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 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 December 8, 1995, there were outstanding 38,002,131 shares of the
issuer's common stock, $.01 par value.
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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 28, 1995,
July 29, 1995 and October 29, 1994 1
Condensed Consolidated Statements of Earnings for the Thirteen
Weeks ended October 28, 1995 and October 29, 1994 2
Condensed Consolidated Statements of Cash Flows for the Thirteen
Weeks Ended October 28, 1995 and October 29, 1994 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
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<CAPTION>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands) October 28, July 29, October 29,
1995 1995 1994
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Assets
Current assets:
Cash and equivalents $ 12,621 $ 13,695 $ 16,618
Accounts receivable, net 198,679 150,110 408,569
Merchandise inventories 477,132 359,092 429,846
Deferred income taxes 17,102 17,102 24,317
Other current assets 47,983 38,410 49,579
Total current assets 753,517 578,409 928,929
Property and equipment, net 436,418 423,583 417,580
Intangibles and other assets 105,924 106,445 110,093
Total assets $1,295,859 $1,108,437 $1,456,602
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 105,753 $ 51,859 $ 198,209
Accounts payable 203,173 170,672 196,085
Accrued liabilities 162,205 152,049 163,290
Total current liabilities 471,131 374,580 557,584
Long-term liabilities:
Notes and debentures 275,000 202,000 368,667
Other long-term liabilities 67,901 69,056 74,171
Total long-term liabilities 342,901 271,056 442,838
Deferred income taxes 30,812 30,812 37,768
Redeemable preferred stocks 405,938 405,442 403,963
Common stock 380 380 380
Additional paid-in capital 83,126 82,366 82,346
Accumulated deficit (38,429) (56,199) (68,277)
Total liabilities and shareholders'
equity $1,295,859 $1,108,437 $1,456,602
See Notes to Condensed Consolidated Financial Statements.
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<CAPTION>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for Thirteen Weeks Ended
per share data) October 28, October 29,
1995 1994
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Revenues $ 489,898 $ 462,322
Cost of goods sold, including buying and
occupancy costs 318,083 297,360
Selling, general and administrative expenses 118,868 115,315
Corporate expenses 2,932 3,060
Operating earnings 50,015 46,587
Interest expense (6,832) (9,316)
Earnings from continuing operations
before income taxes 43,183 37,271
Income taxes (18,137) (15,654)
Earnings from continuing operations 25,046 21,617
Loss from discontinued operations, net - (1,804)
Net earnings 25,046 19,813
Dividends and accretion on
redeemable preferred stocks (7,276) (7,270)
Net earnings applicable to common
shareholders $ 17,770 $ 12,543
Weighted average number of common and common
equivalent shares outstanding 38,088 37,992
Amounts per share applicable to common shareholders:
Earnings from continuing operations $ .47 $ .38
Loss from discontinued operations - (.05)
Net earnings $ .47 $ .33
Dividends paid $ - $ .05
See Notes to Condensed Consolidated Financial Statements.
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<CAPTION>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) Thirteen Weeks Ended
October 28, October 29,
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 25,046 $ 19,813
Adjustments to reconcile net earnings
to net cash used by operations:
Depreciation and amortization 13,114 12,556
Change in net assets of discontinued operation - (333)
Other items 1,811 462
Changes in current assets and liabilities:
Accounts receivable (48,569) (46,333)
Merchandise inventories (118,040) (84,701)
Other current assets (9,573) 2,162
Accounts payable and accrued liabilities 42,657 44,133
Net cash used by operating activities (93,554) (52,241)
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (24,825) (20,541)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 124,400 81,500
Repayment of debt (318) (115)
Issuance of common stock 3 92
Dividends paid (6,780) (8,677)
Net cash provided by financing activities 117,305 72,800
CASH AND EQUIVALENTS
Increase (decrease) during the period (1,074) 18
Beginning balance 13,695 16,600
Ending balance $ 12,621 $ 16,618
See Notes to Condensed Consolidated Financial Statements.
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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
10-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.
The condensed consolidated financial statements for fiscal 1995 have
been restated to reflect Contempo Casuals as a discontinued operation.
2. Merchandise inventories
Inventories are stated at the lower of cost or market. Substantially
all 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 $16.2 million at October 28, 1995, $14.2 million at July 29,
1995 and $27.7 million at October 29, 1994. The FIFO method would have
increased net earnings by $1.2 million during the thirteen weeks ended
October 28, 1995 and $1.8 million during the thirteen weeks ended
October 29, 1994.
3. Discontinued operations
On June 30, 1995, the Company sold its Contempo Casuals subsidiary to
The Wet Seal, Inc. (Wet Seal) for $1.0 million of Wet Seal Class A
common stock and $100,000 in cash. The loss from discontinued
operations recorded in the quarter ended October 29, 1994 is net of
applicable income tax benefits of $1.3 million. Revenues related to
discontinued Contempo Casuals operations for the thirteen week period
ended October 29, 1994 were $57.3 million.
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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 28, l995
Compared with the Thirteen Weeks Ended October 29, 1994
In June 1995, the Company sold its Contempo Casuals subsidiary to The Wet
Seal, Inc. The Company's fiscal 1995 results have been restated to reflect
Contempo Casuals as a discontinued operation.
Revenues in the thirteen weeks ended October 28, 1995 increased 6.0% over
revenues in the thirteen weeks ended October 29, 1994. Higher revenues at
Neiman Marcus Stores more than offset slightly lower revenues at Bergdorf
Goodman and NM Direct. The increase in revenues at Neiman Marcus Stores was
due to both comparable store sales increases of 6.1% and the opening of a new
store in Short Hills, New Jersey in August 1995.
