Neiman Marcus 2003 Annual Report Download - page 23

Financing Structure
The Company's major sources of funds are comprised of vendor financing, the $350 million Credit Agreement, the $225 million
Credit Card Facility, $125 million senior unsecured notes, $125 million senior unsecured debentures, operating leases and capital
leases.
The Company has two types of borrowing options under the Credit Agreement, a "committed" borrowing and a "competitive bid"
borrowing. The rate of interest payable under a "committed" borrowing is based on one of two pricing options selected by the
Company, the level of outstanding borrowings and the rating of the Company's senior unsecured long-term debt by Moody's and
Standard & Poor's. The pricing options available to the Company under a "committed" borrowing are based on either LIBOR plus
0.40 percent to 1.50 percent or a "base" rate. The base rate is determined based on the higher of the Prime Rate or the Federal Funds
Rate plus 0.50 percent and a "base" rate margin of up to 0.50 percent. The rate of interest payable under a "competitive bid"
borrowing is based on one of two pricing options selected by the Company. The pricing options are based on either LIBOR plus a
competitive bid margin or an absolute rate, both determined in the competitive auction process. Changes in the ratings of the senior
unsecured long-term debt do not represent an event of default, accelerate repayment of any outstanding borrowings or alter any other
terms of the Credit Agreement. The Credit Agreement contains covenants that require the Company to maintain certain leverage and
fixed charge ratios. The Credit Agreement replaces a previous $300 million unsecured credit facility. At July 31, 2004, the Company
had no borrowings outstanding under the Credit Agreement.
At July 31, 2004, the Company had $225.0 million borrowings under its Credit Card Facility. Repayment of this obligation begins in
April 2005 in six monthly installments of $37.5 million. Therefore, $150.0 million of this obligation is included in current liabilities
and $75.0 million is included in long-term liabilities as of July 31, 2004 in the accompanying consolidated balance sheets.
Borrowings pursuant to the Credit Card Facility bear interest at the contractually-defined rate of one month LIBOR plus 0.27 percent
(1.65 percent at July 31, 2004) and are payable monthly to the holders of the Class A Certificates. Management anticipates
negotiating a new credit card facility to replace the Credit Card Facility prior to the final payoff of its borrowings in September 2005.
In May 1998, the Company issued $250 million of unsecured senior notes and debentures to the public. This debt is comprised of
$125 million of 6.65 percent senior notes, due 2008 and $125 million of 7.125 percent senior debentures, due 2028. Interest on the
securities is payable semiannually. Based upon quoted prices, the fair value of the Company's senior notes and debentures was $268.3
million as of July 31, 2004 and $265.0 million as of August 2, 2003.
In the second quarter of 2004, the Company's Board of Directors initiated a quarterly cash dividend of $0.13 per share. The Company
declared dividends on January 30, 2004, April 30, 2004 and July 30, 2004 aggregating $18.9 million, of which dividends payable of
$6.3 million were included in accrued liabilities in the accompanying consolidated balance sheet as of July 31, 2004 and were paid in
August 2004.
In prior years, the Company's Board of Directors authorized various stock repurchase programs and increases in the number of shares
subject to repurchase. In 2004, the Company repurchased 175,600 shares at an average purchase price of $40.01 during the first
quarter and 10,450 shares at an average price of $50.48 during the fourth quarter. During the second quarter of 2003, the Company
repurchased 524,177 shares at an average price of $28.65. As of July 31, 2004, approximately 1.2 million shares remain available for
repurchase under the Company's stock repurchase programs.
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