)-During the year, the Company repurchased, in advance and at a discount, $5 million of 6.7% Notes due 2002. (b)-The Note carries a variable interest rate of 1.5% over prime with a final payment due on February 1, 1997. Maturities of long-term debt, including capitalized leases, for the next five years are as follows: Fiscal year (in thousands) Amount 1995 $ 5,210 1996 $ 6,251 1997 $ 25,027 1998 $ 25,181 1999 $ 23,644 During fiscal 1992, the Company tendered for and redeemed $94 million of Sinking Fund Debentures due 2014 and 2015. 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. 5. Income Taxes The components of taxes on income, excluding the extraordinary charge and cumulative effect of accounting changes, consisted of the following: (in thousands) 1994 Federal State Total Current $56,041 $ 9,807 $65,848 Deferred 1,781 746 2,527 Total $57,822 $10,553 $68,375 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 Deferred (2,694) (874) (3,568) Total $45,702 $10,560 $56,262 Deferred income taxes result from temporary 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 changes, of each were as follows: (in thousands) 1994 1993 1992 Depreciation $ (5,231) $ (4,431) $ (1,102) Associate benefit plans 5,520 4,410 2,061 Consolidation/ relocation 2,025 1,883 (3,670) Other 213 721 (857) Total $ 2,527 $ 2,583 $ (3,568) 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: (in thousands) 1994 1993 1992 Provision at statutory rate of 35% for 1994 and 1993, and 34% in 1992 $60,512 $50,287 $48,654 State and local income tax, less Federal income tax benefit 6,859 6,196 6,970 Other 1,004 556 638 Total income tax provision $68,375 $57,039 $56,262 Effective income tax rate 39.5% 39.7% 39.3% During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 109, - "Accounting for Income Taxes" - (SFAS 109). 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 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 tax effects of significant temporary differences representing deferred tax assets and liabilities were as follows: 1994 1993 Assets: Inventory accounting $ 3,060 $ 3,294 Associate benefit costs 14,047 11,341 Interest, taxes, and real estate costs 10,364 10,490 Relocation costs 960 2,898 Capitalized leases 3,893 3,527 Other 8,538 6,429 Total deferred tax assets 40,862 37,979 Liabilities: Depreciation (10,981) (3,597) Pension, savings and profit sharing costs (21,120) (15,057) Other (794) (3,251) Total deferred tax liabilities (32,895) (21,905) Total Net Deferred Tax Assets $ 7,967 $16,074 6. 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: (in thousands) 1994 1993 1992 Service cost $ 6,884 $ 6,524 $ 6,908 Interest cost 11,267 10,351 9,788 Actual return on plan assets 1,723 (39,586) (21,551) Amortization of transition asset (5,043) (5,043) (5,043) Other amortization and deferral (30,484) 13,966 2,056 Net pension benefit $(15,653) $(13,788) $ (7,842) The expected long-term rate of return on assets used in determining the net pension benefit was 8.5% in 1994, 1993, and 1992. The actuarial present value of benefits was determined using a discount rate of 8.5% in 1994 and 7.5% in 1993 and 1992. The rate of compensation increase used to measure the projected benefit obligation was 5.5% in all years presented. The change in the discount rate assumption lowered the October 31, 1994 projected benefit obligation by approximately $20 million. The funded status of the formal qualified pension plan at January 28, 1995 and January 29, 1994, based on actuarial and plan asset information as of October 31, 1994 and 1993, was as follows: (in thousands) 1994 1993 Actuarial present value of benefit obligations: Vested benefits $116,600 $123,900 Non-vested benefits 1,800 1,800 Accumulated benefits obligation 118,400 125,700 Impact of future salary increases 26,830 28,553 Projected benefit obligation 145,230 154,253 Plan assets at fair value 298,091 306,094 Plan assets in excess of projected benefit obligation 152,861 151,841 Items not yet recognized in income: Initial transition credit which is being amortized over 15 years (35,302) (40,345) Subsequent net gain (61,378) (70,968) Prepaid pension benefit $ 56,181 $ 40,528 No funding activity occurred between the plan and the Company during the fourth quarter of 1994 or 1993. 