-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QjvocV7Rt2XpVJtQPAlre3MGdr+tQ7ESNpl4XIKGXWx7m8btVc8Ic0ESsrwbQTP2 eq3jHT8XqlDbc0zXbhzzew== 0000819539-97-000006.txt : 19970618 0000819539-97-000006.hdr.sgml : 19970618 ACCESSION NUMBER: 0000819539-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970503 FILED AS OF DATE: 19970617 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEIMAN MARCUS GROUP INC CENTRAL INDEX KEY: 0000819539 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 954119509 STATE OF INCORPORATION: DE FISCAL YEAR END: 0801 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09659 FILM NUMBER: 97625377 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: P O BOX 9187 CITY: CHESTNUT HILL STATE: MA ZIP: 02167 BUSINESS PHONE: 6172320760 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: P O BOX 9187 CITY: CHESTNUT HILL STATE: MA ZIP: 02167 10-Q 1 HGI 10Q FOR QTR ENDED 05/03/97 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 May 3, 1997 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 10, 1997, there were outstanding 49,873,074 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 May 3, 1997, August 3, 1996 and April 27, 1996 1 Condensed Consolidated Statements of Earnings for the Thirty-Nine and Thirteen Weeks Ended May 3, 1997 and April 27, 1996 2 Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended May 3, 1997 and April 27, 1996 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 10.1 - Exhibit 11.1 10 Exhibit 27.1 11 THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
May 3, August 3, April 27, (In thousands) 1997 1996 1996 Assets Current assets: Cash and equivalents $ 21,122 $ 12,659 $ 10,832 Undivided interests in NMG Credit Card Master Trust 151,055 114,392 143,304 Accounts receivable, net 60,438 51,050 57,169 Merchandise inventories 490,062 443,948 421,803 Deferred income taxes 21,666 21,666 17,102 Other current assets 40,812 45,368 41,195 Total current assets 785,155 689,083 691,405 Property and equipment, net 451,104 457,625 455,939 Intangibles and other assets 100,171 105,642 105,660 Total assets $1,336,430 $1,252,350 $1,253,004 Liabilities and Shareholders' Equity Current liabilities: Notes payable and current maturities of long-term liabilities $ 8,797 $ 35,576 $ 31,460 Accounts payable 164,484 192,146 174,314 Accrued liabilities 159,838 146,326 152,264 Total current liabilities 333,119 374,048 358,038 Long-term liabilities: Notes and debentures 360,000 292,000 317,000 Other long-term liabilities 69,268 69,940 68,026 Total long-term liabilities 429,268 361,940 385,026 Commitments and contingencies Deferred income taxes 33,329 33,329 30,812 Redeemable preferred stocks - 407,426 406,930 Common stock 499 380 380 Additional paid-in capital 485,656 83,106 83,174 Retained earnings (accumulated deficit) 54,559 (7,879) (11,356) Total liabilities and shareholders' equity $1,336,430 $1,252,350 $1,253,004 See Notes to Condensed Consolidated Financial Statements.
THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except Thirty-Nine Weeks Ended Thirteen Weeks Ended for per share amounts) May 3, April 27, May 3, April 27, 1997 1996 1997 1996 Revenues $1,712,582 $1,589,381 $ 506,532 $ 474,059 Cost of goods sold including buying and occupancy costs 1,155,034 1,077,796 343,834 320,771 Selling, general and administrative expenses 396,270 367,990 118,360 111,428 Corporate expenses 9,933 9,449 3,137 3,114 Operating earnings 151,345 134,146 41,201 38,746 Interest expense (20,439) (21,144) (6,086) (6,887) Earnings before income taxes 130,906 113,002 35,115 31,859 Income taxes (53,671) (46,331) (14,397) (13,062) Net earnings 77,235 66,671 20,718 18,797 Dividends and accretion on redeemable preferred stocks (6,201) (21,828) - (7,276) Loss on redemption of redeemable preferred stocks (22,361) - - - Net earnings applicable to common shareholders $ 48,673 $ 44,843 $ 20,718 $ 11,521 Weighted average number of common and common equiva- lent shares outstanding 46,439 38,184 50,026 38,224 Net earnings per common share $ 1.05 $ 1.17 $ .41 $ .30 See Notes to Condensed Consolidated Financial Statements.
