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 29, l995
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, M 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 8, 1995, there were outstanding 37,959,522 shares of the issuer's
common stock, $.01 par value.<PAGE>
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 29,
1995, July 30, l994 and April 30, 1994 1
Condensed Consolidated Statements of Operations for the
Thirty-Nine and Thirteen Weeks Ended April 29, 1995 and
April 30, 1994 2
Condensed Consolidated Statements of Cash Flows for the
Thirty-Nine Weeks Ended April 29, 1995 and April 30, 1994 3
Notes to Condensed Consolidated Financial Statements 4-5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 8
Signatures 9
Exhibit 11.1 10
Exhibit 27.1 11<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
April 29, July 30, April 30,
(In thousands) 1995 1994 1994
<S> <C> <C> <C>
Assets
Current assets:
Cash and equivalents $ 16,916 $ 16,600 $ 16,393
Accounts receivable, net 174,690 362,236 376,572
Merchandise inventories 379,727 345,145 378,671
Deferred income taxes 24,317 24,317 16,903
Other current assets 44,208 51,741 41,806
Total current assets 639,858 800,039 830,345
Property and equipment, net 431,914 410,913 418,154
Intangibles and other assets 114,252 112,176 112,147
Total assets $1,186,024 $1,323,128 $ 1,360,646
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 10,306 $ 116,619 $ 132,935
Accounts payable 173,977 164,281 152,654
Accrued liabilities 184,013 153,625 182,591
Total current liabilities 368,296 434,525 468,180
Long-term liabilities:
Notes and debentures 277,000 368,667 362,000
Other long-term liabilities 73,816 74,982 74,887
Total long-term liabilities 350,816 443,649 436,887
Deferred income taxes 37,768 37,768 37,582
Redeemable preferred stocks 404,949 403,470 402,980
Common stock 380 380 380
Additional paid-in capital 82,359 82,254 82,407
Accumulated deficit (58,544) (78,918) (67,770)
Total liabilities and shareholders'
equity $1,186,024 $1,323,128 $1,360,646
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
(In thousands except for Thirty-Nine Weeks Ended Thirteen Weeks Ended
per share amounts) April 29, April 30, April 29, April 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues $1,467,604 $1,387,397 $ 415,746 $ 399,729
Cost of goods sold including
buying and occupancy costs 983,188 926,299 280,492 267,543
Selling, general and
administrative expenses 348,298 324,439 105,036 98,331
Corporate expenses 8,948 9,597 2,951 3,177
Operating earnings 127,170 127,062 27,267 30,678
Interest expense (27,658) (23,589) (8,152) (7,900)
Earnings before income taxes 99,512 103,473 19,115 22,778
Income tax expense (41,795) (43,459) (8,029) (9,567)
Earnings from continuing operations 57,717 60,014 11,086 13,211
Discontinued operations, net of tax:
Loss from operations (1,854) (42,107) (1,548) (32,019)
Loss on disposal, including a
provision of $2,018 for
operating losses through
estimated closing date (9,873) - (9,873) -
Loss from discontinued operations (11,727) (42,107) (11,421) (32,019)
Net earnings (loss) 45,990 17,907 (335) (18,808)
Dividends and accretion
on preferred stocks 21,819 21,810 7,273 7,270
Net earnings (loss) applicable
to common shareholders $ 24,171 ($ 3,903) ($ 7,608) ($ 26,078)
Weighted average number of
common and common equiva-
lent shares outstanding 37,991 37,943 37,959 37,956
Amounts per common share:
Earnings from continuing
operations $ .95 $ 1.01 $ .10 $ .15
Loss from discontinued
operations, net (.31) (1.11) (.30) (.84)
Net earnings (loss) $ .64 ($ .10) ($ .20) ($ .69)
Dividends $ .10 $ .15 $ - $ .05
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands) Thirty-Nine Weeks Ended
April 29, April 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 45,990 $ 17,907
Adjustments to reconcile net earnings
to net cash provided (used) by operating activities:
Depreciation and amortization 43,495 47,370
Other items, net (5,130) 1,046
Changes in assets and liabilities:
Accounts receivable (58,419) (67,000)
Merchandise inventories (34,582) (16,104)
Other current assets 7,533 (3,269)
Accounts payable and accrued liabilities 40,083 15,364
Net cash provided (used) by operating activities 38,970 (4,686)
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (61,292) (45,587)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings, net 47,665 73,300
Repayment of debt (246,961) (1,007)
Proceeds from receivables securitization 245,965 -
Issuance of common stock 105 202
Dividends paid (24,136) (26,033)
Net cash provided by financing activities 22,638 46,462
CASH AND EQUIVALENTS
Increase (decrease) during the period 316 (3,811)
Beginning balance 16,600 20,204
Ending balance $ 16,916 $ 16,393
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3<PAGE>
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 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-nine 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 $33.0 million at April 29,1995, by $24.6 million at July 30, l994 and
by $30.1 million at April 30, 1994. The FIFO valuation method would have
increased net earnings by $4.9 million during the thirty-nine weeks ended
April 29, 1995 and by $4.6 million during the thirty-nine weeks ended
April 30, 1994.
