Exhibit 99.1
The Neiman Marcus Group Reports Third Quarter Earnings
DALLAS--(BUSINESS WIRE)--June 4, 2003--The Neiman Marcus Group,
Inc. (NYSE:NMG.A)(NYSE:NMG.B) today reported financial results for the
third quarter of fiscal year 2003.
For the 13 weeks ended May 3, 2003, the Company reported total
revenues of $723 million compared to $693 million in the prior year
and comparable revenues increased 1.5 percent. Net earnings were $41
million, or $0.87 per diluted share, in the third quarter of fiscal
year 2003 compared to $47 million, or $0.98 per diluted share, in the
third quarter of fiscal year 2002. Excluding the impact of
implementing a new vacation policy and certain other items, as
described below, adjusted earnings for the third quarter of fiscal
2002 were $42 million, or $0.87 per diluted share. See the attached
"Reconciliation of GAAP Net Earnings to Non-GAAP Adjusted Earnings"
for the reconciliation of adjusted earnings and the Company's
statements regarding the use of this non-GAAP financial measure.
For the 39 weeks ended May 3, 2003, total revenues increased to
$2.40 billion compared to $2.28 billion in the prior year and
comparable revenues increased 2.3 percent. Net earnings were $102
million, or $2.14 per diluted share, for the 39 weeks ended May 3,
2003 compared to $94 million, or $1.97 per diluted share, for the 39
weeks ended April 27, 2002. Adjusted earnings for the 39 weeks ended
May 3, 2003 exclude the impact of adopting a new accounting standard
as described below. Adjusted earnings for the 39 weeks ended April 27,
2002 exclude the impact of implementing a new vacation policy and
certain other items as described below. Adjusted earnings for the 39
weeks ended May 3, 2003 were $117 million, or $2.45 per diluted share,
compared to $90 million, or $1.89 per diluted share, for the prior
year.
"Overall, given the continued challenging retail environment, I am
pleased with our third quarter results," said Burton M. Tansky,
President and Chief Executive Officer. "I believe our performance
highlights the relative strength of the luxury category as well as our
success in serving this market. We have maintained our focus on
serving the affluent customer with outstanding customer service and
fashion leadership."
Based on the current sales trends, the Company anticipates its
comparable store revenues for the fourth quarter of fiscal year 2003
to increase in the range of 2 percent to 4 percent. In addition, the
Company currently anticipates the decline in gross margin in the
fourth quarter to approximate the decline experienced in the third
quarter primarily as a result of an expected year over year increase
in inventory markdowns.
Business Segments
During the fourth quarter of fiscal year 2002, the Company
realigned its business segments to reflect its current operating
strategies. All the Company's online operations are now included in
the Direct Marketing segment. Previously, certain online operations
were included in the Other business segment. The Company's principal
business segments are Specialty Retail Stores and Direct Marketing.
All prior amounts have been restated based on this new alignment.
Third quarter revenues for the Specialty Retail Stores segment,
which consists of Neiman Marcus Stores and Bergdorf Goodman, were $591
million compared to $573 million in the previous year. Revenues for
the third quarter of fiscal year 2003 compared to last year increased
3.1 percent and 4.0 percent at Neiman Marcus Stores and Bergdorf
Goodman, respectively. Comparable revenues for Neiman Marcus Stores
decreased 0.9 percent for the third quarter of fiscal year 2003. Third
quarter operating earnings for the Specialty Retail Stores segment
were $67 million compared to $67 million in the prior year.
Neiman Marcus Direct, the Company's direct marketing division,
reported third quarter fiscal year 2003 revenues of $113 million
compared to $102 million in the previous year. Operating earnings for
Neiman Marcus Direct were $10 million in the third quarter compared to
$10 million a year ago.
The Company's Other segment includes the operations of the Kate
Spade and Laura Mercier brands and corporate expenses.
Other Items
In the first quarter of fiscal year 2003, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets". Based upon the valuation
results of its third party appraisal experts, the Company recorded a
pretax charge of approximately $24 million in the first quarter of
fiscal year 2003 as a result of implementing the fair value model of
the new accounting standard.
