-----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, eXi22duUpyWOjHQofdQlXKVqIsnkulUJ9lqmvFc+4/mQtsuzHUspIDd0z6Q3A/Gf m/mbMjwVlu+i7kWrw6tzLw== 0000064923-94-000008.txt : 19940915 0000064923-94-000008.hdr.sgml : 19940915 ACCESSION NUMBER: 0000064923-94-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940730 FILED AS OF DATE: 19940914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCANTILE STORES CO INC CENTRAL INDEX KEY: 0000064923 STANDARD INDUSTRIAL CLASSIFICATION: 5311 IRS NUMBER: 510032941 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03339 FILM NUMBER: 94548943 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-Q 1 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ___ | X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) --- OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 30, 1994 ___ | | 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 jurisdiction of incorporation) (I.R.S. Employer 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 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 36,844,050 shares of Common Stock at $.14 2/3 par value as of September 14, 1994 Total number of sequentially number pages in this filing, including exhibits thereto: 11 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- -1- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES FORM 10-Q INDEX PART I - FINANCIAL INFORMATION Item 1 - Financial Statements: Consolidated Condensed Balance Sheets - July 30, 1994 and January 29, 1994 3 Consolidated Condensed Statements of Income - For the thirteen and twenty-six weeks ended July 30, 1994 and July 31, 1993 4 Consolidated Condensed Statements of Cash Flows - For twenty-six weeks ended July 30, 1994 and July 31, 1993 5 Notes to Consolidated Condensed Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 11 Item 6 - Exhibits and Reports on Form 8-K 11 -2-
MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) July 30, January 29, 1994 1994 ---------- ----------- ASSETS - ------ Current Assets: Cash and cash equivalents $ 89,798 $ 194,544 Receivables: Customer 540,688 587,859 Other 20,671 47,255 Inventories 498,960 425,492 Deferred income taxes 9,796 5,875 Other current assets 8,478 8,120 ---------- ---------- Total Current Assets 1,168,391 1,269,145 ---------- ---------- Investments & Other Noncurrent Assets 68,334 61,136 ---------- ---------- Deferred Income Taxes 4,501 10,199 ---------- ---------- Property and Equipment, at cost, less accumulated depreciation 687,370 691,502 ---------- ---------- Total Assets $1,928,596 $2,031,982 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Accounts payable $ 152,571 $ 116,116 Notes payable and current maturities of long-term debt 5,145 115,487 Accrued income taxes 5,055 41,035 Taxes other than income 23,922 16,182 Accrued employee benefits 15,110 6,412 Accrued payroll 21,421 20,612 Other current liabilities 45,422 51,040 ---------- ---------- Total Current Liabilities 268,646 366,884 ---------- ---------- Long-term Debt 268,290 271,965 ---------- ---------- Due to Affiliated Companies 26,487 26,713 ---------- ---------- Other Long-term Liabilities 31,553 31,712 ---------- ---------- Stockholders' Equity 1,333,620 1,334,708 ---------- ---------- Total Liabilities & Stockholders' Equity $1,928,596 $2,031,982 ========== ========== The accompanying notes are an integral part of these statements. -3-
MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME (In thousands, except per share data) Thirteen Weeks Ended Twenty-Six Weeks Ended July 30, July 31, July 30, July 31, 1994 1993 1994 1993 Net Sales (including sales from leased departments) $ 619,307 $ 615,380 $1,211,816 $1,187,725 Cost of goods sold (including occupancy and central buying expenses) 455,082 459,614 876,462 861,295 --------- --------- ----------- ----------- Gross Profit 164,225 155,766 335,354 326,430 --------- --------- ----------- ----------- Expenses and Other Income: Selling, general and administrative expenses 148,766 157,159 299,485 308,379 Provision for consolidation - - 5,000 - Interest expense, net 6,637 7,719 13,810 15,502 Other income (7,679) (7,217) (14,366) (14,286) --------- --------- ---------- ---------- 147,724 157,661 303,929 309,595 --------- --------- ---------- ---------- Income (Loss) before Income Taxes 16,501 (1,895) 31,425 16,835 Provision for Income Taxes 6,702 (562) 12,622 6,692 --------- --------- ---------- ---------- Income (Loss) before Cumulative Effect of Accounting Changes 9,799 (1,333) 18,803 10,143 Cumulative Effect of Accounting Changes: Postemployment Benefits (net of income taxes of $700) - - (1,100) - Income taxes - - - 3,100 --------- --------- ---------- ---------- Net Income (Loss) $ 9,799 $ (1,333) $ 17,703 $ 13,243 ========= ========= ========== ========== Net Income (Loss) Per Share (based on 36,844,050 shares outstanding) Income (Loss) before cumulative effect of accounting changes $ .27 $ (.04) $ .51 $ .27 Cumulative effect of accounting changes: Postemployment benefits - - (.03) - Income taxes - - - .09 --------- --------- ---------- ----------- Net Income (Loss) Per Share $ .27 $ (.04) $ .48 $ .36 ========= ========= ========== =========== Dividends Paid Per Share $ .25-1/2 $ .25-1/2 $ .51 $ .51 The accompanying notes are an integral part of these statements.
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MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) Twenty-Six Weeks Ended July 30, July 31, 1994 1993 ----------- ----------- Cash Flows From Operating Activities: Net Income $ 17,703 $ 13,243 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 44,719 45,527 Deferred income taxes (3,779) (386) Gain on sale of property - (1,164) Equity in unremitted earnings of affiliated companies 164 231 Provision for divisional consolidation 5,000 - Postretirement benefits costs 200 1,200 Cumulative effect of accounting changes, net of taxes 1,100 (3,100) Net pension benefit (7,824) (6,894) Change in inventories (73,468) (59,601) Change in accounts receivable 73,755 76,915 Change in accounts payable 36,455 38,773 Change in other working capital items (22,654) (38,721) ---------- --------- Net cash provided by operating activities 71,371 66,023 Cash Flows From Investing Activities: Cash payments for property and equipment (40,582) (37,097) Proceeds from sale of property - 1,254 Net change in other noncurrent assets and liabilities (2,727) (2,042) --------- -------- Net cash used in investing activities (43,309) (37,885) Cash Flows From Financing Activities: Payments of notes payable and long-term debt(114,017) (22,122) Dividends paid (18,791) (18,791) --------- --------- Net cash used in financing activities (132,808) (40,913) Net decrease in cash and cash equivalents (104,746) (12,775) Beginning cash and cash equivalents 194,544 217,244 --------- ---------- Ending cash and cash equivalents $ 89,798 $204,469 =========== ========== Supplemental Cash Flow Information: Interest paid $ 17,671 $ 19,214 Income taxes paid $ 43,825 $ 38,142 The accompanying notes are an integral part of these statements.
