Neiman Marcus 2008 Annual Report Download - page 121

Table of Contents
benefits was $6.6 million, all of which would impact our effective tax rate, if recognized. We classify interest and penalties as a
component of income tax (benefit) expense and our liability for accrued interest and penalties was $5.8 million as of August 1, 2009.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in millions):
(in thousands)
August 1,
2009
August 2,
2008
Balance at beginning of fiscal year $ 21,244 $ 26,624
Gross amount of increases for current year tax positions 591 1,779
Gross amount of decreases for settlements with tax authorities (14,263 ) (7,159 )
Gross amount of decreases for expiration of statutes of limitation (967 )—
Balance at ending of fiscal year $ 6,605 $ 21,244
We file income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. During the third quarter
of fiscal year 2009, we closed the IRS examination of fiscal years 2005 and 2006 and received net refunds of approximately $2.8
million. In addition, as a result of the completion of the audit and IRS determination regarding certain deductions taken in connection
with the Acquisition, we recorded a decrease in the gross amount of unrecognized tax benefits of $13.7 million and a decrease in
accrued interest and penalties of $2.2 million. This $15.9 million reduction in our liability for unrecognized tax benefits resulted in a
decrease to goodwill of $17.3 million and a tax benefit of $1.3 million, offset by a decrease to deferred tax liabilities of $2.7 million
during fiscal year 2009. Finally, in the fourth quarter of fiscal year 2009, we recorded a decrease to our recorded liability for
unrecognized tax benefits and a corresponding reduction to goodwill of $0.7 million as a result of the expiration of statutes of
limitation in various taxing jurisdictions.
During the fourth quarter of fiscal year 2008, we entered into a negotiated settlement with a state tax authority regarding a
state non-filing position which resulted in a decrease in our accruals for uncertain tax positions and a reduction to our gross
unrecognized tax benefits of $7.2 million and a corresponding decrease to goodwill of $3.0 million related to the resolution of
uncertainties that existed at the time of the Acquisition.
The IRS is now examining our federal tax returns for fiscal year 2007. We believe our recorded tax liabilities as of August 1,
2009 are sufficient to cover any potential assessments to be made by the IRS upon the completion of their examinations. We will
continue to monitor the progress of the IRS examinations and review our recorded tax liabilities for potential audit assessments. With
respect to state and local jurisdictions, with limited exceptions, the Company and its subsidiaries are no longer subject to income tax
audits for fiscal years before 2005. We believe it is reasonably possible that additional adjustments in the amounts of our
unrecognized tax benefits could occur within the next 12 months as a result of settlements with tax authorities or expiration of statutes
of limitation. At this time, we do not believe such adjustments will have a material impact on our consolidated financial statements.
NOTE 14. EMPLOYEE BENEFIT PLANS
Description of Benefit Plans. We sponsor a defined benefit pension plan (Pension Plan) and an unfunded supplemental
executive retirement plan (SERP Plan) which provides certain employees additional pension benefits. Benefits under both plans are
based on the employees' years of service and compensation over defined periods of employment. As more fully described below, we
froze benefits offered under our Pension and SERP Plans effective December 31, 2007. Retirees and active employees hired prior to
March 1, 1989 are eligible for certain limited postretirement health care benefits (Postretirement Plan) if they meet certain service and
minimum age requirements.
We also maintain defined contribution plans consisting of a 401(k) Plan and, in connection with the redesign of our long-term
benefits effective January 1, 2008 as more fully described below, a retirement savings plan (RSP) and defined contribution
supplemental executive retirement plan (Defined Contribution SERP Plan). Employees make contributions to the 401(k) Plan and
RSP and we match an employee's contribution up to a maximum of 6% of the employee's compensation subject to statutory
limitations for a potential maximum match of 50% of employee contributions to the 401(k) Plan and 75% of employee contributions
to the RSP. We also sponsor an unfunded key employee deferred compensation plan, which provides certain employees with
additional benefits. Our aggregate expense related to these plans was approximately $20.0 million in fiscal year 2009, $19.2 million
in fiscal year 2008 and $11.0 million in fiscal year 2007.
Plan Redesign. On September 7, 2007, our Board of Directors approved certain changes to our long-term benefits program.
Effective January 1, 2008, we offered a new, enhanced retirement savings plan subject to participants' elections to participate (as more
fully described below). For associates participating in the RSP:
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