-----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, NKJVAvc8wrF+phj1H/CBThkY3MfjNyXV2d/VyJYrm/STD5zDoDmRrnyxGSexTWzs 0Nct7b4PoTX3e6y3BkerqQ== 0000819539-98-000011.txt : 19981216 0000819539-98-000011.hdr.sgml : 19981216 ACCESSION NUMBER: 0000819539-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981031 FILED AS OF DATE: 19981215 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: 98769434 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. 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 October 31, 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 02467 (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 4, 1998, there were 49,003,455 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 October 31, 1998, August 1, 1998 and November 1, 1997 1 Condensed Consolidated Statements of Earnings for the Thirteen Weeks ended October 31, 1998 and November 1, 1997 2 Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended October 31, 1998 and November 1, 1997 3 Notes to Condensed Consolidated Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-7 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 8 Signatures 9 Exhibit 27.1 10 [PAGE] THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands) October 31, August 1, November 1, 1998 1998 1997 ----------- ----------- ----------- Assets Current assets: Cash and equivalents $ 24,661 $ 56,644 $ 18,537 Undivided interests in NMG Credit Card Master Trust 180,504 138,867 177,268 Accounts receivable, net 59,592 53,571 64,692 Merchandise inventories 646,176 499,068 569,733 Deferred income taxes 24,058 24,058 19,049 Other current assets 53,733 61,188 47,531 ----------- ----------- ----------- Total current assets 988,724 833,396 896,810 Property and equipment, net 494,974 479,256 457,952 Other assets 123,577 125,140 97,218 ----------- ----------- ----------- Total assets $ 1,607,275 $ 1,437,792 $ 1,451,980 =========== =========== =========== Liabilities and Shareholders' Equity Current liabilities: Notes payable and current maturities of long-term liabilities $ 5,973 $ 5,963 $ 71,466 Accounts payable 211,826 201,490 207,643 Accrued liabilities 206,688 180,809 183,885 ----------- ----------- ----------- Total current liabilities 424,487 388,262 462,994 Long-term liabilities: Notes and debentures 409,622 284,617 300,000 Other long-term liabilities 69,477 71,083 69,735 ----------- ----------- ----------- 479,099 355,700 369,735 ----------- ----------- ----------- Deferred income taxes 37,139 37,139 31,902 Common stock 490 498 499 Additional paid-in capital 466,200 481,295 485,686 Retained earnings 199,860 174,898 101,164 ----------- ----------- ----------- Total liabilities and shareholders' equity $ 1,607,275 $ 1,437,792 $ 1,451,980 =========== =========== ===========
See Notes to Condensed Consolidated Financial Statements. 1 [PAGE] THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(In thousands except for Thirteen Weeks Ended per share data) October 31, November 1, 1998 1997 ----------- ----------- Revenues $ 587,113 $ 580,499 Cost of goods sold including buying and occupancy costs 384,888 376,127 Selling, general and administrative expenses 151,886 141,183 Corporate expenses 3,281 3,138 ----------- ----------- Operating earnings 47,058 60,051 Interest expense (6,136) (5,729) ----------- ----------- Earnings before income taxes 40,922 54,322 Income taxes (15,960) (21,729) ----------- ----------- Net earnings $ 24,962 $ 32,593 =========== =========== Weighted average number of common and common equivalent shares outstanding: Basic 49,460 49,905 ============ =========== Diluted 49,574 50,096 ============ =========== Earnings per share: Basic $ .50 $ .65 =========== =========== Diluted $ .50 $ .65 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 2 [PAGE] THE NEIMAN MARCUS GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands) Thirteen Weeks Ended -------------------------- October 31, November 1, 1998 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 24,962 $ 32,593 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 16,136 15,747 Other items 202 1,692 Changes in current assets and liabilities: Accounts receivable (6,021) (9,651) Merchandise inventories (147,108) (109,321) Other current assets 7,455 6,808 Accounts payable and accrued liabilities 34,623 68,846 ----------- ---------- Net cash (used for) provided by operating activities (69,751) 6,714 ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (30,492) (18,767) Purchases of held-to-maturity securities (160,652) (164,817) Maturities of held-to-maturity securities 119,015 115,890 ----------- ---------- Net cash used for investing activities (72,129) (67,694) ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings 125,000 62,656 Repurchase of common stock (15,356) - Other financing activities 253 - ----------- ---------- Net cash provided by financing activities 109,897 62,656 ----------- ---------- CASH AND EQUIVALENTS Increase (decrease) during the period (31,983) 1,676 Beginning balance 56,644 16,861 ---------- ---------- Ending balance $ 24,661 $ 18,537 =========== ===========
