Neiman Marcus 2013 Annual Report Download - page 31

Table of Contents
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The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited
Consolidated Financial Statements and related notes. Unless otherwise specified, the meanings of all defined terms in Management’s Discussion and
Analysis of Financial Condition and Results of Operations are consistent with the meanings of such terms as defined in the Notes to Consolidated Financial
Statements. This discussion contains forward-looking statements. Please see “—Other Matters—Factors That May Affect Future Results” for a discussion of
the risks, uncertainties and assumptions relating to these statements.
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We are a luxury, multi-branded, omni-channel fashion retailer conducting integrated store and online operations principally under the Neiman
Marcus and Bergdorf Goodman brand names. We report our store operations as our Specialty Retail Stores segment and our direct-to-consumer operations as
our Online segment.
The Company is a subsidiary of NM Mariposa Holdings, Inc., a Delaware corporation (Parent), which is owned by private investment funds affiliated
with Ares Management, L.P. (Ares) and Canada Pension Plan Investment Board (CPPIB, and together with Ares, the Sponsors) and certain co-investors. The
Company’s operations are conducted through its wholly owned subsidiary, The Neiman Marcus Group LLC (NMG). The Sponsors acquired the Company in
a leveraged transaction on October 25, 2013 (the Acquisition). Prior to the Acquisition, we were owned by Newton Holding, LLC, which was controlled by
investment funds affiliated with TPG Global, LLC (together with its affiliates, TPG) and Warburg Pincus LLC (together with TPG, the Former Sponsors). The
accompanying Consolidated Financial Statements are presented as “Predecessor” or “Successor” to indicate whether they relate to the period preceding the
Acquisition or the period succeeding the Acquisition, respectively. The Acquisition and the allocation of the purchase price have been recorded for
accounting purposes as of November 2, 2013, the end of our first quarter of fiscal year 2014.
We have prepared our discussion of the results of operations for the fiscal year ended August 2, 2014 by comparing the results of operations of the
Predecessor for the fiscal year ended August 3, 2013 to the combined amounts obtained by adding the operations and cash flows for the Predecessor thirteen
week period ended November 2, 2013 and the Successor thirty-nine week period ended August 2, 2014. Although this combined presentation does not
comply with U.S. generally accepted accounting principles (GAAP), we believe that it provides a meaningful method of comparison. The combined operating
results have not been prepared on a pro forma basis under applicable regulations and may not reflect the actual results we would have achieved absent the
Acquisition and may not be predictive of future results of operations.
We believe that our customers have allocated a higher portion of their luxury spending to online retailing in recent years and that our customers'
expectations of a seamless shopping experience across our in-store and online channels have increased, and we expect these trends will continue for the
foreseeable future. As a result, we have made investments and redesigned processes to integrate our shopping experience across channels consistent with our
customers' shopping preferences and expectations. In particular, we have invested and continue to invest in technology and systems that further our omni-
channel selling capabilities and in fiscal year 2014, we realigned the merchandising responsibilities for our Neiman Marcus brand into a single team
responsible for inventory procurement for both our store and online channels. With the acceleration of omni-channel retailing and our past and ongoing
investments in omni-channel initiatives, we believe the growth in our total comparable revenues and operating results are the best measures of our ability to
grow our brands. As a result, we are re-evaluating our current segment reporting practices and anticipate that we may begin to report a single "omni-channel"
reporting segment in the future.
Our fiscal year ends on the Saturday closest to July 31. Like many other retailers, we follow a 4-5-4 reporting calendar, which means that each fiscal
quarter consists of thirteen weeks divided into periods of four weeks, five weeks and four weeks. This resulted in an extra week in fiscal year 2013 (the 53rd
week). All references to fiscal year 2014 relate to the combined fifty-two weeks ended August 2, 2014 (calculated as described above). All references to fiscal
year 2013 relate to the fifty-three weeks ended August 3, 2013 and all references to fiscal year 2012 relate to the fifty-two weeks ended July 28, 2012.
References to fiscal year 2015 and years thereafter relate to our fiscal years for such periods.
In connection with the Acquisition, the Company incurred substantial new indebtedness, in part in replacement of former indebtedness. See
“Liquidity and Capital Resources.” In addition, the purchase price paid in connection with the
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