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 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 June 5, 1996, there were outstanding 38,003,554 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 27, 1996,
July 29, 1995 and April 29, 1995 1
Condensed Consolidated Statements of Operations for the
Thirty-Nine and Thirteen Weeks Ended April 27, 1996 and
April 29, 1995 2
Condensed Consolidated Statements of Cash Flows for the
Thirty-Nine Weeks Ended April 27, 1996 and April 29, 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 6. Exhibits and Reports on Form 8-K 7
Signatures 8
Exhibit 11.1 9
Exhibit 27.1 10
<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
April 27, July 29, April 29,
(In thousands) 1996 1995 1995
Assets
<S> <C> <C> <C>
Current assets:
Cash and equivalents $ 10,832 $ 13,695 $ 16,916
Accounts receivable, net 200,473 150,110 174,690
Merchandise inventories 421,803 359,092 379,727
Deferred income taxes 17,102 17,102 24,317
Other current assets 41,195 38,410 44,208
Total current assets 691,405 578,409 639,858
Property and equipment, net 455,939 423,583 431,914
Intangibles and other assets 105,660 106,445 114,252
Total assets $1,253,004 $1,108,437 $1,186,024
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 203,460 $ 51,859 $ 10,306
Accounts payable 174,314 170,672 173,977
Accrued liabilities 152,264 152,049 184,013
Total current liabilities 530,038 374,580 368,296
Long-term liabilities:
Notes and debentures 145,000 202,000 277,000
Other long-term liabilities 68,026 69,056 73,816
Total long-term liabilities 213,026 271,056 350,816
Deferred income taxes 30,812 30,812 37,768
Redeemable preferred stocks 406,930 405,442 404,949
Common stock 380 380 380
Additional paid-in capital 83,174 82,366 82,359
Accumulated deficit (11,356) (56,199) (58,544)
Total liabilities and shareholders'
equity $1,253,004 $1,108,437 $1,186,024
See notes to Condensed Consolidated Financial Statements.
</TABLE>
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 27, April 29, April 27, April 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues $1,589,381 $1,467,604 $ 474,059 $ 415,746
Cost of goods sold, including
buying and occupancy costs 1,077,796 983,188 320,771 280,492
Selling, general and
administrative expenses 367,990 348,298 111,428 105,036
Corporate expenses 9,449 8,948 3,114 2,951
Operating earnings 134,146 127,170 38,746 27,267
Interest expense (21,144) (27,658) (6,887) (8,152)
Earnings from continuing operations
before income taxes 113,002 99,512 31,859 19,115
Income taxes (46,331) (41,795) (13,062) (8,029)
Earnings from continuing operations 66,671 57,717 18,797 11,086
Loss from discontinued operations,
net of income taxes - (11,727) - (11,421)
Net earnings (loss) 66,671 45,990 18,797 (335)
Dividends and accretion on
redeemable preferred stocks 21,828 21,819 7,276 7,273
Net earnings (loss) applicable
to common shareholders $ 44,843 $ 24,171 $ 11,521 ($ 7,608)
Weighted average number of
common and common equiva-
lent shares outstanding 38,184 37,991 38,224 37,959
Amounts per share applicable to
common shareholders:
Earnings from continuing
operations $ 1.17 $ .95 $ .30 $ .10
Loss from discontinued
operations - (.31) - (.30)
Net earnings (loss) $ 1.17 $ .64 $ .30 ($ .20)
Dividends paid $ - $ .10 $ - $ -
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
2<PAGE>
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
(In thousands) Thirty-Nine Weeks Ended
April 27, April 29,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net earnings $ 66,671 $ 45,990
Adjustments to reconcile net earnings
to net cash provided (used) by operations:
Depreciation and amortization 41,827 43,495
Changes in assets and liabilities:
Accounts receivable (50,363) (58,419)
Merchandise inventories (62,711) (34,582)
Other current assets (2,785) 7,533
Accounts payable and accrued liabilities 3,857 40,083
Other items (492) (5,130)
Net cash provided (used) by operating activities (3,996) 38,970
CASH FLOWS USED BY INVESTING ACTIVITIES
Capital expenditures (70,781) (61,292)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings of debt 93,250 47,665
Repayment of debt (1,047) (246,961)
Proceeds from receivables securitization - 245,965
Common stock issued 51 105
Dividends paid (20,340) (24,136)
Net cash provided by financing activities 71,914 22,638
CASH AND EQUIVALENTS
Increase (decrease) during the period (2,863) 316
Beginning balance 13,695 16,600
Ending balance $ 10,832 $ 16,916
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
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. 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 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 $20.2 million at April 27, 1996, by $14.2 million at July 29, l995 and
by $33.0 million at April 29, 1995. The FIFO valuation method would have
increased net earnings by $3.5 million during the thirty-nine weeks ended
April 27, 1996 and by $4.9 million during the thirty-nine weeks ended
April 29, 1995.
