Bank of America Securities 2008 Credit Conference November 20, 2008
Forward Looking Statements Disclaimer The following information contains, or may be deemed to contain, forward-looking statements (as defined in the U.S. Private Securities Litigation Reform Act of 1995). By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. The future results of the company may vary from the results expressed in, or implied by, the following forward-looking statements, possibly to a material degree. For a discussion of some of the important factors that could cause the company s results to differ from those expressed in, or implied by, the following forward-looking statements, please refer to the company s Offering Circular. The company undertakes no obligation to update or revise any forward-looking statements.
Company Overview Specialty Retail Neiman Marcus Direct 40 Full Line NM Stores 2 BG Stores 5 Cusp Stores $3.85B $748M LTM Revenue: $4.6 Billion* * Note: LTM revenue is as of July 2008.
Responses to a Downturn Revenue Levers Hold additional selling and promotional events Increase discount levels Develop additional programs to incentivize sales force Margin and Expense Levers Work with vendors to reduce inventory commitments, return products and obtain additional vendor markdown participation Experienced buying group able to implement strict buying plans to reduce future purchases Implement disciplined expense controls Capital Levers Delay projects Increase scrutiny of all projects
Competitive Advantages Attractive Market & Customer Demographics Professional, Relationship-Focused Salesforce Unique Customer Loyalty Program Strong Relationships with Diverse Group of Vendors
Specialty Retail Initiatives Merchandise Productivity Customer Service Inventory Management Return on Full Line Stores Maintaining and Expanding our Leadership Position
Focused Expansion Strategy STATE COMPLETION DATE SQ. FOOTAGE New Stores Topanga California September 2008 (Opened) 120,000 Bellevue Washington Fall 2009 125,000 Sarasota Florida Fall 2010 80,000 Walnut Creek California Fall 2011 110,000 San Jose California Fall 2012 90,000 Princeton New Jersey Fall 2012 120,000 Long Island New York TBD 150,000 Remodels Atlanta Georgia Spring 2008 (Completed) Additional 50,000 Westchester New York Summer 2008 (Completed) No additional sq. footage Cusp Chestnut Hill Massachusetts August 2008 6,000
1 Prime Store Locations Bellevue 1 Minneapolis Chicago Northbrook, Oakbrook Troy Long Island Westchester, NYC - BG (2) LA, SF, Palo Alto, San Diego, Newport Beach, Topanga Walnut Creek, San Jose 8 1 1 1 1 1 3 1 King of Prussia 4 1 1 1 1 3 2 Short Hills, Paramus Princeton Washington D.C. Tyson s Corner Charlotte Boston, Natick 1 Honolulu Las Vegas Scottsdale Denver 7 1 8 Atlanta Northpark, Houston, Dallas, Plano, Ft. Worth, San Antonio, Austin St. Louis Bal Harbour, Coral Gables, Ft. Lauderdale, Tampa Bay, Orlando, Palm Beach, Boca Raton, Sarasota Geographically diverse store base in premier locations in the nation s most affluent markets
Topanga, CA Topanga Plaza Opened: September 2008 120,000 square feet
Bellevue, WA The Bravern Scheduled opening: Fall 2009 125,000 square feet
Sarasota, FL University Town Center Scheduled opening: Fall 2010 80,000 square feet
CUSP
CUSP
Neiman Marcus Direct
NeimanMarcus.com
BergdorfGoodman.com
Horchow.com
Cusp.com
Neiman Marcus Direct Growth of Internet FY 2002 $355M FY 2008 $748M 17% 24% 83% 76% Catalog Internet
Neiman Marcus Direct Innovative marketing
Neiman Marcus Direct Designer sites
Neiman Marcus Direct Customer personalization
Financial Overview
Historical Financial Performance Historical Financial Performance ($ in millions) $2,580 $1,888 $2,181 $2,338 $2,042 $150 $159 $183 $199 $183 7% Revenue CAGR 10% EBIT CAGR $2,913 $2,998 $2,861 $248 $203 $173 $3,001 $214 $3,421 $336 $3,695 $407 $4,030 $447 $4,390 $550 $4,601 $537 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Fiscal Years Ending July Revenue EBIT 1 1 1 1 Consistent growth through multiple business and economic cycles highlighted by 13 year Revenue and EBIT CAGRs of 7% and 10%, respectively Note: All information for 2000 and thereafter reflects the change in classification of revenues deferred in connection with the Company s loyalty programs. EBIT figures exclude non-recurring items. FY 2002 and FY 2008 reflect 53 weeks. 1 Operating earnings are adjusted to exclude amortization of customer lists and favorable lease commitments, purchase accounting adjustments, transaction and other costs and other non-recurring items.