2 THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) Thirty-Nine Weeks Ended May 3, April 27, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 77,235 $ 66,671 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 44,364 41,827 Other items 1,763 (492) Changes in assets and liabilities: Accounts receivable (9,388) (11,520) Merchandise inventories (46,114) (62,711) Other current assets 4,556 (2,785) Accounts payable and accrued liabilities (15,671) 3,857 Net cash provided by operating activities 56,745 34,847 CASH FLOWS USED BY INVESTING ACTIVITIES Capital expenditures (35,086) (70,781) Purchases of held-to-maturity securities (457,784) (411,754) Maturities of held-to-maturity securities 421,121 372,911 Net cash used by investing activities (71,749) (109,624) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 173,500 93,250 Repayment of debt (132,000) (1,047) Issuance of common stock 269,189 51 Payment of redemption of preferred stock (281,426) - Dividends paid (5,796) (20,340) Net cash provided by financing activities 23,467 71,914 CASH AND EQUIVALENTS Increase (decrease) during the period 8,463 (2,863) Beginning balance 12,659 13,695 Ending balance $ 21,122 $ 10,832 See Notes to Condensed Consolidated Financial Statements.
3 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 historically have not been indicative of the results for a full year. Fiscal year 1997 will have 52 weeks, while fiscal year 1996 had 53 weeks. The 53rd week in fiscal year 1996 was included in the 1996 fourth quarter operating results. Certain prior period amounts have been reclassified to conform to current period presentation. 2. Company public offering On October 17, 1996, the Company completed a public offering of 8.0 million shares of its common stock at a price of $35.00 per share. The net proceeds from the offering ($267.3 million) were used by the Company to partially fund the repurchase of all of the Company's issued and outstanding preferred stocks from Harcourt General, Inc., the Company's majority shareholder. In addition to the net proceeds, on November 12, 1996 the Company paid Harcourt General 3.9 million shares of the Company's common stock (valued at $135.0 million at $35.00 per share) and completed the exchange for all of the Company s issued and outstanding preferred stocks. The total consideration paid by the Company to Harcourt General in connection with the repurchase was $416.4 million, plus accrued and unpaid dividends through the date of the public offering. In connection with the transaction, the Company incurred a non-recurring charge to net earnings applicable to common shareholders of $22.4 million. Had the public offering and repurchase of the preferred stocks taken place at the beginning of the thirty-nine week periods ended May 3, 1997 and April 27, 1996, net earnings per share applicable to common shareholders for those periods would have been $1.54 and $1.33, respectively. Had the public offering and repurchase of the preferred stocks taken place at the beginning of the thirteen week periods ended May 3, 1997 and April 27, 1996, net earnings per share applicable to common shareholders for those periods would have been $.41 and $.38, respectively. 3. 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. 4 THE NEIMAN MARCUS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 3. Merchandise Inventories (continued) If the FIFO method of inventory valuation had been used to value all inventories, merchandise inventories would have been higher than reported by $19.5 million at May 3, 1997, by $13.5 million at August 3, 1996 and by $20.2 million at April 27, 1996. The FIFO valuation method would have increased net earnings by $3.5 million during each of the thirty-nine weeks ended May 3, 1997 and April 27, 1996. 4. Undivided interests in NMG Credit Card Master Trust In March 1995, NMG 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. During the quarter ended May 3, 1997 the Company began to segregate its undivided interests in NMG Credit Card Master Trust from its accounts receivable on the consolidated balance sheets. The undivided interests in NMG Credit Card Master Trust include the interests retained by NMG's subsidiary which are represented by the Class C Certificate ($54.0 million) and the Seller's Certificate (the excess of the total receivables transferred to the trust over the portion represented by certificates sold to investors and the Class C Certificate). The undivided interests in NMG Credit Card Master Trust represent securities which the Company intends to hold to maturity in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." Due to the short-term revolving nature of the credit card portfolio, the carrying value of the Company's undivided interest in the NMG Credit Card Master Trust approximates fair value. 