UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
X OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended February 1, 1997
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock $.14 2/3 par value The New York Stock 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 the 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. [ X ]
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 28, 1997 was $1,039,767,600.
The number of shares outstanding of the registrant's common stock,
$.14 2/3 par value was 36,770,750 at April 28, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of Registrant's 1996 Annual Report to Stockholders are
incorporated into Parts I, II and III.
2. Portions of Registrant's Proxy Statement, dated April 29, 1997, relating
to the Annual Meeting of Stockholders to be held on May 28,1997 filed
pursuant to Regulation 14A, are incorporated by reference into Parts I
and III of this Form 10-K.
<PAGE>
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. The Company's retailing
strategy is to cater to middle and upper income customers by carrying wide
assortments of national brand items and goods sold under the Company's
private labels, with emphasis on apparel, accessories and fashion home
products. Its stores compete with other national, regional and local retail
establishments, including department stores, mass merchants, specialty
stores and discount stores which carry similar lines of merchandise. The
Company's competitive methodology focuses on value, customer service,
fashion, selection, marketing and store location.
The retail business is highly seasonal. The fourth quarter, which includes
the Christmas season, is the most significant selling period. For the year
ended February 1, 1997, the fourth quarter accounted for approximately 33%
of consolidated retail sales and 52% of consolidated net income.
The Company regularly employs, on a full or part-time basis, an average of
approximately 34,300 associates, of which approximately 19,800 are considered
full-time equivalents.
The following portions from the Registrant's Annual Report to Stockholders
for the fiscal year ended February 1, 1997 are incorporated herein by
reference: Financial Highlights (page 1); Management's Discussion and
Analysis (pages 11-14); Note 1 (pages 21-22), Note 2 and Note 3 (page 22)
of Notes to Consolidated Financial Statements; Five-Year Selected Financial
Data (pages 30-31); Store Divisions and Locations (pages 32-33).
Item 2. Properties.
The Company's typical store averages 170,000 square feet. These stores are
located in seventeen different states and operate under thirteen
different names. The following table summarizes the property ownership
and applicable square footage of the one hundred and two department stores
and fifteen home fashion stores operated by the Company as of
February 1, 1997:
Home
Department Fashion Square
Stores Units Footage
Owned Stores 60 2 9,629,032
Leased Stores 42 13 7,652,960
Total 102 15 17,281,992
Management's Discussion and Analysis (pages 11-14), Note 1 (pages 21-22) of
Notes to Consolidated Financial Statements and Store Divisions and Locations
(pages 32-33) from the Registrant's Annual Report to Stockholders for the
fiscal year ended February 1, 1997 are incorporated herein by reference.
<PAGE>
Item 3. Legal Proceedings.
Information required by Item 3 is incorporated herein by reference to Note
10 of Notes to Consolidated Financial Statements (page 28) from the
Registrant's Annual Report to Stockholders for the fiscal year ended
February 1, 1997.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
Market and Dividend Information (page 15) and Stockholder Information
(inside back cover) from the Registrant's Annual Report to Stockholders
for the fiscal year ended February 1, 1997 are incorporated herein by
reference.
Item 6. Selected Financial Data.
The Five-Year Selected Financial Data (pages 30-31) and Notes to Consolidated
Financial Statements (pages 21-28) from the Registrant's Annual Report
to Stockholders for the fiscal year ended February 1, 1997 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 11-14) and Notes to Consolidated
Financial Statements (pages 21-28) from the Registrant's Annual Report
to Stockholders for the fiscal year ended February 1, 1997 are incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements (pages 17-20), Notes to Consolidated
Financial Statements (pages 21-28), Report of Independent Public Accountants
(page 16), which includes an explanatory paragraph that describes the change
in the methods of accounting for long-lived assets discussed in Note 2 and
accounting for postemployment benefits discussed in Note 8 of Notes to
Consolidated Financial Statements, and Quarterly Results (page 29) from the
Registrant's Annual Report to Stockholders for the fiscal year ended
February 1, 1997 are incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosures.
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information set forth under the captions "Election of Directors", "Stock
Ownership of Management", "Other Executive Officers" and "Section 16(a)
Beneficial Ownership Reporting Compliance" included in the Registrant's
definitive Proxy Statement, dated April 29, 1997, relating to the Annual
Meeting of Stockholders to be held on May 28, 1997 and filed pursuant to
Regulation 14A, is incorporated herein by reference.
Item 11. Executive Compensation.
The information set forth under the caption "Management Remuneration",
included in the Registrant's definitive Proxy Statement, dated April 29, 1997,
relating to the Annual Meeting of Stockholders to be held on May 28, 1997
and filed pursuant to Regulation 14A, is incorporated herein by reference.
Notwithstanding the foregoing, the information set forth under the captions
"Report of the Compensation Committee" and "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" included in the
Registrant's definitive Proxy Statement, dated April 29, 1997, relating to
the Annual Meeting of Stockholders to be held on May 28, 1997 and filed
pursuant to Regulation 14A, is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information set forth under the caption "Transactions with Management
and Others" included in the Registrant's definitive Proxy Statement, dated
April 29, 1997, relating to the Annual Meeting of Stockholders to be held
on May 28, 1997 and filed pursuant to Regulation 14A, is incorporated herein
by reference.
<PAGE>
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 February 1, 1997
are incorporated herein by reference:
(a) Statements of Consolidated Income and Retained Earnings for
the fiscal years ended February 1, 1997, February 3, 1996 and
January 28, 1995 - page 17.
(b) Consolidated Balance Sheets as of February 1, 1997 and
February 3, 1996 - pages 18 and 19.
(c) Statements of Consolidated Cash Flows for the fiscal years
ended February 1, 1997, February 3, 1996 and
January 28, 1995 - page 20.
(d) Notes to Consolidated Financial Statements - pages 21-28.
(e) Report of Independent Public Accountants, which includes an
explanatory paragraph that describes the change in the
methods of accounting for long-lived assets discussed in
Note 2 and accounting for postemployment benefits discussed
in Note 8 of Notes to Consolidated Financial Statements
page - 16.
2. Financial Statement Schedules of the Registrant and Consolidated
Subsidiaries included herein:
(a) Report of Independent Public Accountants 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.
<PAGE>
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 Statement No.33-50604, Exhibit 4.1.
* (10.a)- The Form of Severance Protection Agreement, dated as of
May 1, 1995, between David L. Nichols and the Company, is
incorporated herein by reference from the Registrant's
Form 10-K for the fiscal year ended February 3, 1996.
* (10.b)- The Form of Severance Protection Agreement, dated as of
May 1, 1995, between the Company and each of James
M. McVicker, and Randolph L. Burnette,is incorporated
herein by reference from the Registrant's Form 10-K for
the fiscal year ended February 3, 1996.
* (10.c)- Mercantile Stores Company, Inc. 1996 Stock Option Plan.
(13)- The Registrant's Annual Report to Stockholders for the fiscal
year ended February 1, 1997.
(21)- A listing of the subsidiaries of the Registrant.
(23)- Consent of Independent Public Accountants.
(24)- Power of Attorney.
(27)- Financial Data Schedule.
- -----------------
* - Management contract or compensatory plan.
B. No reports on Form 8-K have been filed during the fourth quarter of the
fiscal year ended February 1, 1997.
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 30, 1997.
<PAGE>
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 * Lawrence R. Pugh
(Senior Vice President and (Director)
Chief Financial Officer)
--------------------------- ---------------------
* John A. Herdeg * Gerrish H. Milliken
(Director) (Director)
--------------------------- ---------------------
* Roger K. Smith * Minot K. Milliken
(Director) (Director)
--------------------------- ----------------------
* Roger Milliken * H. Keith H. Brodie, MD
(Director) (Director)
---------------------------
* Francis G. Rodgers
(Director)
* BY: s/ David L. Nichols
---------------------------------
David L. Nichols
Date: April 30, 1997
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 Registrant
is being filed concurrently with the Securities and Exchange Commission.
<PAGE>
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, 1997. Our audit was
made for the purpose of forming an opinion on those statements taken as a
whole. The schedule listed under Part IV, Item 14(A)(2)(b) is the responsi-
bility of the Company's management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not a part 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.
Cincinnati, Ohio ARTHUR ANDERSEN LLP
April 1, 1997
<PAGE>
MERCANTILE STORES COMPANY, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(dollars in thousands)
<TABLE>
<CAPTION>
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 net end of
Description of period expenses accounts of recoveries period
Allowance for Doubtful Accounts:
<S> <C> <C> <C> <C> <C>
Year Ended
February 1, 1997 $16,499 $16,817 $0 $16,891 $16,425
Year Ended
February 3, 1996 $ 3,100 $20,282 $0 $ 6,883 $16,499
Year Ended
January 28, 1995 $0 $ 1,462 $ 3,130 (A) $ 1,492 $ 3,100
Note:
(A) - Prior to November 1993, the Company sold all Maison Blanche
(MB) customer receivables to MB Funding Trust, an unaffiliated
company. This agreement was terminated during fiscal 1994.
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.
</TABLE>
Exhibit 10-C
Mercantile Stores Company, Inc.
1996 Stock Option Plan
Section 1: Purpose
The purpose of the Mercantile Stores Company, Inc. 1996 Stock Option Plan
(the "Plan") is to enable Mercantile Stores Company, Inc. (the "Company")
to attract and retain key employees who will make significant contributions
towards the successful management and growth of the Company. In addition,
the Plan is designed to encourage and provide opportunities for stock ownership
by such employees which will more closely align their interests with those of
the stockholders of the Company.
Section 2: Definition of Terms
(a) Award means any Stock Option granted under the Plan.
(b) Board means the Board of Directors of the Company, excluding all
directors who are employees of the Company.
(c) Change in Control means a Change in Control of the Company as
defined in Exhibit A attached hereto.
(d) Code means the Internal Revenue Code of 1986, as amended from time
to time.
(e) Committee means a committee of not less than two non-employee
members of the Board, appointed by the Board to administer the
Plan. The Committee shall be comprised of members who qualify
to administer this Plan as contemplated by (a) both Rule 16b-3
and item 402(j) under the 1934 Act or any successor rule, and (b)
Section 162(m) under the Code.
(f) Common Stock means the Common Stock of the Company.
