Neiman Marcus 2005 Annual Report Download - page 29

On July 27, 2006, we sold our former majority interest in Gurwitch Products, L.L.C. to Alticor Inc., for pretax net cash proceeds
of approximately $40.8 million (Gurwitch Disposition). Gurwitch Products, L.L.C. designs and markets the Laura Mercier cosmetics line
and had annual revenues of approximately $71.6 million in fiscal year 2006. The net assets of Gurwitch Products, L.L.C. were sold for their net
carrying value (after purchase accounting adjustments made in connection with the Transactions to state such assets at fair value). In addition, we recorded
tax expense of $13.3 million, payable by the Company, on the excess of the tax over book gain realized in connection with the Gurwitch Disposition. The
Company's financial statements, accompanying notes and other information provided in this Annual Report on Form 10-K reflect Gurwitch Products, L.L.C. as a
discontinued operation for all periods presented.
Recent Developments
On August 31, 2006, we announced preliminary total revenues and comparable revenues of approximately $270 million and
$262 million, respectively, for the four-week August period of fiscal year 2007, representing increases of 7.4% and 4.4%, respectively,
compared to the four-week August period of fiscal year 2006. For the four-week August period of fiscal year 2007, comparable revenues
increased 2.1% in the Specialty Retail stores segment and 19.3% in the Direct Marketing Segment.
All the financial data for the four-week August period of fiscal year 2007 set forth above are preliminary and unaudited and
subject to revision based upon our review and the review by our independent registered public accounting firm of our financial condition
and results of operations for the quarter ending October 28, 2006. Once we and our independent registered public accounting firm have
completed our respective reviews of our financial information for the quarter ending October 28, 2006, we may report financial results
that are materially different from those set forth above.
Factors Affecting Our Results
Revenues. We generate our revenues primarily from the sale of high-end merchandise through our Specialty Retail stores and
Direct Marketing operation. Components of our revenues include:
• Sales of merchandise—Revenues from our Specialty Retail stores are recognized at the later of the point of sale or the
delivery of goods to the customer. Revenues from our Direct Marketing operation are recognized when the merchandise is
delivered to the customer. We maintain reserves for anticipated sales returns primarily based on our historical trends related
to returns by both our retail and direct marketing customers.
• Commissions from leased departments—A small portion of the sales of our Specialty Retail stores consist of commissions
from certain departments in our stores that we lease to independent companies.
• Delivery and processing—We generate revenues from delivery and processing charges related to merchandise delivered to
our customers from our retail and direct marketing operations.
Our revenues can be affected by the following factors:
• changes in the level of consumer spending generally and, specifically, on luxury goods;
• changes in the level of full-price sales;
• changes in the level of promotional events conducted by our Specialty Retail stores;
• our ability to successfully implement our store expansion and remodeling strategies;
• the rate of growth in internet sales by our Direct Marketing operation; and
• general economic conditions.
In addition, our revenues are seasonal. For a description of the seasonality of our business, see "Seasonality."
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