See Notes to Condensed Consolidated Financial Statements. 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 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 historically have not been indicative of the results for a full year. 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 $15.5 million at October 31, 1998, $14.5 million at August 1, 1998 and $17.0 million at November 1, 1997. The FIFO method would have increased net earnings by $.6 million and $1.2 million during the thirteen weeks ended October 31, 1998 and November 1, 1997, respectively. 3. 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. In September 1998, the Company's Board of Directors authorized an increase in the stock repurchase program to 1.5 million shares. During the thirteen weeks ended October 31, 1998, the Company repurchased 827,000 shares at an average price of $18.57 per share. At October 31, 1998 there were 512,900 shares remaining under this program. 4. 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 for the computations of basic and diluted EPS during the periods presented. Options to purchase 430,850 and 438,350 shares of common stock were not included in the computation of diluted EPS for the thirteen weeks ended October 31, 1998 and November 1, 1997, respectively, because the exercise price of those options was greater than the average market price of the common shares. 4 [PAGE] THE NEIMAN MARCUS GROUP, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. Earnings per share (continued) ------------------
(In thousands of shares) Thirteen Weeks Ended -------------------------- October 31, November 1, 1998 1997 ----------- ----------- Shares for computation of basic EPS 49,460 49,905 Effect of assumed option exercises 114 191 ----------- ----------- Shares for computation of diluted EPS 49,574 50,096 =========== ===========
5 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 31, 1998 Compared - ------------------------------------------------------------------------------ with the Thirteen Weeks Ended November 1, 1997 - ---------------------------------------------- Revenues in the thirteen weeks ended October 31, 1998 increased $6.6 million or 1.1% over revenues in the thirteen weeks ended November 1, 1997. The increase in revenues was primarily attributable to sales from Chef's Catalog, acquired in January 1998, and the new Neiman Marcus store in Hawaii. Total comparable sales for the Company decreased 2.3%. Comparable sales decreased 1.7% at Neiman Marcus Stores, 7.4% at Bergdorf Goodman and 1.1% at NM Direct. Cost of goods sold including buying and occupancy costs increased $8.8 million or 2.3% to $384.9 million compared to the same period last year, primarily due to increased sales. As a percentage of revenues, cost of goods sold increased to 65.6% from 64.8% in the prior year, due primarily to lower overall comparable sales and, to a lesser extent, to lower margins on sales by Chef's Catalog, acquired in January 1998, and higher markdowns at Bergdorf Goodman. Selling, general and administrative expenses increased 7.5% to $151.8 million from $141.2 million in 1997. As a percentage of revenues, selling, general and administrative expenses increased to 25.9% from 24.3% in the prior year. The increase is primarily attributable to lower overall comparable sales, pre- opening costs incurred in the period and, to a lesser extent, higher selling and sales promotion expenses. Interest expense increased 7.1% to $6.1 million in the thirteen weeks ended October 31, 1998 from $5.7 million in the prior year. The increase resulted from a higher effective interest rate on borrowings resulting from the issuance of fixed rate debt in May 1998, as well as higher average outstanding borrowings. Changes in Financial Condition and Liquidity Since August 1, 1998 - ----------------------------------------------------------------- During the thirteen weeks ended October 31, 1998, the Company financed its working capital needs and capital expenditures primarily with cash from its revolving credit facility. 