Neiman Marcus 2009 Annual Report Download - page 41

Table of Contents
We attempt to offset the effects of inflation through price increases and control of expenses, although our ability to increase
prices may be limited by customer resistance and competitive factors. We attempt to offset the effects of merchandise deflation,
which has occurred on a limited basis in recent years, through control of expenses. There is no assurance, however, that inflation or
deflation will not materially affect our operations in the future.
LIQUIDITY AND CAPITAL RESOURCES
Our cash requirements consist principally of:
• the funding of our merchandise purchases;
• capital expenditures for new store construction, store renovations and upgrades of our management information systems;
• debt service requirements;
• income tax payments; and
• obligations related to our Pension Plan.
Our primary sources of short-term liquidity are comprised of cash on hand, availability under our Asset-Based Revolving
Credit Facility and vendor financing. The amounts of cash on hand and borrowings under the Asset-Based Revolving Credit Facility
are influenced by a number of factors, including revenues, working capital levels, vendor terms, the level of capital expenditures, cash
requirements related to financing instruments and debt service obligations, Pension Plan funding obligations and tax payment
obligations, among others. As to vendor financing, some of our vendors have experienced serious cash flow issues, reductions in
available credit from banks, factors or other financial institutions, or increases in the cost of capital as a result of recent economic
conditions. To counteract their cash flow problems, our vendors may attempt to increase their prices, pass through increased costs,
alter historical credit and payment terms available to us or seek other relief. Any of these actions could have an adverse impact on our
relationship with the vendor or constrain the amounts or timing of our purchases from the vendor and, ultimately, have an adverse
impact on our revenues, profitability and liquidity.
Our working capital requirements fluctuate during the fiscal year, increasing substantially during the first and second quarters
of each fiscal year as a result of higher seasonal levels of inventories. We have typically financed the increases in working capital
needs during the first and second fiscal quarters with available cash balances, cash flows from operations and, if necessary, with cash
provided from borrowings under our credit facilities. We have made no borrowings under our Asset-Based Revolving Credit Facility
during fiscal years 2010, 2009 or 2008.
We believe that operating cash flows, cash balances, available vendor financing and amounts available pursuant to our senior
secured Asset-Based Revolving Credit Facility, will be sufficient to fund our operations, anticipated capital expenditure requirements,
debt service obligations, contractual obligations and commitments and Pension Plan funding requirements through the end of fiscal
year 2011.
At July 31, 2010, cash and cash equivalents were $421.0 million compared to $323.4 million at August 1, 2009. Net cash
provided by our operating activities was $268.0 million for fiscal year 2010 compared to $210.8 million for fiscal year 2009. This
change was primarily due to the improvement in operating earnings and lower working capital requirements attributable to the closer
alignment of on-hand inventories to customer demand in fiscal year 2010, offset by a higher level of funding of our defined benefit
pension plan.
Net cash used for investing activities, representing capital expenditures, was $58.7 million in fiscal year 2010 and
$101.5 million in fiscal year 2009. We incurred capital expenditures in fiscal year 2010 related to the construction of our new store in
Bellevue (suburban Seattle). We incurred capital expenditures in fiscal year 2009 related to the construction of new stores in Topanga
(the greater Los Angeles area) and Bellevue. We opened our Topanga store in September 2008 and our Bellevue store in
September 2009. Currently, we project gross capital expenditures for fiscal year 2011 to be approximately $125 to $135 million. Net
of developer contributions, capital expenditures for fiscal year 2011 are projected to be approximately $110 to $120 million.
Net cash used for financing activities was $111.8 million in fiscal year 2010 as compared to $25.0 million in fiscal year
2009. In fiscal year 2010, pursuant to the terms of our Senior Secured Term Loan Facility, we prepaid $111.6 million of
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