3. Discontinued operations
On June 30, 1995, the Company sold its Contempo Casuals operations to The
Wet Seal, Inc. The losses from discontinued operations recorded in the
thirteen and thirty-nine week periods ended April 29, 1995 are net of
applicable income tax benefits of $8.2 million and $8.4 million,
respectively. Revenues related to discontinued Contempo Casuals
operations for the thirteen and thirty-nine week periods ended
April 29, 1995 were $47.9 million and $174.3 million, respectively.
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 Thirty-Nine Weeks Ended April 27, l996
Compared with the Thirty-Nine Weeks Ended April 29, 1995
Revenues in the thirty-nine weeks ended April 27, l996 increased 8.3% over
revenues in the thirty-nine weeks ended April 29, 1995. Comparative sales for
the period increased 5.3%. Neiman Marcus store openings in Short Hills, New
Jersey in August 1995 and King of Prussia, Pennsylvania in February 1996 also
contributed to the improvement.
Cost of goods sold increased 9.6% to $1,078 million during the thirty-nine
week period ended April 27, 1996, primarily due to higher sales volume. As a
percentage of revenues, cost of goods sold was 67.8% in l996 compared to 67.0%
in l995. The higher percentage is primarily due to higher markdowns during
the holiday season.
Selling, general and administrative expenses increased 5.7% to $368 million
from $348 million in 1995, primarily due to new store openings, higher selling
costs and lower finance charge income for the thirty-nine week period. The
Company s securitization of its credit card receivables, which was completed
in March, 1995, reduced finance charge income by approximately $11.9 million
for the thirty-nine week period ended April 27, 1996. As a percentage of
revenues, selling, general and administrative expenses were 23.2% in 1996
compared to 23.7% in 1995.
Interest expense decreased 23.6% to $21.1 million in the 1996 period,
primarily due to the use of the proceeds from the credit card receivable
securitization to pay down outstanding debt.
The Company's effective income tax rate is estimated to be 41.0% in fiscal
l996 compared to 42.0% in fiscal l995, due to lower estimated state income
taxes.
Results of Continuing Operations for the Thirteen Weeks Ended April 27, l996
Compared with the Thirteen Weeks ended April 29, l995
Revenues in the thirteen weeks ended April 27, l996 increased 14.0% over
revenues in the thirteen weeks ended April 29, 1995. Comparable sales for the
period increased 9.2%. New Neiman Marcus stores in Short Hills, New Jersey and
King of Prussia, Pennsylvania also contributed to the higher revenues.
Cost of goods sold increased 14.4% in the thirteen week period ended April 27,
1996 compared to the prior year, primarily due to higher sales volume. As a
percentage of revenues, cost of goods sold was 67.7% in l996 compared to 67.5%
in l995. The increase in the 1996 quarter reflects slightly higher buying and
occupancy costs.
Selling, general and administrative expenses increased 6.1% in the 1996
period, primarily due to higher selling costs and lower finance charge income.
The reduction in finance charge income resulting from the securitization of
the Company's credit card receivables was $2.4 million for the thirteen week
period. As a percentage of revenues, selling, general and administrative
expenses were 23.5% in 1996 and 25.3% in 1995.
