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EX-32.1 - EXHIBIT 32.1 - Neiman Marcus Group LTD LLCexhibit321-q1fy16.htm
EX-31.1 - EXHIBIT 31.1 - Neiman Marcus Group LTD LLCexhibit311-q1fy16.htm
EX-31.2 - EXHIBIT 31.2 - Neiman Marcus Group LTD LLCexhibit312-q1fy16.htm

 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 
FORM 10-Q
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 31, 2015
 
OR
 
o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to            
 
Commission file no. 333-133184-12
 
Neiman Marcus Group LTD LLC
(Exact name of registrant as specified in its charter) 
Delaware
20-3509435
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
1618 Main Street
Dallas, Texas
75201
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (214) 743-7600
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes o  No ý
(Note: The registrant is a voluntary filer and not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. Although not subject to these filing requirements, the registrant has filed all reports that would have been required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months had the registrant been subject to such requirements.)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filer o
 
 
Non-accelerated filer x
Smaller reporting company o
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o  No ý

 
 
 
 
 



NEIMAN MARCUS GROUP LTD LLC
 
INDEX
 
 
 
 
Page
Part I.
Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II.
Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




NEIMAN MARCUS GROUP LTD LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
(in thousands, except units)
 
October 31,
2015
 
August 1,
2015
 
November 1,
2014
 
 
 
 
 
 
 
ASSETS
 
 

 
 

 
 

Current assets:
 
 

 
 

 
 

Cash and cash equivalents
 
$
58,582

 
$
72,974

 
$
81,577

Merchandise inventories
 
1,350,377

 
1,154,844

 
1,280,752

Deferred income taxes
 
40,393

 
30,714

 
37,081

Other current assets
 
129,401

 
126,169

 
107,296

Total current assets
 
1,578,753

 
1,384,701

 
1,506,706

 
 
 
 
 
 
 
Property and equipment, net
 
1,504,390

 
1,477,886

 
1,409,144

Intangible assets, net
 
3,569,650

 
3,598,562

 
3,696,979

Goodwill
 
2,272,571

 
2,272,483

 
2,292,626

Other assets
 
134,493

 
142,130

 
155,331

Total assets
 
$
9,059,857

 
$
8,875,762

 
$
9,060,786

 
 
 
 
 
 
 
LIABILITIES AND MEMBER EQUITY
 
 

 
 

 
 

Current liabilities:
 
 

 
 

 
 

Accounts payable
 
$
323,237

 
$
342,999

 
$
372,616

Accrued liabilities
 
468,653

 
465,402

 
475,299

Current portion of long-term debt
 
29,426

 
29,426

 
29,426

Total current liabilities
 
821,316

 
837,827

 
877,341

 
 
 
 
 
 
 
Long-term liabilities:
 
 

 
 

 
 

Long-term debt
 
4,884,005

 
4,681,309

 
4,803,218

Deferred income taxes
 
1,463,766

 
1,471,091

 
1,538,082

Other long-term liabilities
 
487,236

 
471,791

 
412,456

Total long-term liabilities
 
6,835,007

 
6,624,191

 
6,753,756

 
 
 
 
 
 
 
Membership unit (1 unit issued and outstanding at October 31, 2015, August 1, 2015 and November 1, 2014)
 

 

 

Member capital
 
1,584,106

 
1,584,106

 
1,584,106

Accumulated other comprehensive loss
 
(50,900
)
 
(51,228
)
 
(20,530
)
Accumulated deficit
 
(129,672
)
 
(119,134
)
 
(133,887
)
Total member equity
 
1,403,534

 
1,413,744

 
1,429,689

Total liabilities and member equity
 
$
9,059,857

 
$
8,875,762

 
$
9,060,786

 
See Notes to Condensed Consolidated Financial Statements.


1


NEIMAN MARCUS GROUP LTD LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
 
Thirteen weeks ended
(in thousands)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
Revenues
 
$
1,164,900

 
$
1,186,492

Cost of goods sold including buying and occupancy costs (excluding depreciation)
 
736,074

 
728,394

Selling, general and administrative expenses (excluding depreciation)
 
285,342

 
286,317

Income from credit card program
 
(13,287
)
 
(14,123
)
Depreciation expense
 
55,890

 
43,508

Amortization of intangible assets
 
15,353

 
36,017

Amortization of favorable lease commitments
 
13,612

 
13,494

Other expenses
 
17,098

 
19,800

 
 
 
 
 
Operating earnings
 
54,818

 
73,085

 
 
 
 
 
Interest expense, net
 
71,685

 
72,610

 
 
 
 
 
Earnings (loss) before income taxes
 
(16,867
)
 
475

 
 
 
 
 
Income tax expense (benefit)
 
(6,329
)
 
279

 
 
 
 
 
Net earnings (loss)
 
$
(10,538
)
 
$
196


See Notes to Condensed Consolidated Financial Statements.




2


NEIMAN MARCUS GROUP LTD LLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
 
 
 
Thirteen weeks ended
(in thousands)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
Net earnings (loss)
 
$
(10,538
)
 
$
196

 
 
 
 
 
Other comprehensive earnings (loss):
 
 

 
 

Foreign currency translation adjustments, net of tax
 
116

 

Change in unrealized loss on financial instruments, net of tax
 
823

 
(1,191
)
Change in unrealized loss on unfunded benefit obligations, net of tax
 
(611
)
 
(1,910
)
Total other comprehensive earnings (loss)
 
328

 
(3,101
)
 
 
 
 
 
Total comprehensive loss
 
$
(10,210
)
 
$
(2,905
)
 
See Notes to Condensed Consolidated Financial Statements.


3


NEIMAN MARCUS GROUP LTD LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
 
Thirteen weeks ended
(in thousands)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
CASH FLOWS - OPERATING ACTIVITIES
 
 

 
 

Net earnings (loss)
 
$
(10,538
)
 
$
196

Adjustments to reconcile net earnings (loss) to net cash used for operating activities:
 
 

 
 

Depreciation and amortization expense
 
90,998

 
99,150

Deferred income taxes
 
(17,201
)
 
(25,596
)
Other
 
4,293

 
3,539

 
 
67,552

 
77,289

Changes in operating assets and liabilities, excluding net assets acquired:
 
 

 
 

Merchandise inventories
 
(195,448
)
 
(169,264
)
Other current assets
 
(3,208
)
 
1,885

Other assets
 
1,373

 
(852
)
Accounts payable and accrued liabilities
 
(21,622
)
 
(10,702
)
Deferred real estate credits
 
9,267

 
2,420

Net cash used for operating activities
 
(142,086
)
 
(99,224
)
 
 
 
 
 
CASH FLOWS - INVESTING ACTIVITIES
 
 

 
 

Capital expenditures
 
(74,950
)
 
(56,361
)
Acquisition of MyTheresa
 

 
(181,727
)
Net cash used for investing activities
 
(74,950
)
 
(238,088
)
 
 
 
 
 
CASH FLOWS - FINANCING ACTIVITIES
 
 

 
 

Borrowings under senior secured asset-based revolving credit facility
 
250,000

 
230,000

Repayment of borrowings under senior secured asset-based revolving credit facility
 
(40,000
)
 

Repayment of borrowings under senior secured term loan facility
 
(7,356
)
 
(7,357
)
Debt issuance costs paid
 

 
(230
)
Net cash provided by financing activities
 
202,644

 
222,413

 
 
 
 
 
CASH AND CASH EQUIVALENTS
 
 

 
 

Decrease during the period
 
(14,392
)
 
(114,899
)
Beginning balance
 
72,974

 
196,476

Ending balance
 
$
58,582

 
$
81,577

 
 
 
 
 
Supplemental Schedule of Cash Flow Information
 
 

 
 

Cash paid during the period for:
 
 

 
 

Interest
 
$
98,470

 
$
97,825

Income taxes
 
$
3,527

 
$
255

Non-cash activities:
 
 

 
 

Contingent earn-out obligation incurred in connection with acquisition of MyTheresa
 
$

 
$
50,043

See Notes to Condensed Consolidated Financial Statements.

4


NEIMAN MARCUS GROUP LTD LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
1.              Basis of Presentation
 
Neiman Marcus Group LTD LLC (the Company) is a luxury omni-channel retailer conducting store and online operations principally under the Neiman Marcus, Bergdorf Goodman and MyTheresa brand names.  References to “we,” “our” and “us” are used to refer to the Company or collectively to the Company and its subsidiaries, as appropriate to the context.

On October 25, 2013, the Company merged with and into Mariposa Merger Sub LLC (Mariposa) pursuant to an Agreement and Plan of Merger, dated September 9, 2013, by and among Neiman Marcus Group, Inc. (f/k/a NM Mariposa Holdings, Inc.) (Parent), Mariposa and the Company, with the Company surviving the merger (the Acquisition).  As a result of the Acquisition and the Conversion (as defined below), the Company is now a direct subsidiary of Mariposa Intermediate Holdings LLC (Holdings), which in turn is a direct subsidiary of Parent. Parent is owned by entities affiliated with Ares Management, L.P. and Canada Pension Plan Investment Board (together, the Sponsors) and certain co-investors.  Previously, the Company was a subsidiary of Newton Holding, LLC, which was controlled by investment funds affiliated with TPG Global, LLC (collectively with its affiliates, TPG) and Warburg Pincus LLC (together with TPG, the Former Sponsors).  On October 28, 2013, the Company and NMG (as defined below) each converted from a Delaware corporation to a Delaware limited liability company (the Conversion).
 
