Neiman Marcus 2007 Annual Report Download - page 123

Table of Contents
NOTE 14. COMMITMENTS AND CONTINGENCIES
Leases. We lease certain property and equipment under various non-cancelable capital and operating leases. The leases
provide for monthly fixed rentals and/or contingent rentals based upon sales in excess of stated amounts and normally require us to
pay real estate taxes, insurance, common area maintenance costs and other occupancy costs. Generally, the leases have primary terms
ranging from two to 99 years and include renewal options ranging from one to 80 years.
Rent expense and related occupancy costs under operating leases is as follows:
(Successor) (Predecessor)
(in thousands)
Fiscal year
ended
August 2,
2008
Fiscal year
ended
July 28,
2007
Forty-three
weeks
ended
July 29,
2006
Nine weeks
ended
October 1,
2005
Minimum rent $ 53,000 $ 46,900 $ 36,200 $ 6,600
Contingent rent 29,700 28,600 22,900 4,700
Other occupancy costs 13,600 13,700 10,400 2,000
Amortization of deferred real estate
credits (3,700)(1,700)(200) (800)
Total rent expense $ 92,600 $ 87,500 $ 69,300 $ 12,500
Future minimum rental commitments, excluding renewal options, under non-cancelable leases are as follows: fiscal year
2009—$56.3 million; fiscal year 2010—$54.8 million; fiscal year 2011—$51.7 million; fiscal year 2012—$47.7 million; fiscal year
2013—$45.7 million; all fiscal years thereafter—$682.5 million.
Long-term Incentive Plan. The Company has a long-term incentive plan (Long-term Incentive Plan) that provides for a cash
incentive payable upon a change of control, as defined, subject to the attainment of certain performance objectives to certain
employees. Performance objectives and targets are based on cumulative EBITDA percentages for three year periods beginning in
fiscal year 2006. Earned awards for each completed performance period will be credited to a book account and will earn interest at a
contractually defined annual rate until the award is paid. Awards will be paid within 30 days of a change of control or the first day
there is a public market of at least 20% of total outstanding common stock. As of August 2, 2008, the vested participant balance in the
Long-Term Incentive Plan aggregated $3.7 million.
Cash Incentive Plan. The Company also has 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 or an initial public offering, as defined in the Cash
Incentive Plan, provided that the internal rate of return to the Sponsors is positive.
Litigation. We are currently involved in various 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 $24.0 million of outstanding irrevocable letters of credit relating to purchase commitments
and insurance and other liabilities at August 2, 2008. We had approximately $4.0 million in surety bonds at August 2, 2008 relating
primarily to merchandise imports, state sales tax and utility requirements.
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