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 January 28, 1995
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 March 6, 1995, there were outstanding 37,959,012 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
January 28, l995, July 30, l994 and January
29, 1994 1
Condensed Consolidated Statements of Earnings
for the Twenty-Six and Thirteen Weeks ended
January 28, l995 and January 29, l994 2
Condensed Consolidated Statements of Cash Flows
for the Twenty-Six Weeks ended January 28, l995
and January 29, l994 3
Notes to Condensed Consolidated Financial
Statements 4-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operatio 6-8
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Exhibit 11.1 11
Exhibit 27.1 12
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
January 28, July 30, January 29,
(In thousands) 1995 1994 1994
Assets
Current assets:
Cash and equivalents $ 24,681 $ 16,600 $ 18,598
Accounts receivable, net 448,935 362,236 394,661
Merchandise inventories 314,679 345,145 323,051
Deferred income taxes 24,317 24,317 16,903
Other current assets 48,994 51,741 43,074
Total current assets 861,606 800,039 796,287
Property and equipment, net 424,306 410,913 413,410
Intangibles and other assets 109,025 112,176 112,374
Total assets $ 1,394,937 $1,323,128 $ 1,322,071
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 159,815 $ 116,619 $ 58,535
Accounts payable 161,560 164,281 145,370
Accrued liabilities 167,213 153,625 154,048
Total current liabilities 488,588 434,525 357,953
Long-term liabilities:
Notes and debentures 358,667 368,667 407,000
Other long-term liabilities 73,659 74,982 74,096
Total long-term liabilities 432,326 443,649 481,096
Deferred income taxes 37,768 37,768 37,582
Redeemable preferred stocks 404,456 403,470 402,490
Common stock 380 380 380
Additional paid-in capital 82,346 82,254 82,355
Accumulated deficit (50,927) (78,918) (39,785)
Total liabilities and shareholders'
equity $ 1,394,937 $1,323,128 $ 1,322,071
See Notes to Condensed Consolidated Financial Statements.
1
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(Caption>
(In thousands except for Twenty-Six Weeks Ended Thirteen Weeks Ended
per share amounts) January 28, January 29, January 28, January 29,
1995 1994 1995 1994
Revenues $ 1,178,263 $ 1,158,324 $ 658,594 $ 650,690
Cost of goods sold including
buying and occupancy costs 799,251 801,478 456,416 458,913
Selling, general and
administrative expenses 273,451 271,247 143,248 143,424
Corporate expenses 6,185 6,608 3,031 3,197
Operating earnings 99,376 78,991 55,899 45,156
Interest expense (19,506) (15,689) (10,190) (8,051)
Earnings before income taxes 79,870 63,302 45,709 37,105
Income taxes 33,545 26,587 19,197 15,584
Net earnings 46,325 36,715 26,512 21,521
Dividends and accretion on
redeemable preferred stocks 14,546 14,540 7,276 7,270
Net earnings applicable
to common shareholders $ 31,779 $ 22,175 $ 19,236 $ 14,251
Weighted average number of
common and common equiva-
lent shares outstanding 37,991 38,061 37,989 38,105
Amounts per common share:
Net earnings $ .84 $ .58 $ .51 $ .37
Dividends $ .10 $ .10 $ .05 $ .05
See Notes to Condensed Consolidated Financial Statements.
2
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) Twenty-Six Weeks Ended
January 28, January 29,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 46,325 $ 36,715
Adjustments to reconcile net earnings
to net cash provided (used) by operations:
Depreciation and amortization 29,996 31,459
Other items, net 445 1,287
Changes in assets and liabilities:
Accounts receivable (86,699) (85,088)
Merchandise inventories 30,466 39,516
Other current assets 2,747 (4,537)
Accounts payable and accrued liabilities 10,867 (20,462)
Net cash provided (used) by operating activities 34,147 (1,110)
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (41,109) (26,074)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, net 43,000 43,410
Repayment of debt (10,701) (636)
Issuance of common stock 92 150
Dividends paid (17,348) (17,346)
Net cash provided by financing activities 15,043 25,578
CASH AND EQUIVALENTS
Increase (decrease) during the period 8,081 (1,606)
Beginning balance 16,600 20,204
Ending balance $ 24,681 $ 18,598
See Notes to Condensed Consolidated Financial Statements.
