-----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, m+/GfpSRppSwuPgreC9xkGWLfCmPMM+zX2kp8GNImFuOsiWzSDGpRvGtC8BqBWVo XlIXpd8onP9Tct2hRwDRlw== 0000064923-95-000006.txt : 19950614 0000064923-95-000006.hdr.sgml : 19950614 ACCESSION NUMBER: 0000064923-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950429 FILED AS OF DATE: 19950613 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03339 FILM NUMBER: 95546804 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 MERCANTILE STORES COMPANY, INC. 9450 SEWARD ROAD FAIRFIELD, OHIO 45014-2230 June 13, 1995 Securities and Exchange Commission Washington, D.C. 20549 Gentlemen: Pursuant to the requirements of the Securities Exchange Act of 1934, we are transmitting herewith the attached Form 10-Q. Sincerely, James M. McVicker Senior Vice President and Chief Financial Officer - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- 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 April 29, 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 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 June 13, 1995 Total number of sequentially number pages in this filing, including exhibits thereto: 12 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- -1- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES FORM 10-Q INDEX PART I - FINANCIAL INFORMATION Item 1 - Financial Statements: Consolidated Condensed Balance Sheets - April 29, 1995 and January 28, 1995 3 Consolidated Condensed Statements of Income - For the thirteen weeks ended April 29, 1995 and April 30, 1994 4 Consolidated Condensed Statements of Cash Flows - For the thirteen weeks ended April 29, 1995 and April 30, 1994 5 Notes to Consolidated Condensed Financial Statements 6 - 7 Item 2 - Management's Discussion and Analysis of Results of Operations and Financial Condition 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)
April 29, January 28, 1995 1995 --------- ----------- ASSETS - ------ Current Assets: Cash and cash equivalents $ 97,724 $ 114,237 Receivables: Customer, net 547,271 592,402 Other 16,618 27,836 Inventories 544,712 468,782 Other current assets 17,592 15,488 ---------- ---------- Total Current Assets 1,223,917 1,218,745 ---------- ---------- Investments & Other Noncurrent Assets 77,248 73,878 ---------- ---------- Deferred Income Taxes 1,061 300 ---------- ---------- Property and Equipment, net 679,748 688,806 ---------- ---------- Total Assets $1,981,974 $1,981,729 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Accounts payable $ 160,446 $ 121,667 Notes payable and current maturities of long-term debt 5,198 5,210 Accrued income taxes 13,821 32,381 Taxes other than income 22,355 17,101 Accrued payroll 20,250 24,224 Other current liabilities 52,117 61,132 ---------- ---------- Total Current Liabilities 274,187 261,715 ---------- ---------- Long-term Debt 258,467 261,187 ---------- ---------- Other Long-term Liabilities 57,977 58,276 ---------- ---------- Stockholders' Equity 1,391,343 1,400,551 ---------- ---------- Total Liabilities & Stockholders' Equity $1,981,974 $1,981,729 ========== ========== 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 April 29, April 30, 1995 1994 -------- ---------- Revenues $602,858 $592,509 Cost of goods sold (including occupancy and central buying expenses) 427,006 421,380 Gross Profit 175,852 171,129 Expenses and Other Income: Selling, general and administrative expenses 159,994 150,719 Provision for divisional consolidation - 5,000 Interest expense, net 3,976 7,173 Other income (4,682) (6,687) 159,288 156,205 Income before Provision for Income Taxes 16,564 14,924 Provision for income taxes 6,613 5,920 Income before Cumulative Effect of Accounting Change 9,951 9,004 Cumulative effect of accounting change for postemployment benefits (net of income taxes of $ 700) - (1,100) Net Income $ 9,951 $ 7,904 Net Income Per Share (based on 36,844,050 shares outstanding): Income before cumulative effect of accounting change $ .27 $ .24 Cumulative effect of accounting change for postemployment benefits - (.03) Net Income Per Share $ .27 $ .21 Dividends Declared Per Share $ .52 $ .51 The accompanying notes are an integral part of these statements.
