Neiman Marcus 2008 Annual Report Download - page 104

Table of Contents
before financial statements are issued, including the required disclosure of the date through which subsequent events have been
evaluated and the basis for that date. SFAS 165 is effective for interim or annual periods ending after June 15, 2009. We adopted
SFAS 165 during the fourth quarter of fiscal year 2009, as more fully described in Note 1 "Basis of Presentation."
NOTE 2. DISCONTINUED OPERATION
In February 1999, NMG acquired a 56% controlling interest in Kate Spade LLC, a designer and marketer of high-end
accessories. In April 2005, the minority investor in Kate Spade LLC exercised the put option with respect to the sale of the full
amount of its 44% stake in such company to NMG. In October 2006, we entered into an agreement to settle the put option whereby we
purchased the interest held by the minority investor for approximately $59.4 million.
In November 2006, we entered into a definitive agreement to sell 100% of the ownership interests in Kate Spade LLC to Liz
Claiborne, Inc. (consisting of both our original 56% interest and the 44% minority interest subsequently purchased by NMG) for
pretax net cash proceeds of approximately $121.5 million. Both the purchase of the minority interest in Kate Spade LLC and the sale
of Kate Spade LLC to Liz Claiborne, Inc. were consummated in December 2006.
Our consolidated financial statements, accompanying notes and other information provided in this Annual Report on
Form 10-K reflect Kate Spade LLC as a discontinued operation for all periods presented.
Summarized financial information with respect to the results of operations of Kate Spade LLC is as follows:
(in thousands)
Fiscal year
ended
July 28,
2007
Revenues $ 29,612
Earnings from discontinued operation before income taxes $ 3,494
Income taxes 1,967
Net earnings from discontinued operation 1,527
Loss on disposition before income taxes (13,398)
Income taxes (10,900)
Net loss on disposition (24,298)
Loss from discontinued operation, net of taxes $ (22,771)
In the first quarter of fiscal year 2007, we impaired the intangible assets of Kate Spade LLC by $12.5 million in order to state
the net assets of Kate Spade LLC at their estimated net realizable value to NMG.
NOTE 3. TRANSACTIONS WITH SPONSORS
Pursuant to a management services agreement with affiliates of the Sponsors, and in exchange for on-going consulting and
management advisory services that are provided to us by the Sponsors and their affiliates, affiliates of the Sponsors receive an
aggregate annual management fee equal to the lesser of (i) 0.25% of our consolidated annual revenues or (ii) $10 million. Affiliates of
the Sponsors also receive reimbursement for out-of-pocket expenses incurred by them or their affiliates in connection with services
provided pursuant to the agreement. These management fees are payable quarterly in arrears. We recorded management fees of $9.1
million during fiscal year 2009 and $10.0 million during fiscal years 2008 and 2007, which are included in selling, general and
administrative expenses in the consolidated statements of operations.
The management services agreement also provides that affiliates of the Sponsors may receive future fees in connection with
certain future financing and acquisition or disposition transactions. The management services agreement includes customary
exculpation and indemnification provisions in favor of the Sponsors and their affiliates.
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