Neiman Marcus 2002 Annual Report Download - page 25

Company anticipates that Pension Plan expense, which was approximately $10.1 million in 2003, will increase by approximately $6.0
million in 2004.
The Company had cumulative unrecognized expense for the Pension Plan of $76.5 million at August 1, 2003 primarily related to the
delayed recognition of differences between the Company's actuarial assumptions and actual results, which has contributed to the $62.0
million underfunded status of the Pension Plan at August 1, 2003.
Management believes that operating cash flows, currently available vendor financing and amounts available pursuant to its Credit
Agreement and its credit card securitization program should be sufficient to fund the Company's operations, debt service, Pension Plan
funding requirements, contractual obligations and commitments and currently anticipated capital expenditure requirements through the
end of 2004.
OFF-BALANCE SHEET ARRANGEMENTS
Pursuant to a revolving credit card securitization program, the Company transfers substantially all of its credit card receivables to a
wholly-owned subsidiary, Neiman Marcus Funding Corporation, which in turn sells such receivables to the Neiman Marcus Credit
Card Master Trust (Trust). The Trust issued $225 million certificates representing undivided interests in the credit card receivables to
both third-party investors (Sold Interests) and to the Company (Retained Interests). The Retained Interests are shown as "Undivided
interests in NMG Credit Card Master Trust" on the Company's consolidated balance sheets. In order to maintain the committed level
of securitized assets, cash collections on the securitized receivables are used by the Trust to purchase new credit card balances from
the Company in accordance with the terms of the revolving credit card securitization program.
Beginning in April 2005, cash collections will be used by the Trust to repay the principal balance of the Class A Certificates in six
monthly installments of $37.5 million (Amortization Period). As a result of certain provisions in the securitization agreement, the
Company holds certain rights to repurchase the Class A Certificates (Repurchase Option) subsequent to the commencement of the
Amortization Period and, therefore, has the ability to regain effective control over the credit card receivables held by the Trust at the
time the Repurchase Option becomes exercisable. The Company currently believes that the Repurchase Option will become
exercisable in September 2005 and that the revolving transfers of credit card receivables to the Trust will cease to qualify for off-
balance sheet sales type treatment beginning in December 2003, the date when the contractual life of the transferred receivables is
estimated to extend to September 2005 when the Repurchase Option becomes exercisable.
As a result, transfers to the Trust subsequent to December 2003 will be accounted for as secured borrowings. Based upon historical
information, the Company believes that the $225 million of receivables representing the Sold Interests and the $225 million obligation
for the Class A certificates will be brought back onto the Company's consolidated balance sheet over a four month period beginning in
December 2003 during which time the Company will incur an incremental loss of approximately $6 to $7 million.
The Company's securitization of credit card receivables is more fully described in Note 2 of the Notes to Consolidated Financial
Statements in Item 15.
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