Neiman Marcus 2005 Annual Report Download - page 7

We refer to these transactions, including the merger and our payment of any costs related to these transactions and certain related
transactions as the "Transactions." See "Management's Discussion and Analysis of Financial Condition and Results of Operations—
Liquidity and Capital Resources" for a description of our senior secured credit facilities and senior and senior subordinated notes.
Prior to the Acquisition, the Company had no independent assets or operations. After the Acquisition, the Company
represents the Successor to NMG since the Company's sole asset is its investment in NMG and its operations consist solely of the
operating activities of NMG as well as costs incurred by the Company related to its investment in NMG. For periods prior to the
Acquisition, NMG is deemed to be the predecessor to the Company. As a result, for periods prior to the Transactions, the financial
statements of the Company consist of the financial statements of NMG for such periods. All references to "we" and "our" relate to the
Company for periods subsequent to the Transactions and to NMG for periods prior to the Transactions. The accompanying
consolidated statements of earnings and cash flows present our results of operations and cash flows for the periods preceding the
Acquisition (Predecessor) and the periods succeeding the Acquisition (Successor), respectively.
We have prepared our discussion of the results of operations for the fiscal year ended July 29, 2006 by comparing the results of operations
of the Predecessor for the fiscal year ended July 30, 2005 to the combined amounts obtained by adding the earnings and cash flows for the Predecessor nine-
week period ended October 1, 2005 and the Successor forty-three week period ended July 29, 2006. Although this combined presentation does not comply with
generally accepted accounting principles (GAAP), we believe that it provides a meaningful method of comparison. The combined operating results have not been
prepared on a pro forma basis under applicable regulations and may not reflect the actual results we would have achieved absent the Transactions and may not be
predictive of future results of operations.
In connection with the Transactions, we incurred significant indebtedness and became highly leveraged. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources." In addition, the purchase
price paid in connection with the Acquisition has been allocated to state the acquired assets and liabilities at fair value. The purchase
accounting adjustments increased the carrying value of our property and equipment and inventory, established intangible assets for our
tradenames, customer lists and favorable lease commitments and revalued our long-term benefit plan obligations, among other things.
Subsequent to the Transactions, interest expense and non-cash depreciation and amortization charges have significantly increased. As a
result, our successor financial statements subsequent to the Transactions are not comparable to our predecessor financial statements.
Disposition of Gurwitch Products, L.L.C.
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 set forth above for the four-week August period of fiscal year 2007 are preliminary and unaudited and
subject to revision based upon our review and a 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.
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