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 27, 1996
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 07, 1996, there were outstanding 38,003,487 shares of the issuer's
common stock, $.01 par value.
[Page]
<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 January 27, 1996,
July 29, 1995 and January 28, 1995 1
Condensed Consolidated Statements of Earnings for the
Twenty-Six and Thirteen Weeks ended January 27, 1996 and
January 28, 1995
2
Condensed Consolidated Statements of Cash Flows for the
Twenty-Six Weeks ended January 27, 1996 and January 28, 1995
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 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
Exhibit 27.1
10
[Page]
<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
January 27, July 29, January 28,
(In thousands) 1996 1995 1995
Assets
<S> <C> <C> <C>
Current assets:
Cash and equivalents $ 38,239 $ 13,695 $ 24,681
Accounts receivable, net 224,014 150,110 448,935
Merchandise inventories 348,733 359,092 314,679
Deferred income taxes 17,102 17,102 24,317
Other current assets 47,959 38,410 48,994
Total current assets 676,047 578,409 861,606
Property and equipment, net 451,974 423,583 424,306
Intangibles and other assets 105,340 106,445 109,025
Total assets $1,233,361 $1,108,437 $ 1,394,937
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 193,167 $ 51,859 $ 159,815
Accounts payable 148,549 170,672 161,560
Accrued liabilities 155,714 152,049 167,213
Total current liabilities 497,430 374,580 488,588
Long-term liabilities:
Notes and debentures 170,000 202,000 358,667
Other long-term liabilities 68,031 69,056 73,659
Total long-term liabilities 238,031 271,056 432,326
Deferred income taxes 30,812 30,812 37,768
Redeemable preferred stocks 406,434 405,442 404,456
Common stock 380 380 380
Additional paid-in capital 83,151 82,366 82,346
Accumulated deficit (22,877) (56,199) (50,927)
Total liabilities and shareholders'
equity $1,233,361 $1,108,437 $ 1,394,937
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
[Page 1]
1<PAGE>
<TABLE>
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 27, January 28, January 27, January 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $1,115,322 $1,051,858 $ 625,424 $ 589,536
Cost of goods sold, including
buying and occupancy costs 757,025 702,696 438,942 405,336
Selling, general and
administrative expenses 256,562 243,262 137,694 127,947
Corporate expenses 6,335 5,997 3,403 2,937
Operating earnings 95,400 99,903 45,385 53,316
Interest expense (14,257) (19,506) (7,425) (10,190)
Earnings from continuing
operations before
income taxes 81,143 80,397 37,960 43,126
Income taxes (33,269) (33,766) (15,132) (18,112)
Earnings from continuing
operations 47,874 46,631 22,828 25,014
Earnings (loss) from
discontinued operations, net - (306) - 1,498
Net earnings 47,874 46,325 22,828 26,512
Dividends and accretion on
redeemable preferred stocks (14,552) (14,546) (7,276) (7,276)
Net earnings applicable
to common shareholders $ 33,322 $ 31,779 $ 15,552 $ 19,236
Weighted average number of
common and common equiva-
lent shares outstanding 38,163 37,991 38,238 37,989
Amounts per share
applicable to common
shareholders:
Earnings from continuing
operations $ .87 $ .85 $ .41 $ .47
Earnings (loss) from
discontinued operations - (.01) - .04
Net earnings $ .87 $ .84 $ .41 $ .51
Dividends paid $ - $ .10 $ - $ .05
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
[Page 2] 2<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands) Twenty-Six Weeks Ended
January 27, January 28,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 47,874 $ 46,325
Adjustments to reconcile net earnings
to net cash provided (used) by operations:
Depreciation and amortization 26,844 29,996
Other items 727 445
Changes in current assets and liabilities:
Accounts receivable (73,904) (86,699)
Merchandise inventories 10,359 30,466
Other current assets (9,549) 2,747
Accounts payable and accrued liabilities (18,458) 10,867
Net cash provided (used) by operating activities (16,107) 34,147
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (52,986) (41,109)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of debt 107,900 43,000
Repayment of debt (731) (10,701)
Common stock issued 28 92
Dividends paid (13,560) (17,348)
Net cash provided by financing activities 93,637 15,043
CASH AND EQUIVALENTS
Increase during the period 24,544 8,081
Beginning balance 13,695 16,600
Ending balance $ 38,239 $ 24,681
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
[Page 3] 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 historically the results of operations
for these periods have not been indicative of the results for a full year.
Fiscal 1996 will have 53 weeks, while fiscal 1995 had 52 weeks. The 53rd
week will be included in the 1996 fourth quarter operating results.
