Neiman Marcus, Inc. Reports Third Quarter Results

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Neiman Marcus, Inc. Reports Third Quarter Results

DALLAS--(BUSINESS WIRE)-- Neiman Marcus, Inc. today reported financial results for the third quarter of fiscal year 2013. For the 13 weeks ended April 27, 2013, the Company reported total revenues of $1.10 billion compared to $1.06 billion in the prior year. Comparable revenues increased 3.6 percent. Operating earnings for the third quarter of fiscal year 2013 were $150.3 million compared to $146.6 million for the third quarter of fiscal year 2012.

The Company reported net earnings of $70.8 million for the third quarter of fiscal year 2013 compared to $62.6 million in the prior year, an increase of 13.0 percent. EBITDA for the third quarter of fiscal year 2013 was $196.0 million compared to EBITDA of $191.2 million in the third quarter of fiscal year 2012.


For the 39 weeks ended April 27, 2013, the Company reported total revenues of $3.53 billion compared to $3.34 billion in the prior year. Comparable revenues increased 4.8 percent. The Company reported operating earnings for the 39 weeks ended April 27, 2013 of $402.5 million compared to operating earnings of $378.1 million for the comparable period a year ago, an increase of 6.5 percent.

The Company reported net earnings of $160.8 million for the 39 weeks ended April 27, 2013. Excluding the $9.4 million after-tax loss on debt extinguishment as described below under "Other Items," the Company's adjusted net earnings for the 39 weeks ended April 27, 2013 were $170.2 million compared to net earnings of $151.1 million in the prior year, an increase of 12.6 percent. EBITDA for the 39 weeks ended April 27, 2013 was $538.9 million compared to EBITDA of $511.9 million for the 39 weeks ended April 28, 2012.

Other Items

The Company incurred a pre-tax loss on debt extinguishment of $15.6 million (or $9.4 million after-tax) which included 1) costs of $10.7 million related to the tender and redemption of its senior subordinated notes and 2) the write-off of $4.9 million of debt issuance costs related to the extinguished debt facility. The total loss on debt extinguishment was recorded in the second quarter of fiscal year 2013 as a component of interest expense.

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 Tuesday, June 4, 2013 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.

Non-GAAP Financial Measures. In this press release, the Company's financial results are provided both in accordance with generally accepted accounting principles (GAAP) and using certain non-GAAP financial measures. In particular, the Company presents the non-GAAP financial measures adjusted net earnings, which excludes certain charges such as the Company's loss on debt extinguishment, and EBITDA. These results are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help investors' ability to analyze underlying trends in the Company's business, evaluate its performance relative to other companies in its industry, provide useful information to both management and investors by excluding certain items that may not be indicative of the Company's core operating results and, in the case of EBITDA, help investors to evaluate the Company's ability to service its debt. In addition, the Company uses EBITDA as a component of the measurement of incentive compensation. These measures should not be considered a substitute for or superior to GAAP results and may vary from others in the industry. For further information related to the Company's use of EBITDA as a non-GAAP financial measure, see page 8 of this release.

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: weakness in domestic and global capital markets and other economic conditions and the impact of such conditions on the Company's ability to obtain credit; general economic and political conditions or changes in such conditions, including relationships between the United States and the countries from which the Company sources its merchandise; economic, political, social or other events resulting in the short-or long-term disruption 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 the demographic or retail environment; changes in consumer preferences or fashion trends; changes in the Company's relationships with customers due to, among other things, its failure to provide quality service and competitive loyalty programs, its inability to provide credit pursuant to its proprietary credit card arrangement or its failure to protect customer data or comply with regulations surrounding information security and privacy; the effects of incurring a substantial amount of indebtedness under the Company's senior secured credit facilities; the ability to refinance the Company's indebtedness under its senior secured credit facilities and the effects of any refinancing; the effects upon the Company of complying with the covenants contained in its senior secured credit facilities; restrictions on the terms and conditions of the indebtedness under the Company's senior secured credit facilities may place on the Company's ability to respond to changes in its business or to take certain actions; competitive responses to the Company's loyalty programs, marketing, merchandising and promotional efforts or inventory liquidations by vendors or other retailers; changes in the financial viability of the Company's competitors; seasonality of the retail business; adverse weather conditions or natural disasters, particularly during peak selling seasons; delays in anticipated store openings and renovations; the Company's success in enforcing its intellectual property rights; changes in the Company's relationships with designers, vendors and other sources of merchandise, including changes in the level of goods and/or changes in the form in which such goods are made available to us for resale; delays in receipt of merchandise ordered due to work stoppages or other causes of delay in connection with either the manufacture or shipment of such merchandise; changes in foreign currency exchange or inflation rates; significant increases in paper, printing and postage costs; changes in key management personnel and the Company's ability to retain key management personnel; changes in the Company's relationships with certain of its key sales associates and the Company's ability to retain its key sales associates; changes in government or regulatory requirements increasing the Company's costs of operations; litigation that may have an adverse effect on the Company's financial results or reputation; terrorist activities in the United States and elsewhere; the impact of funding requirements related to the Company's pension plan; the Company's ability to provide credit to its customers pursuant to its proprietary credit card program arrangement, including any future changes in the terms of such arrangement and/or legislation impacting the extension of credit to its customers; and the design and implementation of new information systems as well as enhancements of existing systems.