(g) Company means Mercantile Stores Company, Inc., a corporation
established under the laws of the State of Delaware, and any
entity that is directly or indirectly controlled by the Company
or any entity in which the Company has a significant equity
interest as determined by the Committee.
(h) Fair Market Value means, any time that the Common Stock is traded
on a public market, the average of the low and high sale prices at
which the Common Stock is traded on such date or, if no Common
Stock is traded on such date, the most recent date on which Common
Stock was traded, as reflected on such public market. Under no
circumstances shall the Fair Market Value be less than the par
value of the Common Stock.
(i) Non-Qualified Stock Option means a Stock Option to purchase Shares
of Common Stock awarded to a Participant which is not intended to
qualify as an "Incentive Stock Option" within the meaning of
Section 422 of the Code or any successor provision.
(j) 1934 Act means the Securities Exchange Act of 1934, as amended
from time to time.
(k) Option Price means the specified price per Share at which a Stock
Option can be exercised.
(l) Participant means a person recommended by the Committee and
approved by the Board to receive an Award under the Plan.
(m) Reporting Person means an individual who is subject to Rule 16
of the 1934 Act or any successor rule.
(n) Shares means shares of the Common Stock of the Company.
(o) Stock Option means an Award in the form of the right to purchase
a specified number of Shares at the Option Price during a specified
period.
Section 3: Effective Dates
The Plan shall be effective as of December 3, 1996 (the date of Board approval
for the Plan). No Awards may be made under the Plan after ten years from the
date of approval or earlier termination of the Plan by the Board. However,
unless otherwise expressly provided in an applicable Stock Option agreement,
any Stock Option granted prior to the termination date may extend beyond such
date, and, to the extent set forth in the Plan, the authority of the Board to
amend any such Stock Option and the Plan, shall extend beyond such date.
Section 4: Administration
The Plan shall be administered by the Committee, subject at all times to the
approval of the Board. Except as expressly provided herein to the contrary,
the Committee, subject to the approval of the Board, shall have the authority
to adopt, alter and repeal such administrative rules, guidelines and practices
governing the operation of the Plan as it shall from time to time consider
advisable. The Committee shall also have full discretion, subject to the
approval of the Board, to interpret the provisions of the Plan.
Section 5: Eligibility
Eligibility for Awards will be limited to Corporate Officers, Group Presidents
and Corporate General Merchandise Managers and other key executives as
recommended by the Committee and approved by the Board provided that such
participation would not jeopardize the Plan s compliance with Rule 16b-3 under
the 1934 Act or any successor rule. Those individuals eligible at the time of
the adoption of this Plan are listed on Exhibit B attached hereto.
Section 6: Stock Available for Awards
(a) Common Shares Available. Subject to adjustment as provided in Section
6(c) below, the maximum number of Shares available for Awards under the
Plan shall be 1,500,000. All Shares issued under the Plan for Stock
Options exercised will be purchased by the Company and held in its
treasury. No authorized but unissued Shares will be issued under the
Plan.
(b) Share Usage Limits. For the period that the Plan is in effect, the
aggregate number of Stock Options that may be awarded to any one
Participant shall not exceed 450,000 Stock Options.
(c) Adjustments. In the event of any stock dividend, stock split,
combination or exchange of Shares, merger, consolidation, reorganiza-
tion, spin-off or other distribution (other than normal cash dividends)
of the Company s assets to shareholders, or any other change in
corporate structure or capitalization affecting Shares, such
proportionate adjustments, if any, as the Board in its reasonable
discretion may deem appropriate to reflect such change shall be made
with respect to (i) the aggregate number of Stock Options that may be
granted under the Plan; (ii) the number of Stock Options covered by
each outstanding Award made under the Plan; and (iii) the Option
Price for any outstanding Stock Options granted under the Plan;
provided that any such adjustments are consistently and equitably
applicable to all affected Participants.
(d) Common Stock Usage. Stock Options which are forfeited, canceled,
reacquired by the Company, satisfied without the issuance of Common
Stock or otherwise terminated (other than by exercise) shall be added
back to the Shares available for grant under the Plan so long as the
Participants to whom such Awards had been previously granted received
no benefits of ownership of the underlying Shares to which the Award
related.
(e) Accounting for Awards. The number of Stock Options covered by an Award
under the Plan shall be counted on the date of grant of such Award
against the number of Shares available for granting Awards under the
Plan.
Section 7: Stock Options
(a) General. A Stock Option shall confer on a Participant the right to
purchase a specified number of Shares from the Company subject to the
terms and conditions of the Stock Option grant. The Committee shall
recommend and the Board shall approve the terms and conditions of all
Stock Options granted under the Plan.
(b) Form of Stock Options. Non-Qualified Stock Options shall be the only
form of Stock Option available for grant under the Plan.
(c) Option Price. The Committee shall establish the Option Price at the
time each Stock Option is awarded, based on 100% of the Fair Market
Value on the date of Award.
(d) Vesting. A Stock Option shall become exercisable over a four-year
period (one fourth in each year). This vesting schedule is subject
to adjustment as provided in Section 8(e) or as otherwise determined
by the Board.
(e) Exercise Period. The terms of each Stock Option shall be fixed by the
Committee, subject to Board approval; provided, however, that in no
event shall the term of any Stock Option exceed a period of ten years
from the date of its grant. In the event of retirement at normal
retirement age, death or disability, the maximum exercise period shall
be the earlier of ten years from date of grant or four years from the
last date of employment. In the event of other types of separation
including voluntary resignation or retirement other than at normal
retirement age without Board approval, the right to exercise Stock
Options shall expire on the last date of employment.
(f) Form of Payment at Exercise. The recipient of a Stock Option grant
shall pay for the Shares at the time of exercise in cash or such other
forms as the Committee may approve, including Shares valued at their
Fair Market Value on the date of exercise, or in a combination of
forms.
Section 8: General Provisions Applicable to Awards
(a) Transferability and Exercisability. Any Award under this Plan will
be non-transferable and accordingly shall not be assignable, alienable,
saleable or otherwise transferable by the Participant other than by
will or the laws of descent and distribution. A Participant may
designate a beneficiary or beneficiaries to exercise the Participant's
rights upon the Participant's death. To the extent required to comply
with regulations and rules under the 1934 Act, including Rule 16b-3,
any contrary requirements shall prevail over the provisions set forth
above in regards to Reporting Persons.
(b) General Restrictions. Each Award shall be subject to the requirement
that, if at any time the Committee shall determine, in its sole
discretion, that the listing, registration or qualification of any
Award under the Plan upon any Securities Exchange or under any state
or federal law, or the consent or approval of any government regulatory
body, is necessary as a condition of the granting of such Award, such
Award may not be exercised unless such listing, registration, qualifi-
cation, consent or approval has been effected or obtained free of any
conditions not acceptable to the Committee.
(c) Tax Withholding. The Company shall have the right to deduct a
sufficient amount to cover withholding of any federal, state or local
taxes required by law or to take such other actions as may be necessary
to satisfy any such withholding obligations resulting from the exercise
of Stock Options. The Committee may permit Shares to be used to
satisfy required tax withholding and such Shares shall be valued at
their Fair Market Value on the date the tax withholding is effective.
(d) Documentation of Grants. Awards made under the Plan shall be evidenced
by written agreements or such other appropriate documentation as the
Committee shall prescribe. The Committee need not require the execu-
tion of any instrument or acknowledgment of notice of an Award under
the Plan, in which case acceptance of such Award by the respective
Participant will constitute agreement to the terms of the Award.
(e) Change in Control. In order to preserve a Participant's rights under
an Award in the event of a Change in Control of the Company, the Board
shall, at the time an Award is made or at any time thereafter:
(i) provide for the acceleration of any time period relating to the
vesting of Awards to a date not less than ten days prior to the
proposed effective date of Change in Control, or (ii) provide for the
purchase of the Award for an amount of cash or other property that
could have been received upon the exercise of the Award had the Award
been exercisable or payable immediately prior to the proposed effective
date of the Change in Control.
Section 9: Miscellaneous
(a) Plan Amendment. The Board may amend, alter, suspend, discontinue or
terminate the Plan as it deems necessary or appropriate, provided that
any such action by the Board shall not adversely affect Stock Options
already Awarded and such options shall remain in full force and effect
as if such adverse action had not been taken.
(b) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as
giving a Participant the right to continued employment. The Company
expressly reserves the right at any time to terminate a Participant's
employment.
(c) No Rights as Shareholder. Only upon issuance of Shares to a Partici-
pant (and only in respect to such Shares) shall the Participant obtain
the rights of a shareholder.
(d) No Fractional Shares. No fractional shares shall be issued under the
Plan, however, the Committee may round any fractional shares to the
nearest whole number.
(e) Company Benefit Programs. Except as expressly determined by the
Committee, settlements of Awards received by Participants under this
Plan shall not be deemed as part of a Participant's regular, recurring
compensation for purposes of calculating payments or benefits from any
Company benefit or severance program.
(f) No Fiduciary Relationship. The Plan shall not establish any fiduciary
relationship between the Company and any Participant or other person.
To the extent any person holds any rights by virtue of an Award granted
under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
(g) Successors and Assignees. The Plan shall be binding on all successors
and assignees of a Participant, including, without limitation, the
estate of such Participant and the executor, administrator or trustee
of such estate, or any receiver or trustee in bankruptcy or representa-
tive of the Participant's creditors.
(h) Governing Law. The validity, construction and effect to the Plan and
any actions taken under or relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable
federal law.
