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 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 March 7, 1994, there were outstanding 37,956,039 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 29, l994, July 31, l993 and January
30, 1993 1
Condensed Consolidated Statements of Earnings for
the Twenty-Six and Thirteen Weeks ended January
29, l994 and January 30, l993 2
Condensed Consolidated Statements of Cash
Flows for the Twenty-Six Weeks ended January 29,
l994 and January 30, l993 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5-7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 7
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Exhibit 11.1 9
<PAGE>1
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
January 29, July 31, January 30,
(In thousands) 1994 1993 1993
<S> <C> <C> <C>
Assets
Current assets:
Cash and equivalents $ 18,598 $ 20,204 $ 21,745
Accounts receivable, net 407,807 319,018 301,690
Merchandise inventories 323,051 362,567 302,832
Deferred income taxes 16,903 16,918 17,313
Other current assets 29,928 29,091 24,257
Total current assets 796,287 747,798 667,837
Property and equipment, net 413,410 416,519 417,557
Intangibles and other assets 112,374 114,257 113,635
Total assets $ 1,322,071 $1,278,574 $ 1,199,029
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities 58,535 45,877 $ 16,930
Accounts payable 145,370 171,348 133,745
Accrued liabilities 154,048 148,533 152,294
Total current liabilities 357,953 365,758 302,969
Long-term liabilities:
Notes and debentures 407,000 377,000 361,929
Other long-term liabilities 74,096 72,448 71,448
Total long-term liabilities 481,096 449,448 433,377
Deferred income taxes 37,582 37,500 33,152
Redeemable preferred stocks 402,490 401,510 400,536
Common stock 380 379 379
Additional paid-in capital 82,355 82,154 82,174
Accumulated deficit (39,785) (58,175) (53,558)
Total liabilities and share-
holders' equity $ 1,322,071 $1,278,574 $ 1,199,029
</TABLE>
See Notes to condensed consolidated financial statements.
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<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<CAPTION>
(In thousands except for For the Twenty-Six Weeks Ended For the Thirteen Weeks Ended
per share amounts)
<S> <C> <C> <C> <C>
January 29, January 30, January 29, January 30,
1994 1993 1994 1993
Revenues $ 1,158,324 $ 1,096,239 $ 650,690 $ 617,236
Cost of goods sold including
buying and occupancy costs 801,478 758,963 458,913 437,573
Selling, general and
administrative expenses 271,247 261,461 143,424 139,197
Corporate expenses 6,608 6,370 3,197 3,202
Operating earnings 78,991 69,445 45,156 37,264
Interest expense, net (15,689) (14,683) (8,051) (7,432)
Other income - 21,275 - -
Earnings before income taxes
and cumulative effect of
accounting change 63,302 76,037 37,105 29,832
Income taxes 26,587 31,175 15,584 12,231
Earnings before cumulative
effect of accounting change 36,715 44,862 21,521 17,601
Cumulative effect of change
in accounting for
postretirement health care
benefits, net - 11,199 - -
Net earnings 36,715 33,663 21,521 17,601
Dividends and accretion
on redeemable
preferred stocks 14,540 14,534 7,270 7,267
Net earnings applicable
to common shareholders $ 22,175 $ 19,129 $ 14,251 $ 10,334
Weighted average number of
common and common equiva-
lent shares outstanding 38,061 37,380 38,105 37,718
Amounts per common share:
Earnings before cumulative
effect of accounting change$ .58 $ .81 $ .37 $ .27
Charge for cumulative effect
of accounting change, net - (.30) - -
Net earnings $ .58 $ .51 $ .37 $ .27
Dividends $ .10 $ .10 $ .05 $ .05
</TABLE>
See Notes to consensed consolidated financial statements.
<PAGE>3
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands) For the Twenty-Six Weeks Ended
January 29, January 30,
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 36,715 $ 33,663
Adjustments to reconcile net earnings
to net cash used by operations:
Depreciation and amortization 31,459 28,821
Other income - (20,755)
Cumulative effect of accounting change, net - 11,199
Other items, net 1,288 2,510
Changes in assets and liabilities:
Accounts receivable (88,789) (73,429)
Merchandise inventories 39,516 4,268
Other current assets (837) (1,830)
Accounts payable and accrued liabilities (20,462) 418
Net cash used by operating activities (1,110) (15,135)
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (26,074) (23,184)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, net 43,410 33,628
Repayment of debt (636) (209)
Issuance of common stock 150 16,504
Dividends paid (17,346) (17,279)
Net cash provided by financing activities 25,578 32,644
CASH AND EQUIVALENTS
Decrease during the period (1,606) (5,675)
Beginning balance 20,204 27,420
Ending balance $ 18,598 $ 21,745
</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 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.
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 $27.5 million at January 29, 1994, by $22.2 million at July 31, l993
and by $31.9 million at January 30, l993. The FIFO valuation method
would have increased net earnings by $3.0 million during the twenty-six
weeks ended January 29, 1994 and by $3.8 million during the twenty-six
weeks ended January 30, 1993.
3. LONG-TERM LIABILITIES
The Company has revolving credit agreements 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.
Amounts outstanding under these agreements were $235.0 million at January
29, l994, $205.0 million at July 31, l993, and $180.0 million at January
30, l993.
In addition to its revolving credit agreements, the Company borrows from
other banks on a short-term committed and uncommitted basis. The
committed credit agreements expire in July 1994. Committed borrowings
amounted to $40.7 million at January 29, l994, and uncommitted borrowings
amounted to $27.2 million at July 31, l993 and $8.5 million at January
30, l993.