3
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 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 historically the results of operations
for these periods have 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-seven 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 and, 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 $30.9 million at January 28, 1995, $24.6 million at July 30, l994 and
$27.5 million at January 29, l994. The FIFO valuation method would have
increased net earnings by $3.6 million during the twenty-six weeks ended
January 28, 1995 and $3.0 million during the twenty-six weeks ended
January 29, 1994.
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 on March 31, 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 $280.0 million at January 28, 1995,
$295.0 million at July 30, 1994 and $235.0 million at January 29, 1994.
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 $100.0 million. The six $25.0 million credit
agreements expire on March 31, 1995. At January 28, 1995, borrowings
under these credit agreements and the uncommitted credit lines were $24.0
million and $35.0 million, respectively. At July 30, 1994, borrowings
under these credit agreements were $11.0 million, and there were no
borrowings under the uncommitted lines.
4
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. Securitization of credit card receivables
On or about March 15, 1995, the Company expects to sell all of its Neiman
Marcus credit card receivables through a subsidiary to a trust in exchange
for certificates representing undivided interests in such receivables.
Certificates representing an undivided interest in $246.0 million of these
receivables will be sold to third parties in a public offering of $225.0
million 7.60% Class A certificates and $21.0 million 7.75% Class B
certificates. The Company anticipates using the proceeds from this
offering to pay down existing debt. The Company's subsidiary will retain
the remaining undivided interest in the receivables not represented by the
Class A and Class B certificates. A portion of that interest will be
subordinated to the Class A and Class B certificates. The Company will
continue to service all receivables for the trust.
5. Interest rate lock agreements
In anticipation of the $246.0 million securitization of its credit card
receivables, the Company entered into several forward interest rate lock
agreements. The agreements allowed the Company to establish a weighted
average effective rate of approximately 8.0% on the certificates to be
issued as part of the securitization. In March 1995, the Company paid
$5.4 million to settle all of its interest rate lock agreements.
5
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Twenty-six Weeks Ended January 28, l995
Compared with the Twenty-six Weeks Ended January 29, l994
Revenues in the twenty-six weeks ended January 28, 1995 increased $19.9
million or 1.7% over revenues in the twenty-six weeks ended January 29, l994.
Higher revenues at the Neiman Marcus Division and Bergdorf Goodman were
partially offset by lower revenues at Contempo Casuals. Comparable store
sales increased 9.3% at Neiman Marcus stores and 4.8% at Bergdorf Goodman over
the previous year. Lower revenues at Contempo Casuals resulted primarily from
the closing of 40 Contempo Casuals retail stores and all of the Pastille
retail stores as part of a restructuring in fiscal 1994. A decline in
comparable store sales also contributed to the decrease in revenues at
Contempo Casuals.
Cost of goods sold was essentially unchanged at $799.3 million on slightly
higher revenues as compared to the previous year. As a percentage of
revenues, cost of goods sold was 67.8% in l995 compared to 69.2% in l994. The
improvement was principally due to lower buying and occupancy costs at
Bergdorf Goodman and lower markdowns at Contempo Casuals.
Selling, general and administrative expenses decreased $2.2 million primarily
due to higher finance charge income partially offset by higher sales and
promotion costs at the Neiman Marcus Division.
Interest expense increased $3.8 million in the 1995 period due to higher
interest rates and higher outstanding balances on bank borrowings.
The Company's effective income tax rate is estimated to be 42% in fiscal 1995,
unchanged from fiscal 1994.
Results of Operations for the Thirteen Weeks Ended January 28, l995
Compared with the Thirteen Weeks Ended January 29, 1994
Revenues in the thirteen weeks ended January 28, 1995 increased $7.9 million
or 1.2% over revenues in the thirteen weeks ended January 29, 1994. Higher
revenues at the Neiman Marcus Division and Bergdorf Goodman were partially
offset by lower revenues at Contempo Casuals.
Cost of goods sold was $456.4 million on slightly higher revenues in 1995
compared to $458.9 million in 1994. As a percentage of revenues, cost of
goods sold was 69.3% in 1995 and 70.5% in 1994.
Selling, general and administrative expenses were essentially unchanged at
$143.2 million in 1995 compared to 1994. Slightly higher finance charge
income and lower selling costs at Contempo were offset by higher selling and
promotion costs at the Neiman Marcus Division.
