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
<PAGE>
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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
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<PAGE>
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
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<PAGE>
<TABLE>
MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<CAPTION>
April 29, January 28,
1995 1995
--------- -----------
<S> <C> <C>
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
========== ==========
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
<CAPTION>
Thirteen Weeks Ended
April 29, April 30,
1995 1994
-------- ----------
<S> <C> <C>
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
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
MERCANTILE STORES COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Thirteen Weeks Ended
April 29, April 30,
1995 1994
----------- -----------
<S> <C> <C>
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
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
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)
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<PAGE>
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.
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<PAGE>
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)
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<PAGE>
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)
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<PAGE>
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.
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<PAGE>
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)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-29-1995
<PERIOD-END> APR-29-1995
<CASH> 97,724
<SECURITIES> 0
<RECEIVABLES> 556,474
<ALLOWANCES> 9,203
<INVENTORY> 544,712
<CURRENT-ASSETS> 1,223,917
<PP&E> 1,098,968
<DEPRECIATION> 419,220
<TOTAL-ASSETS> 1,981,974
<CURRENT-LIABILITIES> 274,187
<BONDS> 0
<COMMON> 5,403
0
0
<OTHER-SE> 1,385,940
<TOTAL-LIABILITY-AND-EQUITY> 1,981,974
<SALES> 599,901
<TOTAL-REVENUES> 602,858
<CGS> 427,006
<TOTAL-COSTS> 427,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,367
<INCOME-PRETAX> 16,564
<INCOME-TAX> 6,613
<INCOME-CONTINUING> 9,951
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,951
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
