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 April 30, l994
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 June 6, 1994, there were outstanding 37,956,958 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
April 30, l994, July 31, l993 and May 1, 1993 1
Condensed Consolidated Statements of Operations
for the Thirty-Nine and Thirteen Weeks Ended
April 30, l994 and May 1, 1993 2
Condensed Consolidated Statements of Cash Flows for
the Thirty-Nine Weeks Ended April 30, l994 and
May 1, 1993 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibit 11.1 10
<PAGE> 1
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
April 30, July 31, May 1,
(In thousands) 1994 1993 1993
<S> <C> <C> <C>
Assets
Current assets:
Cash and equivalents $ 16,393 $ 20,204 $ 17,177
Accounts receivable, net 387,892 319,018 313,905
Merchandise inventories 378,671 362,567 350,259
Deferred income taxes 16,903 16,918 17,313
Other current assets 30,486 29,091 19,934
Total current assets 830,345 747,798 718,588
Property and equipment, net 418,154 416,519 414,703
Intangibles and other assets 112,147 114,257 113,965
Total assets $1,360,646 $1,278,574 $1,247,256
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 132,935 $ 45,877 $ 49,839
Accounts payable 152,654 171,348 142,267
Accrued liabilities 182,591 148,533 151,130
Total current liabilities 468,180 365,758 343,236
Long-term liabilities:
Notes and debentures 362,000 377,000 367,000
Other long-term liabilities 74,887 72,448 71,956
Total long-term liabilities 436,887 449,448 438,956
Deferred income taxes 37,582 37,500 33,152
Redeemable preferred stocks 402,980 401,510 401,023
Common stock 380 379 379
Additional paid-in capital 82,407 82,154 82,134
Accumulated deficit (67,770) (58,175) (51,624)
Total liabilities and shareholders'
equity $1,360,646 $1,278,574 $1,247,256
</TABLE>
See Notes to condensed consolidated financial statements.
<PAGE> 2
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
(In thousands except for For the Thirty-Nine Weeks Ended For the Thirteen Weeks Ended
per share amounts) April 30, May 1, April 30, May 1,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues $1,630,994 $1,552,724 $ 472,670 $ 456,485
Cost of goods sold including
buying and occupancy costs 1,127,817 1,070,400 326,339 311,437
Selling, general and
administrative expenses 390,434 377,532 119,187 116,071
Corporate expenses 9,879 9,600 3,271 3,230
Restructuring of Contempo Casuals 48,401 - 48,401 -
Operating earnings (loss) 54,463 95,192 (24,528) 25,747
Interest expense, net (23,589) (21,868) (7,900) (7,185)
Other income - 21,523 - 248
Earnings (loss) before income
taxes and cumulative effect
of accounting change 30,874 94,847 (32,428) 18,810
Income tax benefit (expense) (12,967) (38,887) 13,620 (7,712)
Earnings (loss) before cumulative
effect of accounting change 17,907 55,960 (18,808) 11,098
Cumulative effect of change
in accounting for
postretirement health care
benefits, net - 11,199 - -
Net earnings (loss) 17,907 44,761 (18,808) 11,098
Dividends and accretion
on preferred stocks 21,810 21,801 7,270 7,267
Net earnings (loss) applicable
to common shareholders ($ 3,903) $ 22,960 ($ 26,078) $ 3,831
Weighted average number of
common and common equiva-
lent shares outstanding 37,943 37,596 37,956 38,030
Amounts per common share:
Earnings (loss) before cumulative
effect of accounting change ($ .10) $ .91 ($ .69) $ .10
Cumulative effect of
accounting change, net - (.30) - -
Net earnings (loss) ($ .10) $ .61 ($ .69) $ .10
Dividends $ .15 $ .15 $ .05 $ .05
</TABLE>
See Notes to condensed consolidated financial statements.
<PAGE> 3
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands) For the Thirty-Nine Weeks Ended
April 30, May 1,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 17,907 $ 44,761
Adjustments to reconcile net earnings
to net cash used by operating activities:
Depreciation and amortization 47,370 44,501
Other income - (20,755)
Cumulative effect of accounting change, net - 11,199
Other items, net 1,046 319
Changes in assets and liabilities:
Accounts receivable (68,874) (85,006)
Merchandise inventories (16,104) (43,159)
Other current assets (1,395) 2,493
Accounts payable and accrued liabilities 15,364 7,776
Net cash used by operating activities (4,686) (37,871)
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (45,587) (33,923)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, net 73,300 71,360
Repayment of debt (1,007) (317)
Issuance of common stock 202 16,464
Dividends paid (26,033) (25,956)
Net cash provided by financing activities 46,462 61,551
CASH AND EQUIVALENTS
Decrease during the period (3,811) (10,243)
Beginning balance 20,204 27,420
Ending balance $ 16,393 $ 17,177
</TABLE>
See Notes to condensed consolidated financial statements.