EXHIBIT A
Change in Control. A "Change in Control" shall mean any of the following
events:
1. An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person"
(as the term person is used for purposes of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) forty percent
(40%) or more of the combined voting power of the Company's then
outstanding Voting Securities; provided, however, that
(a) if, at any time, Minot Mercantile Corporation (together with any
Person who is a party to a Schedule 13D or Schedule 13G, or any
amendment thereto, that is jointly filed with Minot Mercantile
Corporation) ("Minot Mercantile") has Beneficial Ownership of
any amount of the Company's Voting Securities having a combined
voting power that is less than forty percent (40%) but not
less than twenty-five percent (25%) (such amount, as it may
change from time to time, being hereinafter referred to as
the "Floating Block"), then a Change in Control shall occur
if any Person (i) has Beneficial Ownership of an amount of the
Company's Voting Securities having a combined voting power equal
to or in excess of the Floating Block, or (ii) acquires
Voting Securities of the Company and immediately thereafter has
Beneficial Ownership of an amount of the Company's Voting
Securities equal to or in excess of the Floating Block; and
(b) if, at any time, Minot Mercantile has Beneficial Ownership of any
amount of the Company's Voting Securities having a combined
voting power that is less than twenty-five percent (25%), then
a Change in Control shall occur if any Person (i) has
Beneficial Ownership of an amount of the Company's Voting
Securities having a combined voting power equal to or in excess
of twenty percent (20%), or (ii) acquires Voting Securities of
the Company and immediately thereafter has Beneficial Ownership
of an amount of the Company's Voting Securities equal to or
in excess of twenty percent (20%);
and, provided, further, that in determining whether a Change in Control
has occurred, Voting Securities which are acquired in a Non-Control
Acquisition (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (1) an employee benefit plan
(or a trust forming a part thereof) maintained by (x) the Company or
(y) any corporation or other Person of which a majority of its voting
power or its equity securities or equity interest is owned directly or
indirectly by the Company (a "Subsidiary"), (2) the Company or any
Subsidiary, or (3) any Person in connection with a Non-Control
Transaction (as hereinafter defined);
2. The individuals who, as of January 1, 1995, are members of the Board
(the "Incumbent Board"), cease for any reason to constitute at least
two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's stockholders, of any new
director was approved by a vote of at least two-thirds of the
Incumbent Board, such new director shall, for purposes of this
Agreement, be considered a member of the Incumbent Board; provided,
further, however, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed office
as a result of either an actual or threatened "Election Contest"
(as described in Rule 14a-11 promulgated under the 1934 Act) or
other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle
any Election Contest or Proxy Contest; or
3. Approval by stockholders of the Company of:
(a) A merger, consolidation or reorganization involving the Company,
unless
(i) the stockholders of the Company, immediately before such merger,
consolidation or reorganization, own, directly or indirectly
immediately following such merger, consolidation or reorganization,
at least seventy percent (70%) of the combined voting power of
the outstanding voting securities of the corporation
merger or consolidation or reorganization (the" Surviving
Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation or reorganization,
(ii) the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for such merger,
consolidation or reorganization constitute at least two-thirds of
the members of the board of directors of the Surviving Corporation,
and
(iii) no Person (other than the Company, any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by
the Company, the Surviving Corporation or any Subsidiary, or any
Person who, immediately prior to such merger, consolidation or
reorganization, had Beneficial Ownership of fifteen percent (15%)
or more of the then outstanding Voting Securities) has Beneficial
Ownership of fifteen percent (15%) or more of the combined voting
power of the Surviving Corporation's then outstanding voting
securities (a transaction described in clauses (i) through (iii)
above shall herein be referred to as a "Non-Control Transaction");
(b) A complete liquidation or dissolution of the Company; or
(c) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the
outstanding Voting Securities as a result of the acquisition of Voting
Securities by the Company which, by reducing the number of Voting
Securities outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Person, provided that if a Change in
Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and
after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities
beneficially owned by the Subject Person, then a Change in Control
shall occur.
4. Notwithstanding anything contained in this Agreement to the
contrary, if the Executive's employment is terminated prior to a Change
in Control and the Executive reasonably demonstrates that such
termination
(i) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a
Change in Control and who effectuates a Change in Control
a "Third Party") or (ii) otherwise occurred in connection
with, or in anticipation of, a Change in Control which
actually occurs, then for all purposes of this Agreement,
the date of a Change in Control with respect to the
Executive shall mean the date immediately prior to the
date of such termination of the Executive's employment.
EXHIBIT 13
FRONT COVER
1996 ANNUAL REPORT
MERCANTILE STORES
"focusing on our customer"
INSIDE FRONT COVER
Table of Contents
financial highlights page 1
chairman's letter page 3
overview page 4-10
financial information page 11-31
group presidents,
store divisions and locations page 32-33
corporate officers page 34
directors and
stockholder information inside back cover
Mercantile Stores Company, Inc.
is a traditional department store retailer which, at year-end, operated 102
predominantly fashion apparel stores and 15 home fashion stores. Most of these
stores are mall-based. They are located in a total of 17 states and
operate under 13 different names. The stores are situated in 53 different
markets and, in the majority of these markets, the Company holds the dominant
general merchandise retailer position. This acceptance within the communities
in which we operate essentially conforms with our Corporate strategy: To
operate profitable stores in markets in which we hold a substantial
competitive position and thereby produce an acceptable return for our
stockholders while offering value, selection and service to our customers.
The typical Mercantile department store encompasses approximately 170,000
square feet and presents a merchandise assortment which includes apparel,
cosmetics, accessories and home fashions which is tailored to appeal to the
middle to upper-middle income consumer.
The Company also maintains a partnership interest in five operating shopping
centers. In each of these centers, the Company operates a full-line
department store and, in two of them, a home fashions unit.
<PAGE>
<TABLE>
<CAPTION>
Financial Highlights
1996 1995 % change
Year Ending February 1, 1997 Year Ending February 3, 1996
<S> <C> <C> <C>
For the year:
Retail Sales $ 2,945,600,000 $ 2,859,800,000 (a) 3.0
Income:
Net Operating Income-
Excluding Impairment Charge $ 128,665,000 $ 123,248,000 4.4
Impairment Charge (7,200,000) --
Net Income $ 121,465,000 $ 123,248,000 (1.4)
Per Share Data:
Net Income-
Excluding Impairment Charge $ 3.50 $ 3.35
Impairment Charge (.20) --
Net Income $ 3.30 $ 3.35
At year end:
Working Capital $ 1,017,533,000 $ 1,013,576,000 0.4
Ratio 4.6 4.7
Long-Term Debt
(including
current maturities) $ 254,927,000 $ 261,073,000 (2.4)
Debt to Capitalization Ratio 14.0% 15.0%
Stockholders Equity $ 1,565,313,000 $ 1,485,113,000 5.4
Book Value Per Share $ 42.48 $ 40.31 5.4
(a) Fiscal 1995 included 53 weeks. Retail sales for 1995, however, are shown
on a comparable 52-week basis. Income and per share data for 1995 are as
reported.
</TABLE>
<PAGE>
(Picture: Chairman of the Board - Mercantile Stores Company, Inc.)
"our most important
constituency
is our
customers"
<PAGE>
Dear Shareholders,
From the onset, we knew that 1996 was going to be a challenging year. We
were opening five new stores, the largest single new-store growth in the
history of Mercantile. In addition, we were facing a very promotional
and competitive environment. Like the rest of the retail industry, we were
being confronted with an abbreviated calendar for the all-important Christmas
holiday season. In spite of this, we were determined not to lose any market
share.
Our associates took on these challenges with enthusiasm, and their efficient
execution of our programs produced better than satisfactory results for the
first three-quarters of the fiscal year. For these first nine months, FIFO
earnings from our core retail business increased 24%. Then, the difficult
reality of the 1996 calendar and the promotional environment set in.
Experience has taught us that, traditionally, when the comparative Christmas
selling period is shortened by a later Thanksgiving, holiday business suffers
vis-a-vis the preceding year. The 1996 year was no exception. Recognizing
this calendar phenomenon, we planned the fourth quarter conservatively and,
actually, exceeded our sales goal. We had, in fact, retained our market share,
but had done so at a price. Margins, driven by accelerated promotional
intensity designed to curry the favor of an increasingly sale-oriented
consumers in the condensed holiday period, eroded. This was a principal
contributor to our less-than-satisfactory results for the quarter.
Based on the strength of the first nine months, however, we did record a 4.4%
increase in net income for the year as profit per share increased to $3.50
(excluding a mandated 20 cent per share accounting charge in the first quarter)
from the $3.35 posted in 1995. On a FIFO basis of inventory valuation, net
income increased 9% over the prior year.
Although disappointing, the under-performing fourth quarter should not diminish
many of the positives that evolved during 1996.
Among these were:
One million square feet, the largest square footage addition
(excluding acquisitions) in the history of your Company and five new
stores were added to our retail format.
In its first full year of operation, our Credit Center met its goal in
spite of the sudden and unanticipated, nationwide deterioration in the
consumer credit environment.
Dedicated "brand teams" were established and charged with the objective
to increase private label merchandise business by 50% by the turn
of the century. These private lines, as personified in such
well-established and accepted names as 955 Originals(TM),
955 Kids(TM), and Laura Gayle(TM), are targeted at our most
important core customer--the middle to upper-income consumer.
During the year, we completed a multi-year project to centralize
the merchandising of our cosmetics business. Cosmetics is the
cornerstone of the retail presence in the emporium which is known
as a department store. This bellwether business now constitutes
almost 10% of our total volume.
Significant advancements and cost efficiencies were made in the area
of distribution center management and logistics.
Our managerial philosophy continually focuses on offering quality, value and
convenience to our customers. In addition, as we have attempted to depict
in the following, non-financial pages of this Report, there are aspects of
our business which set us apart and serve to capture the emotion and
favor of our customers. In that respect, we are hearty endorsers of the new
buzz word which has surfaced in our business, "Retail-tainment." Essentially,
this means turning the shopping experience from one which is devoid of
emotion and characterized by sameness into one which buoys the mood and
entertains. Simply put, the essence of retail-tainment is to infuse fun and
desire back into the shopping experience--an activity which, at times, has
become dull and burdensome.
To the consumer, fun can be as pragmatic as finding the right product in the
right size at the right price. In can also be, as the following pages
illustrate, as satisfying as a day of pampering in a state-of-the-art,
in-store spa... or as exciting as enjoying a cup of cappuccino in the midst of
new and exciting home merchandise presented in a Market Centre(TM).
Thanks to the dedicated efforts of our 34,276 full and part-time associates,
significant achievements were made during the past year. In 1997, we shall
continue in our efforts to create points of value and differentiation for our
most important constituency--our customers. In these endeavors, we value,
most highly, the continuing support of our vendor partners and the
cooperative interest of our shareholders.
