8-K 1 a05-12061_18k.htm 8-K

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (date of earliest event reported) July 7, 2005

 

THE NEIMAN MARCUS GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

0-19659

 

95-4119509

(State or other jurisdiction
of incorporation)

 

(Commission File Number)

 

(IRS Employer
Identification No.)

 

 

 

 

 

One Marcus Square
1618 Main Street, Dallas, Texas

 

75201

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code (214) 741-6911

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425

 

ý       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17CFR 240.13e-4(c))

 

 


 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

On July 7, 2005, The Neiman Marcus Group, Inc. (the Company) completed the previously announced sale of its private label credit card accounts and related assets to HSBC Bank Nevada, National Association and certain of its affiliates (collectively, HSBC) and entered into a related strategic alliance with HSBC with respect to the proprietary credit card and credit operations of Neiman Marcus and Bergdorf Goodman.

 

Pursuant to the Purchase, Sale and Servicing Transfer Agreement, dated as of June 8, 2005, among the Company, Bergdorf Goodman, Inc. and HSBC (the Sale Agreement), the Company and Bergdorf Goodman 1) sold both their private label credit card and non-card payment plan accounts and related assets and their interests in the securitization arrangements relating to the outstanding balances associated with such accounts (the Securitization Arrangements) and 2) HSBC assumed the obligations of the Company and its affiliates under the Securitization Arrangements (the foregoing sale and assumption, collectively, the Sale Transaction).  The total consideration in the Sale Transaction was approximately $653 million and consisted of net cash proceeds equal to the face value of the outstanding receivables and accumulated accounts receivable collections (totaling approximately $540 million) and the assumption of approximately $113 million of outstanding liabilities of the Company under the Securitization Arrangements.

 

In connection with the execution and delivery of the Sale Agreement, the Company and HSBC entered into a long-term marketing and servicing alliance with HSBC under a Credit Card Program Agreement and related Servicing Agreement (collectively, the On-Going Agreement).  Under the On-Going Agreement, HSBC will offer credit cards and non-card payment plans bearing the brands of the Company and its subsidiaries and the Company will receive ongoing compensation from HSBC in connection with credit sales under those credit cards and payment plans.  The Company will continue to handle certain customer service functions under the On-Going Agreement, including new account processing, transaction authorization, billing adjustments, collection services and customer inquiries.

 

Further details regarding the terms of the Sale Agreement, Program Agreement and Servicing Agreement referred to above are contained in the Company’s Current Report on Form 8-K dated June 8, 2005 and filed on June 9, 2005.

 

Item 9.01 Financial Statements.

 

(b) Unaudited Pro Forma Consolidated Financial Statements

 

The following Unaudited Pro Forma Consolidated Financial Statements are based on the unaudited consolidated financial statements of The Neiman Marcus Group, Inc. adjusted to give effect to the Sale Transaction and the On-Going Agreement.

 

The Unaudited Pro Forma Consolidated Financial Statements are presented for illustrative purposes only and, therefore, are not necessarily indicative of the operating results and financial position that might have been achieved had the transactions occurred as of an earlier date, nor are they necessarily indicative of operating results and financial position that may occur in the future.  The Unaudited Pro Forma Consolidated Financial Statements do not reflect the use of the net cash proceeds from the Sale Transaction on the Company’s on-going results of operations and future financial position.

 

The Unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with the historical consolidated financial statements and notes thereto in (1) the Quarterly Report on Form 10-Q for the period ended April 30, 2005 and (1) the amendment to the Annual Report on Form 10-K/A for the year ended July 31, 2004.

 

2


 

THE NEIMAN MARCUS GROUP, INC.

Unaudited Pro Forma Consolidated Statement of Earnings

Thirty-Nine Weeks Ended April 30, 2005

(Unaudited)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

(in thousands, except per share data)

 

Historical

 

Sale
Transaction

 

On-Going
Agreement

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

2,970,533

 

 

 

 

 

$

2,970,533

 

Cost of goods sold including buying and occupancy costs

 

1,892,904

 

 

 

 

 

1,892,904

 

Selling, general and administrative expenses

 

698,054

 

$

52,414

(a) 

$

(32,922

)(b)

717,546

 

Loss on disposition of Chef’s Catalog

 

15,348

 

 

 

 

 

15,348

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

364,227

 

(52,414

)

32,922

 

344,735

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

10,948

 

(4,110

)(a)

 

 

6,838

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes and minority interest

 

353,279

 

(48,304

)

32,922

 

337,897

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

136,014

 

(18,597

)(c)

12,675

(c)

130,092

 

Earnings before minority interest

 

217,265

 

(29,707

)

20,247

 