Interest expense increased $2.1 million from the 1994 period reflecting higher
interest rates and higher outstanding balances on bank borrowings.
6
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
During the first six months of fiscal 1995, the Company financed its working
capital needs, expenditures for store renovations and dividend requirements
primarily with cash provided by operations and 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 statement of cash flows.
Operating activities - Net cash provided by operating activities was $34.1
million during the twenty-six weeks ended January 28, l995. Net earnings for
the six month period were $46.3 million, depreciation and amortization was
$30.0 million and items affecting working capital used $42.7 million. The
primary items affecting working capital were an increase in accounts
receivable ($86.7 million) partially offset by an increase in accounts payable
and accrued liabilities ($10.9 million) and a decrease in merchandise
inventories ($30.5 million). The increase in accounts receivable was due to
the seasonal increase in revenues.
Investing activities - The Company's investing activities consisted
principally of capital expenditures for the remodeling of existing stores and
the construction of new stores. Capital expenditures relating to these
activities were $41.1 million during the twenty-six weeks ended January 28,
l995. The Company's store renovation and expansion plans include the opening
of three new Neiman Marcus stores by the end of calendar 1996 and the
renovation of three existing Neiman Marcus stores during fiscal 1995. Capital
expenditures are expected to approximate $100.0 million during the current
fiscal year.
Financing activities - The Company increased its net borrowings by $33.0
million since July 30, 1994. These borrowings were used to partially fund
expenditures for store renovations, the construction of three new stores, the
expansion of the mail order facility, and dividend requirements. The Company
paid aggregate quarterly dividends on its common and preferred stocks of $17.3
million during the twenty-six weeks ended January 28, l995. The Company has
decided to eliminate its quarterly cash dividend on common stock beginning in
the third quarter of fiscal 1995. Elimination of this dividend will conserve
approximately $7.6 million of cash annually.
On or about March 15, 1995, the Company expects to sell all of its Neiman
Marcus credit card receivables through a subsidiary to a trust in exchange for
certificates representing undivided interests in such receivables.
Certificates representing an undivided interest in $246.0 million of these
receivables will be sold to third parties in a public offering of $225.0
million 7.60% Class A certificates and $21.0 million 7.75% Class B
certificates. The Company anticipates using the proceeds from this offering
to pay down existing debt. The Company's subsidiary will retain the remaining
undivided interest in the receivables not represented by the Class A and Class
B certificates. A portion of that interest will be subordinated to the Class
A and Class B certificates. The Company will continue to service all
receivables for the trust.
In anticipation of the $246.0 million securitization of its credit card
7
receivables, the Company entered into several forward interest rate lock
agreements. The agreements allowed the Company to establish a weighted
average effective rate of approximately 8.0% on the certificates to be issued
as part of the securitization. In March 1995, the Company paid $5.4 million
to settle all of its interest rate lock agreements.
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At January 28, l995, the Company had $146.0 million available under its
committed credit facilities, $250.0 million of which expires at the end of
March 1995. The Company expects to replace its existing committed credit
facilities with a five year $500.0 million revolving credit facility in April
1995. The Company believes that internally generated funds along with the
securitization and the anticipated new revolving credit agreement will be
sufficient to fund its planned capital growth as well as operating and
preferred dividend requirements.
8
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on January 20, l995.
The following matters were voted upon at the meeting:
1. Election of Richard A. Smith as a Class I Director
for a term of three years.
For 42,882,070
Withheld 181,576
Election of Robert J. Tarr, Jr. as a Class I Director
for a term of three years.
For 42,887,493
Withheld 176,153
2. Ratification of the appointment by the Board of
Directors of Deloitte & Touche LLP as the Company's
independent auditors for the 1995 fiscal year.
For 42,967,491
Against 42,946
Abstain 53,209
3. Stockholder proposal to elect all directors of the
Company annually.
For 6,431,543
Against 35,162,027
Abstain 168,557
Non-voting 1,301,519
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11.1 Computation of weighted 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 January 28, l995.
9
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 March 13, l995
Officer: Chief Financial Officer
/s/ John R. Cook
John R. Cook
Principal Accounting Vice President and Controller March 13, l995
Officer:
/s/ Stephen C. Richards
Stephen C. Richards
11