EX-99.1 2 a5289305ex99.txt EXHIBIT 99.1 Exhibit 99.1 Neiman Marcus, Inc. Reports First Quarter Earnings DALLAS--(BUSINESS WIRE)--Dec. 7, 2006--Neiman Marcus, Inc. today reported financial results for the first quarter fiscal year 2007. On October 6, 2005, the Company announced the completion of the acquisition of Neiman Marcus, Inc. by an investor group led by Texas Pacific Group and Warburg Pincus LLC. The accompanying condensed consolidated statements of earnings and related information present the Company's results of operations for the period preceding the acquisition (Predecessor) and the period succeeding the acquisition (Successor). The results of operations have been prepared by comparing the results of the Successor for the 13 weeks ended October 28, 2006 to the mathematical combination of the Successor and Predecessor periods in the 13 weeks ended October 29, 2005. The presentation does not comply with generally accepted accounting principles, but the Company believes that it provides a more meaningful method of comparison. For further information related to the Company's financial results, refer to the Company's Form 10-Q and other information available from the Securities and Exchange Commission. Neiman Marcus, Inc. believes reporting adjusted operating earnings is a more meaningful representation of the Company's on-going economic performance and therefore uses adjusted reporting internally to evaluate and manage the Company's operations. Adjusted operating earnings exclude the impact of certain items as described below under "Other Items." For the first quarter of fiscal year 2007, the Company reported total revenues of $1.04 billion compared to $946.2 million in the prior year. Comparable revenues increased 6.8 percent. Operating earnings for the first quarter of fiscal 2007 were $154.3 million compared to $104.9 million for the first quarter of fiscal year 2006. Adjusted operating earnings were $168.1 million in the first quarter of fiscal year 2007 compared to $140.2 million in the first quarter of fiscal year 2006, an increase of 19.9%. See the attached schedule of "Other Operating Data" for the reconciliation of adjusted operating earnings and the Company's statements regarding the use of this non-GAAP financial measure. Other Items As a result of the acquisition, the Company recorded costs related to the amortization of customer lists and favorable lease commitments in the first quarter of fiscal year 2007 and 2006 of approximately $18.0 million and $4.8 million, respectively. In addition, the Company recorded other income of approximately $4.2 million in the first quarter of fiscal year 2007 which represents proceeds it received from its investment in an internet retailer. The Company also recorded other non-cash items related to various valuation adjustments during the first quarter of fiscal 2006 of approximately $7.0 million. Also, prior to consummation of the acquisition, the Company recorded in the first quarter of fiscal year 2006 transaction and other costs of approximately $23.5 million. In October 2006, the Company entered into an agreement to purchase the interest held by the minority investor of Kate Spade LLC. In November 2006, the Company entered into a definitive agreement to sell 100% of its ownership in Kate Spade LLC. Also, in July 2006 the Company sold its majority interest in Gurwitch Products, L.L.C. The Company's financial statements reflect Kate Spade LLC and Gurwitch Products, L.L.C. as discontinued operations for all periods presented. A live webcast of the conference call on earnings can be accessed through the Investor Information section of the Neiman Marcus, Inc. website at www.neimanmarcusgroup.com on Thursday, December 7, 2006 beginning at 10:00 a.m. Central Daylight Time. Following the live broadcast, interested parties may replay the webcast by accessing this website. To access financial information that will be presented during the call, please visit the Investor Information section of the Neiman Marcus, Inc. website at www.neimanmarcusgroup.com. From time to time, the Company may make statements that predict or forecast future events or results, depend on future events for their accuracy or otherwise contain "forward-looking information." These statements are made based on management's expectations and beliefs concerning future events and are not guarantees of future performance. The Company cautions readers that actual results may differ materially as a result of various factors, some of which are beyond its control, including but not limited to: political or economic conditions; terrorist activities in the United States and elsewhere; disruptions in business at the Company's stores, distribution centers or offices; changes in consumer confidence resulting in a reduction of discretionary spending on goods; changes in demographic or retail environments; changes in consumer preferences or fashion trends; competitive responses to the Company's marketing, merchandising and promotional efforts; changes in the Company's relationships with key customers; delays in the receipt of merchandise; seasonality of the retail business; adverse weather conditions, particularly during peak selling seasons; delays in anticipated store openings or renovations; natural disasters; significant increases in paper, printing and postage costs; litigation that may have an adverse effect on the Company's financial results or reputation; changes in the Company's relationships with designers, vendors and other sources of merchandise; the Company's success in enforcing its intellectual property rights; the effects of incurring a substantial amount of indebtedness under the Company's senior secured credit facilities, senior notes and senior subordinated notes and of complying with the related covenants and conditions; the financial viability of the Company's designers, vendors and other sources of merchandise; the design and implementation of new information systems or enhancement of existing systems; changes in foreign currency exchange rates or inflation rates; impact of funding requirements related to the Company's noncontributory defined benefit pension plan; changes in the Company's relationships with certain of key sales associates; changes in key management personnel; changes in the Company's proprietary credit card arrangement that adversely impact its ability