-4- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
Thirteen Weeks Ended April 29, April 30, 1995 1994 ----------- ----------- Cash Flows From Operating Activities: Net Income $ 9,951 $ 7,904 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 21,354 22,227 Deferred income taxes (1,241) (847) Equity in unremitted earnings of affiliated companies (17) (106) Provision for divisional consolidation - 5,000 Postretirement benefits costs - 200 Cumulative effect of accounting change, net of taxes - 1,100 Net pension benefit (3,651) (3,912) Change in inventories (75,930) (69,125) Change in accounts receivable 56,349 32,671 Change in accounts payable 38,779 22,206 Net change in other working capital (37,683) (17,911) ---------- --------- Net cash provided by (used in) operating activities 7,911 (593) Cash Flows From Investing Activities: Cash payments for property and equipment (12,296) (16,035) Net change in other noncurrent assets and liabilities (1) (2,036) --------- -------- Net cash used in investing activities (12,297) (18,071) Cash Flows From Financing Activities: Payments of notes payable and long-term debt (2,732) (4,072) Dividends paid (9,395) (9,395) --------- --------- Net cash used in financing activities (12,127) (13,467) Net decrease in cash and cash equivalents (16,513) (32,131) Beginning cash and cash equivalents 114,237 194,544 --------- ---------- Ending cash and cash equivalents $ 97,724 $ 162,413 =========== ========== Supplemental Cash Flow Information: Interest paid $ 9,251 $ 12,558 Income taxes paid $ 26,410 $ 25,555 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 1995. 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 February 3, 1996. 2. Short-term Investments Short-term investments which have a maturity of ninety days or less are considered cash equivalents. 3. Customer Receivables Customer receivables are classified as current assets and include some amounts which are due after one year, consistent with industry practice. Customer receivables at April 29, 1995 and January 28, 1995 are net of an allowance for doubtful accounts of $9.2 million and $4.2 million, respectively. 4. Merchandise 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. 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 and costs as of the fiscal year-end. (Continued) -6- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) 5. Revenues Revenues include sales of leased departments. In the 1995 quarter, revenues also include finance charge income of approximately $3 million earned on Maison Blanche (MB) customer receivables serviced by the Company. In the 1994 quarter, this finance charge income accrued to the Company under a Trust Agreement and was classified as a component of other income. 6. Provision for Divisional 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 of 1994. 7. Accounting Change During the first quarter of 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," which requires employers 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- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Material Changes in the Results of Operations For the First Quarter of 1995 Compared to the First Quarter of 1994 Revenues were $603 million for the first quarter of 1995. Sales were $600 million, reflecting an increase of 1.2% over the 1994 quarter. Sales in comparable units increased .7% during the period, as business continued to be sluggish in this highly competitive retail environment. Cost of good sold, as a percent to total revenue, decreased from 71.1% to 70.8%. This decline was substantially attributable to the inclusion of finance charge revenue in the 1995 quarter. Merchandise margins improved by .2% over 1994 but were offset by a .3% increase in costs associated with lower margin leased department sales which increased 15% in the period. Selling, general and administrative expenses (SG&A), as a percent to total revenue, increased to 26.5% from the 25.4% level of 1994. The increase was primarily attributable to start up costs associated with the Company's assumption of full responsibility for managing its private label credit program at the end of the second quarter of 1995. The private label credit program is currently being managed by an affiliate of Citibank and that service agreement will be terminated effective July 31, 1995. Credit center operating expenses charged to SG&A in 1995 included a $5 million charge (.8% of total revenue) for the partial establishment of a bad debt reserve; and additional personnel costs (.1% of total revenue) for staffing requirements in anticipation of fully taking over the credit program on July 31 of this year. It is anticipated that the credit center will experience somewhat higher operating costs in the second quarter of this year as the expense of finalizing staffing requirements is incurred and the bad debt reserve is fully established. Payroll and payroll related expenses, exclusive of the credit center, declined by .1% and were offset by a .2% increase in marketing and media expenses. During the first quarter of 