<PAGE> 4
THE NEIMAN MARCUS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. 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 necessary adjustments,
consisting only of normal recurring and restructuring 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.
2. Merchandise Inventories
Inventories are stated at the lower of cost or market. Approximately
seventy-five 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 comparison purposes as if the Company were utilizing the FIFO
methodology.
If the FIFO method of inventory valuation had been used to value all
inventories, merchandise inventories would have been higher than reported
by $30.1 million at April 30, l994, by $22.2 million at July 31, l993 and
by $33.4 million at May 1, 1993. The FIFO valuation method would have
increased net earnings by $4.6 million during the thirty-nine weeks ended
April 30, 1994 and by $4.4 million during the thirty-nine weeks ended
May 1, 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 million may be terminated on not less than three years' notice. Amounts
outstanding under this facility were $285.0 million at April 30, l994,
$205.0 million at July 31, l993, and $185.0 million at May 1, 1993. Of
the amount outstanding at April 30, 1994 $95.0 million is due in
March 1995.
In addition to its revolving credit agreement, the Company borrows from
other banks under short-term credit agreements which expire in July 1994.
Borrowings under these agreements amounted to $20.5 million at
April 30, l994.
Short-term uncommitted borrowings amounted to $27.2 million at July 31,
l993 and $41.5 million at May 1, l993.
4. Restructuring of Contempo Casuals
In April 1994 the Company recorded a pre-tax charge of $48.4 million related
to the Company's decision to close up to fifty Contempo Casuals retail
stores and to discontinue all of the Pastille retail stores. This charge,
which is reflected in accrued liabilities, includes an estimate for
lease termination costs, the write-down of fixed assets, inventory
liquidation costs and employee severance.
<PAGE> 5
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations for the Thirty-nine Weeks Ended April 30, l994
Compared with the Thirty-nine Weeks Ended May 1, 1993
Revenues in the thirty-nine weeks ended April 30, l994, increased 5.0% over
revenues in the thirty-nine weeks ended May 1, l993. Higher revenues at
the Neiman Marcus division and Bergdorf Goodman were partially offset by
lower revenues at the Contempo Casuals division. The number of stores was
substantially unchanged in the current period.
Cost of goods sold, including buying and occupancy costs, increased 5.4%
primarily due to higher revenues. As a percentage of revenues, cost of
goods sold was 69.1% in l994 versus 68.9% in l993. The higher percentage
in 1994 reflects a higher rate of markdowns principally at the Contempo
Casuals division.
Selling, general and administrative expenses increased 3.4% in the 1994 period,
primarily because of increased selling and volume-related expenses partially
offset by higher finance charge income.
The Contempo Casuals restructuring charge is a result of the Company's
evaluation of the operating performance of its Contempo Casuals division.
Based upon this evaluation the Company decided to close up to fifty
under-performing Contempo Casuals retail stores and discontinue all of the
Pastille retail stores. The Company recorded a pre-tax charge of
approximately $48.4 million which includes an estimate for lease termination
costs ($20.7 million), the write-down of fixed assets ($12.8 million),
inventory liquidation costs ($10.8 million) and other expenses ($4.1 million).
The Company anticipates that the decision to discontinue these Contempo Casuals
and Pastille retail stores will result in approximately $1.2 million of
existing costs that the remaining Contempo Casuals stores will have to absorb
and is expected to reduce the operating losses that the Contempo Casuals
division has been incurring. Substantially all of the cash payments for
lease termination costs will occur in the final quarter of fiscal 1994 and
in fiscal 1995.
Interest expense increased 7.9% in the 1994 period reflecting both an increase
in interest rates and higher outstanding balances on bank borrowings during
the period.
Other income in the 1993 period represents a gain from a reduction in the
level of the Company's estimated liabilities due to the settlement of
various disputes with Carter Hawley Hale Stores, Inc.
The cumulative effect of the accounting change in 1993 represents the adoption
by the Company of Statement of Financial Accounting Standards No. 106 "
Employers' Accounting for Postretirement Benefits Other Than Pensions."
The Company's effective income tax rate is estimated to be 42.0% in fiscal
l994 which is comparable to the fiscal l993 rate. During the first quarter
of 1994, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 109 (SFAS No. 109) "Accounting for Income Taxes."
SFAS No. 109 requires the asset and liability method of accounting for income
taxes. The effect of adopting this standard was not material to the Company's
financial position or results of operations.