to provide consumer credit; or changes in government or regulatory requirements increasing the Company's cost of operations. These and other factors that may adversely effect the Company's future performance or financial condition are contained in its Annual Report in Form 10-K and other reports filed with and available from the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances. NEIMAN MARCUS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) October 28, October 29, (in thousands) 2006 2005 ----------- ----------- (Successor) (Successor) ASSETS --------------------------------------------- Current assets: Cash and cash equivalents $ 159,430 $ 191,532 Restricted cash - 134,734 Accounts receivable, net of allowance 46,207 23,115 Merchandise inventories 971,302 959,103 Other current assets 75,928 94,780 Current assets of discontinued operations 16,354 39,843 ----------- ----------- Total current assets 1,269,221 1,443,107 ----------- ----------- Property and equipment, net 1,038,138 1,095,403 Goodwill and intangibles, net 4,205,723 4,188,316 Other assets 109,791 119,173 Non-current assets of discontinued operations 79,297 140,416 ----------- ----------- Total assets $6,702,170 $6,986,415 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY --------------------------------------------- Current liabilities: Accounts payable $ 320,212 $ 335,097 Accrued liabilities 431,295 322,374 Notes payable and current maturities of long-term liabilities 4,179 200 Senior notes due 2008 - 134,734 Current liabilities of discontinued operations 28,565 35,580 ----------- ----------- Total current liabilities 784,251 827,985 ----------- ----------- Long-term liabilities: Asset-based revolving credit facility - 150,000 Notes and debentures 3,195,760 3,295,565 Deferred income taxes 1,031,959 1,106,419 Other long-term liabilities 222,265 169,826 Non-current liabilities of discontinued operations 12,735 13,188 ----------- ----------- Total long-term liabilities 4,462,719 4,734,998 ----------- ----------- Minority interest 5,993 11,751 Total shareholders' equity 1,449,207 1,411,681 ----------- ----------- Total liabilities and shareholders' equity $6,702,170 $6,986,415 =========== =========== NEIMAN MARCUS, INC. CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) First Quarter Ended ----------------------- (in thousands) October 28, October 29, 2006 2005 ----------- ----------- (Successor) (Combined) Revenues $1,039,211 $946,184 Cost of goods sold including buying and occupancy costs 606,778 563,070 Selling, general and administrative expenses 247,530 232,895 Income from credit card operations (16,371) (11,603) Depreciation expense 33,175 28,531 Amortization of customer lists 13,564 3,249 Amortization of favorable lease commitments 4,470 1,559 Transaction and other costs - 23,544 Other income (4,210) - ----------- ---------- Operating earnings 154,275 104,939 Interest expense, net 68,818 16,344 ----------- -------- Earnings from continuing operations before income taxes 85,457 88,595 Income taxes 34,002 33,016 ----------- ---------- Earnings from continuing operations 51,455 55,579 Loss from discontinued operations, net of taxes (24,226) (576) ----------- ---------- Net earnings $ 27,229 $ 55,003 =========== ========== The results of operations have been prepared by comparing the results of the Successor for the 13 weeks ended October 28, 2006 to the mathematical combination of the Successor and Predecessor periods in the 13 weeks ended October 29, 2005. The presentation does not comply with generally accepted accounting principles, but the Company believes that it provides a more meaningful method of comparison. NEIMAN MARCUS, INC. OTHER OPERATING DATA (UNAUDITED) SEGMENTS: First Quarter Ended ----------------------- (dollars in millions) October 28, October 29, 2006 2005 ----------- ----------- (Successor) (Combined) REVENUES: Specialty Retail Stores $ 879.9 $ 807.3 Direct Marketing 159.3 138.9 ---------- - ---------- Total $1,039.2 $ 946.2 ========== = ========== OPERATING EARNINGS: Specialty Retail Stores $ 156.6 $ 135.5 Direct Marketing 20.8 14.6 Corporate expenses (9.3) (9.9) ---------- - ---------- ADJUSTED OPERATING EARNINGS $ 168.1 $ 140.2 Amortization of customer lists and favorable lease commitments (18.0) (4.8) Non-cash items related to other valuation adjustments made in connection with the acquisition - (7.0) Other income 4.2 - Transaction and other costs - (23.5) ---------- - ---------- OPERATING EARNINGS $ 154.3 $ 104.9 ========== = ========== The results of operations have been prepared by comparing the results of the Successor for the 13 weeks ended October 28, 2006 to the mathematical combination of the Successor and Predecessor periods in the 13 weeks ended October 29, 2005. The presentation does not comply with generally accepted accounting principles, but the Company believes that it provides a more meaningful method of comparison. Adjusted operating earnings represents operating earnings excluding amortization of customer lists and favorable lease commitments, purchase accounting adjustments, other income and transaction and other costs. Neiman Marcus, Inc. believes reporting adjusted operating earnings is a more meaningful representation of the Company's on-going economic performance and therefore uses adjusted reporting internally to evaluate and manage the Company's operations. Neiman Marcus, Inc. has chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations. Adjusted operating earnings is not a recognized term under generally accepted accounting principles (GAAP). Adjusted earnings should be considered in addition to, not as a substitute for, the Company's other measures of financial performance reported in accordance with generally accepted accounting principles. Adjusted operating earnings as presented herein are not necessarily comparable to similarly titled measures. NEIMAN MARCUS, INC. OTHER OPERATING DATA (UNAUDITED) OTHER DATA: First Quarter Ended -------------------------- (dollars in millions) October 28, October 29, 2006 2005 ----------- ------------ (Successor) (Combined) Capital Expenditures $ 41 $ 48 Depreciation $ 33 $ 29 Amortization of intangibles $ 18 $ 5 Rent Expense $ 21 $ 19 CONTACT: Neiman Marcus, Inc. James E. Skinner, 214-757-2954 Senior Vice President and Chief Financial Officer or Stacie Shirley, 214-757-2967 Vice President - Finance and Treasurer