1994, the Company recorded a $5 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 covered severance pay, early retirement costs and relocation costs. Interest expense, net, decreased $3 million in the quarter. The decline in the quarter was primarily the result of the scheduled payment of $110 million of structured debt, bearing an average coupon of 10.4%, during the second quarter of 1994. (Continued) -8- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Material Changes in the Results of Operations For the First Quarter of 1995 Compared to the First Quarter of 1994 Other income declined approximately $2 million in the quarter. The primary elements of this caption in 1995 are the Company's share of finance charge income from the private label credit program which it shares under the terms of a service agreement with Citibank and the Company's share of joint venture income. Other income in the 1994 quarter also included the Company's share of finance charge income earned on the MB customer receivables. The termination of this credit program was concluded in the second quarter of 1994, and the MB customer receivables are currently being serviced by the Company. The finance charge income associated with these MB accounts has been classified as a component of revenue in 1995, resulting in the decline in other income between periods. The Company's effective tax rate was relatively consistent for both reported periods. During the first quarter of 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits." The cumulative effect of this accounting change resulted in an after tax charge to net income of $1.1 million, or $.03 per share. Material Changes in Financial Condition From Janaury 28, 1995 to April 29, 1995 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 $16 million during the period was attributable, primarily, to $12 million of payments for capital expenditures and $12 million used for financing activities. This cash outflow was partially offset by $8 million of cash generated by operations. Net customer receivables decreased $45 million in the period due to a combination of the normal pay down of peak year-end balances and a 3.3% decline in the ratio of private label credit sales to total sales. The decrease also reflects a $5 million bad debt provision made in the quarter as a result of the termination of the service agreement with Citibank effective July 31, 1995. An additional $5 million bad debt provision will be recorded during the second quarter of 1995. The decrease in other receivables of $11 million was 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 $76 million during the period primarily due to the normal replenishment of inventory levels following the Christmas promotional and January clearance periods, as well as the impact of the sluggish business envionment. The increase of $39 million in accounts payable was related to the replenishment of inventory levels. (Continued) -9- MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Material Changes in Financial Condition From Janaury 28, 1995 to April 29, 1995 Accrued income taxes declined $19 million. This was primarily due 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's capital expenditure requirements from those outlined in the 1994 Annual Report. The Company satisfies short-term financing needs primarily through internally generated funds. In addition, the Company has available a committed $175 million revolving credit facility and uncommitted lines of credit which total $85 million. At April 29, 1995 and January 28, 1995, no balances were outstanding under these lines of credit. The Company maintained significant cash balances throughout the first quarter, and it was not necessary to use these lines of credit in the period. On May 31, 1995, the Company gave notice of its intention to terminate the revolving credit facility effective July 31, 1995. The Company is presently negotiating with several financial institution to secure a new revolving credit facility. On April 5, 1995, the Board of Directors increased the indicated annual dividend rate from $1.02 per share to $1.06 per share. The first payment at the new quarterly rate of $.26-1/2 will be made on June 15, 1995 to holders of record of the common stock at the close of business on May 31, 1995. -10- PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders (a) There were no matters submitted to a vote of security holders during the quarterly period ended April 29, 1995. 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 April 29, 1995. 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) June 13, 1995 (Date) s/ James M. McVicker (James M. McVicker, Senior 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 APRIL 29, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-28-1995 JAN-29-1995 APR-29-1995 97,724 0 556,474 9,203 544,712 1,223,917 1,098,968 419,220 1,981,974 274,187 0 5,403 0 0 1,385,940 1,981,974 599,901 602,858 427,006 427,006 0 0 5,367 16,564 6,613 9,951 0 0 0 9,951 .27 .27
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