These and other factors that may adversely affect 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)
 
  April 27,  April 28,
(in thousands)20132012
 

ASSETS

Current assets:
Cash and cash equivalents$68,559$64,696
Merchandise inventories995,395945,792
Other current assets 121,842 120,410
Total current assets 1,185,796 1,130,898
 
Property and equipment, net897,401887,916
Goodwill and intangible assets, net3,057,5543,105,015
Other assets 73,768 76,187
Total assets$5,214,519$5,200,016
 

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable$251,237$246,511
Accrued liabilities 437,992 452,707
Total current liabilities 689,229 699,218
 
Long-term liabilities:
Asset-based revolving credit facility20,000125,000
Long-term debt2,682,0282,681,833
Deferred income taxes617,713665,126
Other long-term liabilities 414,337 329,147
Total long-term liabilities 3,734,078 3,801,106
 
Total shareholders' equity 791,212 699,692
Total liabilities and shareholders' equity$5,214,519$5,200,016

 
 
NEIMAN MARCUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
 
  Thirteen Weeks Ended  Thirty-Nine Weeks Ended
April 27,  April 28,April 27,  April 28,
(in thousands)2013201220132012
 
Revenues$1,098,267$1,057,727$3,529,169$3,340,016
Cost of goods sold including buying and occupancy costs663,317628,0692,230,4462,094,808
Selling, general and administrative expenses248,676251,003790,469771,714
Income from credit card program(13,315)(12,495)(39,529)(38,393)
Depreciation expense34,06732,558100,94795,713
Amortization of intangible assets7,2517,52922,30824,717
Amortization of favorable lease commitments4,3854,46913,15513,408
Equity in loss of foreign e-commerce retailer 3,607  -  8,858  - 
 
Operating earnings150,279146,594402,515378,049
Interest expense, net 32,346  44,354  134,765  130,533 
 
Earnings before income taxes117,933102,240267,750247,516
 
Income tax expense 47,168  39,600  106,934  96,372 
 
Net earnings$70,765 $62,640 $160,816 $151,144 

 
 
NEIMAN MARCUS, INC.
OTHER OPERATING DATA
(UNAUDITED)
 
SEGMENTS:  Thirteen Weeks Ended  Thirty-Nine Weeks Ended
April 27,  April 28,April 27,  April 28,
(dollars in millions)2013201220132012
 
REVENUES:
Specialty Retail Stores$855.7$846.9$2,754.7$2,671.0
Online 242.6  210.8  774.5  669.0 
Total$1,098.3 $1,057.7 $3,529.2 $3,340.0 
 
 
OPERATING EARNINGS:
Specialty Retail Stores$135.1$135.6$366.2$362.2
Online46.641.7124.9106.7
Corporate expenses(16.2)(18.7)(44.2)(52.7)
Equity in loss of foreign e-commerce retailer(3.6)-(8.9)-

Amortization of intangible assets and favorable lease commitments

 (11.6) (12.0) (35.5) (38.1)
OPERATING EARNINGS$150.3 $146.6 $402.5 $378.1 

 
 
NEIMAN MARCUS, INC.
OTHER OPERATING DATA
(UNAUDITED)
 
OTHER DATA:
  Thirteen Weeks Ended  Thirty-Nine Weeks Ended
April 27,  April 28,April 27,  April 28,
(dollars in millions)2013201220132012
 
Capital expenditures$30.3$35.2$103.6$108.6
 
Depreciation$34.1$32.6$100.9$95.7
Amortization of intangibles$11.6$12.0$35.5$38.1
 
Rent expense$22.9$22.8$73.1$69.8
 
EBITDA*$196.0$191.2$538.9$511.9

*For an explanation of EBITDA, see "Non-GAAP Financial Measure."

NEIMAN MARCUS, INC.
NON-GAAP FINANCIAL MEASURE
(UNAUDITED)

The following table reconciles net earnings as reflected in the Company's condensed consolidated statements of earnings prepared in accordance with GAAP to EBITDA:

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