Neiman Marcus 2005 Annual Report Download - page 118

In fiscal year 2005, the accumulated benefit obligation exceeded the fair value of the assets held by the Pension Plan, which
required us to record additional minimum liabilities of $64.5 million related to the Pension Plan and $3.7 million related to the SERP
Plan. In recording the additional minimum liabilities, we reduced shareholders' equity by $68.8 million ($42.2 million, net of tax).
The projected benefit obligation of the Pension Plan exceeded the plan's assets by $71.0 million in fiscal year 2006 and
$73.2 million in fiscal year 2005. The underfunded status is reflected in our consolidated balance sheets as follows:
Fiscal years
(in thousands) 2006 2005
(Successor) (Predecessor)
Prepaid pension contribution reflected in the consolidated balance
sheets and not yet charged to expense $ (78,819 ) $ 48,697
Liability charged to shareholders' equity and not yet recognized in
expense — (64,491 )
Liability reflected in other assets and not yet charged to expense — (2 )
Unrecognized gain (loss) not yet recognized in expense 7,819 (57,371 )
Underfunded status $ (71,000 ) $ (73,167 )
The unrecognized asset of $7.8 million for the Pension Plan at July 29, 2006 relates primarily to the change in discount rate from
the date of the Acquisition to the end of the year. In addition, we had cumulative unrecognized gains for the SERP Plan and
Postretirement Plan aggregating $4.0 million at July 29, 2006.
NOTE 13. LOSS ON DISPOSITION OF CHEF'S CATALOG
In November 2004, we sold our Chef's Catalog direct marketing business to a private equity firm. Chef's Catalog is a multi-
channel retailer of professional-quality kitchenware with revenues of approximately $73 million in fiscal year 2004. At October 30, 2004,
Chef's Catalog had net tangible assets, primarily inventory, of $12.5 million and net intangible assets of $17.2 million. We received
proceeds, net of selling costs, of $14.4 million from the sale. As the carrying value of the Chef's Catalog assets exceeded the net proceeds
from the sale, we incurred a pretax loss of $15.3 million in the first quarter of 2005 related to the disposition of Chef's Catalog.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Leases. We lease certain property and equipment under various non-cancelable capital and operating leases. The leases provide
for monthly fixed rentals and/or contingent rentals based upon sales in excess of stated amounts and normally require us to pay real estate
taxes, insurance, common area maintenance costs and other occupancy costs. Generally, the leases have primary terms ranging from one
to 99 years and include renewal options ranging from two to 80 years.
Rent expense under operating leases is as follows:
(Successor) (Predecessor)
(in thousands)
Forty-three
weeks ended
July 29,
2006
Nine weeks
ended
October 1,
2005
Fiscal year
ended
July 30,
2005
Fiscal year
ended
July 31,
2004
Minimum rent $ 36,700 $ 6,800 $ 42,100 $ 37,400
Contingent rent 22,900 4,700 23,800 20,300
Total rent expense $ 59,600 $ 11,500 $ 65,900 $ 57,700
Future minimum rental commitments, excluding renewal options, under non-cancelable leases are as follows: fiscal year 2007—
$50.4 million; fiscal year 2008—$51.6 million; fiscal year 2009—$50.4 million; fiscal year 2010—$47.5 million; fiscal year 2011—
$46.1 million; all fiscal years thereafter—$568.2 million.
Common area maintenance costs were $10.9 million for the forty-three weeks ended July 29, 2006, $2.1 million for the nine
weeks ended October 1, 2005, $12.6 million for fiscal year 2005 and $11.8 million for fiscal year 2004.
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