During the third quarter of fiscal year 2002, the Company
terminated its prior vacation plan. Under the previous plan, eligible
employees received an annual vacation grant at the beginning of each
service year. Pursuant to the new vacation policy, eligible employees
earn vacation pay ratably over the course of the year in which
services are rendered. As a result of this change, the Company's $17
million vacation accrual was no longer required and, therefore, the
liability was eliminated and credited to operating results.
Also in the third quarter of fiscal 2002, the Company recorded an
$8.2 million pretax charge. This charge related to 1) the write-off of
the net carrying value of the Company's investment in the
WeddingChannel.com, an internet bridal registry service, 2) the
write-down of the carrying values of the fixed assets of the two
Neiman Marcus Galleries stores to estimated fair value and 3) the
accrual of the estimated loss associated with the abandonment of
excess warehouse space held by the Company pursuant to a long-term
operating lease.
During the second quarter of fiscal year 2002, the Company
incurred expenses of approximately $2.0 million in connection with
cost reduction strategies. These expenses consisted primarily of
severance costs and lease termination expenses incurred in connection
with the closing of the Neiman Marcus Galleries store in Seattle,
Washington.
A live webcast of the conference call on earnings can be accessed
through the Investor Information section of the Neiman Marcus Group
website at www.neimanmarcusgroup.com on Wednesday, June 4, 2003
beginning at 4:00 p.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 Group website at www.neimanmarcusgroup.com.
This release contains forward-looking statements, including
statements regarding the Company's objectives and expectations
concerning, among other things, its productivity and profitability;
merchandising and marketing strategies; inventory performance; store
renovation and expansion plans; capital expenditures; liquidity; and
development of management information systems. These forward-looking
statements are made based on management's expectations and beliefs
concerning future events, as well as on assumptions made by and data
currently available to management. Therefore, these forward-looking
statements involve a number of risks and uncertainties and are not
guarantees of future performance. A variety of factors could cause the
Company's actual results to differ materially from the anticipated or
expected results expressed in these forward-looking statements.
Factors that could affect future performance include, but are not
limited to: current political and economic conditions; changes in
political and economic conditions that may occur in the future;
terrorist activities in the United States, as well as the potential
escalation in the international war on terrorism; changes in consumer
confidence resulting in a reduction of discretionary spending on goods
that are, or are perceived to be, "luxuries"; changes in demographic
or retail environments; changes in consumer preferences or fashion
trends; competitive responses to the Company's marketing,
merchandising and promotional efforts and/or inventory liquidations by
vendors or other retailers; delays in the receipt of merchandise
ordered by the Company due to work stoppages and/or other causes of
delay in connection with either the manufacture or shipment of such
merchandise; seasonality of the retail business; adverse weather
conditions, particularly during peak selling seasons; delays in
anticipated store openings; political, social, economic or other
events resulting in the short or long-term disruption in business at
the Company's stores, distribution centers or offices; natural
disasters; significant increases in paper, printing and postage costs;
litigation that may have an adverse effect on the financial results or
reputation of the Company; changes in the Company's relationships with
designers, vendors and other sources of merchandise; the financial
viability of the Company's designers, vendors and other sources of
merchandise; changes in foreign currency exchange rates; impact of
funding requirements related to the Company's noncontributory defined
benefit pension plan; changes in the Company's relationships with
certain of its 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. The Company undertakes no obligation
to update or revise (publicly or otherwise) any forward-looking
statements to reflect subsequent events, new information or future
circumstances.
