Neiman Marcus 2009 Annual Report Download - page 39

Table of Contents
Interest expense, net. Net interest expense was $235.6 million, or 6.5% of revenues, in fiscal year 2009 and $239.8 million,
or 5.2% of revenues, for the prior fiscal year. The net decrease in interest expense is primarily due to 1) the decrease in interest rates
on our variable-rate indebtedness, partially offset by 2) incremental non-cash interest on the Senior Notes, 3) lower interest income
and 4) lower capitalized interest as a result of lower capital expenditures. The significant components of interest expense are as
follows:
Fiscal year ended
(in thousands)
August 1,
2009
August 2,
2008
Senior Secured Term Loan Facility $ 90,952 $ 106,504
2028 Debentures 8,906 8,903
Senior Notes 66,356 63,000
Senior Subordinated Notes 52,028 51,875
Amortization of debt issue costs 17,185 14,217
Other, net 1,140 (1,658)
Capitalized interest (993)(3,036)
Interest expense, net $ 235,574 $ 239,805
Income tax (benefit) expense. Our effective income tax rate for fiscal year 2009 was 24.8% compared to 37.0% for fiscal
year 2008. No income tax benefit exists related to the $329.7 million of goodwill impairment charges recorded in fiscal year 2009.
Excluding the impact of the goodwill impairment charges, our effective income tax rate was 39.5% for fiscal year 2009.
During the third quarter of fiscal year 2009, we closed the IRS examination of fiscal years 2005 and 2006 and received net
refunds of approximately $2.8 million. In addition, as a result of the completion of the audit and IRS determination regarding certain
deductions taken in connection with the Acquisition, we recorded a decrease in the gross amount of unrecognized tax benefits of $13.7
million and a decrease in accrued interest and penalties of $2.2 million. This $15.9 million reduction in our liability for unrecognized
tax benefits resulted in a decrease to goodwill of $17.3 million and a tax benefit of $1.3 million, offset by a decrease to deferred tax
liabilities of $2.7 million during fiscal year 2009. Finally, in the fourth quarter of fiscal year 2009, we recorded a decrease to our
recorded liability for unrecognized tax benefits and a corresponding reduction to goodwill of $0.7 million as a result of the expiration
of statutes of limitation in various taxing jurisdictions.
During the fourth quarter of fiscal year 2008, we entered into a negotiated settlement with a state tax authority regarding a
state non-filing position which resulted in a decrease in our accruals for uncertain tax positions and a reduction to our gross
unrecognized tax benefits of $7.2 million and a corresponding decrease to goodwill of $3.0 million related to the resolution of
uncertainties that existed at the time of the Acquisition.
Non-GAAP Financial Measure — EBITDA and Adjusted EBITDA
We present the financial performance measures of earnings before interest, taxes, depreciation and amortization (EBITDA)
and Adjusted EBITDA because we use these measures to monitor and evaluate the performance of our business and believe the
presentation of these measures will enhance investors' ability to analyze trends in our business, evaluate our performance relative to
other companies in our industry and evaluate our ability to service our debt. EBITDA and Adjusted EBITDA are not presentations
made in accordance with generally accepted accounting principals in the U.S. (GAAP). Our computations of EBITDA and Adjusted
EBITDA may vary from others in our industry. In addition, we use performance targets based on Adjusted EBITDA as a component
of the measurement of incentive compensation as described under "Executive Compensation — Compensation Discussion and
Analysis — 2010 Executive Officer Compensation."
The non-GAAP measures of EBITDA and Adjusted EBITDA contain some, but not all, adjustments that are taken into
account in the calculation of the components of various covenants in the indentures governing NMG's senior secured Asset-Based
Revolving Credit Facility, Senior Secured Term Loan Facility, Senior Notes and Senior Subordinated Notes. EBITDA and Adjusted
EBITDA should not be considered as alternatives to operating earnings or net earnings as measures of operating performance. In
addition, EBITDA and Adjusted EBITDA are not presented as and should not be considered as alternatives to cash flows as measures
of liquidity. EBITDA and Adjusted EBITDA have important limitations as analytical tools and should not be considered in isolation,
or as a substitute for analysis of our results as reported under GAAP. For example, EBITDA and Adjusted EBITDA:
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