Neiman Marcus 2010 Annual Report Download - page 130

Table of Contents
case, the internal rate of return to the Sponsors is positive. As of July 30, 2011, the vested participant balance in the Long-Term
Incentive Plan aggregated $7.3 million.
Cash Incentive Plan. We also have a cash incentive plan (Cash Incentive Plan) to aid in the retention of certain key
executives. The Cash Incentive Plan provides for the creation of a $14 million cash bonus pool. Each participant in the Cash
Incentive Plan will be entitled to a cash bonus upon the earlier to occur of a change of control, as defined, or an initial public offering,
as defined, subject to the requirement that, in each case, the internal rate of return to the Sponsors is positive.
Litigation. On April 30, 2010, a Class Action Complaint for Injunction and Equitable Relief was filed in the United States
District Court for the Central District of California by Sheila Monjazeb, individually and on behalf of other members of the general
public similarly situated, against the Company, Newton Holding, LLC, TPG Capital, L.P. and Warburg Pincus, LLC. On July 12,
2010, all defendants except for the Company were dismissed without prejudice, and on August 20, 2010, this case was refiled in the
Superior Court of California for San Francisco County. This complaint, along with a similar class action lawsuit originally filed by
Bernadette Tanguilig in 2007, alleges that the Company has engaged in various violations of the California Labor Code and Business
and Professions Code, including without limitation 1) asking employees to work "off the clock," 2) failing to provide meal and rest
breaks to its employees, 3) improperly calculating deductions on paychecks delivered to its employees, and 4) failing to provide a
chair or allow employees to sit during shifts. The plaintiffs in these matters seek certification of their cases as class actions,
reimbursement for past wages and temporary, preliminary and permanent injunctive relief preventing defendant from allegedly
continuing to violate the laws cited in their complaints. We intend to vigorously defend our interests in these matters. Currently, we
cannot reasonably estimate the amount of loss, if any, arising from these matters. However, we do not currently believe the resolution
of these matters will have a material adverse impact on our financial position. We will continue to evaluate these matters based on
subsequent events, new information and future circumstances.
We are currently involved in various other legal actions and proceedings that arose in the ordinary course of business. We
believe that any liability arising as a result of these actions and proceedings will not have a material adverse effect on our financial
position, results of operations or cash flows.
Other. We had approximately $13.7 million of outstanding irrevocable letters of credit relating to purchase commitments
and insurance and other liabilities at July 30, 2011. We had approximately $3.0 million in surety bonds at July 30, 2011 relating
primarily to merchandise imports and state sales tax and utility requirements.
NOTE 15. SEGMENT REPORTING
We have identified two reportable segments: Specialty Retail Stores and Direct Marketing. The Specialty Retail Stores
segment aggregates the activities of our Neiman Marcus and Bergdorf Goodman retail stores, including Neiman Marcus Last Call
stores. The Direct Marketing segment conducts both online and print catalog operations under the Neiman Marcus, Bergdorf
Goodman, Neiman Marcus Last Call and Horchow brand names. Both the Specialty Retail Stores and Direct Marketing segments
derive their revenues from the sales of high-end fashion apparel, accessories, cosmetics and fragrances from leading designers,
precious and fashion jewelry and decorative home accessories.
Operating earnings (loss) for the segments include 1) revenues, 2) cost of sales, 3) direct selling, general, and administrative
expenses, 4) other direct operating expenses, 5) income from credit card program and 6) depreciation expense for the respective
segment. Items not allocated to our operating segments include those items not considered by management in measuring the assets
and profitability of our segments. These amounts include 1) corporate expenses including, but not limited to, treasury, investor
relations, legal and finance support services, and general corporate management, 2) charges related to the application of purchase
accounting adjustments made in connection with the Acquisition including amortization of intangible assets and favorable lease
commitments and other non-cash items and 3) interest expense. These items, while often related to the operations of a segment, are
not considered by segment operating management, corporate operating management and the chief operating decision maker in
assessing segment operating performance. The accounting policies of the operating segments are the same as those described in the
summary of significant accounting policies (except with respect to purchase accounting adjustments not allocated to the operating
segments).
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