JPMorgan High Yield Conference January 22, 2008

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Transcription:

JPMorgan High Yield Conference January 22, 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. 2

Company Overview High-end specialty retailer offering luxury apparel and accessories Specialty Retail LTM Revenue: Neiman Marcus Direct $4.5 Billion* 3 * Note: LTM revenue is as of Q1 FY 2008 and excludes Kate Spade LLC.

Prime Store Locations Minneapolis Chicago Northbrook, Oakbrook Troy Westchester, NYC - BG (2) LA, SF, Palo Alto, San Diego, Newport Beach 1 Honolulu 5 Las Vegas 1 1 Scottsdale Denver 1 7 1 1 3 1 King of Prussia 1 7 1 1 3 1 1 2 Atlanta 2 Short Hills, Paramus Tyson s Corner Boston, Natick Washington D.C. Charlotte 39 Neiman Marcus Stores 2 Bergdorf Goodman Stores Total Specialty Square Footage: 5.6M Northpark, Houston, Dallas, Plano, Ft. Worth, San Antonio, Austin St. Louis Bal Harbour, Coral Gables, Ft. Lauderdale, Tampa Bay, Orlando, Palm Beach, Boca Raton Geographically diverse store base in premier locations in the nation s most affluent markets 4

Professional, Relationship-Focused Salesforce Focus on building long-term relationships, not just transactions Highly specialized sales associate selection, training, and development programs Sales Associate Turnover Sales Associate Productivity (3) 65% 66% 32% 20% Neiman Marcus Specialty Retail (2) Retail Average (1) % of Associates Selling Over $500K % of Associates Selling Over $1M (1) Includes all full-time and part-time sales associates for fiscal 2007 for Neiman Marcus Stores and Bergdorf Goodman. (2) Retail average turnover statistics are for full-time only sales staff provided by 2005 National Retail Federation Annual Compensation and Benefits Survey. (3) Represents fiscal 2007 revenues at Neiman Marcus full-line stores and Bergdorf Goodman only. Excludes associates with less than one year of service. 5

Unique Customer Loyalty Program Unique and powerful InCircle rewards program drives superior loyalty from an attractive, affluent customer base InCircle Program Revenue InCircle Customer Behavior InCircle Sales Non-InCircle InCircle ($ in millions) $1,600 $1,400 % of Total Neiman Marcus Store Sales 10% CAGR $1,324 $1,567 60% Annual Purchases ($) $629 $12,333 Difference vs. Non-InCircle 19.6x Trips Per Year 3.3 16.9 Difference vs. Non-InCircle 5.1x $1,200 $1,000 $800 $880 40% $850 $894 41% $1,174 $1,008 45% 43% 46% 51% 50% 40% Spend Per Item ($) $86 $212 Difference vs. Non-InCircle 2.5x $600 37% $400 2000 2001 2002 2003 2004 2005 2006 Calendar Year 30% Note: InCircle customer behavior data presented for calendar year 2006. Customer behavior statistics based on private label credit card information only. 6

Powerful Relationships With Diverse Group of Top Vendors 2007 Merchandise Mix (1) No dependency on any one product category Designer and Precious Jewelry Home Furnishings and Décor 9% 11% 37% Women s Apparel Men s Apparel and Shoes 12% 11% 20% Cosmetics and Fragrances Women s Shoes, Handbags and Accessories Neiman Marcus long-term relationships with leading designers and diverse merchandise base mitigates fashion / brand risk (1) Amounts exclude revenues from leased departments. 7

Specialty Retail Initiatives Drive Greater Merchandise Productivity Attract and Develop a Younger Customer Base Maximize Return on Full Line Stores Expand Last Call Clearance Centers Maintaining and Expanding our Leadership Position 8

Focused Expansion Strategy STATE COMPLETION DATE SQ. FOOTAGE New Stores Natick Massachusetts September 2007 (Opened) 100,000 Topanga California Fall 2008 120,000 Bellevue Washington Fall 2009 125,000 Sarasota Florida Fall 2010 80,000 Princeton New Jersey Spring 2011 90,000 Long Island New York TBD 150,000 Remodels San Diego California Summer 2007 No additional sq. footage Atlanta Georgia Spring 2008 Additional 50,000 Westchester New York Summer 2008 No additional sq. footage 9

