Neiman Marcus 2002 Annual Report Download - page 63

Pursuant to the previous plan, eligible employees received an annual vacation grant at the beginning of each service year. Such grants
were made in anticipation of future service; however, eligible employees were allowed to take vacation time to the extent of the
vacation grant as of the grant date. Further, in the event of termination, an employee was entitled to receive cash compensation to the
extent of the untaken balance of the annual grant. As a result, the Company recorded vacation expense ratably over the twelve months
prior to each annual grant such that the liability for the annual grant was fully recorded as of the grant date.
With the termination of the prior vacation plan, the previously recorded vacation liability of $16.6 million, which amount represented
the vacation time that would have been granted to employees on April 28, 2002 pursuant to the previous plan, was eliminated and
credited to operating earnings in the third quarter of 2002.
NOTE 11. Impairment and Other Charges
In the fourth quarter of 2002, the Company recorded a $3.1 million pretax impairment charge. The charge related to the write-down
of the net carrying values of the fixed assets of three Kate Spade LLC stores to estimated fair value.
In the third quarter of 2002, the Company recorded an $8.2 million pretax charge. The charge related to 1) the write-off of the
remaining net carrying value of its cost method investment in WeddingChannel.com, Inc. in light of its continued operating losses, 2)
the write-down of the carrying values of the fixed assets of two Neiman Marcus Galleries stores to estimated fair value and 3) the
accrual of the estimated loss associated with the abandonment of excess warehouse space held by the Company pursuant to a long-
term operating lease.
In the second quarter of 2002, the Company incurred expenses of approximately $2.0 million in connection with cost reduction
strategies. These expenses consisted primarily of severance costs and lease termination expenses incurred in connection with the
closing of the Neiman Marcus Galleries store in Seattle, Washington.
NOTE 12. Commitments and Contingencies
The Company leases certain property and equipment under various non-cancelable capital and operating leases. The leases provide
for monthly fixed amount rentals or contingent rentals based upon sales in excess of stated amounts and normally require the
Company to pay real estate taxes, insurance, common area maintenance costs and other occupancy costs. Generally, the leases have
primary terms ranging from 1 to 99 years and include renewal options ranging from 5 to 80 years.
Rent expense under operating leases are as follows:
Years Ended
(in thousands)
August 2,
2003
August 3,
2002
July 28,
2001
Minimum rent $ 41,200 $ 37,400 $ 38,400
Contingent rent 16,500 17,000 19,200
Total rent expense $ 57,700 $ 54,400 $ 57,600
Future minimum rental commitments, excluding renewal options, under capital leases and non-cancelable operating leases are as
follows: fiscal year 2004 – $45.7 million; fiscal year 2005 – $43.9 million; fiscal year 2006 – $41.2 million; fiscal year 2007 – $37.2
million; fiscal year 2008 – $34.9 million; all years thereafter – $579.1 million.
Common area maintenance costs were $12.5 million for 2003, $10.0 million for 2002 and $10.0 million for 2001.
Litigation. The Company is involved in various suits and claims in the ordinary course of business. Management does not believe
that the disposition of any such suits and claims will have a material adverse effect upon the consolidated results of operations, cash
flows or the financial position of the Company.
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