Financial Metrics Specialty Retail Revenue ($ in millions) ($ in millions) Specialty Retail EBIT $2,442 $2,487 $2,417 6% CAGR $2,507 $2,850 $3,103 $3,375 $3,675 $3,853 $249 10.2% $201 8.1% 9% CAGR $311 10.9% $198 $171 7.9% 7.1% $378 12.2% $404 $491 $477 12.0% 13.4% 12.4% 2000 2001 2002 2003 2004 2005 2006 2007 2008 NMD Revenue ($ in millions) ($ in millions) $405 $438 $444 8% CAGR $494 $571 $592 $655 $715 $748 2000 2001 2002 2003 2004 2005 2006 2007 2008 2000 2001 2002 2003 2004 2005 2006 2007 2008 EBIT EBIT Margin NMD EBIT EBIT EBIT Margin Note: Specialty Retail revenue reflects the change in classification of revenues deferred in connection with the Company s loyalty programs. $2 $11 $23 2.5% 5.1% 67% CAGR $46 9.3% $61 10.7 % $75 12.7 % $98 $116 $118 15.0 % 16.2 % 15.8 % 2000 2001 2002 2003 2004 2005 2006 2007 2008
Superior Performance $700 $600 $500 $400 $300 $200 $100 Sales Per Square Foot Note Figures are from LTM ending August 2, 2008. NMG data is for the Specialty Retail segment only (Full line Neiman Marcus Stores and Bergdorf Goodman). SFAE is estimated Saks Fifth Avenue stores and internet sales (excludes estimated clearance center sales).
FY 2008 Financial Highlights NMG FY '07 FY '08 % change Total Sales $4.4B $4.6B 4.8% Comparable Sales Increase 6.7% 1.7% Adjusted Operating Earnings ($M)* $550 $537-2.4% Adjusted Operating Margin 12.5% 11.7% Merchandise Inventories ($M) $918 $978 6.5% Capital Expenditures ($M) $148 $183 Source Neiman Marcus, Inc. FY2008 Q4 Earnings Release (for the fiscal period ended August 2, 2008). *Adjusted Operating earnings represents operating earnings excluding amortization of customer lists and favorable lease commitments and other income/expense.
Comparable Store Sales Q4 FY '08 Q1 FY '09 Neiman Marcus Group -1.4% -14.5% Specialty Retail -1.8% -15.8% Neiman Marcus Direct 0.7% -7.0% Saks Fifth Avenue -4.0% -11.5% Nordstrom -6.0% -11.1%
Other Financial Information ($M) Q1 FY '06 FY '06 FY '07 FY '08 Cash $192 $224 $141 $239 Debt Paydown $0 $250 $250 $0 Revolver Availability $434 $571 $573 $576 Leverage Ratio 6.5x 5.6x 4.3x 4.3x
Reconciliation of Adjusted Operating Earnings Fiscal Year Ended August 2, July 28, (dollars in millions) 2008 2007 OPERATING EARNINGS: Specialty Retail Stores $ 477 $ 491 Direct Marketing 118 116 Corporate expenses (57) (56) ADJUSTED OPERATING EARNINGS $ 537 $ 550 Amortization of intangible assets (72) (72) Other income (expense) 1 (1) OPERATING EARNINGS $ 466 $ 477 Depreciation & Amortization 221 209 Source Neiman Marcus, Inc. 10-K (For the fiscal period ended Aug 2, 2008).
EBITDA Reconciliation ($ in millions) Q4 FY '08 Q4 FY '07 Q4 FY '06 Q1 FY '06 LTM EBITDA (Reported) $ 687 $ 686 $ 515 $ 509 Adjustments: Inventory purchase price adjustment - - 38 7 Transaction costs - - 24 24 Gain on credit card transaction - - - (6) Other (income) expense (1) 1 - - Total EBITDA adjustments (1) 1 62 25 LTM EBITDA (Adjusted) $ 686 $ 687 $ 577 $ 534 Debt/LTM EBITDA (Adjusted) 4.3 4.3 5.6 6.5