3. Debt and Credit Agreements
On April 7, 1995, the Company replaced its $300 million revolving credit
facility and its six $25 million revolving credit facilities with a five
year, $500 million facility. The Company may terminate this agreement at
any time on three business days' notice. The rate of interest payable
(6.5% at April 29, 1995) varies according to one of four pricing options
selected by the Company. At April 29, 1995, the Company had $105 million
outstanding under this new agreement.
4. Securitization of Credit Card Receivables
On March 15, 1995, the Company sold 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
were sold to third parties in a public offering of $225.0 million 7.60%
4<PAGE>
Class A certificates and $21.0 million 7.75% Class B certificates. The
Company used 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 is subordinated to the Class A and Class B
certificates. The Company will continue to service all receivables for
the trust.
4. Securitization of Credit Card Receivables (continued)
In anticipation of the securitization, 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 issued as part of the securitization. On March 15, 1995,
the Company paid $5.4 million to settle all of its interest rate lock
agreements.
5. Discontinued Operations
Pursuant to a letter of intent dated March 31, 1995, the Company agreed to
sell certain assets and liabilities of its Contempo Casuals subsidiary to
The Wet Seal, Inc. ("Wet Seal") for $1.0 million of Wet Seal common stock
and $100,000 in cash. The sale, which is subject to the completion of a
definitive purchase and sale agreement and other closing conditions, is
expected to close on or about June 30, 1995. The condensed consolidated
financial statements have been restated to reflect Contempo Casuals as a
discontinued operation.
The losses from operations recorded in the thirteen and thirty-nine week
periods ended April 29, 1995 are net of applicable income tax benefits of
$1.1 million and $1.3 million, respectively. The loss on disposal for
these periods includes a provision for operating losses through the
estimated closing date of $2.0 million, net of $1.5 million of applicable
income tax benefits. The remaining loss on disposal of $7.9 million is
net of $5.6 million of applicable income tax benefits. Revenues related
to the discontinued Contempo Casuals operations were $47.9 million and
$174.3 million for the thirteen and the thirty-nine week periods ended
April 29, 1995. The Company's balance sheet as of April 29, 1995,
includes approximately $56.0 million of assets and $43.0 million of
liabilities related to Contempo.
5<PAGE>
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
In March 1995, the Company agreed to sell certain assets and liabilities of
its Contempo Casuals subsidiary to The Wet Seal, Inc. The sale, which is
subject to the completion of a definitive purchase and sale agreement and
other closing conditions, is expected to close on or about June 30, 1995. The
condensed consolidated financial statements have been restated to reflect
Contempo Casuals as a discontinued operation.
Results of Operations for the Thirty-Nine Weeks Ended April 29, l995
Compared with the Thirty-Nine Weeks Ended April 30, 1994
Revenues in the thirty-nine weeks ended April 29, l995 increased 5.8% over
revenues in the thirty-nine weeks ended April 30, 1994. Revenues increased
$68.7 million at Neiman Marcus stores and $10.0 million at Bergdorf Goodman,
while NM Direct revenues remained essentially flat compared to last year.
Comparable store sales increased at both Neiman Marcus stores and Bergdorf
Goodman.
Cost of goods sold, including buying and occupancy costs, increased 6.1% to
$983.2 million during the thirty-nine week period ended April 29, 1995
primarily due to higher revenues. As a percentage of revenues, cost of goods
sold was 67.0% in l995 versus 66.8% in l994.
Selling, general and administrative expenses increased 7.4% in the 1995
period, primarily because of increased selling and volume-related expenses
partially offset by higher finance charge income.
Interest expense increased $4.1 million in 1995, primarily due to higher
interest rates on bank borrowings partially offset by the reduction of bank
debt as a result of the securitization of the Company's credit card receivables
in April 1995.
The Company's effective income tax rate is estimated to be 42.0% in fiscal
l995 which is unchanged from the fiscal l994 rate.
Results of Operations for the Thirteen Weeks Ended April 29, l995
Compared with the Thirteen Weeks ended April 30, l994
Revenues in the thirteen weeks ended April 29, l995 increased 4.0% over
revenues in the thirteen weeks ended April 30, 1994. Higher revenues at
Neiman Marcus stores and Bergdorf Goodman were partially offset by lower
revenues at NM Direct. Comparable store sales for the quarter increased at
both Neiman Marcus stores and Bergdorf Goodman.