207,805

 

 

 

 

 

 

 

 

 

 

 

Minority interest in net earnings of subsidiaries

 

(2,787

)

 

 

 

 

(2,787

)

Net earnings

 

$

214,478

 

$

(29,707

)

$

20,247

 

$

205,018

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

Basic

 

48,309

 

48,309

 

48,309

 

48,309

 

Diluted

 

49,427

 

49,427

 

49,427

 

49,427

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

Basic

 

$

4.44

 

$

(0.61

)

$

0.42

 

$

4.24

 

Diluted

 

$

4.34

 

$

(0.60

)

$

0.41

 

$

4.15

 

 

3


 

THE NEIMAN MARCUS GROUP, INC.

Unaudited Pro Forma Consolidated Statement of Earnings

Year Ended July 31, 2004

(Unaudited)

 

 

 

 

 

Pro Forma Adjustments

 

 

 

(in thousands, except per share data)

 

Historical

 

Sale
Transaction

 

On-Going
Agreement

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

3,524,771

 

 

 

 

 

$

3,524,771

 

Cost of goods sold including buying and occupancy costs

 

2,327,229

 

 

 

 

 

2,327,229

 

Selling, general and administrative expenses

 

848,453

 

$

55,750

(a)

$

(38,167

)(b)

866,036

 

Impairment and other charges

 

3,853

 

 

 

 

 

3,853

 

 

 

 

 

 

 

 

 

 

 

Operating earnings

 

345,236

 

(55,750

)

38,167

 

327,653

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

15,923

 

(2,141

)(a)

 

 

13,782

 

 

 

 

 

 

 

 

 

 

 

Earnings before income taxes and minority interest

 

329,313

 

(53,609

)

38,167

 

313,871

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

120,932

 

(20,908

)(c)

14,885

(c) 

114,909

 

Earnings before minority interest

 

208,381

 

(32,701

)

23,282

 

198,962

 

 

 

 

 

 

 

 

 

 

 

Minority interest in net earnings of subsidiaries

 

(3,549

)

 

 

 

 

(3,549

)

Net earnings

 

$

204,832

 

$

(32,701

)

$

23,282

 

$

195,413

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares

 

 

 

 

 

 

 

 

 

Basic

 

47,997

 

47,997

 

47,997

 

47,997

 

Diluted

 

48,873

 

48,873

 

48,873

 

48,873

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

Basic

 

$

4.27

 

$

(0.68

)

$

0.49

 

$

4.07

 

Diluted

 

$

4.19

 

$

(0.67

)

$

0.48

 

$

4.00

 

 

4


 

THE NEIMAN MARCUS GROUP, INC.

Notes to Unaudited Pro Forma Consolidated Statement of Earnings

 

The Unaudited Pro Forma Consolidated Statements of Earnings for the thirty-nine weeks ended April 30, 2005 and for the fiscal year ended July 31, 2004 have been prepared as if 1) the transactions contemplated by the Purchase, Sale and Servicing Transfer Agreement, dated as of June 8, 2005 among the Company, Bergdorf Goodman, Inc. and HSBC Bank Nevada, N.A. as well as the assumption of the Company’s outstanding obligations under the Securitization Arrangements (the Sale Transaction) and 2) the strategic alliance contemplated by the Credit Card Program Agreement, dated as of June 8, 2005, among the Company, Bergdorf Goodman, Inc., HSBC Bank Nevada N.A. and Household Corporation and the Servicing Agreement referred to in that Program Agreement (collectively, the On-Going Agreement) were consummated as of August 3, 2003 (the beginning of the Company’s fiscal year 2004).

 

(a)   To reflect the removal of the historical income and expenses generated by the Company’s portfolio of accounts and the costs of the Securitization Arrangements.

 

(in thousands)

 

Thirty-Nine
Weeks Ended
April 30,
2005

 

Year Ended
July 31,
2004

 

 

 

 

 

 

 

Amounts included in selling, general and administrative expenses:

 

 

 

 

 

Finance charge income and late fees

 

$

64,645

 

$

39,936

 

Bad debt expense, net

 

(12,231

)

(7,610

)

Income related to the Securitization Arrangements

 

—

 

31,007

 

Amortization of the premium associated with the Securitization Arrangements

 

—

 

(7,583

)

 

 

$

52,514

 

$

55,750

 

Amounts included in interest expense:

 

 

 

 

 

Costs related to the Securitization Arrangements

 

$

(4,110

)

$

(2,141

)

 

(b)   To reflect compensation paid to the Company pursuant to the terms of the On-Going Agreement.  The compensation to be received by the Company consists of a servicing fee for the on-going credit services to be performed by the Company and a program fee based on credit sales generated.  The compensation to be received by the Company may be 1) increased or decreased based upon the level of future services provided by the Company to HSBC and 2) increased based on potential future changes to the proprietary credit card program.  The Company believes the servicing fee to be received is at current market rates.