The Company’s operations are conducted through its direct wholly owned subsidiary, The Neiman Marcus Group LLC (NMG).

In October 2014, we acquired MyTheresa, a luxury retailer headquartered in Munich, Germany. The operations of MyTheresa are conducted primarily through the mytheresa.com global luxury website.

The accompanying Condensed Consolidated Financial Statements set forth financial information of the Company and its subsidiaries on a consolidated basis.  All significant intercompany accounts and transactions have been eliminated.

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.  All references to (i) the first quarter of fiscal year 2016 relate to the thirteen weeks ended October 31, 2015 and (ii) the first quarter of fiscal year 2015 relate to the thirteen weeks ended November 1, 2014.
 
We have prepared the accompanying Condensed Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and Rule 10-01 of Regulation S-X of the Securities Act of 1933, as amended.  Accordingly, these financial statements do not include all of the information and footnotes required by GAAP for complete financial statements.  Therefore, these financial statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.  In our opinion, the accompanying Condensed Consolidated Financial Statements contain all adjustments, consisting of normal recurring adjustments, necessary to present fairly our financial position, results of operations and cash flows for the applicable interim periods.
 
The luxury retail industry is seasonal in nature, with higher sales typically generated in the fall and holiday selling seasons.  Due to seasonal and other factors, the results of operations for the first quarter of fiscal year 2016 are not necessarily comparable to, or indicative of, results of any other interim period or for the fiscal year as a whole.
 
A detailed description of our critical accounting policies is included in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.

Certain prior period balances have been reclassified to conform to the current period presentation.

Use of Estimates.  We are required to make estimates and assumptions about future events in preparing our financial statements in conformity with GAAP.  These estimates and assumptions affect the amounts of assets, liabilities, revenues and expenses and the disclosure of gain and loss contingencies at the date of the accompanying Condensed Consolidated Financial Statements.
 
While we believe that our past estimates and assumptions have been materially accurate, the amounts currently estimated are subject to change if different assumptions as to the outcome of future events were made.  We evaluate our estimates and assumptions on an ongoing basis and predicate those estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances.  We make adjustments to our estimates and assumptions when facts and circumstances

5


dictate.  Since future events and their effects cannot be determined with absolute certainty, actual results may differ from the estimates and assumptions used in preparing the accompanying Condensed Consolidated Financial Statements.

We believe the following critical accounting policies, among others, encompass the more significant estimates, assumptions and judgments used in the preparation of the accompanying Condensed Consolidated Financial Statements:

allocation of the price paid to acquire MyTheresa to our assets and liabilities as of the acquisition date (as more fully described in Note 2); 
recognition of revenues;
valuation of merchandise inventories, including determination of original retail values, recognition of markdowns and vendor allowances, estimation of inventory shrinkage and determination of cost of goods sold;
determination of impairment of intangible and long-lived assets;
measurement of liabilities related to our loyalty program;
recognition of income taxes; and
measurement of accruals for general liability, workers’ compensation and health insurance claims and pension and postretirement health care benefits.
Segments. We conduct our specialty retail store and online operations on an omni-channel basis. As our store and online operations have similar economic characteristics, products, services and customers, our operations constitute a single omni-channel reportable segment.
 
Recent Accounting Pronouncements. In May 2014, the Financial Accounting Standards Board (FASB) issued guidance to clarify the principles for revenue recognition. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most recent revenue recognition guidance. This new guidance is effective for us no earlier than the first quarter of fiscal year 2019 using one of two retrospective application methods. We are currently evaluating which application method to adopt and the impact of adopting this new accounting guidance on our Condensed Consolidated Financial Statements.

We do not expect that any other recently issued accounting pronouncements will have a material impact on our Condensed Consolidated Financial Statements.


2.              MyTheresa Acquisition

In October 2014, we acquired MyTheresa, a luxury retailer headquartered in Munich, Germany. The operations of MyTheresa are conducted primarily through the mytheresa.com global luxury website. The purchase price paid to acquire MyTheresa, net of cash acquired, was $181.7 million, which was financed through a combination of cash and debt. In addition, the MyTheresa purchase agreement contains contingent earn-out payments of up to €27.5 million per year for operating performance for each of calendar years 2015 and 2016.
 
The accompanying Condensed Consolidated Balance Sheet as of November 1, 2014 has been recast to reflect the final purchase accounting adjustments reflected in our Condensed Consolidated Balance Sheet as of August 1, 2015. MyTheresa results of operations are included in our condensed consolidated results of operations beginning in the second quarter of fiscal year 2015.


6


3.              Fair Value Measurements
 
Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.  Assets and liabilities are classified using a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value as follows:

Level 1 — Unadjusted quoted prices for identical instruments traded in active markets.
Level 2 — Observable market-based inputs or unobservable inputs corroborated by market data.
Level 3 — Unobservable inputs reflecting management’s estimates and assumptions.
The following table shows the Company’s financial assets that are required to be measured at fair value on a recurring basis in our Condensed Consolidated Balance Sheets:
(in thousands)
 
Fair Value
Hierarchy
 
October 31,
2015
 
August 1,
2015
 
November 1,
2014
 
 
 
 
 
 
 
 
 
Other long-term assets:
 
 
 
 

 
 

 
 

Interest rate caps
 
Level 2
 
$

 
$
21

 
$
529

 
 
 
 
 
 
 
 
 
Other long-term liabilities:
 
 
 
 
 
 
 
 
Contingent earn-out obligation
 
Level 3
 
$
53,809

 
$
51,251

 
$
50,043

 
The fair value of the interest rate caps are estimated using industry standard valuation models using market-based observable inputs, including interest rate curves.  In addition, the fair value of the interest rate caps includes consideration of the counterparty’s non-performance risk.

The fair value of the contingent earn-out obligation incurred in connection with the acquisition of MyTheresa was estimated as of the acquisition date using a valuation model that measured the present value of the probable cash payments based upon the forecasted operating performance of MyTheresa and a discount rate that captures the risk associated with the obligation. We update our assumptions based on new developments and adjust the carrying value of the obligation to its estimated fair value at each reporting date.
 
The carrying values of cash and cash equivalents, credit card receivables and accounts payable approximate fair value due to their short-term nature.  We determine the fair value of our long-term debt on a non-recurring basis, which results are summarized as follows:
 
 
 
 
October 31, 2015
 
August 1, 2015
 
November 1, 2014
(in thousands)
 
Fair Value
Hierarchy
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt:
 
 
 
 

 
 

 
 

 
 

 
 

 
 

Asset-Based Revolving Credit Facility
 
Level 2
 
$
340,000

 
$
340,000

 
$
130,000

 
$
130,000

 
$
230,000

 
$
230,000

Senior Secured Term Loan Facility
 
Level 2
 
2,891,129

 
2,824,286

 
2,898,485

 
2,887,616

 
2,920,555

 
2,887,699

Cash Pay Notes
 
Level 2
 
960,000

 
999,600

 
960,000

 
1,021,200

 
960,000

 
1,027,200

PIK Toggle Notes
 
Level 2
 
600,000

 
626,220

 
600,000

 
639,120

 
600,000

 
643,500

2028 Debentures
 
Level 2
 
122,302

 
126,250

 
122,250

 
124,531

 
122,089

 
129,094

 
We estimated the fair value of long-term debt using (i) prevailing market rates for debt of similar remaining maturities and credit risk for the senior secured asset-based revolving credit facility (as amended, the Asset-Based Revolving Credit Facility) and the senior secured term loan facility (as amended, the Senior Secured Term Loan Facility and, together with the Asset-Based Revolving Credit Facility, the Senior Secured Credit Facilities) and (ii) quoted market prices of the same or similar issues for the $960.0 million aggregate principal amount of 8.00% Senior Cash Pay Notes due 2021 (the Cash Pay Notes), the $600.0 million aggregate principal amount of 8.75%/9.50% Senior PIK Toggle Notes due 2021 (the PIK Toggle Notes) and the $125.0 million aggregate

7


principal amount of 7.125% Debentures due 2028 (the 2028 Debentures and, together with the Cash Pay Notes and the PIK Toggle Notes, the Notes).
 
In connection with purchase accounting, we made estimates of the fair value of our long-lived and intangible assets based upon assumptions related to the future cash flows, discount rates and asset lives utilizing currently available information, and in some cases, valuation results from independent valuation specialists (Level 3 determination of fair value).  We also measure certain non-financial assets at fair value on a non-recurring basis, primarily long-lived assets, intangible assets and goodwill, in connection with our periodic evaluations of such assets for potential impairment.


4.     Intangible Assets, Net and Goodwill
 
(in thousands)
 
October 31,
2015
 
August 1,
2015
 
November 1,
2014
 
 
 
 
 
 
 
Favorable lease commitments, net
 
$
1,026,828

 
$
1,040,440

 
$
1,081,273

Other definite-lived intangible assets, net
 
505,928

 
521,275

 
570,254

Tradenames
 
2,036,894

 
2,036,847

 
2,045,452

Intangible assets, net
 
$
3,569,650

 
$
3,598,562

 
$
3,696,979

 
 
 
 
 
 
 
Goodwill
 
$
2,272,571

 
$
2,272,483

 
$
2,292,626


Intangible Assets Subject to Amortization. Our definite-lived intangible assets, which primarily consist of customer lists, are amortized using accelerated methods which reflect the pattern in which we receive the economic benefit of the asset, currently estimated at six to 16 years (weighted average life of 13 years from the respective acquisition dates).  Favorable lease commitments are amortized straight-line over the remaining lives of the leases, ranging from two to 55 years (weighted average life of 30 years from the respective acquisition dates).