-5- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS 1. Accounting Policies The consolidated condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission with respect to Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made herein are adequate to make the information not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Interim statements are subject to possible adjustments in connection with the annual audit of the Company's accounts for the full fiscal year 1994. In the Company's opinion, all adjustments (consisting only of normal recurring adjustments) necessary for fair statement presentation have been included. Because of seasonality, the results of operations for the periods presented are not necessarily indicative of the results expected for the year ending January 28, 1995. 2. Reclassifications Certain reclassifications have been made to the prior year's financial statements to conform with current year presentation. 3. Merchandise 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. Since amounts for inventories under the LIFO method are based on an annual determination of quantities and costs, the inventories at interim periods are based on certain estimates relating to quantities as of the fiscal year-end. 4. Short-term Investments For purposes of these statements, short-term investments which have a maturity of ninety days or less are considered cash equivalents. (Continued) -6- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) 5. Provision for Consolidation 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. 6. Accounting Changes During the first quarter of 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits." This Statement requires employers to recognize, on an accrual basis, the 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 to net income of $1.1 million, or $.03 per share. During the first quarter of 1993, the Company adopted Statement of Financial Accounting Standards No. 109 (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. The cumulative effect of this accounting change resulted in a credit to net income of $3.1 million, or $.09 per share. 7. Subsequent Events On September 9, 1994, the Company announced that it is engaged in discussions with a third party regarding a possible merger or other business combination. The Company's Board of Directors has not authorized a merger or other business combination and no assurance can be given that any agreement regarding such a transaction will be reached. -7- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Material Changes in Financial Condition From January 29, 1994 to July 30, 1994 The retail business is highly seasonal with approximately one-third of annual sales being generated in the fourth quarter which encompasses the important Christmas selling season. As a result, significant variations can occur when comparing financial condition at the above indicated dates. The decrease in cash and cash equivalents of $104.8 million during the period is represented, primarily, by $40.6 million of cash payments for capital expenditures and $114.0 million of structured long-term debt payments, offset by cash provided by operations of $71.4 million. Total customer accounts receivable decreased $47.2 million as a result of a $68.6 million reduction in the Company's private label program (other than Maison Blanche (MB)) due to the pay down of peak, post Christmas year-end balances and a drop in the ratio of private label charge sales to total sales. This decrease was partially offset by an increase of $21.4 million related to the termination of the MB Credit Program. Formerly, the Company sold MB customer accounts to an unaffiliated company. The termination process was concluded during the 1994 second quarter and all MB customer receivables are now reflected on the books of the Company. The decrease of $26.6 million in other receivables is primarily attributable to the contractual arrangement with Citibank under which the Company's share of finance charge income is remitted by the bank in the first quarter of the ensuing year. Inventories increased $73.5 million during the period, primarily due to the normal replenishment of inventory levels following the Christmas promotional and January clearance periods, as well as under achievement of projected sales levels. The increase of $36.5 million in accounts payable is also attributable to the normal replenishment of inventory levels. Accrued income taxes declined $35.9 million. This decline is primarily attributable to payments of federal and state income taxes, partially offset by provision for taxes on current year income. There have been no material changes in the Company capital expenditure requirements as outlined in the 1993 Annual Report. Financing activities increased $91.9 million from prior year, as result of the payment of approximately $110.0 million of structured debt. The structured debt consisted of mortgage notes and senior notes which carried an average annual interest rate of approximately 10.4%. The payment of the structured debt reduced the Company's debt to equity ratio to 20.5% from 29.0%. The Company satisfies its short-term financing needs primarily through internally generated funds. In addition, the Company has available a $175 million revolving credit facility and other discretionary lines of credit which total $65 million. At January 29, 1994 and July 30, 1994, no balances were outstanding under these lines of credit. The Company maintained significant cash balances throughout the period and it was not necessary to use these lines of credit during the current period. (Continued) -8- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Material Changes in the Results of Operations For the Second Quarter and 26 Week Period of 1994 Compared to