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: (in thousands) 1994 1993 1992 Savings and Profit Sharing $ 8,068 $ 7,026 $ 5,295 Pension 1,754 1,258 569 Total $ 9,822 $ 8,284 $ 5,864 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 1993 fiscal 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. The cumulative effect of this accounting change resulted in a 1992 fiscal year charge of $12.2 million, or $.33 per share, after tax benefits of $7.8 million. The components of net periodic postretirement benefit cost for 1994, 1993, and 1992 were as follows: (in thousands) 1994 1993 1992 Service cost earned during the year $ 536 $ 1,729 $ 2,100 Interest cost on projected benefit obligation 770 1,581 1,600 Net amortization and deferral (1,140) (703) - Net periodic postretirement benefit cost $ 166 $ 2,607 $ 3,700 The following table sets forth the plan's combined funded status for 1994 and 1993: (in thousands) 1994 1993 Accumulated postretirement benefit obligation: Retirees $ 4,024 $ 4,130 Fully eligible active plan participants 182 189 Other active plan participants 5,352 5,990 9,558 10,309 Unrecognized net gain from changes in plan and assumptions 5,594 4,935 Unrecognized prior service cost 7,608 8,527 Accrued postretirement benefit costs $22,760 $23,771 For measurement purposes, the following assumptions were used to project changes in the accumulated postretirement benefit obligation for 1994 and 1993: 1994 1993 Discount rate 8.5% 7.5% Health care cost trend rate 9.5% to 5% 10.25% to 5% Years to ultimate trend 10 11 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 $.8 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost by $.2 million. During 1994, the Company changed the measurement date on which plan assets and obligations are measured from January 31 to October 31. This change in measurement date did not have a material effect on the determination of the accumulated postretirement benefit obligation. Effective January 30, 1994, the Company adopted 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 or inactive employees after employment but before retirement. The cumulative effect of this accounting change resulted in a charge of $1.1 million, or $.03 per share, after tax benefits of $.7 million. 7. 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, was approximately equal to book value at both January 28, 1995 and January 29, 1994. 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. 8. 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. Future minimum lease payments under noncancelable leases as of January 28, 1995 were as follows: Fiscal year (in thousands) Capital Operating Total 1995 $ 6,346 $ 21,706 $ 28,052 1996 6,346 21,403 27,749 1997 6,246 20,454 26,700 1998 6,118 18,900 25,018 1999 6,060 17,012 23,072 Thereafter 77,111 114,852 191,963 Total minimum lease payments $108,227 $214,327 $322,554 Less: Executory costs (276) Interest (56,992) Present value of net minimum lease payments $ 50,959 Rent expense consisted of the following: (in thousands) 1994 1993 1992 Minimum rentals $ 23,840 $ 23,509 $ 22,457 Contingent rentals (based on % of sales) 5,328 4,503 7,416 $ 29,168 $ 28,012 $ 29,873 9. 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.
Quarterly Results (unaudited in thousands, except per share data) January 28, 1995 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total Net Sales $592,509 $619,307 $679,453 $928,568 $2,819,837 Costs, Expenses, and Other Income: Cost of goods sold (including occupancy and central buying expenses) 421,380 455,082 475,190 668,612 2,020,264 Selling, general and administrative expenses 150,719 148,766 161,863 164,378 625,726 Provision for consolidation 5,000 - - - 5,000 Interest expense, net 7,173 6,637 5,190 4,526 23,526 Other income (6,687) (7,679) (6,361) (6,844) (27,571) 577,585 602,806 635,882 830,672 2,646,945 Income before provision for income taxes 14,924 16,501 43,571 97,896 172,892 Provision for income taxes 5,920 6,702 17,365 38,388 68,375 Income before cumulative effect of accounting change 9,004 9,799 26,206 59,508 104,517 Cumulative effect of accounting change for postemployment benefits (net of income taxes of $700) (1,100) - - - (1,100) Net income $ 7,904 $ 9,799 $ 26,206 $ 59,508 $ 103,417 Net income per share: Income before cumulative effect of accounting change $ .24 $ .27 $ .71 $ 1.62 $ 2.84 Cumulative effect of accounting change (.03) - - - (.03) Net income per share $ .21 $ .27 $ .71 $ 1.62 $ 2.81