Total amortization of all intangible assets recorded in connection with acquisitions for the current and next five fiscal years is currently estimated as follows (in thousands):
November 1, 2015 through July 30, 2016
$
82,716

2017
105,701

2018
99,755

2019
96,631

2020
89,970

2021
84,027


At October 31, 2015, accumulated amortization was $206.2 million for other definite-lived intangible assets and $108.7 million for favorable lease commitments.

Indefinite-lived Intangible Assets and Goodwill.  Indefinite-lived intangible assets, such as our Neiman Marcus, Bergdorf Goodman and MyTheresa tradenames and goodwill, are not subject to amortization.  Rather, we assess the recoverability of indefinite-lived intangible assets and goodwill in the fourth quarter of each fiscal year and upon the occurrence of certain events.


8


5.              Long-term Debt
 
The significant components of our long-term debt are as follows:
(in thousands)
 
Interest
Rate
 
October 31,
2015
 
August 1,
2015
 
November 1,
2014
 
 
 
 
 
 
 
 
 
Asset-Based Revolving Credit Facility
 
variable
 
$
340,000

 
$
130,000

 
$
230,000

Senior Secured Term Loan Facility
 
variable
 
2,891,129

 
2,898,485

 
2,920,555

Cash Pay Notes
 
8.00%
 
960,000

 
960,000

 
960,000

PIK Toggle Notes
 
8.75%/9.50%
 
600,000

 
600,000

 
600,000

2028 Debentures
 
7.125%
 
122,302

 
122,250

 
122,089

Total debt
 
 
 
4,913,431

 
4,710,735

 
4,832,644

Less: current portion of Senior Secured Term Loan Facility
 
 
 
(29,426
)
 
(29,426
)
 
(29,426
)
Long-term debt
 
 
 
$
4,884,005

 
$
4,681,309

 
$
4,803,218

Asset-Based Revolving Credit Facility.  On October 25, 2013, Neiman Marcus Group LTD LLC entered into a credit agreement and related security and other agreements for the Asset-Based Revolving Credit Facility. At October 31, 2015, the Asset-Based Revolving Credit Facility provided for a maximum committed borrowing capacity of $900.0 million. The Asset-Based Revolving Credit Facility matures on October 25, 2018.  On October 31, 2015, we had $340.0 million of borrowings outstanding under this facility, no outstanding letters of credit and $470.0 million of unused borrowing availability.
 
Availability under the Asset-Based Revolving Credit Facility is subject to a borrowing base.  The Asset-Based Revolving Credit Facility includes borrowing capacity available for letters of credit (up to $150.0 million, with any such issuance of letters of credit reducing the amount available under the Asset-Based Revolving Credit Facility on a dollar-for-dollar basis) and for borrowings on same-day notice.  The borrowing base is equal to at any time the sum of (a) 90% of the net orderly liquidation value of eligible inventory, net of certain reserves, plus (b) 90% of the amounts owed by credit card processors in respect of eligible credit card accounts constituting proceeds from the sale or disposition of inventory, less certain reserves, plus (c) 100% of segregated cash held in a restricted deposit account.  To the extent that excess availability is not equal to or greater than the greater of (a) 10% of the lesser of (1) the aggregate revolving commitments and (2) the borrowing base and (b) $50.0 million, we will be required to maintain a fixed charge coverage ratio.
 
The Asset-Based Revolving Credit Facility permits us to increase commitments under the Asset-Based Revolving Credit Facility or add one or more incremental term loans to the Asset-Based Revolving Credit Facility by an amount not to exceed $200.0 million. However, the lenders are under no obligation to provide any such additional commitments or loans, and any increase in commitments or incremental term loans will be subject to customary conditions precedent.  If we were to request any such additional commitments and the existing lenders or new lenders were to agree to provide such commitments, the size of the Asset-Based Revolving Credit Facility could be increased to up to $1,100.0 million, but our ability to borrow would still be limited by the amount of the borrowing base.  The cash proceeds of any incremental term loans may be used for working capital and general corporate purposes.

At October 31, 2015, borrowings under the Asset-Based Revolving Credit Facility bore interest at a rate per annum equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Deutsche Bank AG New York Branch (the administrative agent), (2) the federal funds effective rate plus ½ of 1.00% and (3) the adjusted one-month LIBOR plus 1.00% or (b) LIBOR, subject to certain adjustments, in each case plus an applicable margin (1.25% at October 31, 2015).  The applicable margin is up to 0.75% with respect to base rate borrowings and up to 1.75% with respect to LIBOR borrowings.  The applicable margin is subject to adjustment based on the average historical excess availability under the Asset-Based Revolving Credit Facility. The weighted average interest rate on the outstanding borrowings pursuant to the Asset-Based Revolving Credit Facility was 1.45% at October 31, 2015.  In addition, we are required to pay a commitment fee in respect of unused commitments at a rate of 0.25% per annum.  We must also pay customary letter of credit fees and agency fees.

If at any time the aggregate amount of outstanding revolving loans, unreimbursed letter of credit drawings and undrawn letters of credit under the Asset-Based Revolving Credit Facility exceeds the lesser of (a) the aggregate revolving commitments and (b) the borrowing base, we will be required to repay outstanding loans or cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.  If the excess availability under the Asset-Based Revolving Credit Facility is less than the greater of (a) 10% of the lesser of (1) the aggregate revolving commitments and (2) the borrowing base and (b) $50.0 million for a period of five or more consecutive business days, funds held in a collection account maintained with the agent would be applied to repay the loans and other obligations and cash collateralize letters of credit.  We would then be required to make daily deposits in the collection account maintained with the agent under the Asset-Based Revolving Credit Facility.

9


 
We may voluntarily reduce the unutilized portion of the commitment amount and repay outstanding loans at any time without premium or penalty other than customary breakage costs with respect to LIBOR loans.  There is no scheduled amortization under the Asset-Based Revolving Credit Facility; the principal amount of the revolving loans outstanding thereunder will be due and payable in full on October 25, 2018, unless extended.
 
The Asset-Based Revolving Credit Facility is guaranteed by Holdings and each of our current and future direct and indirect wholly owned subsidiaries (subsidiary guarantors) other than (a) unrestricted subsidiaries, (b) certain immaterial subsidiaries, (c) foreign subsidiaries and any domestic subsidiary of a foreign subsidiary, (d) certain holding companies of foreign subsidiaries, (e) captive insurance subsidiaries, not for profit subsidiaries, or a subsidiary which is a special purpose entity for securitization transactions or like special purposes and (f) any subsidiary that is prohibited by applicable law or contractual obligation from acting as a guarantor or which would require governmental approval to provide a guarantee. At October 31, 2015, the assets of non-guarantor subsidiaries, primarily NMG Germany GmbH (through which we conduct the operations of MyTheresa), were $266.5 million, or 2.9% of consolidated total assets. All obligations under the Asset-Based Revolving Credit Facility, and the guarantees of those obligations, are secured, subject to certain significant exceptions, by substantially all of the assets of Holdings, the Company and the subsidiary guarantors.
The Asset-Based Revolving Credit Facility contains covenants limiting, among other things, dividends and other restricted payments, investments, loans, advances and acquisitions, and prepayments or redemptions of other indebtedness.  These covenants permit such restricted actions in an unlimited amount, subject to the satisfaction of certain payment conditions, principally that we must have (x) pro forma excess availability under the Asset-Based Revolving Credit Facility for each day of the 30-day period prior to such actions, which exceeds the greater of $90.0 million or 15% of the lesser of (a) the revolving commitments under the Asset-Based Revolving Credit Facility and (b) the borrowing base and (y) a pro forma fixed charge coverage ratio of at least 1.0 to 1.0, unless pro forma excess availability for each day of the 30-day period prior to such actions under the Asset-Based Revolving Credit Facility would exceed the greater of (1) $200.0 million and (2) 25% of the lesser of (i) the aggregate revolving commitments under the Asset-Based Revolving Credit Facility and (ii) the borrowing base.  The Asset-Based Revolving Credit Facility also contains customary affirmative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50.0 million.
For a more detailed description of the Asset-Based Revolving Credit Facility, refer to Note 8 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.
 
Senior Secured Term Loan Facility.  On October 25, 2013, Neiman Marcus Group LTD LLC entered into a credit agreement and related security and other agreements for the $2,950.0 million Senior Secured Term Loan Facility. At October 31, 2015 (after giving effect to the Refinancing Amendment described below), the outstanding balance under the Senior Secured Term Loan Facility was $2,891.1 million. The principal amount of the loans outstanding is due and payable in full on October 25, 2020.
 
The Senior Secured Term Loan Facility permits us to increase the term loans or add a separate tranche of term loans by an amount not to exceed $650.0 million plus an unlimited amount that would result (a) in the case of any incremental term loan facility to be secured equally and ratably with the term loans, a senior secured first lien net leverage ratio equal to or less than 4.25 to 1.00, and (b) in the case of any incremental term loan facility to be secured on a junior basis to the term loans, to be subordinated in right of payment to the term loans or unsecured and pari passu in right of payment with the term loans, a total net leverage ratio equal to or less than the total net leverage ratio as of October 25, 2013.