The discontinued operations in the accompanying financial statements
represent the Contempo Casuals subsidiary, which the Company sold in June
1995.
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 $18.2 million at January 27, 1996, $14.2 million at July 29, 1995 and
$30.9 million at January 28, 1995. The FIFO method would have increased
net earnings by $2.4 million during the twenty-six weeks ended January 27,
1996 and $3.6 million during the twenty-six weeks ended January 28, 1995.
3. Discontinued operations
On June 30 1995, the Company sold its Contempo Casuals subsidiary to The
Wet Seal, Inc. (Wet Seal) for approximately 250,000 shares of Wet Seal
Class A common stock and $100,000 in cash. The earnings from discontinued
operations recorded in the thirteen week period ended January 28, 1995 are
net of applicable income taxes of $1.1 million. The loss from
discontinued operations recorded in the twenty-six week period ended
January 28, 1995 is net of applicable income tax benefits of $0.2 million.
Revenues related to discontinued Contempo Casuals operations for the
thirteen and twenty-six week periods ended January 28, 1995 were $69.1
million and $126.4 million, respectively.
[Page 4] 4<PAGE>
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Continuing Operations for the Twenty-six Weeks
Ended January 27,1996
Compared with the Twenty-six Weeks Ended January 28, 1995
Revenues in the twenty-six weeks ended January 27, 1996 increased $63.5
million or 6.0% over revenues in the twenty-six weeks ended January 28, 1995.
A 3.8% comparable sales increase and the opening of a new Neiman Marcus store
in Short Hills, New Jersey in August 1995 contributed to the improvement.
Cost of goods sold, including buying and occupancy costs, increased $54.3
million or 7.7% compared to the same period last year. The increase was
primarily due to the higher sales volume. As a percentage of revenues, cost
of goods sold, including buying and occupancy costs, increased to 67.9% in the
first half of fiscal 1996 compared to 66.8% in the first half of fiscal 1995.
The higher percentage was principally due to higher markdowns during the
holiday season.
Selling, general and administrative expenses increased 5.5% to $256.6 million
from $243.3 million in 1995 primarily due to both higher sales volume related
costs and lower finance charge income for the six month period. The Company s
securitization of its credit card receivables, which was completed in March,
1995, reduced finance charge income by approximately $9.6 million for the
twenty six weeks ended January 27, 1996. As a percentage of revenues,
selling, general and administrative expenses were essentially unchanged at
23.0% in 1996 compared to 23.1% in 1995.
Interest expense decreased 26.9% to $14.3 million in the 1996 period mainly
due to the use of the securitization proceeds to pay down outstanding debt.
The Company's effective income tax rate is expected to be 41% in fiscal 1996
compared to 42% in fiscal 1995.
Results of Continuing Operations for the Thirteen Weeks Ended January 27, 1996
Compared with the Thirteen Weeks Ended January 28, 1995
Revenues in the thirteen weeks ended January 27, 1996 increased $35.9 million
or 6.1% over revenues in the thirteen weeks ended January 28, 1995. A 3.8%
comparable sales increase, in addition to the opening of the Neiman Marcus
store in Short Hills, New Jersey, contributed to the improvement.
Cost of goods sold, including buying and occupancy costs, increased $33.6
million or 8.3% during the quarter ended January 27, 1996 compared to the same
period in 1995. As a percentage of revenues, cost of goods sold, including
buying and occupancy costs, was 70.2% in 1996 compared to 68.8% in 1995. The
increase in the 1996 quarter was principally due to higher markdowns during
the holiday season.
[Page 5] 5<PAGE>
THE NEIMAN MARCUS GROUP, INC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Selling, general and administrative expenses increased by $9.7 million or 7.6%
to $137.7 million in the thirteen weeks ended January 27, 1996 compared to the
thirteen weeks ended January 28, 1995 primarily due to both higher sales
volume related costs and lower finance charge income. The reduction in
finance charge income resulting from the securitization of the Company s
credit card receivables was $4.8 million for the thirteen week period. As a
percentage of revenues, selling, general and administrative expenses were up
slightly to 22.0% in the 1996 quarter compared to 21.7% in the 1995 quarter
due to the decrease in finance charge income.
Interest expense decreased 27.1% to $7.4 million in the thirteen weeks ended
January 27, 1996 compared to the 1995 quarter, primarily due to the
securitization of the Company s credit card receivables.
Changes in Financial Condition and Liquidity since July 29, 1995
During the first six months of fiscal 1996, the Company financed its working
capital needs, capital expenditures and preferred dividend requirements
primarily with cash provided from its revolving credit agreement. 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.