Natick, MA Natick Mall Opened: September 2007 100,000 square feet 10

Topanga, CA Topanga Plaza Scheduled opening: Fall 2008 120,000 square feet 11

Bellevue, WA The Bravern Scheduled opening: Fall 2009 125,000 square feet 12

Last Call Clearance Centers 22 Clearance Centers in 12 states 20 Last Call 2 Horchow Planned 3 additional stores in FY 08 including 1 Horchow Evaluating potential opportunity of business model Developing infrastructure to support growth Distribution Merchandising Beginning to view as separate business unit 13

Last Call Clearance Centers 14

CUSP store openings LOCATION MALL/AREA OPENING DATE SQ. FOOTAGE Washington, DC Tyson s Mall July 2006 9,500 Los Angeles, CA Century City August 2006 8,100 Washington, DC Georgetown March 2007 11,000 Northbrook, IL Northbrook Court July 2007 7,000 15

CUSP 16

CUSP 17

CUSP 18

19

20

Neiman Marcus Direct

Neiman Marcus Direct Expanding Brand Reach Through Multi-Channels 22

Direct Marketing Initiatives Innovative marketing Designer sites Customer personalization Online clearance Technology investment 23

Growth of Internet FY 2002 FY 2007 17% 30% 83% 70% Catalog Internet Rapid internet growth resulting in strong operating results. 24

Business Activities 2000 - Present Fiscal Year Launched internet business 2000 Formed separate NMG Corporate team 2001 Formed new Merchandise Planning Group 2003 Launched BG.com 2005 Formed Strategic Planning Team 2005 Sold Chef s Catalog 2005 Developed Designer Sites 2005 Sold Credit Card Portfolio 2005 Sold NMG to Private Equity 2006 Sold Gurwitch Products 2006 Opened first CUSP store 2006 Sold Kate Spade 2007 25

Financial Overview

Historical Financial Performance Historical Financial Performance ($ in millions) $1,888 $2,580 $2,181 $2,338 $2,042 $150 $159 $183 $199 $183 7% Revenue CAGR 11% 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 $4,483 $550 $558 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20061 2007 1 LTM Q1 1 2008 Fiscal Years Ending July Revenue EBIT Consistent growth through multiple business and economic cycles highlighted by 12 year Revenue and EBIT CAGRs of 7% and 11%, 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 2002-2007 have been restated to exclude Brand Development. FY 2002 reflects 53 weeks ended August 3, 2002. 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. 27

Financial Metrics Specialty Retail Revenue ($ in millions) ($ in millions) Specialty Retail EBIT 6% CAGR $3,375 $3,675 $3,756 10% CAGR $378 $404 $491 $500 $2,442 $2,487 $2,417 $2,507 $2,850 $3,103 $249 $201 $171 $198 7.9% $311 10.9% 12.2% 12.0% 13.4% 13.3% 10.2% 8.1% 7.1% 2000 2001 2002 2003 2004 2005 2006 2007 LTM Q1 '08 NMD Revenue ($ in millions) ($ in millions) 2000 2001 2002 2003 2004 2005 2006 2007 LTM EBIT EBIT Margin Q1 '08 NMD EBIT 8% CAGR $571 $494 $438 $444 $405 $715 $727 $655 $592 $2 83% CAGR $61 $46 10.7 % $23 $11 9.3% 2.5% 5.1% $116 $119 $98 $75 15.0 % 16.2 % 16.4 % 12.7 % 2000 2001 2002 2003 2004 2005 2006 2007 LTM 2000 2001 2002 2003 2004 2005 2006 2007 LTM Q1 '08 Q1 '08 EBIT EBIT Margin Note: Specialty Retail revenue reflects the change in classification of revenues deferred in connection with the Company s loyalty programs. 28

Superior Performance NMG Sales per Square Foot $440 $452 $497 $511 $478 $472 $528 $577 $611 $638 $647 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 LTM Q1 '08 NMG Comparable Revenue Growth 6.0% 2.6% 11.8% 2.3% 3.8% 14.0% 9.8% 7.3% 6.7% 6.6% -4.4% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 LTM Q1 '08 Note: NMG comparable revenue growth figures for 2002-07 reflect the change in classification of revenues deferred in connection with the Company s loyalty programs and reflect the sale of Gurwitch Products and Kate Spade. NMG Sales per Square Foot figures represent Specialty Retail and exclude clearance centers. 29

Superior Performance $700 $600 $500 $400 $300 $200 $100 Sales Per Square Foot Note Figures are from LTM ending Nov 3, 2007. 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). 30

