-----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, I4UioN3A/aARqJj0uOphjrfHOYvIk/DyOc9z1/cGrdgqIrtlMrTidm+xH1kCzYll XETRybybQcYpwUn7ckA5hg== 0000819539-98-000007.txt : 19980616 0000819539-98-000007.hdr.sgml : 19980616 ACCESSION NUMBER: 0000819539-98-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980502 FILED AS OF DATE: 19980615 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: SEC FILE NUMBER: 001-09659 FILM NUMBER: 98647966 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 THE NEIMAN MARCUS GROUP, INC./FORM 10Q 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 2, 1998 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, 1998, there were 49,759,047 outstanding 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 May 2, 1998, August 2, 1997 and May 3, 1997 1 Condensed Consolidated Statements of Earnings for the Thirty-Nine and Thirteen Weeks Ended May 2, 1998 and May 3, 1997 2 Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended May 2, 1998 and May 3, 1997 3 Notes to Condensed Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 9 Signatures 10 Exhibit 27.1 11 [PAGE] THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
May 2, August 2, May 3, 1998 1997 1997 ---------- ----------- ---------- (In thousands) Assets Current assets: Cash and equivalents $ 13,278 $ 16,861 $ 21,122 Undivided interests in NMG Credit Card Master Trust 165,906 128,341 151,055 Accounts receivable, net 60,185 55,041 60,438 Merchandise inventories 516,272 460,412 490,062 Deferred income taxes 19,049 19,049 21,666 Other current assets 47,825 54,339 40,812 ---------- ---------- ---------- Total current assets 822,515 734,043 785,155 ---------- ---------- ---------- Property and equipment, net 469,107 454,133 451,104 Intangibles and other assets 121,677 99,684 100,171 ---------- ---------- ---------- Total assets $1,413,299 $1,287,860 $1,336,430 ========== ========== ========== Liabilities and Shareholders' Equity Current liabilities: Notes payable and current maturities of long-term liabilities $ 16,488 $ 8,810 $ 8,797 Accounts payable 172,019 174,952 164,484 Accrued liabilities 181,247 147,730 159,838 ---------- --------- ---------- Total current liabilities 369,754 331,492 333,119 ---------- --------- ---------- Long-term liabilities: Revolving credit agreement 300,000 300,000 360,000 Other long-term liabilities 71,292 69,738 69,268 ---------- --------- ---------- Total long-term liabilities 371,292 369,738 429,268 ---------- --------- ---------- Commitments and contingencies Deferred income taxes 31,902 31,902 33,329 Common stock 499 499 499 Additional paid-in capital 481,196 485,658 485,656 Retained earnings 158,656 68,571 54,559 ---------- --------- ---------- Total liabilities and shareholders' equity $1,413,299 $1,287,860 $1,336,430 ========== ========== ==========
See Notes to Condensed Consolidated Financial Statements. [PAGE] 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 2, May 3, May 2, May 3, 1998 1997 1998 1997 ---------- ---------- ---------- --------- Revenues $1,836,618 $1,712,582 $ 547,732 $ 506,532 Cost of goods sold including buying and occupancy costs 1,231,597 1,155,034 368,437 343,834 Selling, general and administrative expenses 427,925 396,270 130,915 118,360 Corporate expenses 10,153 9,933 3,458 3,137 ---------- ---------- --------- --------- Operating earnings 166,943 151,345 44,922 41,201 Interest expense (16,802) (20,439) (4,986) (6,086) ---------- ---------- --------- --------- Earnings before income taxes 150,141 130,906 39,936 35,115 Income taxes (60,056) (53,671) (15,974) (14,397) ---------- ---------- --------- --------- Net earnings 90,085 77,235 23,962 20,718 Dividends and accretion on redeemable preferred stocks - (6,201) - - Loss on redemption of redeemable preferred stocks - (22,361) - - ---------- ---------- ---------- --------- Net earnings applicable to common shareholders $ 90,085 $ 48,673 $ 23,962 $ 20,718 ========== ========== ========== ========= Weighted average number of common and common equivalent shares outstanding: Basic 49,825 46,259 49,760 49,873 ========== ========== ========== ========= Diluted 49,989 46,439 49,957 50,026 ========== ========== ========== ========= Earnings per share applicable to common shareholders: Basic $ 1.81 $ 1.05 $ .48 $ .42 =========== ========== ========== ========= Diluted $ 1.80 $ 1.05 $ .48 $ .41 =========== ========== ========== =========