Net cash used in operating activities was $16.1 million during the twenty-six
weeks ended January 27, 1996. The primary items affecting working capital
were a seasonal increase in accounts receivable ($73.9 million) and a
decrease in accounts payable and accrued liabilities ($18.5 million),
partially offset by a seasonal decrease in merchandise inventories ($10.4
million).
Capital expenditures were $53.0 million during the first half of fiscal 1996
as compared to $41.1 million in the first half of fiscal 1995. The Company s
capital expenditures consisted principally of construction of new stores and a
new distribution center. The Company opened a new Neiman Marcus store in
Short Hills, New Jersey in August 1995, and a new Neiman Marcus store in King
of Prussia, Pennsylvania in February 1996. The Company expects to open a new
Neiman Marcus store in Paramus, New Jersey by the fall of 1996. The Company
completed the construction of a national distribution center in Longview,
Texas during the second quarter of fiscal 1996. Capital expenditures are
expected to approximate $100.0 million during the current fiscal year.
The Company increased its bank borrowings by $107.9 million since July 29,
1995. At January 27, 1996, the Company had $330.0 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 retirement of the Company s senior notes, of
which $40.0 million become due in May 1996, $52.0 million become due in August
1996 and $80.0 million become due in December 1996.
The Company paid aggregate quarterly dividends of $13.6 million on its
Preferred Stocks in the first half of fiscal 1996 and $17.3 million on its
Common and Preferred Stocks during the first half 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 conserves approximately $7.6 million of cash
annually.
[Page 6] 6<PAGE>
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Stockholders was held on January 19, 1996.
The following matters were voted upon at the meeting:
1. Election of Walter J. Salmon as a Class II Director for a term
of three years.
For 46,328,845
Withheld 89,946
Election of Matina S. Horner, Ph.D. as a Class II Director for
a term of three years.
For 46,327,363
Withheld 91,428
2. Ratification of the appointment by the Board of Directors of
Deloitte & Touche LLP as the Company's independent auditors
for the 1996 fiscal year.
For 46,344,154
Against 28,236
Abstain 46,402
3. Stockholder proposal to elect all directors of the Company
annually.
For 3,780,013
Against 39,983,488
Abstain 981,706
Non-voting 1,673,585
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 27, 1996.
[Page 7] 7<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 March 07, l996
Officer: Chief Financial Officer
s/John R. Cook
John R. Cook
Principal Accounting Vice President and March 07, l996
Officer: Controller
s/Stephen C. Richards
Stephen C. Richards
[Page 8] 8<PAGE>
<TABLE>
EXHIBIT 11.1
THE NEIMAN MARCUS GROUP, INC.
<CAPTION>
Computation of weighted average number of shares outstanding used in determining primary and
fully diluted earnings per share:
(In thousands) Twenty-Six Weeks Ended Thirteen Weeks Ended
January 27, January 28, January 27, January 28,
1996 1995 1996 1995
Primary
<S> <C> <C> <C> <C>
1. Weighted average number of
common shares outstanding 37,996 37,957 38,007 37,959
2. Assumed exercise of certain
stock options based on average
market value 167 34 231 30
3. Weighted average number of
shares used in primary per
share computations 38,163 37,991 38,238 37,989
Fully diluted (A)
1. Weighted average number of
common shares outstanding 37,996 37,957 38,007 37,959
2. Assumed exercise of all
dilutive options based on
higher of average or
closing market value 184 34 233 30
3. Weighted average number of
shares used in fully diluted
per share computations 38,180 37,991 38,240 37,989
(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%.
[Page 9]<PAGE>
</TABLE>
<TABLE> <S> <C>
<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> 6-MOS
<FISCAL-YEAR-END> AUG-3-1996
<PERIOD-END> JAN-27-1996
<CASH> 38239
<SECURITIES> 0
<RECEIVABLES> 232570
<ALLOWANCES> 8556
<INVENTORY> 348733
<CURRENT-ASSETS> 676047
<PP&E> 677332
<DEPRECIATION> 225358
<TOTAL-ASSETS> 1233361
<CURRENT-LIABILITIES> 497430
<BONDS> 170000
406434
0
<COMMON> 380
<OTHER-SE> 60274
<TOTAL-LIABILITY-AND-EQUITY> 1233361
<SALES> 1115322
<TOTAL-REVENUES> 1115322
<CGS> 757025
<TOTAL-COSTS> 1019922
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 11965
<INTEREST-EXPENSE> 14257
<INCOME-PRETAX> 81143
<INCOME-TAX> 33269
<INCOME-CONTINUING> 47874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47874
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
</TABLE>