On March 13, 2014, we entered into a refinancing amendment with respect to the Senior Secured Term Loan Facility (the Refinancing Amendment). The Refinancing Amendment provided for an immediate reduction in the interest rate margin applicable to the loans outstanding under the Senior Secured Term Loan Facility from (a) 4.00% to 3.25% for LIBOR borrowings and (b) 3.00% to 2.25% for base rate borrowings. In addition, the interest rate margin in the event of a step down based on our senior secured first lien net leverage, as defined in the credit agreement governing the Senior Secured Term Loan Facility, was reduced from (1) 3.75% to 3.00% for LIBOR borrowings and (2) 2.75% to 2.00% for base rate borrowings. Substantially all other terms are consistent with the credit agreement governing the Senior Secured Term Loan Facility as of October 25, 2013, including the amortization schedule and maturity dates.
 
At October 31, 2015, borrowings under the Senior Secured Term Loan Facility bore interest at a rate per annum equal to, at our option, either (a) a base rate determined by reference to the highest of (1) the prime rate of Credit Suisse AG (the administrative agent), (2) the federal funds effective rate plus ½ of 1.00% and (3) the adjusted one-month LIBOR plus 1.00%, or (b) an adjusted LIBOR (for a period equal to the relevant interest period, and in any event, never less than 1.00%), subject to certain adjustments, in each case plus an applicable margin.  The applicable margin is up to 2.25% with respect to base rate borrowings and up to 3.25%

10


with respect to LIBOR borrowings.  The applicable margin is subject to adjustment based on our senior secured first lien net leverage ratio.  The applicable margin with respect to outstanding LIBOR borrowings was 3.25% at October 31, 2015.  The interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 4.25% at October 31, 2015.
 
Subject to certain exceptions and reinvestment rights, the Senior Secured Term Loan Facility requires that 100% of the net cash proceeds from certain asset sales and debt issuances and 50% (which percentage will be reduced to 25% if our senior secured first lien net leverage ratio, as defined in the credit agreement governing the Senior Secured Term Loan Facility, is equal to or less than 4.0 to 1.0 but greater than 3.5 to 1.0 and will be reduced to 0% if our senior secured first lien net leverage ratio is equal to or less than 3.5 to 1.0) from excess cash flow, as defined in the credit agreement governing the Senior Secured Term Loan Facility, for each of our fiscal years (commencing with the period ended July 26, 2015) must be used to prepay outstanding term loans under the Senior Secured Term Loan Facility at 100% of the principal amount to be prepaid, plus accrued and unpaid interest. We were not required to prepay any outstanding term loans pursuant to the annual excess cash flow requirements for fiscal year 2015.
 
We may repay all or any portion of the Senior Secured Term Loan Facility at any time, subject to redeployment costs in the case of prepayment of LIBOR borrowings other than the last day of the relevant interest period. The Senior Secured Term Loan Facility amortizes in equal quarterly installments in an amount equal to 1.00% per annum of the principal amount outstanding as of the Refinancing Amendment, less certain voluntary or mandatory prepayments, with the remaining balance due at final maturity.
 
The Senior Secured Term Loan Facility is guaranteed by Holdings and each of our current and future subsidiary guarantors other than (a) unrestricted subsidiaries, (b) certain immaterial subsidiaries, (c) foreign subsidiaries and any domestic subsidiary of a foreign subsidiary, (d) certain holding companies of foreign subsidiaries, (e) captive insurance subsidiaries, not for profit subsidiaries, or a subsidiary which is a special purpose entity for securitization transactions or like special purposes and (f) any subsidiary that is prohibited by applicable law or contractual obligation from acting as a guarantor or which would require governmental approval to provide a guarantee. At October 31, 2015, the assets of non-guarantor subsidiaries, primarily NMG Germany GmbH (through which we conduct the operations of MyTheresa), were $266.5 million, or 2.9% of consolidated total assets. All obligations under the Senior Secured Term Loan Facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all of the assets of Holdings, the Company and the subsidiary guarantors.
The credit agreement governing the Senior Secured Term Loan Facility contains a number of negative covenants and covenants related to the security arrangements for the Senior Secured Term Loan Facility.  The credit agreement also contains customary affirmative covenants and events of default, including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50.0 million.
For a more detailed description of the Senior Secured Term Loan Facility, refer to Note 8 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.
 
Cash Pay Notes.  In connection with the Acquisition, Neiman Marcus Group LTD LLC, along with Mariposa Borrower, Inc. as co-issuer, incurred indebtedness in the form of $960.0 million aggregate principal amount of 8.00% Senior Cash Pay Notes due 2021.  Interest on the Cash Pay Notes is payable semi-annually in arrears on each April 15 and October 15.  The Cash Pay Notes are guaranteed by the same entities that guarantee the Senior Secured Term Loan Facility, other than Holdings.  The Cash Pay Notes are unsecured and the guarantees are full and unconditional.  The Cash Pay Notes mature on October 15, 2021.

We may redeem the Cash Pay Notes, in whole or in part, at any time and from time to time prior to October 15, 2016, at a price equal to 100% of the principal amount of the Cash Pay Notes redeemed plus accrued and unpaid interest up to the redemption date plus the applicable premium. In addition, we may redeem up to 40% in the aggregate principal amount of the Cash Pay Notes with the net proceeds of certain equity offerings at any time and from time to time before October 15, 2016 at a redemption price equal to 108.00% of the face amount thereof, plus accrued and unpaid interest up to the date of redemption, so long as at least 50% of the original aggregate principal amount of the Cash Pay Notes remain outstanding after such redemption and such redemption occurs within 120 days of the equity offering. On and after October 15, 2016, we may redeem the Cash Pay Notes, in whole or in part, at the redemption prices set forth in the indenture governing the Cash Pay Notes.

For a more detailed description of the Cash Pay Notes, refer to Note 8 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.

PIK Toggle Notes.  In connection with the Acquisition, Neiman Marcus Group LTD LLC, along with Mariposa Borrower, Inc. as co-issuer, incurred indebtedness in the form of $600.0 million aggregate principal amount of 8.75%/9.50% Senior PIK Toggle Notes due 2021. The PIK Toggle Notes are guaranteed by the same entities that guarantee the Senior Secured Term Loan Facility, other than Holdings. The PIK Toggle Notes are unsecured and the guarantees are full and unconditional. The PIK Toggle Notes mature

11


on October 15, 2021. Interest on the PIK Toggle Notes is payable semi-annually in arrears on each April 15 and October 15.  Interest on the PIK Toggle Notes was paid entirely in cash for the first two interest payments and now may be paid (i) entirely in cash (Cash Interest), (ii) entirely by increasing the principal amount of the PIK Toggle Notes by the relevant interest (PIK Interest), or (iii) 50% in Cash Interest and 50% in PIK Interest, subject to certain restrictions on the timing and number of elections of PIK Interest or partial PIK Interest payments.  Cash Interest on the PIK Toggle Notes accrues at a rate of 8.75% per annum.  PIK Interest on the PIK Toggle Notes accrues at a rate of 9.50% per annum.

We may redeem the PIK Toggle Notes, in whole or in part, at any time and from time to time prior to October 15, 2016, at a price equal to 100% of the principal amount of the PIK Toggle Notes redeemed plus accrued and unpaid interest up to the redemption date plus the applicable premium. In addition, we may redeem up to 40% in the aggregate principal amount of the PIK Toggle Notes with the net proceeds of certain equity offerings at any time and from time to time before October 15, 2016 at a redemption price equal to 108.75% of the face amount thereof, plus accrued and unpaid interest up to the date of redemption, so long as at least 50% of the original aggregate principal amount of the PIK Toggle Notes remain outstanding after such redemption and such redemption occurs within 120 days of the equity offering. On and after October 15, 2016, we may redeem the PIK Toggle Notes, in whole or in part, at the redemption prices set forth in the indenture governing the PIK Toggle Notes.

For a more detailed description of the PIK Toggle Notes, refer to Note 8 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.

2028 Debentures.  NMG has outstanding $125.0 million aggregate principal amount of our 7.125% Senior Debentures due 2028.  The 2028 Debentures are secured by a first lien security interest on certain collateral subject to liens granted under the Senior Secured Credit Facilities.  The 2028 Debentures are guaranteed on an unsecured, senior basis by the Company.  The guarantee is full and unconditional.  At October 31, 2015, our non-guarantor subsidiaries consisted principally of Bergdorf Goodman, Inc., through which we conduct the operations of our Bergdorf Goodman stores, NM Nevada Trust, which holds legal title to certain real property and intangible assets used by us in conducting our operations, and NMG Germany GmbH, through which we conduct the operations of MyTheresa.  The 2028 Debentures include certain restrictive covenants and a cross-acceleration provision in respect of any other indebtedness that has an aggregate principal amount exceeding $15.0 million.  The 2028 Debentures mature on June 1, 2028.
 
For a more detailed description of the 2028 Debentures, refer to Note 8 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.

Maturities of Long-term Debt.  At October 31, 2015, annual maturities of long-term debt during the current and next five fiscal years and thereafter are as follows (in millions):
November 1, 2015 through July 30, 2016
$
22.1

2017
29.4

2018
29.4

2019
369.4

2020
29.4

2021
2,751.4

Thereafter
1,682.3

 
The previous table does not reflect future excess cash flow prepayments, if any, that may be required under the Senior Secured Term Loan Facility.
 