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands) May 3, April 27,
2003 2002
------- ---------
ASSETS
- ----------------------------------------
Current assets:
Cash and cash equivalents $ 133,670 $ 150,059
Undivided interests in NMG Credit
Card Master Trust 279,556 263,614
Accounts receivable, net 25,132 24,975
Merchandise inventories 719,118 635,252
Other current assets 58,681 57,557
------------------ -----------
Total current assets 1,216,157 1,131,457
------------------ -----------
Property and equipment, net 676,059 647,741
Other assets 107,851 126,210
------------------ -----------
Total assets $ 2,000,067 $1,905,408
================== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ----------------------------------------
Current liabilities:
Notes payable and current maturities
of long-term liabilities $ 1,799 $ 1,098
Accounts payable 224,945 227,237
Accrued liabilities 293,145 284,810
------------------ -----------
Total current liabilities 519,889 513,145
------------------ -----------
Long-term liabilities:
Notes and debentures 249,727 249,704
Other long-term liabilities 87,530 87,389
------------------ -----------
Total long-term liabilities 337,257 337,093
------------------ -----------
Minority interest 9,462 9,508
Total shareholders' equity 1,133,459 1,045,662
------------------ -----------
Total liabilities and shareholders'
equity $ 2,000,067 $1,905,408
================== ===========
THE NEIMAN MARCUS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- -----------------------
(in thousands, except per May 3, April 27, May 3, April 27,
share data) 2003 2002 2003 2002
--------- --------- ----------- -----------
Revenues $722,917 $692,741 $2,395,467 $2,281,976
Cost of goods sold
including buying and
occupancy costs 463,713 441,412 1,572,222 1,523,068
Selling, general and
administrative expenses 187,372 179,292 617,765 597,782
Effect of change in
vacation policy - (16,576) - (16,576)
Impairment and other
charges (1) - 8,163 - 10,163
--------- --------- ----------- -----------
Operating earnings 71,832 80,450 205,480 167,539
Interest expense, net 4,245 3,914 12,183 12,160
--------- --------- ----------- -----------
Earnings before income
taxes, minority interest
and change in accounting
principle 67,587 76,536 193,297 155,379
Income taxes 26,020 29,084 74,419 59,044
--------- --------- ----------- -----------
Earnings before minority
interest and change in
accounting principle 41,567 47,452 118,878 96,335
Minority interest in net
earnings of subsidiaries (437) (489) (1,946) (2,077)
--------- --------- ----------- -----------
Earnings before change in
accounting principle 41,130 46,963 116,932 94,258
Change in accounting
principle - write-down of
intangible assets, net of
taxes - - (14,801) -
--------- --------- ----------- -----------
Net earnings $ 41,130 $ 46,963 $ 102,131 $ 94,258
========= ========= =========== ===========
Weighted average number of
common and common
equivalent shares
outstanding:
Basic 47,240 47,524 47,498 47,407
========= ========= =========== ===========
Diluted 47,497 48,011 47,772 47,782
========= ========= =========== ===========
Basic earnings per share:
Earnings before
effect of change in
accounting principle $ 0.87 $ 0.99 $ 2.46 $ 1.99
Change in accounting
principle - write-down
of intangible assets,
net of taxes - - (0.31) -
--------- --------- ----------- -----------
Basic earnings per
share $ 0.87 $ 0.99 $ 2.15 $ 1.99
========= ========= =========== ===========
Diluted earnings per
share:
Earnings before
effect of change in
accounting principle $ 0.87 $ 0.98 $ 2.45 $ 1.97
Change in accounting
principle - write-down
of intangible assets,
net of taxes - - (0.31) -
--------- --------- ----------- -----------
Diluted earnings per
share $ 0.87 $ 0.98 $ 2.14 $ 1.97
========= ========= =========== ===========
(1) Impairment and other charges for the thirty-nine weeks ended April
27, 2002 include severance costs and lease termination expenses
incurred in connection with the closing of the Neiman Marcus Galleries
store in Seattle, Washington recorded in the second fiscal quarter and
the following impairment and other charges recorded in the third
fiscal quarter: a) the write-off of the net carrying value of the
Company's investment in the WeddingChannel.com, an internet bridal
registry service, b) the write-down of the carrying values of the
fixed assets of the two Neiman Marcus Galleries stores to estimated
fair value and c) the accrual of the estimated loss associated with
the abandonment of the excess warehouse space held by the Company
pursuant to a long-term operating lease.
THE NEIMAN MARCUS GROUP, INC.