Quarterly Results (unaudited in thousands, except per share data) January 29, 1994 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total 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) 401,681 459,614 461,289 638,330 1,960,914 Selling, general and dministrative expenses 151,220 157,159 157,200 161,812 627,391 Interest expense, net 7,783 7,719 7,706 7,740 30,948 Other income (7,069) (7,217) (5,932) (12,785) (33,003) 553,615 617,275 620,263 795,097 2,586,250 Income (loss) before provision for 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
Ten-Year Selected Financial Data (dollars in thousands, except per share data) 1994 1993 1992 1991 1990 Operating Results Net sales $2,819,837 $2,729,928 $2,732,041 $2,442,425 $2,367,210 Cost of goods sold 2,020,264 1,960,914 1,927,149 1,720,361 1,670,555 Selling, general and administrative expenses 625,726 627,391 641,573 547,268 527,467 Provision for consolidation/relocation 5,000 - 17,000 - - Interest expense 28,118 36,236 35,464 23,390 23,422 Interest income (4,592) (5,288) (3,099) (4,511) (4,160) Other income (27,571) (33,003) (29,145) (30,485) (29,186) Income before provision for income taxes 172,892 143,678 143,099 186,402 179,112 Percent to sales 6.1 5.3 5.2 7.6 7.6 Provision for income taxes 68,375 57,039 56,262 72,363 55,498 Income before extraordinary charge and cumulative effect of accounting change 104,517 86,639 86,837 114,039 123,614 Extraordinary charge, net - - (5,550) - - Accounting change, net (1,100) 3,100 (12,200) - - Net income 103,417 89,739 69,087 114,039 123,614 Percent to sales 3.7 3.3 2.5 4.7 5.2 Per common share $2.81 $2.44 $1.88 $3.10 $3.36 Dividends declared 37,581 37,581 37,581 37,120 26,804 Per common share $1.02 $1.02 $1.02 $1.00-3/4 $72-3/4 Dividends paid 37,581 37,581 37,581 37,120 35,278 Per common share $1.02 $1.02 $1.02 $1.00-3/4 $.95-3/4 Financial Position Working capital $ 957,030 $ 902,268 $ 992,153 $ 988,786 $ 934,495 Ratio of current assets to current liabilities 4.66 3.46 4.64 6.44 6.13 Receivables 620,238 635,114 613,708 656,428 667,600 Inventories 468,782 425,492 422,819 381,406 393,304 Property and equipment, net (includes capitalized leases) 688,806 691,502 680,933 461,563 444,696 Total assets 1,981,729 2,031,982 2,007,868 1,673,099 1,596,630 Long-term debt 261,187 271,965 390,258 207,150 207,906 Retained earnings 1,389,130 1,323,294 1,271,136 1,239,630 1,162,711 Stockholders'equity 1,400,551 1,334,715 1,282,557 1,251,051 1,174,132 Per common share $38.01 $36.23 $34.81 $33.96 $31.87 Return on stockholders' equity (1) 7.6% 6.9% 5.5% 9.4% 11.0% Number of shares outstanding 36,844 36,844 36,844 36,844 36,844 Other Data Capital expenditures for property and equipment, net $ 93,639 $ 106,210 $ 110,638 $ 79,931 $ 82,944 Depreciation 93,540 93,455 94,036 70,607 63,158 Stores opened during year 4 3 1 2 3 Stores acquired - - 16 - - Stores closed during year 2 1 1 1 1 Number of stores 103 101 99 83 82 Total square feet 16,484 16,212 15,820 13,145 12,683 Sales per square foot (2) $173 $169 $174 $188 $191 (1) Based on average stockholders' equity at beginning and end of year. (2) Based on stores opened for the entire year.
Ten-Year Selected Financial Data (dollars in thousands, except per share data) 1989 1988 1987 1986 1985 Operating Results Net sales $2,312,802 $2,265,500 $2,155,653 $2,028,202 $1,880,039 Cost of goods sold 1,594,849 1,551,484 1,476,327 1,377,763 1,279,199 Selling, general and administrative expenses 502,537 480,225 451,885 431,656 404,328 Provision for consolidation/relocation 10,000 - - - - Interest expense 22,818 23,076 22,971 23,695 21,571 Interest income (4,289) (3,934) (3,268) (3,301) (2,833) Other income (26,156) (22,021) (19,402) (17,811) (18,674) Income before provision for income taxes 213,043 236,670 227,140 216,200 196,448 Percent to sales 9.2 10.4 10.5 10.7 10.4 Provision for income taxes 82,700 92,208 97,584 105,135 94,000 Income before extraordinary charge and cumulative effect of accounting change 130,343 144,462 129,556 111,065 102,448 Extraordinary charge, net - - - - - Accounting change, net - - - - - Net income 130,343 144,462 129,556 111,065 102,448 Percent to sales 5.6 6.4 6.0 5.5 5.4 Per common share $3.54 $3.92 $3.52 $3.01 $2.78 