5. New accounting standards On January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" (SFAS 125). This statement provides consistent guidance for distinguishing transfers of financial assets (e.g. securitizations) that are sales from transfers that are secured borrowings. The effect of adopting SFAS 125 was not material to the Company's financial position or results of operations. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). Under the new standard, which must be adopted for periods ending after December 15, 1997, the Company will be required to change the method used to compute earnings per share and to restate prior periods presented. A dual presentation of basic and diluted earnings per share will be required. The basic earnings per share calculation, which will replace primary earnings per share, will exclude the dilutive impact of stock options and other common share equivalents. The diluted earnings per share calculation, which will replace fully diluted earnings per share, will include common share equivalents. Under SFAS 128, basic and diluted earnings per share for the thirteen week period ended May 3, 1997 would have been, respectively, $.42 and $.41, and both basic and diluted earnings per share for the thirty-nine week period would have been $1.05. 5 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 May 3, l997 Compared with the Thirty-Nine Weeks Ended April 27, 1996 Revenues in the thirty-nine weeks ended May 3, l997 increased $123.2 million or 7.8% over revenues in the thirty-nine weeks ended April 27, 1996. Comparable sales for the period increased 4.4%. New Neiman Marcus stores opened in King of Prussia, Pennsylvania in February 1996 and Paramus, New Jersey in August 1996 also contributed to the increase. Cost of goods sold including buying and occupancy costs increased 7.2% to $1.16 billion during the thirty-nine week period ended May 3, 1997 compared to the same period last year, primarily due to higher sales volume. As a percentage of revenues, cost of goods sold was 67.4% in l997 compared to 67.8% in l996. The lower percentage is primarily due to proportionately lower buying and occupancy costs, and to improved gross margins at Bergdorf Goodman. Selling, general and administrative expenses increased 7.7% to $396.3 million from $368.0 million in 1996, primarily due to new store openings and higher selling costs for the thirty-nine week period. As a percentage of revenues, selling, general and administrative expenses were essentially unchanged at 23.1% in 1997 compared to 23.2% in 1996. Interest expense decreased 3.3% to $20.4 million in the 1997 period. Higher average borrowings were offset by a lower effective interest rate which resulted from the repayment at maturity of the Company's fixed rate senior notes with borrowings under its revolving credit agreement. The Company's effective income tax rate is estimated to be 41.0% in fiscal l997, unchanged from fiscal 1996. Results of Continuing Operations for the Thirteen Weeks Ended May 3, l997 Compared with the Thirteen Weeks ended April 27, l996 Revenues in the thirteen weeks ended May 3, l997 increased $32.5 million or 6.8% over revenues in the thirteen weeks ended April 27, 1996. The primary factors contributing to the revenue increase were the opening of a new Neiman Marcus store in Paramus, New Jersey in August 1996 and a 9.9% increase in revenues at NM Direct. Comparable sales for the period increased 4.5%. Cost of goods sold including buying and occupancy costs increased 7.2% in the thirteen week period ended May 3, 1997 compared to the same period last year, primarily due to higher sales volume. As a percentage of revenues, cost of goods sold was 67.9% in l997 compared to 67.7% in l996. The increase in the 1997 quarter is primarily due to higher markdowns. Selling, general and administrative expenses increased 6.2% in the 1997 period, primarily due to higher sales volume and the additional Neiman Marcus store in Paramus, New Jersey. As a percentage of revenues, selling, general and administrative expenses were essentially unchanged at 23.4% in 1997 and 23.5% in 1996. 