12


Interest Expense.  The significant components of interest expense are as follows:
 
 
Thirteen weeks ended
(in thousands)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
Asset-Based Revolving Credit Facility
 
$
874

 
$
230

Senior Secured Term Loan Facility
 
31,169

 
31,579

Cash Pay Notes
 
19,200

 
19,200

PIK Toggle Notes
 
13,125

 
13,125

2028 Debentures
 
2,227

 
2,227

Amortization of debt issue costs
 
6,143

 
6,131

Other, net
 
(1,053
)
 
118

Interest expense, net
 
$
71,685

 
$
72,610



6.              Derivative Financial Instruments
 
At October 31, 2015, we had outstanding floating rate debt obligations of $3,231.1 million. In April 2014, we entered into interest rate cap agreements (at a cost of $2.0 million) for an aggregate notional amount of $1,400.0 million to hedge the variability of our cash flows related to a portion of our floating rate indebtedness. The interest rate cap agreements effectively cap LIBOR at 3.00% from December 2014 through December 2016 with respect to the $1,400.0 million notional amount of such agreements. In the event LIBOR is less than 3.00%, we will pay interest at the lower LIBOR rate. In the event LIBOR is higher than 3.00%, we will pay interest at the capped rate of 3.00%. On October 31, 2015, the fair value of our interest rate caps was negligible.
Gains and losses realized due to the expiration of applicable portions of the interest rate caps are reclassified to interest expense at the time our quarterly interest payments are made. No gains or losses were realized in the first quarter of fiscal years 2016 or 2015.


7.              Income Taxes
 
Our effective income tax rates are as follows:
 
 
Thirteen weeks ended
 
 
October 31,
2015
 
November 1,
2014
 
 

 

Effective income tax rate
 
37.5
%
 
58.7
%

Our effective income tax rate on the loss for the first quarter of fiscal year 2016 exceeded the federal statutory tax rate of 35.0% due primarily to state income taxes. Our effective income tax rate on the earnings for the first quarter of fiscal year 2015 exceeded the federal statutory tax rate due primarily to the non-deductible portion of transaction and other costs incurred in connection with the MyTheresa acquisition and state income taxes.
 
At October 31, 2015, the gross amount of unrecognized tax benefits was $2.0 million ($1.3 million of which would impact our effective tax rate, if recognized).  We classify interest and penalties as a component of income tax expense and our liability for accrued interest and penalties was $4.9 million at October 31, 2015, $4.8 million at August 1, 2015 and $5.2 million at November 1, 2014.
 
We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions.  The Internal Revenue Service (IRS) is currently auditing our fiscal year 2012 and short-year 2013 federal income tax returns. With respect to state, local and foreign jurisdictions, with limited exceptions, we are no longer subject to income tax audits for fiscal years before 2011.  We believe our recorded tax liabilities as of October 31, 2015 are sufficient to cover any potential assessments to be made by the IRS or other taxing authorities upon the completion of their examinations and we will continue to review our recorded tax liabilities for potential audit assessments based upon subsequent events, new information and future circumstances.  We believe it is reasonably possible that adjustments in the amounts of our unrecognized tax benefits could occur within the next twelve months as a result of settlements with tax authorities or expiration of statutes of limitation.  At this time, we do not believe such adjustments will have a material impact on our Condensed Consolidated Financial Statements.
 

13


Subsequent to the Acquisition, Parent and its subsidiaries, including the Company, file U.S. federal income taxes as a consolidated group.  The Company has elected to be treated as a corporation for U.S. federal income tax purposes and all operations of Parent are conducted through Holdings and its subsidiaries, including the Company. Income taxes incurred by Parent are reflected by the Company and its subsidiaries in the preparation of our Condensed Consolidated Financial Statements. There are no differences between the Company's and Parent's current and deferred income taxes.


8.              Employee Benefit Plans
 
Description of Benefit Plans.  We currently maintain defined contribution plans consisting of a retirement savings plan (RSP) and a defined contribution supplemental executive retirement plan (Defined Contribution SERP Plan).  In addition, we sponsor a defined benefit pension plan (Pension Plan) and an unfunded supplemental executive retirement plan (SERP Plan) which provides certain employees additional pension benefits.  As of the third quarter of fiscal year 2010, benefits offered to all participants in our Pension Plan and SERP Plan were frozen.  Retirees and active employees hired prior to March 1, 1989 are eligible for certain limited postretirement health care benefits (Postretirement Plan) if they meet certain service and minimum age requirements.  We also sponsor an unfunded key employee deferred compensation plan, which provides certain employees with additional benefits.
Obligations for our employee benefit plans, included in other long-term liabilities, are as follows:
(in thousands)
 
October 31,
2015
 
August 1,
2015
 
November 1,
2014
 
 
 
 
 
 
 
Pension Plan
 
$
219,865

 
$
218,612

 
$
197,062

SERP Plan
 
110,050

 
111,157

 
109,803

Postretirement Plan
 
9,058

 
9,121

 
10,932

 
 
338,973

 
338,890

 
317,797

Less: current portion
 
(6,016
)
 
(6,724
)
 
(5,814
)
Long-term portion of benefit obligations
 
$
332,957

 
$
332,166

 
$
311,983

 
Funding Policy and Plan Status.  Our policy is to fund the Pension Plan at or above the minimum level required by law.  In fiscal year 2015, we were not required to make contributions to the Pension Plan. As of October 31, 2015, we do not believe we will be required to make contributions to the Pension Plan for fiscal year 2016.  We will continue to evaluate voluntary contributions to our Pension Plan based upon the unfunded position of the Pension Plan, our available liquidity and other factors.

Cost of Benefits. The components of the expenses we incurred under our Pension Plan, SERP Plan and Postretirement Plan are as follows:
 
 
Thirteen weeks ended
(in thousands)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
Pension Plan:
 
 

 
 

Interest cost
 
$
5,429

 
$
6,382

Expected return on plan assets
 
(5,807
)
 
(6,234
)
Pension Plan expense (income)
 
$
(378
)
 
$
148

 
 
 
 
 
SERP Plan:
 
 

 
 

Interest cost
 
$
892

 
$
1,126

SERP Plan expense
 
$
892

 
$
1,126

 
 
 
 
 
Postretirement Plan:
 
 

 
 

Service cost
 
$
1

 
$
3

Interest cost
 
71

 
113

Net amortization of gains
 
(146
)
 
(93
)
Postretirement Plan expense (income)
 
$
(74
)
 
$
23



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9.       Commitments and Contingencies
 
Employment and Consumer Class Actions Litigation.  On April 30, 2010, a Class Action Complaint for Injunction and Equitable Relief was filed against the Company, Newton Holding, LLC, TPG Capital, L.P. and Warburg Pincus LLC in the U.S. District Court for the Central District of California by Sheila Monjazeb, individually and on behalf of other members of the general public similarly situated. On July 12, 2010, all defendants except for the Company were dismissed without prejudice, and on August 20, 2010, this case was dismissed by Ms. Monjazeb and refiled in the Superior Court of California for San Francisco County. This complaint, along with a similar class action lawsuit originally filed by Bernadette Tanguilig in 2007, sought monetary and injunctive relief and alleged that the Company has engaged in various violations of the California Labor Code and Business and Professions Code, including without limitation, by (i) asking employees to work “off the clock,” (ii) failing to provide meal and rest breaks to its employees, (iii) improperly calculating deductions on paychecks delivered to its employees and (iv) failing to provide a chair or allow employees to sit during shifts. The Monjazeb and Tanguilig class actions were deemed “related” cases and were then brought before the same trial court judge.  On October 24, 2011, the court granted the Company’s motion to compel Ms. Monjazeb and Juan Carlos Pinela (a co-plaintiff in the Tanguilig case) to arbitrate their individual claims in accordance with the Company’s Mandatory Arbitration Agreement, foreclosing their ability to pursue a class action in court. However, the court’s order compelling arbitration did not apply to Ms. Tanguilig because she is not bound by the Mandatory Arbitration Agreement.  Further, the court determined that Ms. Tanguilig could not be a class representative of employees who are subject to the Mandatory Arbitration Agreement, thereby limiting the putative class action to those associates who were employed between December 2003 and July 15, 2007 (the effective date of our Mandatory Arbitration Agreement).  Following the court’s order, Ms. Monjazeb and Mr. Pinela filed demands for arbitration with the American Arbitration Association (AAA) seeking to arbitrate not only their individual claims, but also class claims, which the Company asserted violated the class action waiver in the Mandatory Arbitration Agreement. This led to further proceedings in the trial court, a stay of the arbitrations, and a decision by the trial court, on its own motion, to reconsider its order compelling arbitration. The trial court ultimately decided to vacate its order compelling arbitration due to a recent California appellate court decision.  Following this ruling, the Company timely filed two separate appeals, one with respect to Mr. Pinela and one with respect to Ms. Monjazeb, with the California Court of Appeal, asserting that the trial court did not have jurisdiction to change its earlier determination of the enforceability of the arbitration agreement. On June 29, 2015, after briefing and oral argument, the California Court of Appeal issued its order affirming the trial court's denial of our motion to compel arbitration and awarding Mr. Pinela his costs of appeal. On July 13, 2015, we filed our petition for rehearing with the California Court of Appeal, which was denied on July 29, 2015. On August 10, 2015, we filed our petition for review with the California Supreme Court, and Mr. Pinela filed his answer on August 31, 2015. On September 16, 2015, the California Supreme Court denied our petition for review. On October 6, 2015, the case was transferred back to the trial court. On November 16, 2015, Mr. Pinela filed a motion to stay the proceedings in the trial court until after the appellate court resolves Ms. Tanguilig’s appeal. On December 10, 2015, the hearing on Mr. Pinela's motion to stay and a case management conference were held, and the trial court judge issued an order granting the motion and issuing a stay. The appeal with respect to Ms. Monjazeb was dismissed since final approval of the class action settlement (as described below) had been granted.