Interest expense decreased 15.5% to $6.9 million in the 1996 period, primarily
due to the securitization of the Company's credit card receivables.
5 <PAGE>
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
The Company had sufficient cash flows from operations and its revolving credit
agreement to finance its working capital needs, capital expenditures and
preferred dividend requirements during the thirty-nine week period ended April
27, 1996.
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 by operating activities was $4.0 million during the thirty-nine
weeks ended April 27, l996. Net earnings before depreciation and amortization
for the thirty-nine week period provided cash of $108.5 million which was
offset by changes in working capital of $112.5 million. The primary items
affecting working capital were increases in accounts receivable ($50.4
million) and merchandise inventories ($62.7 million).
Capital expenditures were $70.8 million during the thirty-nine weeks ended
April 27, 1996 as compared to $61.3 million for the same period in 1995. The
Company s capital expenditures consisted principally of construction of new
stores and a new distribution center, and renovations of existing stores. The
Company opened new Neiman Marcus stores in Short Hills, New Jersey in August
1995 and in King of Prussia, Pennsylvania in February 1996 and expects to open
a new Neiman Marcus store in Paramus, New Jersey in August 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 $93.3 million since July 29,
1995. At April 27, 1996, the Company had $355.0 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, and the retirement of the Company s senior notes, of which $52.0
million become due in August 1996 and $80.0 million become due in December
1996. In May 1996, $40.0 million of senior notes was paid on maturity through
borrowings from the revolving credit facility.
The Company paid aggregate quarterly dividends of $20.3 million on its
preferred stocks during the thirty-nine weeks ended April 27, l996 and $24.1
million on its common and preferred stocks in the thirty-nine weeks ended
April 29, 1995. Beginning with the third quarter of fiscal 1995, the Company
eliminated its quarterly cash dividend on Common Stock (previously $.05 per
share per quarter). Elimination of this dividend conserves approximately $7.6
million of cash annually.
6<PAGE>
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 27, 1996.
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 June 10, 1996
Officer: Chief Financial Officer
S/John R. Cook
John R. Cook
Principal Accounting Vice President and Controller June 10, 1996
Officer:
S/Stephen C. Richards
Stephen C. Richards
8
EXHIBIT 11.1
<TABLE>
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 27, April 29, April 27, April 29,
1996 1995 1996 1995
Primary
<S> <C> <C> <C> <C>
1. Weighted average number of
common shares outstanding 37,998 37,957 38,003 37,959
2. Assumed exercise of certain
stock options based on average
market value 186 34 221 -
3. Weighted average number of
shares used in primary per
share computations 38,184 37,991 38,224 37,959
Fully diluted (A)
1. Weighted average number of
common shares outstanding 37,998 37,957 38,003 37,959
2. Assumed exercise of all
dilutive options based on
higher of average or
closing market value 212 38 268 -
3. Weighted average number of
shares used in fully diluted
per share computations 38,210 37,995 38,271 37,959
(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%.
</TABLE>
<PAGE>
<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
statement.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-3-1996
<PERIOD-END> APR-27-1996
<CASH> 10,832
<SECURITIES> 0
<RECEIVABLES> 207,650
<ALLOWANCES> 7,177
<INVENTORY> 421,803
<CURRENT-ASSETS> 691,405
<PP&E> 694,946
<DEPRECIATION> 239,007
<TOTAL-ASSETS> 1,253,004
<CURRENT-LIABILITIES> 530,038
<BONDS> 145,000
406,930
0
<COMMON> 380
<OTHER-SE> 71,818
<TOTAL-LIABILITY-AND-EQUITY> 1,253,004
<SALES> 1,589,381
<TOTAL-REVENUES> 1,589,381
<CGS> 1,077,796
<TOTAL-COSTS> 1,455,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,284
<INTEREST-EXPENSE> 21,144
<INCOME-PRETAX> 113,002
<INCOME-TAX> 46,331
<INCOME-CONTINUING> 66,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,671
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
