Neiman Marcus 2005 Annual Report Download - page 89

NEIMAN MARCUS, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On April 22, 2005, Neiman Marcus, Inc., formerly Newton Acquisition, Inc. (the Company), and its wholly-owned subsidiary,
Newton Acquisition Merger Sub, Inc. (Merger Sub), were formed and incorporated in the state of Delaware. On April 29, 2005, the
Company received subscriptions for 900 shares of its common stock from Newton Holding, LLC (Holding) in exchange for a capital
contribution of $900 and Merger Sub issued 900 shares of its common stock to the Company in exchange for a capital contribution of
$900. Holding, the Company and Merger Sub were formed by investment funds affiliated with Texas Pacific Group and Warburg Pincus
LLC (the Sponsors) for the purpose of acquiring The Neiman Marcus Group, Inc. (NMG). The equity subscriptions were subsequently
funded by the Sponsors.
In connection with the acquisition of NMG, Holding made an aggregate cash equity contribution of $1,420.0 million and a
noncash equity contribution of $25.0 million to the Company in exchange for the Company issuing 999,100 shares of its common stock
to Holding. In addition, certain members of executive management of the Company made cash equity contributions aggregating
$7.7 million and noncash equity contributions, consisting of shares of common stock and common stock options in NMG, aggregating
$17.9 million in exchange for 12,264 shares of common stock in the Company.
The acquisition of NMG was completed on October 6, 2005 through the merger of Merger Sub with and into NMG, with NMG
being the surviving entity (the Acquisition). Subsequent to the Acquisition, NMG is a subsidiary of the Company, which is controlled by
Holding.
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 Acquisition has been recorded as of
October 1, 2005, the beginning of the Company's October accounting period. 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.
Our fiscal year ends on the Saturday closest to July 31. All references to fiscal year 2006 relate to the combined period
comprised of forty-three weeks ended July 29, 2006 (Successor) and the nine weeks ended October 1, 2005 (Predecessor); all references
to fiscal year 2005 relate to the 52 weeks ended July 30, 2005 and all references to fiscal year 2004 related to the 52 weeks ended July 31,
2004.
We have prepared the accompanying audited consolidated financial statements in accordance with generally accepted
accounting principles. In our opinion, the accompanying audited consolidated financial statements contain all adjustments, consisting of
normal recurring adjustments, necessary to present fairly our financial position, results of operations and cash flows for the applicable
periods.
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). See Note 4 for further information. 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.
Certain prior period balances have been reclassified to conform to the current period presentation. Depreciation expense and
income from credit card operations are now shown as separate line items on our consolidated statements of earnings. In prior years,
depreciation expense was included in buying and occupancy costs and the income from our credit card operations was included as a
reduction to selling, general and administrative expenses.
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