David L. Nichols
Chairman of the Board
<PAGE>
Tri-fold of Pictures
First trifold
(Pictures - Top - Hair and Nail Salon Day Spa Entrance
Middle - Customer in thalassotherapy bath
Lower left corner - Day Spa door crescent
The assortment palette
presented to our customers
extends far beyond traditional department
store offerings. Pictured above is the elegant
entranceway to the Hair & Nail Salon in
the new J.B. White store
in Columbiana Mall.
On the right, madame
enjoys total relaxation in
a twenty-first century thalassotherapy bath
at the Day Spa in McAlpin's
at Dayton Mall.
Second Trifold
(Picture - Market Centre Cafe area in Castner Knott home store
in Cool Springs Mall)
After fulfilling tangible aspirations from the holistic home merchandise
presentations offered in the new and innovative Market Centre(tm),
our customers are invited to sample the delectable variety
of coffee and pastry delights available in our home venues such
as the new 30,000 square foot Castner Knott home store in Cool Springs Mall.
Third Trifold
(Picture - Top - Cosmestic area in J. B. White Store,
Bottom - Active wear department)
Exciting activewear and a wide, and attractively displayed, assortment of
cosmetics and fragrances have made Mercantile the leading purveyor
of these goods in the communities we serve.
<PAGE>
(Picture - Top - Electronic gift cards, Birthday, Wedding and Personal)
innovation . . .
In the first quarter of 1997, new electronic gift cards were introduced in
all stores extending to our customers an easy-to-use replacement for the
cumbersome, paper certificates which are still in vogue in most retail
establishments.
(Picture - Bottom - Personal Shopping Area)
and service . . .
More than 200 enthusiastic and knowledgeable Personal Shoppers stand at
the ready, on a no-cost basis, to make shopping experiences more convenient
and enjoyable.
<PAGE>
Upper Left Hand Corner
Kathy Robinson (below), Director of Product Development, and her staff are
constantly engaged in figuratively, "pushing the envelope" - discovering
innovative, ahead-of-the-curve, value-oriented merchandise to sate our
customers' fashion appetites.
(Picture of Director of Product Development)
Upper Right Hand Corner
(Picture - Corporate General Merchandising Managers)
Corporate General Merchandise Managers, who combine over 100 years of
retailing experience at both field and central levels,
inspire buyers to bring newness and excitement to the attention of
our customers.
Left to right: Greg Brandjord, Mike Pearson, Marty Richner and David Zant are
dedicated to their primary agenda-satisfying the customer.
Lower Left Hand Corner
Logistics means the ability to bring merchandise to our customers as quickly
and cost-efficiently as possible. To emphasize the significance of this
important function, the Company has identified a new merchandising
logistics team.
Pictured below is Jim Frede, President of Mercantile Stores Logistical Network.
(Picture - President of Mercantile Stores Logistical Network)
Lower Right Hand Corner
(Picture - Marketing Staff)
Marketing, be it print or electronic, is the principal means by which we
present our values to our customers.
Marketing Director, Michael DeStefano, and his staff review a draft of
a Fall Magalog.
<PAGE>
Top Part of Page
(Picture - "955 Originals(TM) Merchandise, and
Private Label Product Team).
During the year, brand teams, combining the exuberance of youth and the
wisdom of experience, were established and charged with the mission of
creating product, value, and differentiation which would drive our private
label business toward 18% by the turn of the century.
Left to right: Rebecca Reeder, Paul Moore, and Kathy Hoopes review a
new product concept.
Bottom Part of Page
(Picture - "955 Originals(TM)" Juniors department at Colombiana Mall,
J.B. White Store).
The Juniors Department at the new Columbiana Mall J.B. White store in
Columbia, South Carolina reflects, as a visual wall display, one of our
most successful private label offerings-955 Originals(TM).
<PAGE>
During 1996, five new stores, entailing almost 900,000 square feet, were added
to the Company's portfolio. Combined with minor expansions, totaling 100,000
square feet, this represented the largest square footage addition in the
history of the Company.
(Picture - of Dayton McAlpin's Store)
McAlpin's at Dayton Mall in Dayton, Ohio - 212,000 square feet
(Picture - of Orlando West Oaks Mall Gayfers Store)
Gayfers in West Oaks Mall in Orlando, Florida - 217,000 square feet
(Picture - Castner Knott Murfreesboro Store)
Castner Knott in Murfreesboro, Tennessee - 110,000 square feet
<PAGE>
Management's Discussion and Analysis
Results of Operations
Revenues in 1996 increased 2.9% to $3 billion. Sales from retail operations
were $2.9 billion, an increase of 1.9% over 1995. Comparable retail sales
increased by 1.3%. However, the 1995 fiscal year consisted of 53 weeks. The
percentage changes in total and comparable retail sales, on an equalized
52-week basis, were as follows:
1996 1995 1994
Total retail sales 3.0% 1.5% 3.3%
Comparable retail sales 2.4% 1.2% 1.7%
Finance charges, which are a component of revenues, increased to $85 million
in 1996 from $52 million in 1995. The increase in finance charge revenue was
attributable to changes in the servicing of the Company's private label credit
program in mid-1995, as discussed in Note 4 of Notes to Consolidated Financial
Statements.
Net Income for 1996, excluding the impact of an impairment charge, increased
4.4% to $129 million, or $3.50 per share, from the $123 million, or $3.35 per
share, reported in the prior year. As discussed in Note 2 of Notes to
Consolidated Financial Statements, reported net income for 1996 has been
reduced by a first quarter charge of $7.2 million ($12 million pre-tax),
or $.20 per share, to recognize the requirements of Statement of Financial
Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Fiscal 1995 net income increased 19.2% to $123 million, or $3.35 per share,
from the $103 million, or $2.81 per share, earned in fiscal 1994. Net income
for 1994 included charges amounting to $4.1 million, or $.11 per share, for
a consolidation provision and the impact of an accounting postemployment
benefits.
The last-in, first-out (LIFO) method of inventory valuation also impacts the
comparison of results for each of the past three fiscal years. Net income
for 1996 includes a LIFO charge of $4.8 million, or $.13 per share, contrasted
with a LIFO credit in 1995 of $.3 million, or $.01 per share and a credit in
1994 of $3.9 million, or $.11 per share.
The following summary presents an analysis of net income for the past
three fiscal years:
<TABLE>
<CAPTION>
1996 1995 1994
(in millions, except per share data) Amount Per Share Amount Per Share Amount Per
Share
<S> <C> <C> <C> <C> <C> <C>
Net income before LIFO, non-recurring
items and accounting change $ 133.4 $3.63 $ 122.9 $3.34 $ 103.6 $2.81
LIFO (charge)/credit (4.8) (.13) 0.3 .01 3.9 .11
Impairment charge (7.2) (.20) - - - -
Consolidation provision - - - - (3.0) (.08)
Accounting change - - - - (1.1) (.03)
______ ______ ______ ______ _________ ______
Net income $ 121.4 $3.30 $ 123.2 $3.35 $ 103.4 $2.81
</TABLE>
<PAGE>
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 and merchandise
planning functions.
In 1996, COGS, as a percent of revenues, decreased by 0.2% from the prior year.
Excluding the impact of finance charge revenue and the application of the LIFO
method, COGS increased approximately 0.2% from 1995. Merchandise margins
improved by 0.2% as higher initial markup was partially offset by an increase
in markdowns. Costs associated with lower margin leased department sales
increased by 0.2% (leased department sales increased by 10% for the year)
and shrinkage expense also increased by 0.2%.
In 1995, COGS, excluding finance charge revenue and the application of the
LIFO method, improved approximately 0.6% over the previous year. Merchandise
margins improved by 0.4% and shrinkage expense decreased 0.5%. These
improvements were partially offset by a 0.3% increase in costs associated with
lower margin leased department sales (leased department sales increased by 12%
in 1995).
The Company utilizes the LIFO method to value all of its retail inventory and
in its calculations applies the inflation indices produced by the
Bureau of Labor Statistics. The impact of LIFO on COGS, as a percent to retail
sales, was:
1996 1995 1994
Cost of goods sold 71.7% 71.2% 71.6%
LIFO credit/(charge) (.3) - .2
Cost of goods sold (excluding LIFO) 71.4% 71.2% 71.8%
Operating Expenses - Selling, general and administrative expenses (SG&A), as a
percent to revenues, decreased 0.1% to 23.2% in 1996. Payroll and payroll
related expenses decreased by 0.2% and were partially offset by increases in
other operating expenses, primarily marketing costs and expenses incurred
in connection with the full year operation of the credit center.
In 1995, SG&A expenses, as a percent of revenues, increased 1.1% to 23.3%. This
increase was attributable primarily to costs associated with the Company's
assumption of full responsibility for managing its private label credit
program at the end of the 1995 second quarter. The most significant credit
related cost was bad debt expense, including the initial establishment of
a bad debt reserve, which increased SG&A by 0.6%. The remaining increase was
attributable mainly to payroll costs and marketing expenses.
In 1994, the Company recorded a $5 million pre-tax 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 and Income (combined) decreased $4 million and $9 million in
1996 and 1995, respectively. The 1996 decrease was due primarily to
a combination of increased interest income earned on higher levels of invested
cash during the first eight months of the year and higher levels of
capitalized interest attributable to a historic high in new store
construction. The decrease in 1995 primarily resulted from the mid-year
scheduled payments of $110 million of mortgages and senior notes.
<PAGE>
Other Income decreased approximately $12 million in 1996 and $6 million in
1995. The decline in both periods was attributable primarily to changes
in the servicing of the Companys private label credit program, as discussed
in Note 4 of Notes to Consolidated Financial Statements. Prior to August 1,
1995, the Company's share of finance charge revenue earned under servicing
agreements was classified as a component of other income. Subsequent to that
date, finance charge revenue recorded on customer accounts serviced by the
Company has been classified as a component of revenues. Other income in 1995
also included a gain of $6 million from the sale of an equity investment in an
unaffiliated company.
Impairment Charge - During the first quarter of 1996, the Company adopted SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of, which addresses the identification and
measurement of asset impairments and requires the recognition of impairment
losses on long-lived assets when carrying values exceed expected future
cash flows. The application of this new accounting standard resulted in a
pre-tax impairment charge of $12 million to write down the carrying value of
certain operating stores to their estimated fair value.
The Effective Income Tax Rate has been relatively consistent for the periods
presented and was 39.7% in 1996, 39.8% in 1995 and 39.5% in 1994.