Dividends declared 33,896 35,923 24,870 21,370 18,791 Per common share $.92 $.97-1/2 $.67-1/2 $.58 $ .51 Dividends paid 32,791 28,554 24,870 21,370 18,791 Per common share $.89 $.77-1/2 $.67-1/2 $.58 $ .51 Financial Position Working capital $ 873,613 $ 846,839 $ 817,450 $ 756,699 $ 628,080 Ratio of current assets to current liabilities 4.65 4.63 4.88 4.52 3.52 Receivables 644,633 625,199 588,510 548,132 514,759 Inventories 393,319 362,037 332,175 306,516 281,446 Property and equipment, net (includes capitalized leases) 408,229 355,438 310,486 294,846 270,035 Total assets 1,548,438 1,451,752 1,353,357 1,279,112 1,163,264 Long-term debt 199,284 197,058 205,241 205,786 211,224 Retained earnings 1,065,901 969,454 860,915 756,229 666,534 Stockholders'equity 1,077,322 980,875 872,336 767,729 678,034 Per common share $29.24 $26.62 $23.68 $20.84 $18.40 Return on stockholders' equity (1) 12.7% 15.6% 15.8% 15.4% 16.1% Number of shares outstanding 36,844 36,844 36,844 36,845 36,845 Other Data Capital expenditures for property and equipment, net $ 97,230 $ 92,572 $ 57,797 $ 64,436 $ 49,639 Depreciation 54,478 47,541 47,141 46,833 43,267 Stores opened during year 1 2 1 2 2 Stores acquired - - - - - Stores closed during year 1 1 4 - - Number of stores 80 80 79 82 80 Total square feet 12,077 11,791 11,124 11,105 10,676 Sales per square foot (2) $192 $195 $195 $185 $178 (1) Based on average stockholders' equity at beginning and end of year. (2) Based on stores opened for the entire year.
Store Divisions and Locations 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) Signatures Home Store (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 Southwyck Shopping Center (Lion) North Towne Square (Lion) Franklin Park Mall (Lion) Westgate Home Store (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) Dothan, AL Wiregrass Commons (Gayfers) Tuscaloosa, AL McFarland Mall (Gayfers) Albany, GA Albany Mall (Gayfers) Columbus, GA Peachtree Mall (Gayfers) Jackson, MS Metrocenter (Gayfers) Northpark Mall (Gayfers) Hattiesburg, MS Turtle Creek 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) Gayfers/Maison Blanche Store Locations Shopping Centers/Malls Mobile, AL Springdale Mall (Gayfers) Jubilee Mall (Gayfers) Biloxi-Gulfport, MS Edgewater 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 (Gayfers) Roosevelt Mall (Gayfers) Orange Park Mall (Gayfers) The Avenues (Gayfers) Daytona Beach, FL Volusia Mall (Gayfers) Orlando, FL Orlando Fashion Square (Gayfers) Altamonte Mall (Gayfers) The Florida Mall (Gayfers) 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) Buckingham Square (Joslins) Villa Italia Center (Joslins) Westminster Mall (Joslins) Southwest Plaza (Joslins) Southglenn Mall (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) 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-four Stores in Kentucky, Ohio and Indiana Headquartered in Louisville, Kentucky Paul E. McLynch President, Mercantile Merchandising Group Central Buying Organization Headquartered in Fairfield, Ohio Edward A. Overbey, Jr. President of Castner Knott Co.Thirteen Stores in Tennessee, Kentucky and Alabama Headquartered in Nashville, Tennessee Robin E. Sanderford President of Gayfers and J.B. White Seventeen Stores in Alabama, Georgia, Mississippi and South Carolina Headquartered in Montgomery, Alabama Michael G. Shannon President of Gayfers and Maison Blanche Twenty-five Stores in Florida, Louisiana, Alabama and Mississippi Headquartered in Mobile, Alabama Charles O. Unfried President, Mercantile Credit Corp. Central Credit Organization Headquartered in Baton Rouge, Louisiana Corporate Officers David L. Nichols Chairman of the Board and Chief Executive Officer James M. McVicker Senior Vice President and Chief Financial Officer Randolph L. Burnette Vice President James D. Cain Vice President Paul E. McLynch Vice President William A. Carr Treasurer Kathryn M. Muldowney Controller Dennis F. Murphy Secretary Directors s n 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, Chief Operating Officer and Director of Milliken & Company n Rene C. McPherson Former Chairman and Chief Executive Officer 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 Director of Milliken & Company s n Roger Milliken Chairman of the Board,Chief Executive Officer and Director 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 