Neiman Marcus 2013 Annual Report Download - page 19

Table of Contents
Legislation and regulatory developments could affect our business or results of operations.
We are subject to customs, anti-corruption laws, truth-in-advertising, intellectual property, labor and other laws, including consumer protection
regulations, credit card regulations, environmental laws and zoning and occupancy ordinances that regulate retailers generally and/or govern the
importation, promotion and sale of merchandise, regulate wage and hour matters with respect to our employees and govern the operation of our retail stores
and warehouse facilities. Although we undertake to monitor changes in these laws, if these laws or the interpretation of these laws change without our
knowledge, or are violated by importers, designers, manufacturers or distributors, we could experience delays in shipments and receipt of goods, suffer
damage to our reputation or be subject to fines or other penalties under the controlling regulations, any of which could adversely affect our business or results
of operations.
If we are unable to enforce our intellectual property rights, or if we are accused of infringing on a third party’s intellectual property rights, our business or
results of operations may be adversely affected.
We and our subsidiaries currently own our tradenames and service marks, including the “Neiman Marcus” and “Bergdorf Goodman” marks. Our
tradenames and service marks are registered in the United States and in various foreign countries. The laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States. The loss or reduction of any of our significant proprietary rights could have an
adverse effect on our business.
Additionally, third parties may assert claims against us alleging infringement, misappropriation or other violations of their tradename or other
proprietary rights, whether or not the claims have merit. Such claims could be time consuming and expensive to defend and we could be required to cease
using the tradename or other rights or sell the allegedly infringing products. This could have an adverse effect on our business or results of operations and
cause us to incur significant litigation costs and expenses.
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Our substantial indebtedness could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.
As a result of our substantial indebtedness incurred in connection with the Acquisition, a significant amount of our cash flow will be used to pay
interest and principal on our outstanding indebtedness, and we may not generate sufficient cash flow from operations, or have future borrowings available
under our Asset-Based Revolving Credit Facility, to enable us to repay our indebtedness or to fund our other liquidity needs. As of August 2, 2014, the
principal amount of our total indebtedness was approximately $4,612.9 million, and we had unused commitments under our Asset-Based Revolving Credit
Facility available to us of $720.0 million, subject to a borrowing base.
Our current indebtedness could adversely affect our business, financial condition and results of operations by:
• making it more difficult for us to satisfy our obligations with respect to our debt;
• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions, execution of our business
and growth strategies or other general corporate requirements;
• requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the
amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes and future growth;
• increasing our vulnerability to general adverse economic, industry and competitive conditions and government regulations;
• exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under our Senior Secured Credit Facilities,
are at variable rates of interest;
• limiting our flexibility in planning for and reacting to changes in the industry in which we compete and to changing business and economic
conditions;
• placing us at a disadvantage compared to other, less leveraged competitors and affecting our ability to compete; and
• increasing our cost of borrowing.
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