Liquidity and Capital Resources - Cash flow from operating activities amounted
to $144 million in 1996, compared to $187 million in 1995 and $169 million
in 1994. The decrease in 1996 was attributable primarily to an increase
in working capital requirements, particularly those associated with accounts
receivable, partially offset by an increase in non-cash charges (including a
$12 million impairment charge related to the adoption of SFAS No. 121). The
1995 increase was due to an improvement in net income and a decrease in working
capital requirements, partially offset by a reduction in non-cash charges.
Accounts receivable increased by $14 million in 1996, primarily as a result of
a $12 million increase in net customer receivables. Private label credit sales
increased by 2% in 1996 and represented approximately 38% of total retail sales,
essentially the same percentage as in 1995. In 1994, private label credit sales
accounted for approximately 40% of total retail sales. In addition to the lower
level of private label credit sales, the $46 million decline in accounts
receivable in 1995 was attributable to the change in the Company's private
label credit program including the initial establishment of a bad debt
reserve and the elimination of the annual revenue sharing settlement.
Year-end inventories increased by $37 million, with approximately two-thirds
of the increase representing the inventory requirements for the five new
department stores opened in the latter part of 1996.
Capital expenditures amounted to $134 million in 1996, versus $101 million in
1995 and $94 million in 1994. The increase in 1996 was attributable primarily
to the requirements for the five new department stores.
Net cash used for financing activities was $47 million in 1996, which was
relatively consistent with the $44 million expended in the prior year. The
difference was due primarily to an increase in dividends paid. In 1994, cash
requirements for financing activities amounted to $159 million. The higher
requirement in that year was due to $110 million of principal payments on debt
assumed in a 1992 acquisition.
Historically, the Company has been able to satisfy its short-term financing
requirements primarily through the use of internally generated funds.
In addition, the Company has in place a committed, unsecured $200 million
revolving credit facility with a syndicate of seven banks which expires
in August, 2000. Interest rates on borrowings are based, at the Company's
option, on either the banks best rates under a competitive bidding
environment or a predefined spread over the appropriate LIBOR rate.
The Company also has available uncommitted lines of credit totaling
$20 million. Maximum short-term borrowings were $43 million in 1996,
$3 million in 1995 and $69 million in 1994. The weighted average interest
rate on short-term borrowings was 6.0% in 1996, 5.9% in 1995 and 5.4% in 1994.
No borrowings were outstanding under any of these facilities at the end of the
last three fiscal years.
The Company is committed to maintaining a strong financial position and that
firmness is best exemplified through the constant stability of its balance
sheet. A significant barometer of the Company's financial strength is its
debt to capitalization ratio, which was 14% at the end of 1996--one of the
lowest ratios in the retail industry. Our long-term debt ratings of A+
and A1 by Standard & Poors Corporation and Moodys Investors Services, Inc.,
respectively, are among the highest awarded in the retail industry.
<PAGE>
Expansion and Capital Expenditures - During 1996, the Company opened five new
department stores, three home fashion units and completed the remodeling of
nine existing stores. The new units and minor expansions added a total of
approximately 1,000,000 square feet to the Company's base and represented the
largest square footage addition (other than by acquisition) in its history.
The new department stores opened during the year (listed by size) were:
Operating Unit Location Square Feet
Gayfers Orlando, Florida 217,000
McAlpins Dayton, Ohio 212,000
J.B. White Columbia, South Carolina 186,000
J.B. White Spartanburg, South Carolina 158,000
Castner Knott Murfreesboro, Tennessee 110,000
Capital expenditures for 1997 are estimated at $134 million, consistent with
1996. It is anticipated that these expenditures will be funded through
a combination of existing working capital and internally generated funds.
Two new stores will be opened during the year and both will be located in new
malls in existing markets--a 200,000 square foot Joslin's store in Denver,
Colorado and a 206,000 square foot Maison Blanche store in Baton Rouse,
Louisiana.
<PAGE>
Benefit Program
The Company offers a comprehensive benefit program to its eligible associates
including pension and profit sharing plans as well as health, disability and
life insurance programs.
The Pension Plan, established in 1945, has been 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. At the end of the 1996 fiscal year, there were approximately 29,000
Pension Plan members, including retirees. The market value of Plan assets was
$401 million.
All associates who are enrolled in the Pension Plan are eligible to participate
in the Savings, Profit Sharing and Supplemental Retirement Plan. During
1996, members in this Plan had the option to have the Company deposit up to
14% of their earnings into the Plan, on a before-tax basis, to the extent
permitted by IRS Code Section 401(k). Associates can elect to have their
contributions invested in a balanced fund, an equity fund, insurance company
contracts or any combination of these funds.
As explained in Note 8 of Notes to Consolidated Financial Statements, the
Company makes an annual contribution to the
Plan based upon its pre-tax income, as defined. For the latest year, the
Company's contribution amounted to $10.3 million, or approximately $.61 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. All members
employed after February 1, 1993 vest in Company contributions according to a
3 to 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 February 1, 1997, the Trustee was holding
1,318,717 shares of Mercantile stock, or 3.6% of the total outstanding
shares, for the benefit of Plan members. Plan assets at year-end
totalled $530 million, at market value.
The Company pays a substantial portion of the costs of various group medical
and dental plans which are offered to eligible associates. In addition, the
Company 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
<TABLE>
<CAPTION>
For the fiscal year 1996 1995
Market Dividends Market Dividends
Quarter High Low Declared Paid High Low Declared Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $62 5/8 $44 1/4 $ .55 $ .26 1/2 $46 5/8 $39 3/4 $ .52 $ .25 1/2
Second 67 57 1/8 - .28 1/2 49 5/8 42 5/8 - .26 1/2
Third 59 3/8 47 .57 .28 1/2 48 3/8 42 3/4 .53 .26 1/2
Fourth 54 47 7/8 - .28 1/2 49 3/8 44 1/4 - .26 1/2
$1.12 $1.12 $1.05 $1.05
</TABLE>
The Company's common stock is traded on the New York Stock Exchange
(NYSE symbol - MST). The number of stockholders at February 1, 1997 was 9,292.
On April 17, 1997, the Board of Directors approved an increase in the
quarterly dividend from $.281/2 to $.30 per share. This increase, payable on
June 13, 1997 to holders of record on May 30, 1997, converts to an indicated
annual dividend of $1.20 per share.
<PAGE>
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 is responsible 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
operation 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.
Arthur Andersen LLP, independent public accountants, have been engaged to
render an objective, independent professional opinion on the fairness of
reported operating results and financial condition. They consider the Company's
internal control structure in determining the nature, timing and extent of
the audit 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 Companys 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
February 1, 1997 and February 3, 1996, and the related statements of
consolidated income and retained earnings and cash flows for each of the
three years in the period ended February 1, 1997. 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 February 1, 1997 and February 3, 1996,
and the results of their operations and their cash flows for each of the
three years in the period ended February 1, 1997 in conformity with generally
accepted accounting principles.
As explained in Notes 2 and 8 to the Consolidated Financial Statements, the
Company changed its method of accounting for long-lived assets effective
February 4, 1996 and its method of accounting for postemployment benefits
effective January 30, 1994.
Cincinnati, Ohio Arthur Andersen LLP
April 1, 1997
<PAGE>
Statements of consolidated income and retained earnings
(in thousands, except per share data) 1996 1995 1994
Revenues $ 3,030,822 $ 2,944,324 $ 2,819,837
Costs, Expenses, and Other Income:
Cost of goods sold (including
occupancy and central
buying expenses) 2,113,022 2,059,753 2,020,264
Selling, general and
administrative expenses 702,862 686,924 625,726
Interest expense 16,451 19,558 28,118
Interest income (5,665) (5,087) (4,592)
Other income (9,400) (21,404) (27,571)
Impairment charge 12,000 - -
Provision for consolidation - - 5,000
--------- --------- ---------
2,829,270 2,739,744 2,646,945
Income before Provision for
Income Taxes 201,552 204,580 172,892
Provision for Income Taxes:
Current 82,951 80,239 65,848
Deferred (2,864) 1,093 2,527
--------- --------- ---------
80,087 81,332 68,375
Income before cumulative effect
of accounting change 121,465 123,248 104,517
Cumulative effect of
accounting change
for postemployment benefits
(net of income taxes of $700) - - (1,100)
--------- --------- ---------
Net Income $ 121,465 $ 123,248 $ 103,417
========= ========= =========
Retained Earnings at Beginning
of Year 1,473,692 1,389,130 1,323,294
Dividends Declared 41,265 38,686 37,581
Retained Earnings at End --------- --------- ---------
of Year $ 1,553,892 $ 1,473,692 $ 1,389,130
========= ========= =========
Net Income per Share:
Income before cumulative effect
of accounting change $ 3.30 $ 3.35 $ 2.84
Cumulative effect of accounting
change - - (0.03)
--------- --------- ---------
Net Income per Share $ 3.30 $ 3.35 $ 2.81
========= ========= =========
See Notes to Consolidated Financial Statements
<PAGE>
Consolidated balance sheets
(in thousands) February 1, 1997 February 3, 1996
Assets
Current Assets:
Cash and cash equivalents $ 128,115 $ 161,893
Receivables:
Customer, net 571,336 559,544
Other 16,851 15,078
Inventories 560,666 523,573
Deferred income taxes 13,009 12,248
Other current assets 13,325 14,048
--------- ---------
Total Current Assets 1,303,302 1,286,384
Prepaid Pension and Other
Noncurrent Assets 100,994 87,107
Property and Equipment:
Land 40,663 37,400
Buildings and improvements 783,825 733,785
Fixtures 251,502 292,349
Leased property 62,018 62,018
--------- ---------
1,138,008 1,125,552
Accumulated depreciation (399,801) (424,319)
--------- ---------
Property and equipment, net 738,207 701,233
--------- ---------
Total Assets $ 2,142,503 $ 2,074,724
========= =========
See Notes to Consolidated Financial Statements
<PAGE>
(in thousands) February 1, 1997 February 3, 1996
Liabilities and Stockholders Equity
Current Liabilities:
Current maturities of long-term debt $ 25,017 $ 6,147
Accounts payable 112,485 106,645
Taxes other than income 18,876 21,352
Other current liabilities 62,438 69,546
Accrued income taxes 39,128 40,533
Accrued payroll 27,825 28,585
--------- ---------
Total Current Liabilities 285,769 272,808
Long-term Debt 229,910 254,926
Due to Affiliated Companies 24,737 25,106
Deferred Income Taxes 5,685 6,867
Other Long-term Liabilities 31,089 29,904
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 1,553,892 1,473,692
--------- ---------
Total Stockholders Equity 1,565,313 1,485,113
Total Liabilities and Stockholders --------- ---------
Equity $ 2,142,503 $2,074,724
========= =========
<PAGE>
Statements of consolidated cash flows
(in thousands) 1996 1995 1994
Cash Flows from Operating Activities:
Net Income $ 121,465 $ 123,248 $ 103,417
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 83,661 88,714 93,540
Deferred taxes (2,864) 1,093 2,527
Net (gain) loss on
disposition of property (157) (5,916) 1,250
Provision for consolidation - - 5,000
Impairment charge 12,000 - -
Cumulative effect of
accounting change - - 1,100
Equity in unremitted earnings
of affiliate (598) (1,453) (206)
Net pension benefit (12,851) (14,667) (15,653)
Changes in working capital:
Change in inventories (37,093) (54,791) (43,290)
Change in accounts receivable (13,565) 45,616 14,876
Change in accounts payable 5,840 (15,022) 5,551
Change in other working
capital items (11,349) 20,416 1,309
Net cash provided by --------- --------- ---------
operating activities 144,489 187,238 169,421
Cash Flows from Investing Activities:
Cash payments for property
and equipment (133,861) (101,202) (93,639)
Proceeds from sale of property 2,777 5,982 1,550
Net change in other noncurrent
assets and liabilities 229 (466) 997
--------- --------- ---------
Net cash used in investing activities (130,855) (95,686) (91,092)
Cash Flows from Financing Activities:
Payments of long-term debt (6,147) (5,210) (121,055)
Dividends paid (41,265) (38,686) (37,581)
--------- --------- ---------
Net cash used in financing activities (47,412) (43,896) (158,636)
Net (Decrease) Increase in Cash and --------- --------- ---------
Cash Equivalents (33,778) 47,656 (80,307)
Cash and Cash Equivalents at
Beginning of Year 161,893 114,237 194,544
Cash and Cash Equivalents at --------- --------- --------
End of Year $ 128,115 $ 161,893 $114,237
========= ========= =========
Supplemental Cash Flow Information:
Interest paid $ 19,950 $ 20,926 $ 29,532
Income taxes paid $ 83,491 $ 70,593 $ 68,227
See Notes to Consolidated Financial Statements
<PAGE>
Notes to consolidated financial statements
1. Summary of Significant Accounting Policies
A. Nature of Operations - Mercantile Stores Company, Inc. (the Company) is a
conventional department store retailer engaged in the general merchandising
business. The Company operates 102 department stores and 15 home fashion
stores under 13 different names in a total of 17 states. A subsidiary,
Mercantile Credit Corp., provides servicing for the Companys private label
credit program. The Company also maintains a partnership interest in five
operating shopping center ventures and one land ownership venture.