Cost of goods sold increased 4.8% in the thirteen week period ended April 29,
1995 compared to the prior year, primarily due to higher revenues. As a
percentage of revenues, cost of goods sold was 67.5% in l995 versus 67.0% in
l994. The increase in 1995 reflects a slightly higher rate of markdowns.
Selling, general and administrative expenses increased 6.8% in the 1995
period, primarily because of increased selling and volume-related expenses and
the cost of the securitization of the Company's credit card receivables. The
securitization also had the effect of reducing finance charge income by $2.4
million for the quarter.
Interest expense increased 3.2% in the 1995 period, primarily due to higher
6<PAGE>
interest rates on bank borrowings during the period partially offset by the
reduction of bank debt as a result of the securitization of the Company's credit
card receivables in April 1995.
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
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 $39.0
million during the thirty-nine weeks ended April 29, l995. The primary items
affecting working capital were increases in accounts payable and accrued
liabilities ($40.1 million) offset by increases in accounts receivable ($58.4
million, net of the effect of the securitization of the Company's credit card
receivables) and merchandise inventories ($34.6 million). The increase in
accounts receivable was due to higher 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 $61.3 million during the thirty-nine weeks ended April 29,
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 -Net cash provided by financing activities was $22.6
million in the thirty-nine week period ended April 29, 1995. This cash was
used to partially fund expenditures for store renovations, the construction of
three new stores and dividend requirements.
The Company paid aggregate quarterly dividends on its common and preferred
stocks of $24.1 million during the thirty-nine weeks ended April 29, l995.
The Company eliminated its quarterly cash dividend on common stock (previously
$.05 per share per quarter) beginning in the third quarter of fiscal 1995.
Elimination of the common stock dividend will conserve approximately $7.6
million of cash annually.
On March 15, 1995, the Company sold 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 were
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 used
all $246.0 million of 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 is subordinated to the Class A and Class B
certificates. The Company will continue to service all receivables for the
trust.
7<PAGE>
On April 7, 1995, the Company replaced its $300 million revolving credit
facility and its six $25 million revolving credit facilities with a five year,
$500 million facility. The Company may terminate this agreement at any time
on three business days' notice. The rate of interest payable (6.5% at April
29, 1995) varies according to one of four pricing options selected by the
Company. At April 29, 1995, the Company had $395 million available under this
new agreement.
The Company believes that internally generated funds along with amounts
available under the new revolving credit facility will be sufficient to fund
its planned capital growth, operating working capital and preferred dividend
requirements.
PART II
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 April 29, 1995.
8<PAGE>
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 12, 1995
Officer: Chief Financial Officer
/S/ John R. Cook
John R. Cook
Principal Accounting Vice President and Controller June 12, 1995
Officer:
/S/ Stephen C. Richards
Stephen C. Richards
9<PAGE>
<TABLE>
EXHIBIT 11.1
THE NEIMAN MARCUS GROUP, INC.
Computation of weighted average number of shares outstanding used in determining primary and fully
diluted earnings per share:
<CAPTION>
(Shares in 000's) Thirty-nine Weeks Ended Thirteen weeks Ended
April 29, April 30, April 29, April 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Primary
1. Weighted average number of
common shares outstanding 37,957 37,943 37,959 37,956
2. Assumed exercise of certain
stock options based on average
market value 34 - - -
3. Weighted average number of
shares used in primary per
share computations 37,991 37,943 37,959 37,956
Fully diluted (A)
1. Weighted average number of
common shares outstanding 37,957 37,943 37,959 37,956
2. Assumed exercise of all
dilutive options based on
higher of average or
closing market value 38 - - -
3. Weighted average number of
shares used in fully diluted
per share computations 37,995 37,943 37,959 37,956
</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%.
10<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
Exhibit 27.1
The Neiman Marcus Group, Inc.
Article 5 of Regulation S-X
<LEGEND>
This schedule contains a summary of financial information extracted from the
Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of
Operations and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> APR-29-1995
<CASH> 16916
<SECURITIES> 0
<RECEIVABLES> 181495
<ALLOWANCES> 6805
<INVENTORY> 379727
<CURRENT-ASSETS> 639858
<PP&E> 681729
<DEPRECIATION> 249815
<TOTAL-ASSETS> 1186024
<CURRENT-LIABILITIES> 368296
<BONDS> 277000
<COMMON> 380
0
404949
<OTHER-SE> 23815
<TOTAL-LIABILITY-AND-EQUITY> 1186024
<SALES> 1467604
<TOTAL-REVENUES> 1467604
<CGS> 983188
<TOTAL-COSTS> 1340434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19385
<INTEREST-EXPENSE> 27658
<INCOME-PRETAX> 99512
<INCOME-TAX> 41795
<INCOME-CONTINUING> 57717
<DISCONTINUED> (11727)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45990
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