<PAGE>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 29, l994
Compared with the Twenty-six Weeks Ended January 30, l993
Revenues in the twenty-six weeks ended January 29, 1994 increased 5.7% over
revenues in the twenty-six weeks ended January 30, l993. Higher revenues at
Neiman Marcus, Bergdorf Goodman and Pastille were partially offset by lower
revenues at Contempo Casuals. The number of stores was substantially unchanged
in the current period.
Cost of goods sold increased 5.6% primarily due to the cost of incremental
merchandise sold and higher volume-related occupancy costs. As a percentage
of revenues, cost of goods sold was 69.2% in both the l994 and l993 periods.
Selling, general and administrative expenses increased 3.7%, primarily because
of increased selling and volume-related costs partially offset by higher
finance charge income.
Corporate expenses increased 3.7% in the l994 period as a result of higher
professional service fees associated with corporate activities in 1994.
Interest expense increased 6.9% in the 1994 period reflecting 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 change in accounting principle 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% in fiscal 1994
and was 42% in fiscal 1993.
During the first quarter of 1994, the Company adopted the provisions of State-
ment 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.
Results of Operations for the Thirteen Weeks Ended January 29, l994
Compared with the Thirteen Weeks ended January 30, l993
Revenues in the thirteen weeks ended January 29, 1994 increased 5.4% over
revenues in the thirteen weeks ended January 30, l993. Higher revenues at
Neiman Marcus, Bergdorf Goodman and Pastille were offset by lower revenues
at Contempo Casuals. The number of stores was substantially unchanged
from the thirteen weeks ended January 30, l993.
Cost of goods sold increased 4.9% primarily due to the cost of incremental
merchandise sold and higher volume-related occupancy costs. As a percentage
of revenues, cost of goods sold was 70.5% in 1994 and 70.9% in 1993.
<PAGE>6
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Selling, general and administrative expenses increased 3.0% in 1994 when
compared to 1993 because of increased selling and volume-related costs
partially offset by higher finance charge income.
Interest expense increased 8.3% from the 1993 period reflecting higher
outstanding balances on bank borrowings during the current period.
Liquidity and Capital Resources
During the first six months of fiscal 1994, the Company financed its working
capital needs, expenditures for store renovations and dividend requirements
primarily with cash provided by operations as well as short-term and long-
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 $1.1 million
during the twenty-six weeks ended January 29, l994. The primary items
affecting working capital were an increase in accounts receivable ($88.8
million) and a decrease in accounts payable and accrued liabilities
($20.5 million) which were partially offset by a decrease in merchandise
inventories ($39.5 million). The increase in accounts receivable was due to
seasonality, the increase in revenues, and, to a lesser extent, the
modification in January 1993 of the credit terms offered to Neiman Marcus
cardholders.
The Company's actuarial assumptions for determining the present value of its
pension liability assume a discount rate of 8.5%, projected salary increases
of 6% and an investment return of 9%. If the discount rate used were to
decrease by 1%, the projected benefit obligation, which includes future
salary increases, would have increased by $11.9 million and the accumulated
benefit obligation would have increased by $6.3 million at July 31, l993.
INVESTING ACTIVITIES - The Company's investing activities consist principally
of capital expenditures for remodeling existing stores and expanding the
Company's mail order facility. Capital expenditures were $26.1 million
during the twenty-six weeks ended January 29, l994. The Company's store
renovation and expansion plans include the opening of four new Neiman Marcus
stores, three of which are expected to be opened by 1996, and the renovation
of five Neiman Marcus stores during 1994. Also in 1994, a major expansion of
the Company's mail order facility is expected to be completed. Capital
expenditures are expected to approximate $70.0 million during fiscal 1994.
<PAGE>7
FINANCING ACTIVITIES - The Company increased its borrowings by $43.4 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 $17.3 million during the twenty-six weeks
ended January 29, l994.
At January 29, l994, the Company had available $65.0 million under its
revolving credit agreements and $59.3 million under committed credit lines.
The Company is evaluating its financing needs and believes that internally
generated funds along with unused debt capacity will be sufficient to finance
current and expected operating and capital requirements.
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on January 19, l994. The
following matters were voted upon at the meeting:
1. Election of Gary L. Countryman as a Class III Director for a term
of three years.
For 43,220,030
Withheld 98,164
Election of Jean Head Sisco as a Class III Director for a term of
three years.
For 43,228,083
Withheld 90,111
2. Ratification of the appointment by the Board of Directors of
Deloitte & Touche as the Company's independent auditors for the
1994 fiscal year.
For 43,248,994
Against 32,094
Abstain 37,106
3. Stockholder proposal to elect all directors of the Company
annually.
For 4,389,972
Against 37,744,057
Abstain 183,638
Non-voting 1,000,527
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 January 29, l994.
<PAGE>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 March 11, l994
Officer: Chief Financial Officer
s/John R. Cook
John R. Cook
Principal Accounting Vice President and Controller March 11, l994
Officer:
s/Stephen C. Richards
Stephen C. Richards
<PAGE>9
<TABLE>
EXHIBIT 11.1
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 Twenty-Six Weeks Ended For the Thirteen Weeks Ended
January 29, January 30, January 29, January 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Primary
1. Weighted average number of
common shares outstanding 37,937 37,288 37,948 37,543
2. Assumed exercise of certain
stock options based on average
market value 124 92 157 175
3. Weighted average number of
shares used in primary per
share computations 38,061 37,380 38,105 37,718
Fully diluted (A)
1. Weighted average number of
common shares outstanding 37,937 37,288 37,948 37,543
2. Assumed exercise of all
dilutive options based on
higher of average or
closing market value 124 134 157 241
3. Weighted average number of
shares used in fully diluted
per share computations 38,061 37,422 38,105 37,784
</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%.