B. 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 the six joint ventures.
C. Fiscal Year - The Company's fiscal year ends on the Saturday nearest to
January 31. All fiscal years presented consist of fifty-two weeks except
1995 which included fifty-three weeks. Fiscal year 1996 ended on
February 1, 1997; fiscal year 1995 ended on February 3, 1996; and fiscal
year 1994 ended on January 28, 1995. References to years relate to fiscal
years rather than calendar
D. Revenues - Revenues include sales from retail operations, leased departments
and finance charge revenue earned on customer accounts serviced by the
Company under its private label credit program. Finance charge revenue
from the Company's private label credit program is recognized in the
period in which it is earned. Prior to 1995, the Company's share of
finance charge revenue accrued to the Company under revenue sharing
agreements with unaffiliated companies and was classified as a component
of other income in the accompanying Statements of Consolidated Income
and Retained Earnings.
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 associat with the corporate buying and merchandise
planning functions.
F. Advertising Costs - Advertising expenditures, including production costs,
are expensed as incurred. In 1996, total advertising expense was $100
million, compared with $97 million in 1995, and $90 million in 1994.
G. Store Pre-opening Expenses - Store pre-opening expenses are charged to
income in the year the expenses are incurred. These include advertising,
occupancy, and payroll costs.
H. Cash and Cash Equivalents - For purposes of these statements, short-term
investments which have a maturity of 90 days or less are considered cash
equivalents. The carrying amount of cash equivalents is a reasonable
estimate of fair value.
I. Customer Receivables - Customer receivables are classified as current
assets and include some amounts which are due after one year, consistent
with industry practice. Concentrations of credit risk with respect to
customer receivables are limited due to the large number of customers
and their geographic dispersion.
J. Inventories - All retail inventories are valued by the retail method and
stated on the last-in, first-out (LIFO) cost basis, which lower than
market. At February 1, 1997 and February 3, 1996, inventories were $38
million and $30 million lower, respectively, than they would have been had
the retail method been applied using the first-in, first-out (FIFO) cost
basis. During the year ended February 3, 1996, the Company changed its
method of accounting for promotional markdowns for purposes of determining
current costs under the FIFO basis. Due to the application of the LIFO
cost method, this change in accounting method for FIFO purposes did not
have a material impact on the Companys financial position and results of
operations.
K. 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 financial reporting 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 financial reporting 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
<PAGE>
The Company leases certain properties, principally store locations, under
capital leases as defined by Statement of Financial Accounting Standards
(SFAS) 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.
L. Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
M. Segment Reporting - The Company has one significant segment of
business (general merchandise department store retailing).
N. Reclassifications - Certain reclassifications have been made to prior years'
financial statements to conform with the classification used in the
1996 financial statements.
2. Impariment Charge
During the first quarter of 1996, the Company adopted SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which addresses the identification and
measurement of asset impairments and requires the recognition of impairment
losses on long-lived assets when carrying values exceed expected future
cash flows. The Company evaluated its investment in long-lived assets on
an individual store basis. Based upon an assessment of operating results,
it was determined that the carrying value of certain operating stores was
impaired under the criteria defined in SFAS No. 121. As a result, the
Company recorded a pre-tax impairment charge of $12 million (a net of tax
impact of $7.2 million, or $.20 per share) to write down the carrying
value of these assets to their estimated fair value. The fair value of
these assets was based on operating projections and discounted future
cash flows.
3. Provision for Consolidation
During the first quarter of 1994, the Company recorded a $5 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 this operation was completed in 1994.
4. Customer Receivables
Effective August 1, 1995, the Company terminated its servicing agreement
with Citibank and assumed full responsibility for servicing its customer
receivables. The servicing agreement covered substantially all of the
Company's private label credit program. Prior to termination, Citibank
was responsible for credit authorization, absorption of bad debts and
collection of customer receivables.
Finance charge revenue earned in 1996 and 1995 on customer accounts
serviced by the Company totalled $85 million and $52 million, respectively,
and is classified as a component of revenues in the accompanying Statements
of Consolidated Income and Retained Earnings. Operating expenses incurred
in connection with the private label credit program are included in
selling, general and administrative expenses. At both February 1, 1997 and
February 3, 1996, customer receivables are net of an allowance for
doubtful accounts in the amount of $16 million.
<PAGE>
5 Long-Term Debt
The Company's long-term debt consisted of the following:
(in thousands) 1996 1995
8.2% Sinking Fund Debentures due 2022 (a) $100,000 $100,000
6.7% Notes due 2002 (a) 95,000 95,000
Industrial Revenue Bonds at rates ranging
from 5.61% to 7.75% 8,250 9,475
Mortgage Note Payable - 980
Other Notes Payable 4,385 6,528
-------- --------
Total 207,635 211,983
Capitalized Lease Obligations 47,292 49,090
-------- --------
254,927 261,073
Less - due within one year 25,017 6,147
-------- --------
Total Long-term Debt $229,910 $254,926
(a) The 6.7% notes have a mandatory annual sinking fund requirement of $19
million commencing in 1997. The 8.2% sinking fund debentures have a
similar requirement of $5 million commencing in 2003.
Maturities of long-term debt, including capitalized leases, for the
next five years are as follows:
Fiscal year (in thousands) Amount
1997 $ 25,017
1998 $ 25,181
1999 $ 23,644
2000 $ 21,505
2001 $ 16,865
The fair value of long-term debt, including the current portion and
excluding capital lease obligations, was approximately $215 million at
February 1, 1997 and approximately $225 million at February 3, 1996.
The fair value is based on the present value of future cash flows. The
discount rates used approximated the current borrowing costs for similar
instruments.
6. Financing Arrangements
The Company has a $200 million Revolving Credit Agreement (The Credit
Agreement) with a syndicate of banks which expires on August 3, 2000.
The applicable interest rate on borrowings is based, at the Company's
option, on either the banks best rates under a competitive bid environment
or a predefined spread (which is tied to the Company's long-term debt
credit rating) over the appropriate LIBOR rate. The Credit Agreement
requires the Company to comply with certain financial covenants with
respect to minimum net worth and financial leverage.
The Company also has in place additional uncommitted lines of credit in
the total amount of $20 million. No fee is paid for maintaining these lines
and interest on any borrowings is charged at a floating rate.
At February 1, 1997 and February 3, 1996, there were no borrowings
outstanding under The Credit Agreement or the discretionary lines.
Maximum borrowings under these facilities for 1996 were $43 million, at
an average interest rate of 6.0 %. During 1995, maximum borrowings
were $3 million, at an average interest rate of 5.9%.