11:00 a.m. on Wednesday, May 24, 1995 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 LLP 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 1994 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 EX-21 3 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 MERCANTILE STORES COMPANY, INC. SUBSIDIARY SCHEDULE AS OF JANUARY 29, 1995 STATE OF SUBSIDIARY COMPANY INCORPORATION J. BACON & SONS KENTUCKY THE CASTNER-KNOTT DRY GOODS COMPANY TENNESSEE THE O.J. de LENDRECIE CO. DELAWARE C.J. GAYFER & COMPANY, INCORPORATED DELAWARE HENNESSY COMPANY MONTANA THE JONES STORE COMPANY DELAWARE THE JOSLIN DRY GOODS COMPANY, INC. COLORADO THE LAZARUS STORE, INC. DELAWARE THE LION DRY GOODS COMPANY, INC. OHIO THE McALPIN COMPANY KENTUCKY GAYFER'S MONTGOMERY FAIR CO. DELAWARE ROOT DRY GOODS COMPANY, INC. INDIANA J.B. WHITE & COMPANY, INC. SOUTH CAROLINA DULUTH GLASS BLOCK STORE COMPANY MINNESOTA THE McALPIN COMPANY OHIO THE PEOPLES STORE COMPANY WASHINGTON J.B. WHITE & COMPANY NEW JERSEY THE MACDOUGAL & SOUTHWICK COMPANY WASHINGTON MCCREERY & COMPANY MAINE SERF CORPORATION MISSOURI MERSCO REALTY CO., INC. OHIO THE JONES STORE COMPANY HAIRSTYLING SCHOOL MISSOURI MERCANTILE STORES COMPANY, INC. (N.Y.) NEW YORK MERSCO FINANCE COMPANY DELAWARE MERCANTILE PROPERTIES, INC. DELAWARE MERCANTILE REAL ESTATE CO., INC. DELAWARE THE O.J. de LENDRECIE CO. MINNESOTA MERSCO DEVELOPMENT COMPANY, INC. DELAWARE MERCANTILE INTERNATIONAL, INC. DELAWARE MAISON BLANCHE, INC. LOUISIANA TSM HOLDING COMPANY, INC. DELAWARE GOUDCHAUX'S CAR CARE CENTER, INC. LOUISIANA MB CREDIT CORPORATION DELAWARE MERCANTILE CREDIT CORP. LOUISIANA EX-23 4 CONSENT OF EXPERTS Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in or incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statement File No. 33-50604. ARTHUR ANDERSEN LLP Cincinnati, Ohio April 20, 1995 EX-24 5 POWER OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints David L. Nichols, James M. McVicker and William A. Carr, and each of them, his true and lawful Attorney-in-Fact and Agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities (including his capacity as director of Mercantile Stores Company, Inc.) to sign Form 10K of Mercantile Stores Company, Inc. for the year ended January 28, 1995, and to file the same together with all Exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting to the Attorneys-in-Fact and Agents and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that the Attorneys-in- Fact and Agents or any of them or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: April 5, 1995 H. Keith H. Brodie, MD Minot K. Milliken John A. Herdeg Roger Milliken Thomas J. Malone George S. Moore Rene C. McPherson Francis G. Rodgers Gerrish H. Milliken Roger K. Smith EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS, CONSOLIDATED BALANCE SHEETS AND STATEMENT OF CONSOLIDATED CASH FLOWS FOR THE PERIOD ENDED JANUARY 28, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JAN-28-1995 JAN-28-1995 114,237 0 595,502 3,100 468,782 1,218,745 1,086,681 397,875 1,981,729 261,715 0 5,403 0 0 1,395,148 1,981,729 2,819,837 2,819,837 2,020,264 2,020,264 5,000 0 28,118 172,892 68,375 104,517 0 0 1,100 103,417 2.81 2.81 Provision for divisional consolidation. Adpotion of FASB No. 112.
EX-99 7 LITIGATION SUMMARY EXHIBIT 99 MERCANTILE STORES COMPANY, INC. LITIGATION SUMMARY On September 28, 1994, an action was filed against the Company in the Chancery Court of Delaware captioned "Francis Bodkin and Irene Bodkin v. Mercantile Stores Company, Inc., et. al." (the "Complaint"). The Complaint purports to be brought individually, on plaintiffs' own behalf, and as a class action, on behalf of all the holders of shares of common stock. The Complaint alleges that the Company and/or its directors breached their fiduciary duties in allegedly rejecting an offer by The May Department Stores Company to acquire the Company during August and September, 1994. As part of their demand for relief, plaintiffs seek unspecified compensatory damages. The defendants filed a motion to dismiss and a motion to stay discovery on December 5, 1994. The motions will be briefed and argued in due course. The Company believes that the Complaint is without merit and intends to vigorously defend the action. -----END PRIVACY-ENHANCED MESSAGE-----