See Notes to Condensed Consolidated Financial Statements. [PAGE] THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) Thirty-Nine Weeks Ended May 2, May 3, 1998 1997 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 90,085 $ 77,235 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 46,516 44,364 Other items 5,227 1,763 Changes in current assets and liabilities: Accounts receivable (4,183) (9,388) Merchandise inventories (50,210) (46,114) Other current assets 9,378 4,556 Accounts payable and accrued liabilities 19,942 (15,671) -------- -------- Net cash provided by operating activities 116,755 56,745 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (57,679) (35,086) Acquisition of Chef's Catalog (31,000) - Purchases of held-to-maturity securities (513,362) (457,784) Maturities of held-to-maturity securities 475,797 421,121 -------- -------- Net cash used by investing activities (126,244) (71,749) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 10,600 173,500 Repayment of debt - (132,000) Issuance (repurchase) of common stock (4,694) 269,189 Payment of redemption of preferred stocks - (281,426) Dividends paid - (5,796) -------- -------- Net cash provided by financing activities 5,906 23,467 -------- -------- CASH AND EQUIVALENTS Increase (decrease) during the period (3,583) 8,463 Beginning balance 16,861 12,659 -------- -------- Ending balance $ 13,278 $ 21,122 ======== ========
See Notes to Condensed Consolidated Financial Statements. [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 historically have not been indicative of the results for a full year. Had the Company repurchased its redeemable preferred stocks at the beginning of the thirteen and thirty-nine week periods ended May 3, 1997, basic and diluted earnings per share available to common shareholders for those periods would have been $.42 and $.41, and $1.55 and $1.54, respectively. Certain reclassifications have been made to the 1997 financial statements to conform to the 1998 presentation. 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 $21.0 million at May 2, 1998, by $15.0 million at August 2, 1997 and by $19.5 million at May 3, 1997. The FIFO method would have increased net earnings by $3.6 million and $3.5 million during the thirty-nine week periods ended May 2, 1998 and May 3, 1997, respectively. 3. Acquisition of Chef's Catalog On January 5, 1998 the Company acquired Chef's Catalog for approximately $31.0 million in cash. Chef's Catalog is a direct marketer of gourmet cookware and high-end kitchenware, and its operations are being integrated with NM Direct. The acquisition has been accounted for by the purchase method of accounting and, accordingly, the results of operations of Chef's Catalog for the period from the date of acquisition are included in the accompanying condensed consolidated financial statements. Intangible assets, consisting primarily of trademarks, customer lists and goodwill, will be amortized on a straight-line basis over their estimated useful lives. [PAGE] THE NEIMAN MARCUS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. Revolving credit agreement In October 1997, the Company replaced its existing revolving credit agreement with a new revolving credit agreement with 20 banks, pursuant to which the Company may borrow up to $650 million. The new agreement, which expires in October 2002, may be terminated by the Company at any time on three business days' notice. The rate of interest payable is determined according to one of four pricing options. On May 2, 1998, borrowings of $300 million were outstanding at an interest rate of 5.9% and were classified as long-term. 5. Stock repurchase program In December 1997, the Board of Directors of the Company authorized the repurchase of up to one million shares of common stock in the open market. During the thirty-nine weeks ended May 2, 1998, the Company repurchased 160,100 shares at an average price of $29.32 per share under this stock repurchase program. 6. Earnings per share Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, "Earnings per Share," the weighted average shares used in computing basic and diluted earnings per share (EPS) are as presented in the table below. No adjustments were made to net earnings applicable to common shareholders for the computations of basic and diluted EPS during the periods presented. All options were included in the computation of diluted EPS because the exercise price of all options was less than the average market price of the common shares.