FY 2008 Q1 Financial Highlights NMG Q1 '08 Q1 '07 % change Comparable Sales 6.5% 6.8% Adjusted Operating Earnings ($M)* $175 $168 4.3% Adjusted Operating Margin 15.5% 16.2% Specialty Retail Comparable Store Sales 6.4% 5.4% Operating Earnings ($M) $166 $157 5.8% Operating Margin 17.2% 17.8% Neiman Marcus Direct Sales Growth 7.1% 14.7% Operating Earnings ($M) $23 $21 11.8% Operating Margin 13.6% 13.1% Source Neiman Marcus, Inc. FY2008 Q1 Earnings Release (for the fiscal period ended October 27, 2007). Figures exclude Kate Spade LLC. *Adjusted Operating earnings represents operating earnings excluding amortization of customer lists and favorable lease commitments and other income. 31

Summary Balance Sheet ($ in millions) Q1 2008 Q1 2007 Cash $ 81 $ 159 Merchandise inventories 1,086 971 Current liabilities $ 796 $ 810 Long-term debt 2,946 3,196 Shareholder s equity $ 1,626 $ 1,449 32

Historical Capital Expenditures Average gross capex spend of $153 million between 2001 and 2007 FY 2001 FY 2006 FY 2007 25% 27% 21% 38% 22% 26% 23% 18% New Stores Major Remodels Information Technology Other Note: Figures represent gross capital expenditures. FY01 FY05 include Brand Development. 33

Leverage Ratio 7.0 6.5 5.6 5.0 4.3 4.3 3.0 1.0 Q1 FY 06 Q4 FY 06 Q4 FY 07 Q1 FY 08 Leverage ratio is calculated as Total Debt / LTM Adjusted EBITDA LTM adjusted EBITDA excludes purchase accounting adjustments and transaction and other costs. (See EBITDA Reconciliation). Figures exclude Brand Development. 34

Capitalization (As of October 27, 2007) ($ in millions) Q1 FY '08 % of Q1 FY '06 % of 10/27/2007 Cap. 10/29/2005 Cap. $600 Million Asset-Based Revolving Credit Facility 0 0.0% 150 3.1% Senior Debentures due 2028 (7.125%) 121 2.6% 121 2.5% Senior Secured Term Loan 1,625 35.5% 1,975 40.6% Other Senior Secured Debt 3 0.1% 6 0.1% Total Senior Secured Debt $1,749 38.2% $2,251 46.3% Senior Unsecured Notes (9.00%) 700 15.3% 700 14.4% Total Senior Debt $2,449 53.5% $2,951 60.7% Senior Subordinated Notes (10.375%) 500 10.9% 500 10.3% Total Debt $2,949 64.5% $3,451 71.0% Equity 1,626 35.5% 1,412 29.0% Total Capitalization $4,575 100.0% $4,863 100.0% No maintenance covenants or mandatory amortization Senior Unsecured Notes Cash / PIK feature provides flexibility Excess liquidity from $600 million Asset-Based Revolver 35

Reconciliation of Adjusted Operating Earnings Thirteen Thirteen weeks ended weeks ended Oct 27, Oct 28, (dollars in millions) 2007 2006 OPERATING EARNINGS: Specialty Retail Stores $ 166 $ 157 Direct Marketing 23 21 Corporate expenses (14) (9) ADJUSTED OPERATING EARNINGS $ 175 $ 168 Amortization of intangible assets (18) (18) Other income 33 4 OPERATING EARNINGS $ 190 $ 154 Depreciation & Amortization 53 51 Source Neiman Marcus, Inc. 10-Q (For the fiscal period ended Oct 27, 2007). 36

EBITDA Reconciliation ($ in millions) Q1 FY '08 Q4 FY '07 Q4 FY '06 Q1 FY '06 LTM EBITDA (Reported) 1 $ 723 $ 686 $ 515 $ 509 Adjustments: Inventory purchase price adjustment - - 38 7 Transaction costs - - 24 24 Gain on credit card transaction - - - (6) Non-cash gain on curtailment of defined benefit retirement obligation (33) - - - Total EBITDA adjustments (33) - 62 25 LTM EBITDA (Adjusted) $ 690 $ 686 $ 577 $ 534 Debt/LTM EBITDA (Adjusted) 4.3 4.3 5.6 6.5 (1) LTM EBITDA excludes Gurwitch Products and Kate Spade. 37