Neiman Marcus 2013 Annual Report Download - page 110

Table of Contents
We receive allowances from developers related to the construction of our stores. We record these allowances as deferred real estate credits, which we
recognize as a reduction of rent expense on a straight-line basis over the lease term beginning with the date the Company takes possession of the leased
asset. We received construction allowances aggregating $5.7 million for the thirty-nine weeks ended August 2, 2014, $7.2 million in fiscal year 2013 and
$10.6 million in fiscal year 2012.
Benefit Plans. We sponsor a defined benefit pension plan (Pension Plan), an unfunded supplemental executive retirement plan (SERP Plan) which
provides certain employees additional pension benefits and a postretirement plan providing eligible employees limited postretirement health care benefits
(Postretirement Plan). In calculating our obligations and related expense, we make various assumptions and estimates, after consulting with outside actuaries
and advisors. The annual determination of expense involves calculating the estimated total benefits ultimately payable to plan participants. We use the
traditional unit credit method in recognizing pension liabilities. The Pension Plan, SERP Plan and Postretirement Plan are valued annually as of the end of
each fiscal year. As of the third quarter of fiscal year 2010, benefits offered to all employees under our Pension Plan and SERP Plan were frozen.
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 10 of the Notes to Consolidated Financial Statements. We
review these assumptions annually based upon currently available information, including information provided by our actuaries.
Our obligations related to our employee benefit plans are included in other long-term liabilities.
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 differs significantly from our historical trends and assumptions.
Derivative Financial Instruments. We enter into derivative financial instruments, primarily interest rate cap agreements, to hedge the variability of
our cash flows related to a portion of our floating rate indebtedness. The derivative financial instruments are recorded at estimated fair value at each balance
sheet date and included in assets or liabilities in our Consolidated Balance Sheets.
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 $38.9 million at August 2, 2014 and $37.4 million
at August 3, 2013.
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 $55.4 million for the thirty-nine weeks ended August 2, 2014, $18.5 million for the thirteen weeks ended November 2, 2013, $72.2 million in
fiscal year 2013 and $65.1 million in fiscal year 2012.
We incur costs to advertise and promote the merchandise assortment offered through our store and online operations. We expense advertising costs
for print media costs and promotional materials mailed to our customers at the time of mailing to
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