<PAGE>
7. Income Taxes
The provision for income taxes consisted of the following:
(in thousands) 1996 Federal State Total
Current $ 67,287 $ 15,664 $ 82,951
Deferred (2,325) (539) (2,864)
-------- -------- --------
Total $ 64,962 $ 15,125 $ 80,087
(in thousands) 1995 Federal State Total
Current $ 66,171 $ 14,068 $ 80,239
Deferred 494 599 1,093
-------- -------- --------
Total $ 66,665 $ 14,667 $ 81,332
(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
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) 1996 1995 1994
Provision at statutory rate of 35% $ 70,543 $ 71,603 $ 60,512
State and local income tax, less
Federal income tax benefit 9,831 9,534 6,859
Other (287) 195 1,004
-------- -------- --------
Total income tax provision $ 80,087 $ 81,332 $ 68,375
Effective income tax rate 39.7% 39.8% 39.5%
<PAGE>
The tax effects of significant temporary differences representing deferred
tax assets and liabilities were as follows:
(in thousands) 1996 1995
Assets:
Inventory accounting $ 3,804 $ 3,783
Associate benefit costs 13,309 12,675
Interest, taxes and real estate costs 11,887 12,786
Bad debts 4,845 4,875
Capitalized leases 4,457 4,184
Other 8,384 3,237
----------- ----------
Total deferred tax assets 46,686 41,540
Liabilities:
Depreciation (6,455) (7,035)
Pension and profit sharing plan costs (30,386) (27,153)
Other (2,521) (1,971)
------------ -----------
Total deferred tax liabilities (39,362) (36,159)
Total net deferred tax assets $ 7,324 $ 5,381
8. Associate Benefit Plans
The Company maintains a formal, qualified, non-contributory, defined
benefit pension plan covering all associates who have met certain age and
service requirements. Benefits under this plan are generally based on a
career average formula. The Company funds this plan in accordance with
ERISA requirements.
As computed under the provisions of SFAS 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) 1996 1995 1994
Service cost $ 8,689 $ 5,656 $ 6,884
Interest cost 14,169 12,405 11,267
Actual return on plan assets (44,416) (54,809) 1,723
Amortization of transition asset (5,043) (5,043) (5,043)
Other amortization and deferral 13,750 27,124 (30,484)
--------- ---------- -----------
Net pension benefit $ (12,851) $ (14,667) $ (15,653)
The expected long-term rate of return on assets used in determining the net
pension benefit was 8.5% in all years presented.
The funded status of the formal, qualified pension plan at February 1, 1997
and February 3, 1996, based on actuarial and plan asset information as of
October 31, 1996 and 1995, was as follows:
(in thousands) 1996 1995
Actuarial present value of
benefit obligations:
Vested benefits $ 154,385 $ 154,580
Non-vested benefits 4,537 3,856
--------- ---------
Accumulated benefit obligation 158,922 158,436
Impact of future salary increases 27,629 22,126
--------- ---------
Projected benefit obligation 186,551 180,562
Plan assets at fair value 379,861 344,141
Plan assets in excess of --------- ---------
projected benefit obligation 193,310 163,579
Items not yet recognized in income:
Initial transition credit which is
being amortized over 15 years (25,216) (30,259)
Subsequent net gains (84,395) (62,472)
--------- ---------
Prepaid pension benefit $ 83,699 $ 70,848
========= =========
The actuarial present value of benefits was determined using a discount rate
of 7.75% in 1996 and 7.5% in 1995. The change in the discount rate
assumption caused the projected benefit obligation to decrease by
approximately $6 million in 1996. The rate of compensation increase used
to measure the projected benefit obligation was 5.0% in 1996 and 1995.
The plans assets include investments in common stocks, fixed income
securities, real estate investments, short-term investments, and cash. No
funding activity occurred between the plan and the Company during the fourth
quarter of 1996 or 1995.
The Company contributes to qualified and non-qualified savings and profit
sharing plans covering certain associates. The Company's total contribution
to the qualified and non-qualified savings and profit sharing is based on 5%
of pre-federal income tax FIFO profits, as defined. The Company also
provides retirement benefits to certain associates through non-qualified
defined benefit pension plans. The costs to the Company under these for
the past three years were as follows:
(in thousands) 1996 1995 1994
Savings and Profit Sharing $ 10,271 $ 9,750 $ 8,068
Pension 1,682 810 1,754
-------- -------- --------
Total $ 11,953 $ 10,560 $ 9,822
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
Company funds these benefits as claims are incurred.
<PAGE>
The Company accounts for postretirement benefits under the provisions of
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The components of net periodic postretirement benefit cost for
the last three years were as follows:
(in thousands) 1996 1995 1994
Service cost earned during
the year $ 522 $ 490 $ 536
Interest cost on projected benefit
obligation 776 800 770
Net periodic postretirement --------- --------- --------
benefit cost $ 150 $ 91 $ 166
The following table sets forth the plans funded status at February 1, 1997
and February 3, 1996:
(in thousands) 1996 1995
Accumulated postretirement benefit obligation:
Retirees $ 3,520 $ 3,816
Fully eligible active plan participants 216 204
Other active plan participants 6,279 6,372
-------- --------
10,015 10,392
Unrecognized net gain from changes in
plan and assumptions 5,490 6,422
Unrecognized prior service cost 5,301 4,968
-------- --------
Accrued postretirement benefit cost $20,806 $21,782
For measurement purposes, the following assumptions were used to project
changes in the accumulated postretirement benefit obligation for 1996 and
1995:
1996 1995
Discount rate 7.75% 7.5%
Health care cost trend rate 8.00% to 5.0% 8.75% to 5.0%
Years to ultimate trend 8 9
The health care cost trend rate affects the amounts reported. To illustrate,
increasing the assumed health care cost trend rate by percentage point in
each year would increase the accumulated postretirement benefit obligation
by $.9 million and the aggregate of the service and interest cost components
of net periodic postretirement benefit cost by $.1 million.
Effective January 30, 1994, the Company adopted SFAS 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.
<PAGE>
9. Leases
The Company leases certain stores, warehouse facilities and equipment under
operating leases. 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 tax and other expenses, and, in
certain instances, increased rentals based on percentages of sales.
Future minimum lease payments under noncancelable leases as of
February 1, 1997 were as follows:
Fiscal Year (in thousands) Capital Operating Total
1997 $ 6,232 $ 24,344 $ 30,576
1998 6,117 23,657 29,774
1999 6,060 22,017 28,077
2000 6,060 20,124 26,184
2001 5,955 19,055 25,010
Thereafter 65,098 112,123 177,221
-------- -------- --------
Total minimum lease payments $ 95,522 $221,320 $ 316,842
Less: Executory costs (211)
Interest (48,019)
Present value of net --------
minimum lease payments $ 47,292
Rent expense consisted of the following:
(in thousands) 1996 1995 1994
Minimum rentals $ 23,993 $ 23,305 $ 23,840
Contingent rentals
(based on % of sales) 7,080 7,269 5,328
-------- -------- --------
$ 31,073 $ 30,574 $ 29,168
10. Contingencies
The Company is involved in various legal actions arising in the normal
course of business. After taking into consideration legal counsel's
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.
<PAGE>
Quarterly results
(unaudited in thousands, except per share data)
<TABLE>
<CAPTION>
February 1, 1997 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
<S> <C> <C> <C> <C> <C>
Revenues $ 655,409 $ 659,527 $ 727,741 $ 988,145 $ 3,030,822
Costs, Expenses, and Other Income:
Cost of goods sold 452,969 467,927 495,379 696,747 2,113,022
Selling, general and
administrative expenses 168,251 168,112 180,814 185,685 702,862
Interest expense, net 2,414 2,222 2,387 3,763 10,786
Other income (2,314) (2,755) (2,590) (1,741) (9,400)
Impairment charge 12,000 - - - 12,000
633,320 635,506 675,990 884,454 2,829,270
Income before provision for
income taxes 22,089 24,021 51,751 103,691 201,552
Provision for income taxes 8,818 9,587 20,663 41,019 80,087
Net Income $ 13,271 $ 14,434 $ 31,088 $ 62,672 $ 121,465
Net income per share $ .36 $ .39 $ .85 $ 1.70 $ 3.30
February 3, 1996 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total
Revenues $ 602,858 $ 642,448 $ 694,765 $ 1,004,253 $ 2,944,324
Costs, Expenses, and Other Income:
Cost of goods sold 427,006 468,917 470,813 693,017 2,059,753
Selling, general and
administrative expenses 159,994 165,423 173,859 187,648 686,924
Interest expense, net 3,976 3,938 3,265 3,292 14,471
Other income (4,682) (6,654) (1,792) (8,276) (21,404)
586,294 631,624 646,145 875,681 2,739,744
Income before provision
for income taxes 16,564 10,824 48,620 128,572 204,580
Provision for income taxes 6,613 4,321 19,410 50,988 81,332
Net income $ 9,951 $ 6,503 $ 29,210 $ 77,584 $ 123,248
Net income per share $ .27 $ .18 $ .79 $ 2.11 $ 3.35
</TABLE>
<PAGE>
Five-year selected financial data
<TABLE>
<CAPTION>
(dollars in thousands,
except per share data) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating Results
Revenues $3,030,822 $2,944,324 $2,819,837 $2,729,928 $2,732,041
Retail sales 2,945,606 2,892,083 2,819,837 2,729,928 2,732,041
Cost of goods sold 2,113,022 2,059,753 2,020,264 1,960,914 1,927,149
Selling, general and
administrative expenses 702,862 686,924 625,726 627,391 641,573
Interest expense, net 10,786 14,471 23,526 30,948 32,365
Other income (9,400) (21,404) (27,571) (33,003) (29,145)
Impairment charge 12,000 - - - -
Provision for consolidation
/relocation - - 5,000 - 17,000
Income before provision for
income taxes 201,552 204,580 172,892 143,678 143,099
Percent to revenues 6.7 6.9 6.1 5.3 5.2
Provision for income taxes 80,087 81,332 68,375 57,039 56,262
Income before extraordinary
charge and cumulative effect
of accounting changes 121,465 123,248 104,517 86,639 86,837
Net income 121,465 123,248 103,417 89,739 69,087
Per common share
Net income $ 3.30 $ 3.35 $ 2.81 $ 2.44 $ 1.88
Dividends $ 1.12 $ 1.05 $ 1.02 $ 1.02 $ 1.02
Stockholders equity $ 42.48 $ 40.31 $ 38.01 $ 36.23 $ 34.81
Financial Position
Working capital $1,017,533 $1,013,576 $ 957,030 $ 902,268 $ 992,153
Current ratio 4.6 4.7 4.7 3.5 4.6
Receivables, net 588,187 574,622 620,238 635,114 613,708
Inventories 560,666 523,573 468,782 425,492 422,819
Property and equipment, net
(includes capitalized leases) 738,207 701,233 688,806 691,502 680,933
Total assets 2,142,503 2,074,724 1,981,729 2,031,982 2,007,868
Long-term debt (includes
capitalized lease obligations) 229,910 254,926 261,187 271,965 390,258
Debt to capitalization ratio 14.0 15.0 16.0 22.5 24.4
Retained earnings 1,553,892 1,473,692 1,389,130 1,323,294 1,271,136
Stockholders equity 1,565,313 1,485,113 1,400,551 1,334,715 1,282,557
Other Data
Capital expenditures for property $ 133,861 $ 101,202 $ 93,639 $ 106,210 $ 110,638
and equipment
Depreciation 83,661 88,714 93,540 93,455 94,036
Department stores
Opened 5 - 3 2 1
Acquired - - - - 16
Closed - 3 2 1 -
Number of department stores,
at end of year 102 97 100 99 98
Home fashion stores
Opened 3 1 3 1 -
Closed - - - - 1
Number of home stores, at end of year 15 12 11 8 7
Total square feet 17,282 16,300 16,484 16,212 15,850
Sales per square foot (1) $ 177 $ 177 $ 173 $ 169 $ 174
</TABLE>
All years include 52 weeks, except 1995 which includes 53 weeks.