With respect to Ms. Tanguilig's case, the trial court decided to set certain of her civil penalty claims for trial on April 1, 2014. In these claims, Ms. Tanguilig sought civil penalties under the Private Attorneys General Act based on the Company's alleged failure to provide employees with meal periods and rest breaks in compliance with California law. On December 10, 2013, the Company filed a motion to dismiss all of Ms. Tanguilig’s claims, including the civil penalty claims, based on her failure to bring her claims to trial within five years as required by California law. After several hearings, on February 28, 2014, the court dismissed all of Ms. Tanguilig’s claims in the case and vacated the April 1, 2014 trial date. The court awarded the Company its costs of suit in connection with the defense of Ms. Tanguilig’s claims, but denied its request of an attorneys’ fees award from Ms. Tanguilig. Ms. Tanguilig filed a notice of appeal from the dismissal of all her claims, as well as a second notice of appeal from the award of costs, both of which are pending before the California Court of Appeal. Should the California Court of Appeal reverse the trial court’s dismissal of all of Ms. Tanguilig’s claims, the litigation will resume, and Ms. Tanguilig will seek class certification of the claims asserted in her Third Amended Complaint. If this occurs, the scope of her class claims will likely be reduced by the class action settlement and release in the Monjazeb case (as described below); however, that settlement does not cover claims asserted by Ms. Tanguilig for alleged Labor Code violations from approximately December 19, 2003 to August 20, 2006 (the beginning of the settlement class period in the Monjazeb case). Briefing on the appeals is complete, but no date has been set for oral argument.

In Ms. Monjazeb's class action, a settlement was reached at a mediation held on January 25, 2014, and the court granted final approval of the settlement after the final approval hearing held on September 18, 2014. Notwithstanding the settlement of the Monjazeb class action, Ms. Tanguilig filed a motion on January 26, 2015 seeking to recover catalyst attorneys' fees from the Company. A hearing was held on February 24, 2015, and the court issued an order on February 25, 2015 allowing Ms. Tanguilig to proceed with her motion to recover catalyst attorneys' fees related to the Monjazeb settlement. On April 8, 2015, Ms. Tanguilig filed her motion for catalyst attorneys' fees. A hearing on the motion was held on July 23, 2015 and the motion was denied by the court on July 28, 2015.

15


    
Based upon the settlement agreement with respect to Ms. Monjazeb's class action claims, we recorded our currently estimable liabilities with respect to both Ms. Monjazeb's and Ms. Tanguilig's employment class actions litigation claims in fiscal year 2014, which amount was not material to our financial condition or results of operations. With respect to the Monjazeb matter, the settlement funds have been paid by the Company and have been disbursed by the claims administrator in accordance with the settlement. We will continue to evaluate the Tanguilig matter, and our recorded reserve for such matter, based on subsequent events, new information and future circumstances.

In addition to the foregoing matters, the National Labor Relations Board (NLRB) has been pursuing a complaint alleging that the Mandatory Arbitration Agreement’s class action prohibition violates employees’ rights to engage in concerted activity, which was submitted to an administrative law judge (ALJ) for determination on a stipulated record. The ALJ issued a recommended decision and order finding that the Company's Arbitration Agreement and class action waiver violated the National Labor Relations Act (NLRA). The matter was transferred to the NLRB for further consideration and decision. On August 4, 2015, the NLRB affirmed the ALJ's decision and ordered the Company not to maintain and/or enforce the provisions of the Arbitration Agreement found to violate the NLRA and to take affirmative steps to effectuate the NLRA's policies. On August 12, 2015, we filed our petition for review of the NLRB's order with the U.S. Court of Appeals for the Fifth Circuit. On September 23, 2015, the NLRB filed a motion to hold our case in abeyance pending the Court's decisions in two other cases, which the NLRB argued presented identical issues to those before the Court in our case. On October 2, 2015, the Court issued an order granting the NLRB's motion to stay our case.

On August 7, 2014, a putative class action complaint was filed against The Neiman Marcus Group LLC in Los Angeles County Superior Court by a customer, Linda Rubenstein, in connection with the Company's Last Call stores in California. Ms. Rubenstein alleges that the Company has violated various California consumer protection statutes by implementing a marketing and pricing strategy that suggests that clothing sold at Last Call stores in California was originally offered for sale at full-line Neiman Marcus stores when allegedly, it was not, and is allegedly of inferior quality to clothing sold at the full-line stores. Ms. Rubenstein also alleges that the Company lacks adequate information to support its comparative pricing labels. On September 12, 2014, we removed the case to the U.S. District Court for the Central District of California. On October 17, 2014, we filed a motion to dismiss the complaint, which the court granted on December 12, 2014. In its order dismissing the complaint, the court granted Ms. Rubenstein leave to file an amended complaint. Ms. Rubenstein filed her first amended complaint on December 22, 2014. On January 6, 2015, we filed a motion to dismiss the first amended complaint, which the court granted on March 2, 2015. In its order dismissing the first amended complaint, the court granted Ms. Rubenstein leave to file a second amended complaint, which she filed on March 17, 2015. On April 6, 2015, we filed a motion to dismiss the second amended complaint. On May 12, 2015, the court granted our motion to dismiss the second amended complaint in its entirety, without leave to amend, and on June 9, 2015, Ms. Rubenstein filed a notice to appeal the court's ruling. The appeal is pending and a briefing schedule was recently set, with full briefing to be completed in February 2016.

On February 2, 2015, a putative class action complaint was filed against Bergdorf Goodman, Inc. in the Supreme Court of the State of New York, County of New York, by Marney Zaslav. Ms. Zaslav seeks monetary relief and alleges that she and other similarly situated individuals were misclassified as interns exempt from minimum wage requirements instead of as employees and, therefore, were not provided with proper compensation under the New York Labor Law. The Company is vigorously defending this matter.

In addition, we are currently involved in various other legal actions and proceedings that arose in the ordinary course of business. With respect to the matters described above as well as all other current outstanding litigation involving us, we believe that any liability arising as a result of such litigation will not have a material adverse effect on our financial position, results of operations or cash flows.

Cyber-Attack Class Actions Litigation. Three class actions relating to a cyber-attack on our computer systems in 2013 (the Cyber-Attack) were filed in January 2014 and later voluntarily dismissed by the plaintiffs between February and April 2014. The plaintiffs had alleged negligence and other claims in connection with their purchases by payment cards and sought monetary and injunctive relief. Melissa Frank v. The Neiman Marcus Group, LLC, et al., was filed in the U.S. District Court for the Eastern District of New York on January 13, 2014 but was voluntarily dismissed by the plaintiff on April 15, 2014, without prejudice to her right to re-file a complaint. Donna Clark v. Neiman Marcus Group LTD LLC was filed in the U.S. District Court for the Northern District of Georgia on January 27, 2014 but was voluntarily dismissed by the plaintiff on March 11, 2014, without prejudice to her right to re-file a complaint. Christina Wong v. The Neiman Marcus Group, LLC, et al., was filed in the U.S. District Court for the Central District of California on January 29, 2014, but was voluntarily dismissed by the plaintiff on February 10, 2014, without prejudice to her right to re-file a complaint. Three additional putative class actions relating to the Cyber-Attack were filed in March and April 2014, also alleging negligence and other claims in connection with plaintiffs’ purchases by payment cards. Two of the cases, Katerina Chau v. Neiman Marcus Group LTD Inc., filed in the U.S. District Court for the Southern District of California on March 14, 2014, and Michael Shields v. The Neiman Marcus Group, LLC, filed in the U.S. District Court for the Southern District of

16


California on April 1, 2014, were voluntarily dismissed, with prejudice as to Chau and without prejudice as to Shields. The third case, Hilary Remijas v. The Neiman Marcus Group, LLC, was filed on March 12, 2014 in the U.S. District Court for the Northern District of Illinois. On June 2, 2014, an amended complaint in the Remijas case was filed, which added three plaintiffs (Debbie Farnoush and Joanne Kao, California residents; and Melissa Frank, a New York resident) and asserted claims for negligence, implied contract, unjust enrichment, violation of various consumer protection statutes, invasion of privacy and violation of state data breach laws. The Company moved to dismiss the Remijas amended complaint on July 2, 2014. On September 16, 2014, the court granted the Company's motion to dismiss the Remijas case on the grounds that the plaintiffs lacked standing due to their failure to demonstrate an actionable injury. On September 25, 2014, plaintiffs appealed the district court's order dismissing the case to the Seventh Circuit Court of Appeals. Oral argument was held on January 23, 2015. On July 20, 2015, the Seventh Circuit Court of Appeals reversed the district court's ruling and remanded the case to the district court for further proceedings. On August 3, 2015, we filed a petition for rehearing en banc. On September 17, 2015, the Seventh Circuit Court of Appeals denied our petition for rehearing. The district court held a status conference on October 29, 2015 and set a supplemental briefing schedule on the remaining portion of our previously filed motion to dismiss that had not been addressed by the court, and scheduled a status hearing for December 15, 2015. Andrew McClease v. The Neiman Marcus Group, LLC was filed in the U.S. District Court for the Eastern District of North Carolina on December 30, 2014, alleging negligence and other claims in connection with Mr. McClease's purchase by payment card. On March 9, 2015, the McClease case was voluntarily dismissed without prejudice by stipulation of the parties.