6 THE NEIMAN MARCUS GROUP, INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest expense decreased 11.6% to $6.1 million in the 1997 period. Higher average borrowings were offset by a lower effective interest rate which resulted from the repayment at maturity of the Company's fixed rate senior notes with borrowings under its revolving credit agreement. Changes in Financial Condition and Liquidity since August 3, 1996 During the thirty-nine weeks ended May 3, 1997, 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 provided by operating activities was $56.7 million during the thirty- nine weeks ended May 3, l997. The primary item affecting working capital was an increase in merchandise inventories ($46.1 million). Capital expenditures were $35.1 million during the thirty-nine weeks ended May 3, 1997 as compared to $70.8 million for the same period in fiscal 1996. The Company's capital expenditures consisted principally of renovations of existing stores. The Company opened new Neiman Marcus stores in King of Prussia, Pennsylvania in February 1996 and in Paramus, New Jersey in August 1996. Capital expenditures are expected to approximate $55.0 million during the current fiscal year, and will include remodeling of certain Neiman Marcus stores and both Bergdorf Goodman stores as well as initial expenditures related to a new Neiman Marcus store in Hawaii, expected to open in 1998. In October 1996, the Company issued 8.0 million shares of common stock to the public at $35.00 per share. The net proceeds were used on November 12, 1996, together with 3.9 million shares of the Company's common stock and borrowings of approximately $20.0 million, to purchase all of its outstanding redeemable preferred stocks and pay accrued and unpaid dividends. The repurchase of the preferred stock will result in a reduction of dividend payments of $21.3 million in fiscal 1997 compared to fiscal 1996 and has eliminated all future preferred dividend and sinking fund requirements. The Company increased its bank borrowings by $173.5 million since August 3, 1996, which included borrowings in August 1996 and December 1996 to repay $52 million and $80 million, respectively, of senior notes at maturity. At May 3, 1997, the Company had $140.0 million available under its revolving credit facility. The Company believes that it will have sufficient resources to fund its planned capital growth and operating requirements. The Company declared the final aggregate quarterly dividends on its preferred stocks in the first quarter of fiscal 1997, and paid such dividends of $5.8 million on November 12, 1996 concurrent with the repurchase of these preferred stocks. The Company paid aggregate quarterly dividends of $20.3 million on its preferred stocks in the thirty-nine weeks ended April 27, 1996. 7 PART II Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 10.1 The Neiman Marcus Group, Inc. 1997 Incentive Plan, incorporated herein by reference to Exhibit A to the Company's Definitive Schedule 14A (Definitive Proxy Statement and Definitive Additional Materials), dated December 10, 1996 and filed with the Securities and Exchange Commission. 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 May 3, 1997. 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 June 17, 1997 Officer: Chief Financial Officer S/John R. Cook John R. Cook Principal Accounting Vice President and Controller June 17, 1997 Officer: S/Stephen C. Richards Stephen C. Richards 9 EX-11.1 2 COMPUTATION OF WEIGHTED AVERAGES 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: (Shares in 000's) Thirty-nine Weeks Ended Thirteen weeks Ended May 3, April 27, May 3, April 27, 1997 1996 1997 1996 Primary 1. Weighted average number of common shares outstanding 46,259 37,998 49,873 38,003 2. Assumed exercise of certain stock options based on average market value 180 186 153 221 3. Weighted average number of shares used in primary per share computations 46,439 38,184 50,026 38,224 Fully diluted (A) 1. Weighted average number of common shares outstanding 46,259 37,998 49,873 38,003 2. Assumed exercise of all dilutive options based on higher of average or closing market value 180 212 153 268 3. Weighted average number of shares used in fully diluted per share computations 46,439 38,210 50,026 38,271 (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%.
EX-27.1 3 FINANCIAL DATA SCHEDULE
5 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. 1000 9-MOS AUG-2-1997 MAY-3-1997 21,122 151,055 66,833 6,395 490,062 785,155 738,139 287,035 1,336,430 333,119 360,000 0 0 499 540,215 1,336,430 1,712,582 1,712,582 1,155,034 1,561,237 22,361 14,461 20,439 130,906 53,671 77,235 0 0 0 77,235 1.05 1.05
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