<PAGE> 6
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 April 30, l994
Compared with the Thirteen Weeks ended May 1, l993
Revenues in the thirteen weeks ended April 30, l994, increased 3.5% over
revenues in the thirteen weeks ended May 1, 1993. Higher revenues at the
Neiman Marcus division and Bergdorf Goodman were partially offset by lower
revenues at the Contempo Casuals division.
Cost of goods sold increased 4.8% primarily due to higher revenues. As a
percentage of revenues, cost of goods sold was 69.0% in l994 versus 68.2%
in l993. The higher 1994 cost percent reflects increased occupancy costs
and a higher rate of markdowns.
Selling, general and administrative expenses increased 2.7% in the 1994
period, primarily because of increased selling and volume-related expenses
partially offset by higher finance charge income.
Interest expense increased 10.0% in the 1994 period reflecting an increase
in the interest rate and higher outstanding balances on bank borrowings during
the period.
Liquidity and Capital Resources
During the thirty-nine weeks ended April 30, 1994, the Company financed its
working capital needs, expenditures for store renovations, the expansion of
the mail order facility and dividend requirements with short-term and
long-term borrowings as well as cash provided by operations. 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 $4.7 million
during the thirty-nine weeks ended April 30, l994. The primary items affecting
working capital were increases in accounts receivable ($68.9 million) and
merchandise inventories ($16.1 million) and a decrease in accounts payable
($18.7 million) which were partially offset by an increase in accrued
liabilities ($34.1 million). The increase in inventories and accounts
receivable is due to the increase in revenues. Also contributing to the
accounts receivable increase was a modification of credit terms offered to
Neiman Marcus cardholders. The increase in accrued liabilities is
attributable to the restructuring of Contempo Casuals.
Investing activities - The Company's investing activities consist principally
of capital expenditures for the renovation of five existing Neiman Marcus
stores and the expansion of the Company's mail order facility. Three stores
are expected to be completed during calendar 1994 and two stores during
calendar 1995. Total capital expenditures were $45.6 million during the
thirty-nine weeks ended April 30, l994. Capital expenditures are expected
to approximate $65.0 million during fiscal 1994. The Company's future
expansion plans include the opening of four new Neiman Marcus stores. One of
these stores is expected to open in calendar 1995, two are expected to open
in calendar 1996 and the fourth new store will follow.
<PAGE> 7
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (Continued)
Financing activities - The Company increased its borrowings by $73.3 million
since July 31, 1993. These borrowings were used to fund expenditures for
store renovations, the expansion of the mail order facility, working capital
and dividend requirements. The Company paid aggregate quarterly dividends
on its Common and Preferred Stocks of $26.0 million during the thirty-nine
weeks ended April 30, 1994. In May 1994 the $10.0 million 9.83% Senior
Notes were paid at maturity with funds borrowed under the Company's revolving
credit agreement.
At April 30, 1994, the Company had available $15.0 million under its revolving
credit agreements and $79.5 million under short-term credit agreements which
expire in July 1994. The Company is currently evaluating its revolving credit
agreements, committed credit facilities and other sources of financing and
anticipates that it will be able to secure additional or new financing with
terms and conditions similar to existing credit arrangements. The Company
believes that internally generated funds, existing credit facilities and
available debt capacity will be sufficient to finance operating and capital
requirements as well as the cash requirements associated with the restructuring
of Contempo Casuals.
<PAGE>8
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.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the
quarter ended April 30, l994.
<PAGE> 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 June 10, 1994
Officer: Chief Financial Officer
s/John R. Cook
John R. Cook
Principal Accounting Vice President and Controller June 10, 1994
Officer:
s/Stephen C. Richards
Stephen C. Richards
EXHIBIT 11.1
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
Computation of average number of shares outstanding used in determining primary
and fully diluted earnings per share:
<CAPTION>
(Shares in 000's) For the Thirty-nine Weeks Ended For the Thirteen weeks Ended
April 30, May 1, April 30, May 1,
1994 1993 1994 1993
Primary
<S> <C> <C> <C> <C>
1. Weighted average number of
common shares outstanding 37,943 37,480 37,956 37,865
2. Assumed exercise of certain
stock options based on average
market value - 116 - 165
3. Weighted average number of
shares used in primary per
share computations 37,943 37,596 37,956 38,030
Fully diluted (A)
1. Weighted average number of
common shares outstanding 37,943 37,480 37,956 37,865
2. Assumed exercise of all
dilutive options based on
higher of average or
closing market value - 144 - 165
3. Weighted average number of
shares used in fully diluted
per share computations 37,943 37,624 37,956 38,030
</TABLE>
(A) This calculation is submitted in accordance with Securities Exchange Act
of l934 Release No. 9083 although not required by Footnote 2 to Paragraph
l4 of APB Opinion No. l5 because it results in dilution of less than 3%.