In addition to class actions litigation, payment card companies and associations may require us to reimburse them for unauthorized card charges and costs to replace cards and may also impose fines or penalties in connection with the security incident, and enforcement authorities may also impose fines or other remedies against us. We have also incurred other costs associated with this security incident, including legal fees, investigative fees, costs of communications with customers and credit monitoring services provided to our customers. At this point, we are unable to predict the developments in, outcome of, and economic and other consequences of pending or future litigation or regulatory investigations related to, and other costs associated with, this matter. We will continue to evaluate these matters based on subsequent events, new information and future circumstances.
 
Other.  We had no outstanding irrevocable letters of credit at October 31, 2015.  We had approximately $3.3 million in surety bonds at October 31, 2015 relating primarily to merchandise imports and state sales tax and utility requirements.
 

10.  Accumulated Other Comprehensive Loss
 
The following table summarizes the changes in accumulated other comprehensive loss by component (amounts are recorded net of related income taxes):
(in thousands)
 
Foreign
Currency
Translation
Adjustments
 
Unrealized
Losses on
Financial
Instruments
 
Unfunded
Benefit
Obligations
 
Total
 
 
 
 
 

 
 

 
 

Balance, August 1, 2015
 
$
(16,886
)
 
$
(2,826
)
 
$
(31,516
)
 
$
(51,228
)
Other comprehensive earnings (loss)
 
116

 
823

 
(611
)
 
328

Balance, October 31, 2015
 
$
(16,770
)
 
$
(2,003
)
 
$
(32,127
)
 
$
(50,900
)
 

11.       Stock-Based Awards
 
Stock Options.  Subsequent to the Acquisition, Parent established various incentive plans pursuant to which eligible employees, consultants and non-employee directors are eligible to receive stock-based awards.  Under the incentive plans, Parent is authorized to grant stock options, restricted stock and other types of awards that are valued in whole or in part by reference to, or are payable or otherwise based on, the shares of common stock of Parent. Charges with respect to options issued by Parent pursuant to the incentive plans are reflected by the Company in the preparation of our Condensed Consolidated Financial Statements.

Co-Invest Options.  In connection with the Acquisition, certain executive officers of the Company rolled over a portion of the amounts otherwise payable in settlement of their pre-Acquisition stock options into stock options of Parent representing options to purchase a total of 56,979 shares of Class A common stock and 56,979 shares of Class B common stock of Parent (the Co-Invest Options).
 
The number of Co-Invest Options issued upon conversion of pre-Acquisition stock options was equal to the product of (a) the number of shares subject to the applicable pre-Acquisition stock options multiplied by (b) the ratio of the per share merger

17


consideration over the fair market value of a share of Parent, which was approximately 3.1x (the Exchange Ratio).  The exercise price of each pre-Acquisition stock option was adjusted by dividing the original exercise price of the pre-Acquisition stock option by the Exchange Ratio.  Following the conversion, the exercise prices of the Co-Invest Options range from $180 to $644 per share.  As of the date of the Acquisition, the aggregate intrinsic value of the Co-Invest Options equaled the intrinsic value of the rolled over pre-Acquisition stock options. The Co-Invest Options are fully vested and are exercisable at any time prior to the applicable expiration dates related to the original grant of the pre-Acquisition options.  The Co-Invest Options contain sale and repurchase provisions.

Non-Qualified Stock Options.  Pursuant to the terms of the incentive plans, Parent granted time-vested and performance-vested non-qualified stock options to certain executive officers, employees and non-employee directors of the Company. These non-qualified stock options will expire no later than the tenth anniversary of the grant date and each grant consists of options to purchase an equal number of shares of Parent’s Class A common stock and Class B common stock.

Accounting for Stock Options. Prior to an initial public offering (IPO), Parent generally has the right to repurchase shares issued upon exercise of vested stock options at the fair market value and shares underlying vested unexercised stock options for the difference between the fair market value of the underlying share and the exercise price in the event the optionee ceases to be an employee of the Company. However, other than with respect to the Co-Invest Options, if the optionee voluntarily leaves the Company without good reason (as defined in the incentive plans) or is terminated for cause, the repurchase price is the lesser of the exercise price of such options or the fair value of such awards at the employee termination date. For certain optionees, in the event of the retirement of the optionee, the repurchase price is the fair value at the retirement date. Parent's repurchase rights expire upon completion of an IPO, including with respect to the Co-Invest Options.

As a result of Parent's repurchase rights prior to an IPO, we currently account for stock options issued to certain optionees who will become retirement eligible prior to the expiration of their stock options (Retirement Eligible Optionees) using the liability method. Under the liability method, we recognize the estimated liability for option awards held by Retirement Eligible Optionees over the vesting periods of such awards and the liability for the vested/earned options is adjusted to its estimated fair value through compensation expense at each balance sheet date. With respect to time-vested options held by non-Retirement Eligible Optionees, such options are effectively forfeited should the optionee voluntarily leave the Company without good reason or be terminated for cause prior to an IPO. As a result, we currently record no expense or liability with respect to such options. With respect to performance-vested options, such options are effectively forfeited should the optionee voluntarily leave the Company without good reason or be terminated for cause prior to achievement of the performance condition. As a result, we currently record no expense or liability with respect to such options.

With respect to the Co-Invest Options, the fair value of such options at the Acquisition date was $36.3 million. Of such amount, $9.5 million represented the fair value of options held by Retirement Eligible Optionees for which a liability was established at the Acquisition date. The remaining value of $26.8 million represented the fair value of options held by non-Retirement Eligible Optionees and such amount was credited to equity.

At October 31, 2015, an aggregate of 54,678 Co-Invest Options and time-vested options were held by Retirement Eligible Optionees. The recorded liability with respect to such options was $17.8 million at October 31, 2015, $15.9 million at August 1, 2015 and $17.9 million at November 1, 2014. We recognize compensation expense, which is included in selling, general and administrative expenses, for stock options on a straight-line basis over the vesting/performance periods.

The following table sets forth certain summary information with respect to our stock options for the periods indicated.
    
 
 
Thirteen weeks ended
(in thousands, except number of options and per option price)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
Stock compensation expense
 
$
1,953

 
$
2,135

 
 
 
 
 
Stock option grants:
 
 

 
 

Number of options granted
 

 
6,003

Weighted average grant date fair value
 
$

 
$
325


For a more detailed description of our stock-based awards, refer to Note 14 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended August 1, 2015.


18


12.       Income from Credit Card Program
 
We maintain a proprietary credit card program through which credit is extended to customers and have a related marketing and servicing alliance with affiliates of Capital One Financial Corporation (Capital One).  Pursuant to our agreement with Capital One (the Program Agreement), Capital One currently offers credit cards and non-card payment plans under both the “Neiman Marcus” and “Bergdorf Goodman” brand names.  Effective July 1, 2013, we amended and extended the Program Agreement to July 2020 (renewable thereafter for three-year terms), subject to early termination provisions.
 
We receive payments from Capital One based on sales transacted on our proprietary credit cards.  We may receive additional payments based on the profitability of the portfolio as determined under the Program Agreement depending on a number of factors including credit losses.  In addition, we receive payments from Capital One for marketing and servicing activities we provide to Capital One. We recognize income from our credit card program when earned.


13.       Other Expenses
 
Other expenses consists of the following components:
 
 
Thirteen weeks ended
(in thousands)
 
October 31,
2015
 
November 1,
2014
 
 
 
 
 
Expenses incurred in connection with strategic growth initiatives
 
$
14,376

 
$
2,186

MyTheresa acquisition costs
 
2,544

 
10,989

Expenses related to cyber-attack, net of insurance recovery
 
178

 
4,301

Other expenses
 

 
2,324

Total
 
$
17,098

 
$
19,800


We incurred costs in connection with our Organizing for Growth and NMG One strategic growth initiatives aggregating $14.4 million in the first quarter of fiscal year 2016. In connection with Organizing for Growth, we eliminated approximately 500 positions across our stores, divisions and facilities on October 1, 2015 and incurred $10.2 million of severance costs.

In October 2014, we acquired MyTheresa, a luxury retailer headquartered in Munich, Germany.

We discovered in January 2014 that malicious software (malware) was clandestinely installed on our computer systems. In the first quarter of fiscal year 2016 and the first quarter of fiscal year 2015, we incurred investigative, legal and other expenses in connection with a cyber-attack. We expect to incur ongoing costs related to the cyber-attack for the foreseeable future. Such expenses are not currently estimable but could be material to our future results of operations.
 

14.  Condensed Consolidating Financial Information
 
2028 Debentures.  All of NMG’s obligations under the 2028 Debentures are guaranteed by the Company.  The guarantee by the Company is full and unconditional and is subject to automatic release if the requirements for legal defeasance or covenant defeasance of the 2028 Debentures are satisfied, or if NMG’s obligations under the indenture governing the 2028 Debentures are discharged.  Currently, the Company’s non-guarantor subsidiaries under the 2028 Debentures consist principally of (i) Bergdorf Goodman, Inc., through which we conduct the operations of our Bergdorf Goodman stores, (ii) NM Nevada Trust, which holds legal title to certain real property and intangible assets used by NMG in conducting its operations and (iii) NMG Germany GmbH, through which we conduct the operations of MyTheresa.
 