OTHER OPERATING DATA
(UNAUDITED)
SEGMENTS: Thirteen Weeks Thirty-Nine Weeks
Ended Ended
--------------------- -------------------
May 3, April 27, May 3, April 27,
(in millions) 2003 2002 2003 2002
---------- --------- --------- ---------
REVENUES:
Specialty Retail Stores $ 591.2 $ 573.4 $1,948.5 $1,880.0
Direct Marketing 112.8 101.7 388.4 348.0
Other (1) 18.9 17.6 58.6 54.0
---------- --------- --------- ---------
Total $ 722.9 $ 692.7 $2,395.5 $2,282.0
========== ========= ========= =========
OPERATING EARNINGS:
Specialty Retail Stores $ 67.3 $ 67.3 $ 182.9 $ 156.5
Direct Marketing 10.4 10.3 35.8 16.3
Other (1) (5.9) (5.6) (13.2) (11.7)
Effect of change in vacation
policy - 16.6 - 16.6
Impairment and other charges - (8.1) - (10.2)
---------- --------- --------- ---------
Total $ 71.8 $ 80.5 $ 205.5 $ 167.5
========== ========= ========= =========
OTHER DATA: Thirteen Weeks Thirty-Nine Weeks
Ended Ended
-------------------- -------------------
(in millions) May 3, April 27, May 3, April 27,
2003 2002 2003 2002
-------- -------- -------- --------
Capital Expenditures $ 16 $ 37 $ 81 $122
Depreciation and Amortization 18 22 58 63
(1) Other includes the results of operations of Kate Spade LLC,
Gurwitch Bristow Products, LLC and corporate expenses. All the
Company's online operations are now included in the Direct Marketing
segment. Previously, certain online operations were included in the
Other business segment.
THE NEIMAN MARCUS GROUP, INC.
RECONCILIATION OF GAAP NET EARNINGS TO NON-GAAP ADJUSTED EARNINGS
(UNAUDITED)
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
------------------ -------------------
(in thousands, except per share May 3, April 27, May 3, April 27,
data) 2003 2002 2003 2002
-------- --------- --------- ---------
Net earnings (GAAP) $41,130 $ 46,963 $102,131 $ 94,258
Effect of change in vacation
policy, net of taxes - (10,277) - (10,277)
Impairment and other
charges, net of taxes (1) - 5,061 - 6,301
Change in accounting
principle - write-down of
intangible assets, net of
taxes - - 14,801 -
-------- --------- --------- ---------
Adjusted earnings (Non-GAAP) $41,130 $ 41,747 $116,932 $ 90,282
======== ========= ========= =========
Diluted earnings per share
(GAAP) $ 0.87 $ 0.98 $ 2.14 $ 1.97
Effect of change in vacation
policy, net of taxes - (0.21) - (0.21)
Impairment and other
charges, net of taxes (1) - 0.10 - 0.13
Change in accounting
principle - write-down of
intangible assets, net of
taxes - - 0.31 -
-------- --------- --------- ---------
Adjusted earnings (Non-GAAP) $ 0.87 $ 0.87 $ 2.45 $ 1.89
======== ========= ========= =========
The Neiman Marcus Group, Inc. believes reporting adjusted earnings
is a more accurate representation of the Company's on-going economic
performance and therefore uses adjusted reporting internally to
evaluate and manage the Company's operations. The Neiman Marcus Group,
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
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.
(1) Impairment and other charges for the thirty-nine weeks ended April
27, 2002 include severance costs and lease termination expenses
incurred in connection with the closing of the Neiman Marcus Galleries
store in Seattle, Washington recorded in the second fiscal quarter and
the following impairment and other charges recorded in the third
fiscal quarter: 1) the write-off of the net carrying value of the
Company's investment in the WeddingChannel.com, an internet bridal
registry service, 2) the write-down of the carrying values of the
fixed assets of the two Neiman Marcus Galleries stores to estimated
fair value and 3) the accrual of the estimated loss associated with
the abandonment of the excess warehouse space held by the Company
pursuant to a long-term operating lease.
CONTACT: The Neiman Marcus Group, Inc., Dallas
James E. Skinner, 214/743-7625
or
Stacie Shirley, 214/757-2967