Neiman Marcus 2008 Annual Report Download - page 36

Table of Contents
Selling, general and administrative expenses (excluding depreciation). SG&A expenses decreased by $162.7 million in
fiscal year 2009 compared to the prior fiscal year. The decrease in SG&A expenses reflects 1) savings in variable costs, primarily
commissions, on lower revenues and 2) savings realized as a result of our initiatives to control our expenses (approximately $90
million).
Despite a decrease in SG&A expenses, SG&A expenses as a percentage of revenues increased to 24.2% of revenues in fiscal
year 2009 compared to 22.7% of revenues in the prior fiscal year. The net increase in SG&A expenses as a percentage of revenues in
fiscal year 2009 of approximately 1.5% of revenues was primarily due to:
• the deleveraging of a significant portion of our SG&A expenses, primarily payroll and related benefits net of lower incentive
compensation requirements, by approximately 1.1% of revenues; and
• expenses, primarily consulting fees and severance, aggregating $21.3 million, or 0.6% of revenues, incurred in connection
with our initiatives to control expenses and to reduce our cost structure, which initiatives included headcount and salary
reductions and the centralization and redesign of various store and corporate job functions; offset by
• a lower level of advertising and promotions costs incurred in fiscal year 2009 of approximately 0.1% of revenues, primarily
due to a lower level of spending by our Specialty Retail stores. During the first quarter of fiscal year 2008, we incurred
incremental advertising and promotions costs in connection with the celebration of the 100th anniversary of Neiman Marcus
in October 2007.
Income from credit card program, net. We earned HSBC Program Income of $50.0 million, or 1.4% of revenues, in fiscal
year 2009 compared to $65.7 million, or 1.4% of revenues, in fiscal year 2008.
Depreciation expense. Depreciation expense was $150.8 million, or 4.1% of revenues, in fiscal year 2009 compared to $148.4
million, or 3.2% of revenues, in fiscal year 2008. The increase in depreciation expense as a percentage of revenues results primarily
from the deleveraging of these costs on lower revenues.
Amortization expense. Amortization of intangible assets (primarily customer lists and favorable lease commitments)
aggregated $72.7 million, or 2.0% of revenues, in fiscal year 2009 compared to $72.2 million, or 1.6% of revenues, in fiscal year
2008. The increase in amortization expense as a percentage of revenues results primarily from the deleveraging of these costs on
lower revenues.
Impairment charges. In fiscal year 2009, we recorded impairment charges, related primarily to our tradenames and
goodwill, aggregating $703.2 million in connection with the review of our long-lived assets for recoverability, as more fully explained
in Note 7 in our notes to consolidated financial statements.
In the fourth quarter of fiscal year 2008, we recorded a $31.3 million, or 0.7% of revenues, pretax impairment charge related
to the writedown to fair value of the Horchow tradename.
Other income. In the first quarter of fiscal year 2008, we recorded a pension curtailment gain of $32.5 million, or 0.7% of
revenues, as a result of our decision to freeze certain Pension and SERP benefits as of December 31, 2007, as more fully explained in
Note 14 in our notes to consolidated financial statements.
Segment operating earnings. Segment operating earnings for our Specialty Retail stores and Direct Marketing segments do
not reflect either the impact of adjustments to revalue our assets and liabilities to estimated fair value at the Acquisition date or
impairment charges related to declines in fair value subsequent to the Acquisition date. The reconciliation of segment operating
earnings to total operating loss is as follows:
Specialty Retail stores $ 112.4
Direct Marketing 70.6
Amortization of intangible assets and favorable lease commitments (72.7)
Corporate expenses (60.0)
Impairment charges (703.2)
Total operating loss $ (652.9)
Operating earnings for our Specialty Retail stores segment were $112.4 million, or 3.8% of Specialty Retail stores revenues,
for fiscal year 2009 compared to $476.7 million, or 12.4% of Specialty Retail stores revenues, for the prior fiscal
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