The following condensed consolidating financial information represents the financial information of the Company and its non-guarantor subsidiaries under the 2028 Debentures, prepared on the equity basis of accounting.  The information is presented in accordance with the requirements of Rule 3-10 under the SEC’s Regulation S-X. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the non-guarantor subsidiaries operated as independent entities.

19


 
 
October 31, 2015
(in thousands)
 
Company
 
NMG
 
Non-
 Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 

 
 

 
 

 
 

 
 

Current assets:
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$

 
$
45,514

 
$
13,068

 
$

 
$
58,582

Merchandise inventories
 

 
1,128,592

 
221,785

 

 
1,350,377

Other current assets
 

 
154,918

 
18,640

 
(3,764
)
 
169,794

Total current assets
 

 
1,329,024

 
253,493

 
(3,764
)
 
1,578,753

Property and equipment, net
 

 
1,378,343

 
126,047

 

 
1,504,390

Intangible assets, net
 

 
610,471

 
2,959,179

 

 
3,569,650

Goodwill
 

 
1,611,364

 
661,207

 

 
2,272,571

Other assets
 

 
133,160

 
1,333

 

 
134,493

Intercompany notes receivable
 

 
189,841

 

 
(189,841
)
 

Investments in subsidiaries
 
1,403,534

 
3,593,643

 

 
(4,997,177
)
 

Total assets
 
$
1,403,534

 
$
8,845,846

 
$
4,001,259

 
$
(5,190,782
)
 
$
9,059,857

LIABILITIES AND MEMBER EQUITY
 
 

 
 

 
 

 
 

 
 

Current liabilities:
 
 

 
 

 
 

 
 

 
 

Accounts payable
 
$

 
$
284,815

 
$
38,422

 
$

 
$
323,237

Accrued liabilities
 

 
366,676

 
105,741

 
(3,764
)
 
468,653

Current portion of long-term debt
 

 
29,426

 

 

 
29,426

Total current liabilities
 

 
680,917

 
144,163

 
(3,764
)
 
821,316

Long-term liabilities:
 
 

 
 

 
 

 
 

 
 

Long-term debt
 

 
4,884,005

 

 

 
4,884,005

Intercompany notes payable
 

 

 
189,841

 
(189,841
)
 

Deferred income taxes
 

 
1,447,245

 
16,521

 

 
1,463,766

Other long-term liabilities
 

 
430,145

 
57,091

 

 
487,236

Total long-term liabilities
 

 
6,761,395

 
263,453

 
(189,841
)
 
6,835,007

Total member equity
 
1,403,534

 
1,403,534

 
3,593,643

 
(4,997,177
)
 
1,403,534

Total liabilities and member equity
 
$
1,403,534

 
$
8,845,846

 
$
4,001,259

 
$
(5,190,782
)
 
$
9,059,857


20


 
 
August 1, 2015
(in thousands)
 
Company
 
NMG
 
Non-
 Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 

 
 

 
 

 
 

 
 

Current assets:
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$

 
$
53,162

 
$
19,812

 
$

 
$
72,974

Merchandise inventories
 

 
970,295

 
184,549

 

 
1,154,844

Other current assets
 

 
138,966

 
18,082

 
(165
)
 
156,883

Total current assets
 

 
1,162,423

 
222,443

 
(165
)
 
1,384,701

Property and equipment, net
 

 
1,359,118

 
118,768

 

 
1,477,886

Intangible assets, net
 

 
625,937

 
2,972,625

 

 
3,598,562

Goodwill
 

 
1,611,365

 
661,118

 

 
2,272,483

Other assets
 

 
140,776

 
1,354

 

 
142,130

Intercompany notes receivable
 

 
150,028

 

 
(150,028
)
 

Investments in subsidiaries
 
1,413,744

 
3,617,680

 

 
(5,031,424
)
 

Total assets
 
$
1,413,744

 
$
8,667,327

 
$
3,976,308

 
$
(5,181,617
)
 
$
8,875,762

LIABILITIES AND MEMBER EQUITY
 
 

 
 

 
 

 
 

 
 

Current liabilities:
 
 

 
 

 
 

 
 

 
 

Accounts payable
 
$

 
$
291,089

 
$
51,910

 
$

 
$
342,999

Accrued liabilities
 

 
380,255

 
85,312

 
(165
)
 
465,402

Current portion of long-term debt
 

 
29,426

 

 

 
29,426

Total current liabilities
 

 
700,770

 
137,222

 
(165
)
 
837,827

Long-term liabilities:
 
 

 
 

 
 

 
 

 
 

Long-term debt
 

 
4,681,309

 

 

 
4,681,309

Intercompany notes payable
 

 

 
150,028

 
(150,028
)
 

Deferred income taxes
 

 
1,454,278

 
16,813

 

 
1,471,091

Other long-term liabilities
 

 
417,226

 
54,565

 

 
471,791

Total long-term liabilities
 

 
6,552,813

 
221,406

 
(150,028
)
 
6,624,191

Total member equity
 
1,413,744

 
1,413,744

 
3,617,680

 
(5,031,424
)
 
1,413,744

Total liabilities and member equity
 
$
1,413,744

 
$
8,667,327

 
$
3,976,308

 
$
(5,181,617
)
 
$
8,875,762


21


 
 
November 1, 2014
(in thousands)
 
Company
 
NMG
 
Non-
 Guarantor
 Subsidiaries
 
Eliminations
 
Consolidated
ASSETS
 
 

 
 

 
 

 
 

 
 

Current assets:
 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
 
$

 
$
66,120

 
$
15,457

 
$

 
$
81,577

Merchandise inventories
 

 
1,090,010

 
190,742

 

 
1,280,752

Other current assets
 

 
133,596

 
10,781

 

 
144,377

Total current assets
 

 
1,289,726

 
216,980

 

 
1,506,706

Property and equipment, net
 

 
1,293,245

 
115,899

 

 
1,409,144

Intangible assets, net
 

 
672,338

 
3,024,641

 

 
3,696,979

Goodwill
 

 
1,669,364

 
623,262

 

 
2,292,626

Other assets
 

 
153,561

 
1,770

 

 
155,331

Investments in subsidiaries
 
1,429,689

 
3,765,133

 

 
(5,194,822
)
 

Total assets
 
$
1,429,689

 
$
8,843,367

 
$
3,982,552

 
$
(5,194,822
)
 
$
9,060,786

LIABILITIES AND MEMBER EQUITY
 
 

 
 

 
 

 
 

 
 

Current liabilities:
 
 

 
 

 
 

 
 

 
 

Accounts payable
 
$

 
$
331,236

 
$
41,380

 
$

 
$
372,616

Accrued liabilities
 

 
376,310

 
98,989

 

 
475,299

Current portion of long-term debt
 

 
29,426

 

 

 
29,426

Total current liabilities
 

 
736,972

 
140,369

 

 
877,341

Long-term liabilities:
 
 

 
 

 
 

 
 

 
 

Long-term debt
 

 
4,803,218

 

 

 
4,803,218

Deferred income taxes
 

 
1,512,485

 
25,597

 

 
1,538,082

Other long-term liabilities
 

 
361,003

 
51,453

 

 
412,456

Total long-term liabilities
 

 
6,676,706

 
77,050

 

 
6,753,756

Total member equity
 
1,429,689

 
1,429,689

 
3,765,133

 
(5,194,822
)
 
1,429,689

Total liabilities and member equity
 
$
1,429,689

 
$
8,843,367

 
$
3,982,552

 
$
(5,194,822
)
 
$
9,060,786


22


 
 
Thirteen weeks ended October 31, 2015
(in thousands)
 
Company
 
NMG
 
Non-
 Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
 
$

 
$
920,714

 
$
244,186

 
$

 
$
1,164,900

Cost of goods sold including buying and occupancy costs (excluding depreciation)
 

 
586,857

 
149,217

 

 
736,074

Selling, general and administrative expenses (excluding depreciation)
 

 
237,025

 
48,317

 

 
285,342

Income from credit card program
 

 
(11,886
)
 
(1,401
)
 

 
(13,287
)
Depreciation expense
 

 
50,853

 
5,037

 

 
55,890

Amortization of intangible assets and favorable lease commitments
 

 
15,467

 
13,498

 

 
28,965

Other expenses
 

 
14,586

 
2,512

 

 
17,098

Operating earnings
 

 
27,812

 
27,006

 

 
54,818

Interest expense, net
 

 
67,677

 
4,008

 

 
71,685

Intercompany royalty charges (income)
 

 
34,823

 
(34,823
)
 

 

Foreign currency loss (gain)
 

 

 
(195
)
 
195

 

Equity in loss (earnings) of subsidiaries
 
10,538

 
(58,200
)
 

 
47,662

 

Earnings (loss) before income taxes
 
(10,538
)
 
(16,488
)
 
58,016

 
(47,857
)
 
(16,867
)
Income tax expense (benefit)
 

 
(6,090
)
 
(184
)
 
(55
)
 
(6,329
)
Net earnings (loss)
 
$
(10,538
)
 
$
(10,398
)
 
$
58,200

 
$
(47,802
)
 
$
(10,538
)
Total other comprehensive earnings (loss), net of tax
 
328

 
328

 

 
(328
)
 
328

Total comprehensive earnings (loss)
 
$
(10,210
)
 
$
(10,070
)
 
$
58,200

 
$
(48,130
)
 
$
(10,210
)

 
 
Thirteen weeks ended November 1, 2014
(in thousands)
 
Company
 
NMG
 
Non-
 Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
Revenues
 
$

 
$
970,415

 
$
216,077