 

(c)   To reflect the tax effect of the above items at the Company’s statutory income tax rate of 38.5% for the thirty-nine weeks ended April 30, 2005 and 39.0% for the year-ended July 31, 2004.

 

5


 

THE NEIMAN MARCUS GROUP, INC.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

April 30, 2005

(Unaudited)

 

 

 

Historical

 

Pro Forma
Adjustments

 

Pro Forma

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

337,589

 

$

491,321

(a)

$

828,910

 

Restricted cash

 

37,500

 

(37,500

)(b)

—

 

Accounts receivable, net

 

666,455

 

(632,994

)(b)

33,461

 

Merchandise inventories

 

788,915

 

 

 

788,915

 

Other current assets

 

49,715

 

 

 

49,715

 

Total current assets

 

1,880,174

 

(179,173

)

1,701,001

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

821,810

 

 

 

821,810

 

Other assets

 

137,822

 

(1,233

)(b)

136,589

 

Total assets

 

$

2,839,806

 

$

(180,406

)

$

2,659,400

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

246,971

 

$

—

 

$

246,971

 

Accrued liabilities

 

352,526

 

2,731

(d)

355,257

 

Notes payable and current maturities of long-term liabilities

 

200

 

 

 

200

 

Current portion of borrowings under Credit Card Facility

 

187,500

 

(187,500

)(c)

—

 

Total current liabilities

 

787,197

 

(184,769

)

602,428

 

 

 

 

 

 

 

 

 

Long-term liabilities:

 

 

 

 

 

 

 

Notes and debentures

 

249,773

 

 

 

249,773

 

Deferred real estate credits

 

74,429

 

 

 

74,429

 

Other long-term liabilities

 

133,114

 

 

 

133,114

 

Total long-term liabilities

 

457,316

 

—

 

457,316

 

 

 

 

 

 

 

 

 

Minority interest

 

13,498

 

 

 

13,498

 

 

 

 

 

 

 

 

 

Common stocks

 

497

 

 

 

497

 

Additional paid-in capital

 

511,338

 

 

 

511,338

 

Accumulated other comprehensive loss

 

(3,432

)

 

 

(3,432

)

Retained earnings

 

1,099,053

 

4,363

(d)

1,103,416

 

Treasury stock, at cost

 

(25,661

)

 

 

(25,661

)

Total shareholders’ equity

 

1,581,795

 

4,363

 

1,586,158

 

Total liabilities and shareholders’ equity

 

$

2,839,806

 

$

(180,406

)

$

2,659,400

 

 

6


 

THE NEIMAN MARCUS GROUP, INC.

Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of April 30, 2005 has been prepared as if the sale of the Company’s proprietary credit card operations to HSBC and the assumption of the Company’s outstanding obligations under the Securitization Arrangements (Sale Transaction) were consummated as of April 30, 2005.

 

 

 

(in thousands)

 

(a)  To reflect the net cash proceeds from the Sale Transaction.

 

 

 

Purchase price paid by HSBC

 

$

683,321

 

Debt assumed by HSBC – Borrowings under Credit Card Facility

 

(187,500

)

Cash paid for transaction expenses

 

(4,500

)

Net cash received by the Company

 

$

491,321

 

 

 

 

 

(b)  Remove the assets sold to HSBC in connection with the Sale Transaction.

 

 

 

 

 

 

 

(c)  Remove the liabilities assumed by HSBC in connection with the Sale Transaction.

 

 

 

 

 

 

 

(d)  Record gain realized by the Company in connection with the Sale Transaction:

 

 

 

 

 

 

 

Net cash proceeds received by the Company

 

$

491,321

 

Net assets sold to HSBC:

 

 

 

Credit card receivables

 

(632,994

)

Restricted cash

 

(37,500

)

Securitization escrow deposit

 

(1,233

)

Liabilities assumed

 

187,500

 

Pre-tax gain on Sale Transaction

 

7,094

 

Income taxes

 

(2,731

)

Gain on Sale Transaction, net of tax

 

$

4,363

 

 

 

7


 

(b)  SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

THE NEIMAN MARCUS GROUP, INC.

 

                       (Registrant)

 

 

Date: July 12, 2005

By:

/s/ T. Dale Stapleton

 

 

T. Dale Stapleton

 

 

Vice President and Controller

 

 

and Duly Authorized Officer

 

 

(principal accounting officer)

 

8