Cost of goods sold, including buying and occupancy costs, increased $20.7
million or 7.0% to $318.1 million compared to the same period last year. As a
percentage of revenues, cost of goods sold, including buying and occupancy
costs, increased slightly to 64.9% during the first quarter of fiscal 1996
compared to 64.3% in the first quarter of fiscal 1995.
Selling, general and administrative expenses increased 3.1% to $118.9 million
from $115.3 million in 1995. The increase resulted primarily from lower
finance charge income and higher selling and volume related costs, partially
offset by lower sales promotion costs. As a percentage of revenues,
selling, general and administrative expenses decreased to 24.3% in 1996
from 24.9% in 1995. The lower percentage was due to lower sales promotion
costs, partially offset by lower finance charge income. The reduction in
finance charge income during the quarter resulted from the securitization of
the Company's credit card receivables, which was completed in March of 1995.
The securitization had the effect of reducing finance charge income by
approximately $4.8 million during the quarter ended October 28, 1995.
Interest expense decreased 26.7% to $6.8 million in the thirteen weeks ended
October 28, 1995 mainly due to the use of the securitization proceeds to pay
down outstanding bank debt. The effect of the lower bank borrowings during
the quarter was partially offset by higher rates compared to the same quarter
in the previous year.
The Company's effective income tax rate was 42% in fiscal 1996, unchanged from
fiscal 1995.
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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 29, 1995
During the first quarter of fiscal 1996, the Company financed its working
capital needs, new store and distribution center construction, and preferred
dividend requirements primarily with cash from bank debt. 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.
Net cash used in operating activities was $93.6 million during the first
quarter of fiscal 1996, compared to $52.2 million during the same period last
year. The cash outflow used to fund working capital requirements related
principally to accounts receivable ($48.6 million) and merchandise inventories
($118.0 million) and was partially offset by increases in accounts payable and
accrued liabilities ($42.7 million). The increase in accounts receivable was
primarily due to the increase in revenues during the period. The increase in
inventories and accounts payable during the period resulted primarily from the
preparation for the holiday selling season.
The Company's capital expenditures in fiscal 1996 will principally consist of
construction on new stores and a new distribution center. Capital expenditures
were $24.8 million during the first quarter of fiscal 1996 as compared to
$20.5 million in the first quarter of fiscal 1995. In August 1995, the
Company opened a new Neiman Marcus store in Short Hills, New Jersey.
Additionally, the Company expects to open new stores in King of Prussia,
Pennsylvania in the spring of 1996 and Paramus, New Jersey in the fall of
1996. Completion of a new distribution center is planned by the spring of
1996. Capital expenditures are expected to approximate $100.0 million during
fiscal 1996.
The Company increased its bank borrowings by $124.4 million since July 29,
1995. At October 28, 1995 the Company had $305.0 million available under its
revolving credit facility. That availability will be sufficient to fund the
Company's planned capital growth, operating and preferred dividend
requirements, as well as the paydown of the Company s senior notes, of which
$40.0 million, $52.0 million and $80.0 million become due in May, August and
December 1996, respectively.
The Company paid aggregate quarterly dividends of $6.8 million on its
Preferred Stocks in the first quarter of fiscal 1996 and $8.7 million on its
Common and Preferred Stocks during the first quarter of fiscal 1995.
Beginning with the third quarter of fiscal 1995, the Company eliminated its
quarterly cash dividend on its Common Stock (previously $.05 per share per
quarter). Elimination of this dividend will conserve approximately $7.6
million of cash annually.
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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 October 28, 1995.
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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 11, 1995
Officer: Chief Financial Officer
/s/ John R. Cook
John R. Cook
Principal Accounting Vice President and December 11, 1995
Officer: Controller
/s/ Stephen C. Richards
Stephen C. Richards
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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:
Thirteen Weeks Ended
(Shares in 000's) October 28, October 29,
1995 1994
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Primary
1. Weighted average number of
common shares outstanding 37,984 37,954
2. Assumed exercise of certain
stock options based on average
market value 104 38
3. Weighted average number of
shares used in primary per
share computations 38,088 37,992
Fully diluted (A)
1. Weighted average number of
common shares outstanding 37,984 37,954
2. Assumed exercise of all dilutive
options based on higher of average
or closing market value 135 38
3. Weighted average number of
shares used in fully diluted
per share computations 38,119 37,992
(A) This calculation is submitted in accordance with the Securities Exchange
Act of 1934 Release No. 9083 although not required by Footnote 2 to Paragraph 14
of APB Opinion No. 15 because it results in dilution of less than 3%.
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<ARTICLE> 5
<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> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 12621
<SECURITIES> 0
<RECEIVABLES> 206492
<ALLOWANCES> 7813
<INVENTORY> 477132
<CURRENT-ASSETS> 753517
<PP&E> 650409
<DEPRECIATION> 213991
<TOTAL-ASSETS> 1295859
<CURRENT-LIABILITIES> 471131
<BONDS> 275000
<COMMON> 380
405938
0
<OTHER-SE> 44697
<TOTAL-LIABILITY-AND-EQUITY> 1295859
<SALES> 489898
<TOTAL-REVENUES> 489898
<CGS> 318083
<TOTAL-COSTS> 439883
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6977
<INTEREST-EXPENSE> 6832
<INCOME-PRETAX> 43183
<INCOME-TAX> 18137
<INCOME-CONTINUING> 25046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25046
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
