Neiman Marcus 2010 Annual Report Download - page 109

Table of Contents
Significant assumptions related to the calculation of our obligations include the discount rates used to calculate the present
value of benefit obligations to be paid in the future, the expected long-term rate of return on assets held by the Pension Plan and the
health care cost trend rate for the Postretirement Plan, as more fully described in Note 9 of the Notes to Consolidated Financial
Statements. We review these assumptions annually based upon currently available information, including information provided by
our actuaries.
Self-insurance and Other Employee Benefit Reserves. We use estimates in the determination of the required accruals for
general liability, workers' compensation and health insurance. We base these estimates upon an examination of historical trends,
industry claims experience and independent actuarial estimates. Although we do not expect that we will ultimately pay claims
significantly different from our estimates, self-insurance reserves could be affected if future claims experience differ significantly
from our historical trends and assumptions.
Other Long-term Liabilities. Other long-term liabilities consist primarily of certain employee benefit obligations,
postretirement health care benefit obligations and the liability for scheduled rent increases.
Revenues. Revenues include sales of merchandise and services and delivery and processing revenues related to merchandise
sold. Revenues are recognized at the later of the point of sale or the delivery of goods to the customer. Revenues associated with gift
cards are recognized at the time of redemption by the customer. Revenues exclude sales taxes collected from our customers.
Revenues are reduced when customers return goods previously purchased. We maintain reserves for anticipated sales returns
primarily based on our historical trends related to returns by our customers. Our reserves for anticipated sales returns aggregated
$28.6 million at July 30, 2011 and $25.2 million at July 31, 2010.
Buying and Occupancy Costs. Our buying costs consist primarily of salaries and expenses incurred by our merchandising
and buying operations. Occupancy costs primarily include rent, property taxes and operating costs of our retail, distribution and
support facilities and exclude depreciation expense.
Selling, General and Administrative Expenses (excluding depreciation). Selling, general and administrative expenses are
comprised principally of the costs related to employee compensation and benefits in the selling and administrative support areas and
advertising and marketing costs.
We receive allowances from certain merchandise vendors in conjunction with compensation programs for employees who
sell the vendors' merchandise. These allowances are netted against the related compensation expense that we incur. Amounts received
from vendors related to compensation programs were $60.3 million in fiscal year 2011, $61.1 million in fiscal year 2010 and $65.8
million in fiscal year 2009.
We incur costs to advertise and promote the merchandise assortment offered by both Specialty Retail Stores and Direct
Marketing. Advertising costs for print media costs and promotional materials mailed to our customers are expensed at the time of
mailing to the customer. Advertising costs also include costs related to the production, printing and distribution of our print catalogs
and the production of the photographic content on our websites. We amortize the costs of print catalogs during the periods we expect
to generate revenues from such catalogs, generally three to six months. We expense the costs incurred to produce the photographic
content on our websites, as well as website design and web marketing costs, as incurred. Net advertising expenses were $86.6 million
in fiscal year 2011, $77.4 million in fiscal year 2010 and $81.1 million in fiscal year 2009.
Consistent with industry practice, we receive advertising allowances from certain of our merchandise vendors. Substantially
all the advertising allowances we receive represent reimbursements of direct, specific and incremental costs that we incur to promote
the vendor's merchandise in connection with our various advertising programs, primarily catalogs and other print media. Advertising
allowances fluctuate based on the level of advertising expenses incurred and are recorded as a reduction of our advertising costs when
earned. Advertising allowances aggregated approximately $49.3 million in fiscal year 2011, $46.2 million in fiscal year 2010 and
$65.7 million in fiscal year 2009.
Preopening expenses primarily consist of payroll and related media costs incurred in connection with store openings and
major renovations and are expensed when incurred. We incurred preopening expenses of $0.8 million in fiscal year 2011, $2.7 million
in fiscal year 2010 and $5.1 million in fiscal year 2009.
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