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 January 31, 1998, the fourth quarter accounted for approximately 32% of consolidated retail sales and 56% of consolidated net income.
The Company regularly employs, on a full or part-time basis, an average of approximately 34,200 associates, of which approximately 19,500 are considered full-time equivalents.
The following portions from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference: Financial Highlights (page 1); Management's Discussion and Analysis (pages 5-8); Note 1 (pages 15-16) and Note 2 (page 16) of Notes to Consolidated Financial Statements; Five-Year Selected Financial Data (pages 24-25); Store Divisions and Locations (pages 26-27).
Item 2.
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 102 department stores and 16 home fashion stores operated by the Company as of January 31, 1998:
Home Department Fashion Square Stores Units Footage
Owned Stores 61 2 9,932,508 Leased Stores 41 14 7,397,998 ________ ________ __________ Total 102 16 17,330,506
Management's Discussion and Analysis (pages 5-8), Note 1 (pages 15-16) of Notes to Consolidated Financial Statements and Store Divisions and Locations (pages 26-27) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference.
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Item 3.
Item 3. Legal Proceedings.
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Market and Dividend Information (page 9) and Stockholder Information (inside back cover) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data.
The Five-Year Selected Financial Data (pages 24-25) and Notes to Consolidated Financial Statements (pages 15-22) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Management's Discussion and Analysis (pages 5-8) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements (pages 11-14), Notes to Consolidated Financial Statements (pages 15-22), Report of Independent Public Accountants (page 10) and Quarterly Results (page 23) from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
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PART III
Item 10.
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 24, 1998, relating to the Annual Meeting of Stockholders to be held on May 27, 1998 and filed pursuant to Regulation 14A, is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation.
The information set forth under the caption "Management Remuneration", included in the Registrant's definitive Proxy Statement, dated April 24, 1998, relating to the Annual Meeting of Stockholders to be held on May 27, 1998 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.
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 24, 1998, relating to the Annual Meeting of Stockholders to be held on May 27, 1998 and filed pursuant to Regulation 14A, is incorporated herein by reference.
Item 13.
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 24, 1998, relating to the Annual Meeting of Stockholders to be held on May 27, 1998 and filed pursuant to Regulation 14A, is incorporated herein by reference.
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PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
A. 1. The following Consolidated Financial Statements of Mercantile Stores Company, Inc., Notes to Consolidated Financial Statements and Report of Independent Public Accountants, from the Registrant's Annual Report to Stockholders for the fiscal year ended January 31, 1998 are incorporated herein by reference:
(a) Statements of Consolidated Income and Retained Earnings for the fiscal years ended January 31, 1998, February 1, 1997 and February 3, 1996 - page 11.
(b) Consolidated Balance Sheets as of January 31, 1998 and February 1, 1997 - pages 12 and 13.
(c) Statements of Consolidated Cash Flows for the fiscal years ended January 31, 1998, February 1, 1997 and February 3, 1996 - page 14.
(d) Notes to Consolidated Financial Statements - pages 15-22.
(e) Report of Independent Public Accountants, page - 10.
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.
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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 and, dated as of April 1, 1997, between the Company and each of Kathryn M. Muldowney and Louis L. Ripley, 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 January 31, 1998.
(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.
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B. No reports on Form 8-K have been filed during the fourth quarter of the fiscal year ended January 31, 1998.
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 23, 1998.
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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 * Lawrence R. Pugh (Chairman of the Board) (Director) As Principal Executive Officer
s/ James M. McVicker James M. McVicker * Gerrish H. Milliken (Senior Vice President and (Director) Chief Financial Officer)
* John A. Herdeg * Minot K. Milliken (Director) (Director)
* Roger K. Smith * Roger Milliken (Director) (Director)
* Francis G. Rodgers * H. Keith H. Brodie, MD (Director) (Director)
* Thomas J. Malone (Director)
*BY: s/ David L. Nichols ____________________________________ David L. Nichols
Date: April 23, 1998
An original Power of Attorney authorizing David L. Nichols, James M. McVicker and William A. Carr and each of them to sign this report hereto as Attorneys for Directors of the Registrant is being filed concurrently with the Securities and Exchange Commission.
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Report of Independent Public Accounts
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 3, 1998. 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 responsibility 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 3, 1998
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