(1) Based on stores opened for the entire year. The 1995 year is presented
on a 52 week basis.
<PAGE>
Group presidents
Store divisions and locations
Mercantile East
Bacons/McAlpin's/Lion/Roots
Store Locations Shopping Centers/Malls
Louisville, KY Bashford Manor Mall (Bacons)
Bashford Manor Home Store (Bacons)
Shively Center (Bacons)
Louisville Galleria (Bacons)
The Mall in St. Matthews (Bacons)
St. Matthews Home Store (Bacons)
Owensboro, KY Towne Square Mall (Bacons)
Lexington, KY Lexington Mall (McAlpin's)
Turfland Mall (McAlpin's)
Turfland Mall Home Store (McAlpin's)
Fayette Mall (McAlpin's)
Crestview Hills, KY Crestview Hills Mall (McAlpin's)
Crestview Hills Mall
Signatures Home Store (McAlpin's)
Clarksville, IN River Falls Mall (Bacons)
Terre Haute, IN Honey Creek Square (Roots)
Cincinnati, OH Eastgate Mall (McAlpin's)
Kenwood Towne Centre (McAlpin's)
Northgate Mall (McAlpin's)
Signatures Home Store -
Harpers Station (McAlpin's)
Tri-County Mall (McAlpin's)
Western Hills Plaza (McAlpin's)
Dayton, OH Dayton Mall (McAlpin's)
Middletown, OH Towne Mall (McAlpin's)
Toledo, OH Southwyck Shopping Center (Lion)
Southwyck Home Store (Lion)
North Towne Square (Lion)
Franklin Park Mall (Lion)
Westgate Home Store (Lion)
<PAGE>
Mercantile Southeast
Gayfers/J.B. White
Store Locations Shopping Centers/Malls
Montgomery, AL Montgomery Mall (Gayfers)
Eastdale Mall (Gayfers)
Eastdale Mall Home Store
(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)
National Hills Home Store
(J.B. White)
Aiken, SC Heritage Square (J.B. White)
Columbia, SC Columbiana Mall (J.B. White)
Dutch Square (J.B. White)
Richland Mall (J.B. White)
Greenville, SC Greenville Mall (J.B. White)
Spartanburg, SC Westgate Mall (J.B. White)
Westgate Mall Home Store
(J.B. White)
<PAGE>
Mercantile Central
Castner Knott
Store Locations Shopping Centers/Malls
Nashville, TN The Mall at Green Hills
Rivergate Mall
Donelson Plaza
Harding Mall
Hickory Hollow Mall
Bellevue Center
Tullahoma, TN Northgate Mall
Murfreesboro, TN Stones River Mall
Franklin, TN Cool Springs Galleria
Cool Springs Galleria Home Store
Florence, AL Regency Square Mall
Decatur, AL Riveroaks Center
Huntsville, AL Madison Square Mall
Bowling Green, KY Greenwood Mall
Greenwood Mall Home Store
(Picture)
Thomas N. Groh,
President of
Mercantile East
Headquartered in Louisville, Kentucky
(Picture)
Robin E. Sanderford,
President of
Mercantile Southeast
Headquartered in Montgomery, Alabama
(Picture)
Edward A. Overbey, Jr.,
President of Mercantile Central
Headquartered in Nashville, Tennessee
(Picture)
Michael G. Shannon,
President of Mercantile South
Headquartered in Mobile, Alabama
(Picture)
James L. Schmidt,
President of Mercantile West
Headquartered in Kansas City, Missouri
(Picture)
Charles O. Unfried,
President of Mercantile Credit Corp.,
Headquartered in Baton Rouge, Louisiana
Mercantile South
Gayfers/Maison Blanche
Store Locations Shopping Centers/Malls
Mobile, AL Springdale Mall (Gayfers)
Jubilee Mall (Gayfers)
Biloxi-Gulfport, MS Edgewater Mall (Gayfers)
Edgewater Mall Home Store (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)
Panama City Mall Home Store (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)
West Oaks Mall (Gayfers)
<PAGE>
Mercantile West
Jones/Joslins/Hennessys/
de Lendrecies/Glass Block
Store Locations Shopping Centers/Malls
Kansas City, MO Downtown (Jones)
Blue Ridge Mall (Jones)
Metro North Mall (Jones)
Bannister Mall (Jones)
Overland Park, KS Metcalf South Shopping Center (Jones)
Metcalf South Home Store (Jones)
Prairie Village, KS Prairie Village Shopping Center (Jones)
Independence, MO Independence Center (Jones)
Topeka, KS West Ridge Mall (Jones)
Denver, CO 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)
<PAGE>
Corporate Officers
David L. Nichols James M. McVicker
Chairman of the Board Senior Vice President and
and Chief Executive Officer Chief Financial Officer
Randolph L. Burnette Kathryn M. Muldowney
Senior Vice President Vice President
Real Estate Chief Information Officer
Louis L. Ripley William A. Carr
Vice President Treasurer and Secretary
Human Resources
Donald L. Radcliff
Controller
(Picture of Corporate Officers)
Seated, left to right: Don Radcliff, David Nichols, Kathy Muldowney,
Randy Burnette. Standing: Lou Ripley, Jim McVicker, Bill Carr.
<PAGE>
Inside Back Cover
Directors
abc H. Keith H. Brodie, M.D.
President Emeritus of Duke University
a John A. Herdeg
Attorney at Law and
Chairman of the Board of
Christiana Bank & Trust Company
a Thomas J. Malone
President, Chief Operating Officer and
Director of Milliken & Company
Gerrish H. Milliken
Director Emeritus of
Milliken & Company
b Minot K. Milliken
Director Emeritus of
Milliken & Company
abc Roger Milliken
Chairman of the Board and
Chief Executive Officer of
Milliken & Company
David L. Nichols
Chairman of the Board and
Chief Executive Officer of
Mercantile Stores Company, Inc.
b Lawrence R. Pugh
Chairman of the Board of
VF Corporation
b Francis G. Rodgers
Former Vice President of
IBM Corporation
c Roger K. Smith
Product Line Marketing Manager of
Analog Devices, Inc.
a Audit Committee
b Compensation Committee
c Nominating Committee
stockholder information
Annual Meeting
The Annual Meeting of Stockholders will be held at 11:00 a.m. on
Wednesday, May 28, 1997 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
311 West Monroe Street, 11th Floor
Chicago, Illinois 60690
Telephone: 312-461-3309
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, New York 10178
Telephone: 212-696-6000
Form 10-K Annual Report
A copy of Mercantiles 1996 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
Mercantiles Home Page on the Internet
http://www.mercstores.com
<PAGE>
Back Cover
Mercantile Stores Company, Inc.
1100 North Market Street
Wilmington, Delaware 19801
(302) 575-1816
EXHIBIT 21
MERCANTILE STORES COMPANY, INC.
SUBSIDIARY SCHEDULE
AS OF FEBRUARY 1, 1997
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 SOUTH CAROLINA
DULUTH GLASS BLOCK STORE COMPANY MINNESOTA
THE McALPIN COMPANY OHIO
THE PEOPLES STORE COMPANY WASHINGTON
J.B. WHITE & CO. 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 CORPROATION 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 CENTERS, INC. LOUISIANA
MERCANTILE CREDIT CORP. LOUISIANA
MERCANTILE LOGISTICS COMPANY, INC. OHIO
Exhibit 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation
of our reports included or incorporated by reference in this Form 10-K,
into the Company's previously filed Registration Statement File No. 33-50604.
Cincinnati, Ohio ARTHUR ANDERSEN LLP
April 30, 1997
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 February 1, 1997, 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 thereof.
Dated: April 17, 1997
s/ s/
- -------------------------------- -----------------------------
H. Keith H. Brodie, M.D. Roger Milliken
s/ s/
- -------------------------------- -----------------------------
John A. Herdeg Thomas J. Malone
s/ s/
- ------------------------------- -----------------------------
Lawrence R. Pugh Gerrish H. Milliken
s/ s/
- ------------------------------- -----------------------------
Francis G. Rodgers Minot K. Milliken
s/
- -------------------------------
Roger K. Smith
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS, CONSOLIDATED BALANCE
SHEETS AND STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE PERIOD ENDED FEBRUARY
1, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> FEB-01-1997
<CASH> 128,115
<SECURITIES> 0
<RECEIVABLES> 587,761
<ALLOWANCES> 16,425
<INVENTORY> 560,666
<CURRENT-ASSETS> 1,303,302
<PP&E> 1,138,008
<DEPRECIATION> 399,801
<TOTAL-ASSETS> 2,142,503
<CURRENT-LIABILITIES> 285,769
<BONDS> 0
<COMMON> 5,403
0
0
<OTHER-SE> 1,559,910
<TOTAL-LIABILITY-AND-EQUITY> 2,142,503
<SALES> 2,945,606
<TOTAL-REVENUES> 3,030,822
<CGS> 2,113,022
<TOTAL-COSTS> 2,113,022
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,451
<INCOME-PRETAX> 201,552
<INCOME-TAX> 80,087
<INCOME-CONTINUING> 121,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121,465
<EPS-PRIMARY> 3.30
<EPS-DILUTED> 3.30
</TABLE>