the Second Quarter and 26 Week Period of 1993 Net sales increased by .6% to $619.3 million in the quarter and increased by 2.0% to $1,211.8 million in the 26 week period. Sales in comparable units declined .2% in the quarter and increased .5% for the first half of 1994, as sales continue to be difficult in this highly competitive retail environment. Cost of goods sold (COGS), as a percent to net sales, was 73.5% in the second quarter compared to 74.7% in last year's second quarter. For the 26 weeks ended July 30, 1994 and July 31, 1993, the ratios were 72.3% and 72.5%, respectively. The improvement in the quarter and the 26 week period is attributable to increased merchandise margins resulting from decreased markdown activity, partially offset by an increase in the cost of merchandise due to changes in merchandise mix and vendor price increases. Occupancy and buying costs, which are a component of COGS and include depreciation, rent, and repairs, were comparable for both the quarter and 26 week period. Selling, general and administrative expenses (SG&A), as a percent to net sales, decreased 1.5% during the quarter and 1.3% in the 26 week period, reflecting benefits achieved from expense control initiatives established during the second half of 1993. Marketing expenses accounted for approximately .4% of this improvement while payroll and payroll related expenses and supply expense reductions represented most of the remaining decrease during the quarter. The reduction in SG&A for the 26 week period is primarily attributable to a .4% decline in payroll and payroll related expenses and a .3% reduction in both marketing and supply expenses. During the first quarter of 1994, the Company recorded a $5.0 million 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 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 of 1994. As a result of this consolidation, the Company expects to save approximately $3 million annually, primarily through a reduction in payroll and payroll related expenses. Interest expense, net, decreased, $1.1 million in the quarter and $1.7 million for the 26 week period. The decline in both the quarter and the 26 week period is attributable to the prepayments of $19 million of mortgages at the end of last year's first quarter and the payment of $110 million of structured debt in second quarter of 1994. (Continued) -9- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Material Changes in the Results of Operations For the Second Quarter and 26 Week Period of 1994 Compared to the Second Quarter and 26 Week Period of 1993 Other income was approximately $7 million for both comparable quarters and approximately $14 million for both comparable 26 week periods. The primary elements of this caption are the Company's share of finance charge income from the private label credit program (other than MB) which it shares under the terms of a service agreement with Citibank, finance charge income earned on the MB credit program, and the Company's share of joint venture income. The slight rise recorded in this line item during the quarter was due to increased levels of finance charge income attributable to the MB customer accounts receivable offset by lower levels of finance charge income earned on the Citibank program. The Company's effective tax rate increased from 39.7% to 40.2% during the 26 week period. This reflects the mandatory increase in the U.S. statutory Federal income tax rate from 34% to 35% enacted in August of 1993. During the first quarter of 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The cumulative effect of this change resulted in an after tax charge to net income of $1.1 million, or $.03 per share. During the first quarter of 1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes." The cumulative effect of this accounting change resulted in a one-time credit to net income of $3.1 million, or $.09 per share. -10- PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Stockholders of the Company was held on May 25, 1994. (b) At the Annual Meeting of Stockholders of the Company held on May 25, 1994, the three matters described below were submitted to a vote of security holders with the voting results indicated. (1) the election of four directors of the Company; for term expiring in 1997. Nominee For Withheld H. Keith H. Brodie, M.D. 33,743,876 320,750 Rene C. McPherson 33,773,330 291,296 Minot K. Milliken 33,772,473 292,153 Roger K. Smith 33,775,180 289,146 (2) the appointment of Arthur Andersen & Co., as independent auditors. (32,601,320 votes in favor, 1,286,930 votes against and 176,376 votes abstained); (3) a Stockholder Proposal relating to the declassification of the Board of Directors. (7,818,004 votes in favor, 23,186,397 votes against and 3,060,225 votes abstained); Item 6 - Exhibits and reports on form 8-K (a) Exhibit 27 - Financial Data Schedule (filed electronically). (b) There were no reports on Form 8-K filed for the quarterly period ended July 30, 1994. SIGNATURE Pursuant to the requirements 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) September 14, 1994 (Date) s/ James M. McVicker (James M. McVicker, Vice President, and Chief Financial Officer) -11- EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED CONDENSED BALANCE SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS FOR THE PERIOD ENDED JULY 30, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS JAN-28-1995 JAN-30-1994 JUL-30-1994 89,798 0 540,688 0 498,960 1,168,391 1,100,996 413,626 1,928,596 268,646 0 5,403 0 0 1,328,217 1,928,596 1,211,816 1,211,816 876,462 876,462 5,000 0 16,788 31,425 12,622 18,803 0 0 1,100 17,703 .48 .48 PROVISION FOR CONSOLIDATION. ADOPTION OF SFAS NO. 112, RESULTING IN A CHARGE TO NET INCOME OF $.03 PER SHARE.
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