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 for operating activities was $69.8 million during the first thirteen weeks of fiscal 1999. The primary items affecting working capital were increases in merchandise inventories of $147.1 million and accounts payable and accrued liabilities of $34.6 million. The seasonal increases in inventories and accounts payable are primarily due to the upcoming holiday selling season. Capital expenditures were $30.5 million during the thirteen week period ended October 31, 1998 as compared to $18.8 million in the prior year period. The Company purchased a building adjacent to its Neiman Marcus store on Union Square in San Francisco for a future expansion of this store. Capital expenditures also include existing store renovations and completion of the construction of the new Neiman Marcus store in Honolulu, Hawaii. Capital expenditures are expected to approximate $120.0 million during fiscal 1999. The Company increased its bank borrowings by $125.0 million since August 1, 1998. At October 31, 1998 the Company had $490 million available under its revolving credit facility. Additionally the Company repurchased 827,000 shares of its common stock during the thirteen weeks ended October 31, 1998 at an average price of $18.57 per share. The Company believes that it will have sufficient resources to fund its planned capital expenditures and its operating requirements. 6 THE NEIMAN MARCUS GROUP, INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Year 2000 Date Conversion - ------------------------- The Company has completed its assessment of its hardware and software systems, including the embedded systems in the Company's buildings, property and equipment, and is implementing plans to ensure that the operations of such systems will not be adversely affected by the Year 2000 date change. The Company is presently in the process of renovating non-compliant systems and implementing converted and replaced systems for substantially all of its hardware and software systems. The Company estimates that its efforts to make these systems Year 2000 compliant are approximately 75% complete, with substantial completion of the Year 2000 project currently anticipated for February 1999. The Company has established an ongoing program to communicate with its significant suppliers and vendors to determine the extent to which the Company's systems and operations are vulnerable to those third parties' failure to rectify their own Year 2000 issues. Based on response to the Company's inquiries, the Company has identified those suppliers and vendors most at risk for failing to achieve Year 2000 compliance on a timely basis and is monitoring their continuing progress. The Company is not presently aware of any significant exposure arising from potential third party failures. However, there can be no assurance that the systems of other companies on which the Company's systems or operations rely will be timely converted or that any failure of such parties to achieve Year 2000 compliance would not have an adverse effect on the Company's results of operations. The Company has engaged both internal and external resources to assess, reprogram, test and implement its systems for Year 2000 compliance. Based on management's current estimates, the costs of Year 2000 remediation, including system renovation, 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, such expenditures have not adversely affected the Company's ability to continue its investment in new technology in connection with its ongoing systems development plans. Management presently believes the Company's most reasonably likely worst case Year 2000 scenario could arise from a business interruption caused by governmental agencies, utility companies, telecommunication service companies, shipping companies or other service providers outside the Company's control. There can be no assurance that such providers will not suffer business interruption caused by a Year 2000 issue. Such an interruption could have a material adverse effect on the Company's results of operations. The Company is in the process of developing a contingency plan for continuing operations in the event of Year 2000 failures, and the current target for completing that plan is December 1998. Forward-looking Statements - -------------------------- Statements in this report 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; failure of the Company or third parties to be Year 2000 compliant; significant increases in paper, printing and postage costs; and changes in the Company's relationships with designers and other resources. 7 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 did not file any reports on Form 8-K during the thirteen week period ended October 31, 1998. 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 December 11, 1998 Officer: Chief Financial Officer /s/ John R. Cook Principal Accounting Vice President and Controller December 11, 1998 Officer: /s/ Catherine N. Janowski Catherine N. Janowski 9 EX-27.1 2 FINANCIAL DATA SCHEDULE/ARTICLE 5
5 This schedule contains a summary of financial information extracted from the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Earnings and is qualified in its entirety by reference to such financial statements. 1000 3-MOS JUL-31-1999 OCT-31-1998 24,661 180,504 61,392 1,800 646,176 988,724 842,797 347,823 1,607,275 424,487 409,622 0 0 490 666,060 1,607,275 587,113 587,113 384,888 540,055 0 520 6,136 40,922 15,960 24,962 0 0 0 24,962 0.50 0.50
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