SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended October 29, 1994
Commission File Number 1-9659
THE NEIMAN MARCUS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4119509
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Boylston Street, Chestnut Hill, MA 02167
(Address of principal executive offices) (Zip Code)
(617) 232-0760
(Registrant's telephone number, including area code)
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
As of December 5, 1994, there were outstanding 37,958,545 shares of the
issuer's common stock, $.01 par value.
THE NEIMAN MARCUS GROUP, INC.
I N D E X
Part I. Financial Information Page Number
Item 1. Condensed Consolidated Balance Sheets as of
October 29, 1994, July 30, 1994 and October 30, 1993 1
Condensed Consolidated Statements of Operations for
the Thirteen Weeks ended October 29, 1994 and
October 30, l993 2
Condensed Consolidated Statements of Cash Flows for
the Thirteen Weeks Ended October 29, 1994 and
October 30, l993 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-6
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Exhibit 11.1 9
Exhibit 27.1 10
1
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands) October 29, July 30, October 30,
1994 1994 1993
Assets
Current assets:
Cash and equivalents $ 16,618 $ 16,600 $ 19,641
Accounts receivable, net 408,569 362,236 362,447
Merchandise inventories 429,846 345,145 449,495
Deferred income taxes 24,317 24,317 16,903
Other current assets 49,579 51,741 45,975
Total current assets 928,929 800,039 894,461
Property and equipment, net 417,580 410,913 411,940
Intangibles and other assets 110,093 112,176 113,655
Total assets $1,456,602 $1,323,128 $1,420,056
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 198,209 $ 116,619 $ 71,598
Accounts payable 196,085 164,281 178,226
Accrued liabilities 163,290 153,625 159,929
Total current liabilities 557,584 434,525 409,753
Long-term liabilities:
Notes and debentures 368,667 368,667 474,559
Other long-term liabilities 74,171 74,982 65,694
Total long-term liabilities 442,838 443,649 540,253
Deferred income taxes 37,768 37,768 37,582
Redeemable preferred stocks 403,963 403,470 402,000
Common stock 380 380 379
Additional paid-in capital 82,346 82,254 82,236
Accumulated deficit (68,277) (78,918) (52,147)
Total liabilities and shareholders'
equity $1,456,602 $1,323,128 $1,420,056
See Notes to Condensed Consolidated Financial Statements.
2
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands except for Thirteen Weeks Ended
per share data) October 29, October 30,
1994 1993
Revenues $ 519,669 $ 507,634
Cost of goods sold including buying and
occupancy costs 342,835 342,565
Selling, general and administrative expenses 130,203 127,823
Corporate expenses 3,154 3,411
Operating earnings 43,477 33,835
Interest expense (9,316) (7,638)
Earnings before income taxes 34,161 26,197
Income taxes 14,348 11,003
Net earnings 19,813 15,194
Dividends and accretion on
redeemable preferred stocks 7,270 7,270
Net earnings applicable to common
shareholders $ 12,543 $ 7,924
Weighted average number of common and common
equivalent shares outstanding 37,992 38,016
Amounts per share applicable to common shareholders:
Net earnings $ .33 $ .21
Dividends paid $ .05 $ .05
See Notes to Condensed Consolidated Financial Statements.
3
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) Thirteen Weeks Ended
October 29, October 30,
l994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 19,813 $ 15,194
Adjustments to reconcile net earnings
to net cash used by operations:
Depreciation and amortization 14,887 15,707
Other items, net 462 289
Changes in assets and liabilities:
Accounts receivable (46,333) (52,875)
Merchandise inventories (84,701) (86,928)
Other current assets 2,162 (7,438)
Accounts payable and accrued liabilities 41,469 18,274
Net cash used by operating activities (52,241) (97,777)
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (20,541) (10,066)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, net 81,500 116,200
Repayment of debt (115) (266)
Issuance of common stock 92 23
Dividends paid (8,677) (8,677)
Net cash provided by financing activities 72,800 107,280
CASH AND EQUIVALENTS
Increase (decrease) during the period, net 18 (563)
Beginning balance 16,600 20,204
Ending balance $ 16,618 $ 19,641
See Notes to Condensed Consolidated Financial Statements.
4
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of presentation
The condensed consolidated financial statements of The Neiman Marcus
Group, Inc. (the Company) are submitted in response to the requirements
of Form 10-Q and should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form
l0-K. In the opinion of management, these statements contain all
adjustments, consisting only of normal recurring accruals, necessary for
a fair presentation of the results for the interim periods presented.
The retail industry is seasonal in nature, and the results of operations
for these periods have historically not been indicative of the results
for a full year.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2. Merchandise inventories
Inventories are stated at the lower of cost or market. Approximately
eighty-six percent of the Company's inventories are valued using the
retail method on the last-in, first-out (LIFO) basis. While the Company
believes that the LIFO method provides a better matching of costs and
revenues, some specialty retailers use the first-in, first-out (FIFO)
method. Accordingly, the Company has provided the following data for
comparative purposes.
If the FIFO method of inventory valuation had been used to value all
inventories, merchandise inventories would have been higher than
reported by $27.7 million at October 29, 1994, $24.6 million at July 30,
1994 and $24.8 million at October 30, 1993. The FIFO valuation method
would have increased net earnings by $1.8 million during the thirteen
weeks ended October 29, 1994 and $1.5 million during the thirteen weeks
ended October 30, 1993.