Thirty-Nine Weeks Ended Thirteen Weeks Ended (in thousands May 2, May 3, May 2, May 3, of shares) 1998 1997 1998 1997 ------ ------ ------ ------ Shares for computation of basic EPS 49,825 46,259 49,760 49,873 Effect of assumed option exercises 164 180 197 153 ------ ------ ------ ------ Shares for computation of diluted EPS 49,989 46,439 49,957 50,026 ====== ====== ====== ======
7. Subsequent event In May 1998, the Company issued $250 million of senior notes and debentures to the public. The proceeds of the debt offering will be used to repay borrowings outstanding on the Company's revolving credit agreement. The debt is comprised of $125 million 6.65% senior notes due 2008 and $125 million 7.125% senior debentures due 2028. Interest on the securities is payable semiannually in arrears beginning December 1998. [PAGE] THE NEIMAN MARCUS GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations for the Thirty-Nine Weeks Ended May 2, l998 Compared with the Thirty-Nine Weeks Ended May 3, 1997 Revenues in the thirty-nine weeks ended May 2, l998 increased 7.2% to $1.84 billion from $1.71 billion in the thirty-nine weeks ended May 3, 1997. Comparable sales for the period increased 6.2%. Revenues at both Neiman Marcus Stores and Bergdorf Goodman increased, reflecting comparable sales increases of 7.2% and 9.8%, respectively. NM Direct revenues increased in comparison to the prior year period as a result of sales from Chef's Catalog, a direct marketer of gourmet cookware and high-end kitchenware, which was acquired on January 5, 1998. Cost of goods sold including buying and occupancy costs increased 6.6% to $1.23 billion during the thirty-nine week period ended May 2, 1998 compared to $1.16 billion during the same period last year, primarily due to higher sales volume. As a percentage of revenues, cost of goods sold was 67.1% in fiscal l998 compared to 67.4% in fiscal l997. The lower percentage is primarily due to proportionately lower buying and occupancy costs, and to higher markups at Neiman Marcus Stores and Bergdorf Goodman. Selling, general and administrative expenses increased 8.0% to $427.9 million from $396.3 million in fiscal 1997, primarily due to higher selling costs and increased catalogue circulation for the thirty-nine week period ending May 2, 1998. As a percentage of revenues, selling, general and administrative expenses were 23.3% and 23.1% in the first thirty-nine weeks of fiscal 1998 and 1997, respectively. Interest expense decreased 17.8% to $16.8 million in the fiscal 1998 period. The decrease resulted from lower average borrowings as well as 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. Results of Operations for the Thirteen Weeks Ended May 2, l998 Compared with the Thirteen Weeks ended May 3, l997 Revenues in the thirteen weeks ended May 2, l998 increased 8.1% to $547.7 million from $506.5 million in the thirteen weeks ended May 3, 1997. Comparable sales for the period increased 5.6%. Higher comparable sales at Neiman Marcus Stores and Bergdorf Goodman in the thirteen weeks ended May 2, 1998 contributed to the increase in revenues over the same period in fiscal 1997. NM Direct also contributed to the increase, as sales generated from the recently acquired Chef's Catalog more than offset a comparable sales decrease in the fiscal 1998 period. Cost of goods sold including buying and occupancy costs increased 7.2% in the thirteen week period ended May 2, 1998 compared to the same period last year, primarily due to higher sales volume. As a percentage of revenues, cost of goods sold was 67.3% in fiscal l998 compared to 67.9% in fiscal l997. The decrease in the 1998 quarter is primarily due to higher markups at Neiman Marcus Stores and Bergdorf Goodman. Selling, general and administrative expenses increased 10.6% in the fiscal 1998 period, primarily due to higher sales volume. As a percentage of revenues, selling, general and administrative expenses increased to 23.9% in fiscal 1998 compared to 23.4% in fiscal 1997. This increase relates principally to higher catalogue circulation costs, and to a lesser extent, lower finance charge income and pre-opening costs associated with the Neiman Marcus store under construction in Hawaii. [PAGE] THE NEIMAN MARCUS GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest expense decreased 18.1% to $5.0 million in the fiscal 1998 period, resulting primarily from lower average borrowings outstanding. Changes in Financial Condition and Liquidity since August 2, 1997 During the thirty-nine weeks ended May 2, 1998, the Company financed its working capital needs and capital expenditures 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 $116.8 million during the thirty-nine weeks ended May 2, l998. The primary items affecting working capital were an increase in merchandise inventories ($50.2 million) offset in part by an increase in accounts payable and accrued liabilities ($19.9 million). Capital expenditures were $57.7 million during the thirty-nine weeks ended May 2, 1998 as compared to $35.1 million for the same period in fiscal 1997. The Company's capital expenditures consisted principally of the construction of a new Neiman Marcus store in Honolulu, Hawaii, expected to open in September 1998, and renovations of existing Neiman Marcus and Bergdorf Goodman stores. Capital expenditures are expected to approximate $100.0 million during the current fiscal year. In January 1998, the Company acquired Chef's Catalog for approximately $31.0 million in cash. The acquisition was funded through borrowings under the Company's revolving credit agreement. The Company increased its bank borrowings by $10.6 million since August 2, 1997. At May 2, 1998, the Company had $350.0 million available under its revolving credit facility. In May 1998, the Company issued $250 million of senior notes and debentures to the public. The proceeds of the debt offering have been used to repay borrowings outstanding on its revolving credit facility. The Company believes that it will have sufficient resources to fund its planned capital growth and operating requirements. Year 2000 Date Conversion The Company has evaluated the effect of the year 2000 on its computer systems and is implementing plans to ensure its systems and applications will effectively process information necessary to support ongoing operations of the Company in the year 2000 and beyond. The Company is engaging both internal and external resources to test its systems for year 2000 compliance. The Company currently anticipates substantially completing the year 2000 project by January 1999. Based on management's current estimates, the costs of system modifications and enhancements, which have been and will be expensed as incurred, are not expected to be material to the results of operations or the financial position of the Company. Additionally, the Company continues to invest in new technology in connection with its ongoing systems development plans. [PAGE] THE NEIMAN MARCUS GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company has initiated formal communications with its significant vendors to determine the extent to which the Company's interface systems and operations are vulnerable to those third parties' failure to rectify their own year 2000 issues. Despite the Company's efforts, it is uncertain whether the systems of other companies on which the Company's systems rely will be converted on a timely basis and will not have an adverse effect on the Company's operations. Forward-Looking Statements Statements in this release referring to the expected future plans and performance of the Company are forward-looking statements. Actual future results may differ materially from such statements. Factors that could affect future performance include, but are not limited to: changes in economic conditions or consumer confidence; changes in consumer preferences or fashion trends; delays in anticipated store openings; adverse weather conditions, particularly during peak selling seasons; changes in demographic or retail environments; competitive influences; significant increases in paper, printing and postage costs; and changes in the Company's relationships with designers and other resources. [PAGE] THE NEIMAN MARCUS GROUP, INC. PART II PART II Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 27.1 Financial data schedule. (b) Reports on Form 8-K. The Company filed a Current Report on Form 8-K on March 24, 1998 restating prior period Financial Data Schedules in order to reflect changes in earnings per share resulting from the adoption of Statement of Financial Accounting Standards No. 128, "Earnings Per Share." [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 15, 1998 Officer: Chief Financial Officer S/John R. Cook John R. Cook Principal Accounting Vice President and Controller June 15, 1998 Officer: S/Catherine N. Janowski Catherine N. Janowski EX-27.1 2 FINANCIAL DATE SCHEDULE/ARTICLE 5
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 statements. 1000 9-MOS AUG-01-1998 MAY-02-1998 13,278 165,906 61,902 1,717 516,272 822,515 799,596 330,489 1,413,299 369,754 300,000 0 0 499 639,852 1,413,299 1,836,618 1,836,618 1,231,597 1,669,675 0 2,052 16,802 150,141 60,056 90,085 0 0 0 90,085 1.81 1.80
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