3. Debt and credit agreements
The Company has a revolving credit agreement with nine banks pursuant to
which the Company may borrow up to $300.0 million, of which $100.0
million expires during fiscal 1995, $175.0 million expires during fiscal
1996 and $25.0 million may be terminated on not less than three years'
notice. Borrowings under this agreement were $295.0 million at October
29, 1994, July 30, 1994 and October 30, 1993.
The Company also has credit agreements with six banks, pursuant to which
the Company may borrow up to $25.0 million from each bank, and
uncommitted credit lines totaling $81.9 million. The six $25.0 million
credit agreements expire on March 31, 1995. At October 29, 1994,
borrowings under the credit agreements and the uncommitted credit lines
were $75.6 million and $16.9 million, respectively. At July 30, 1994,
borrowings under the credit agreements were $11.0 million and there were
no borrowings under the uncommitted lines.
At October 30, 1993, the Company had credit agreements with four banks,
pursuant to which the Company could borrow up to $25.0 million from each
bank, and uncommitted credit lines totaling $55.0 million. At October
30, 1993, borrowings under the credit agreements and uncommitted credit
lines were $38.4 million and $15.0 million, respectively.
5
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Thirteen Weeks Ended October 29, l994
Compared with the Thirteen Weeks Ended October 30, 1993
Revenues in the thirteen weeks ended October 29, 1994 increased 2.4% over
revenues in the thirteen weeks ended October 30, 1993. Higher revenues at
Neiman Marcus and Bergdorf Goodman were partially offset by lower revenues at
Contempo Casuals. The decrease in revenues at Contempo Casuals was primarily
due to the closing of 40 under-performing Contempo Casuals retail stores and
all of the Pastille retail stores in the fourth quarter of fiscal 1994.
Cost of goods sold, including buying and occupancy costs, remained essentially
unchanged at approximately $343 million compared to the same period last year.
As a percentage of revenues, cost of goods sold, including buying and
occupancy costs, was 66.0% during the first quarter of fiscal 1995 compared to
67.5% in the first quarter of fiscal 1994. The improvement is principally
attributable to increased revenues, decreased markdowns and reduced occupancy
costs as a result of the Contempo Casuals and Pastille store closings in
fiscal 1994.
Selling, general and administrative expense increased 1.9%, primarily as a
result of increased selling and volume related costs. These increases were
partially offset by higher finance charge income. As a percentage of
revenues, these expenses decreased to 25.1%, compared to 25.2% during the
first quarter of fiscal 1994. Higher finance charge income and lower store
management expenses, partially offset by higher selling and credit costs,
contributed to this reduction.
Interest expense increased 22.0% compared to the first quarter of fiscal 1994
due mainly to higher rates and also to higher outstanding balances on bank
borrowings.
The Company's effective income tax rate will be 42% in fiscal 1995, unchanged
from fiscal 1994.
During the first quarter of fiscal 1995, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112 "Employers' Accounting for
Postemployment Benefits." The effect of adopting this standard was not
material to the Company's financial position or results of operations.
6
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition and Liquidity Since July 30, l994
During the first quarter of fiscal 1995, the Company financed its working
capital needs, expenditures for store renovations and dividend requirements
primarily with cash from short-term borrowings. The following discussion
analyzes liquidity and capital resources by operating, investing and financing
activities as presented in the Company's Condensed Consolidated Statements of
Cash Flows.
Operating activities - Net cash used in operating activities was $52.2 million
during the first quarter of fiscal 1995, compared with $97.8 million during
the same period last year. The net cash outflow was used to fund working
capital requirements, primarily increases in accounts receivable ($46.3
million) and merchandise inventories ($84.7 million) and was partially offset
by increases in accounts payable and accrued liabilities ($41.5 million). The
increase in accounts receivable was primarily due to the increase in revenues
during the period. The seasonal increase in inventories, and the increase in
revenues during the period accounted for the changes in working capital.
Investing activities - Capital expenditures were $20.5 million during the
first quarter of fiscal 1995 as compared to $10.1 million during the same
period last year. The Company's investing activities consist principally of
capital expenditures for new stores and existing store renovations. The
Company's expansion plans include the opening of three new Neiman Marcus
stores by the end of the 1996 calendar year. The Company is also planning the
renovation of three Neiman Marcus stores during fiscal 1995. Capital
expenditures are expected to approximate $100.0 million during fiscal 1995.
Financing activities - The Company increased its borrowings by $81.5 million
since July 30, 1994. At October 29, 1994, the Company had approximately $62.5
million available under its committed credit facilities, $250.0 million of
which expires in March 1995. The Company anticipates that it will be able to
secure additional or new financing to supplement and replace existing credit
arrangements. The Company believes its current and future debt capacity will
be sufficient to fund its planned capital growth as well as operating and
dividend requirements.
The Company paid aggregate quarterly dividends on its Common and Preferred
Stocks of $8.7 million during the first quarters of both fiscal 1995 and 1994.
7
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11.1 Computation of average number of shares outstanding used in
determining primary and fully diluted earnings per share.
27.1 Financial data schedule.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended October 29, 1994.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
Signature Title Date
Principal Financial Senior Vice President and December 12, 1994
Officer: Chief Financial Officer
s/John R. Cook
John R. Cook
Principal Accounting Vice President and December 12, 1994
Officer: Controller
s/Stephen C. Richards
Stephen C. Richards