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Nordstrom, Inc. and subsidiaries 27
Adjusted Debt to EBITDAR (Non-GAAP financial measure)
We define Adjusted Debt to Earnings before Interest, Income Taxes, Deprecation, Amortization and Rent (“EBITDAR”) as follows:
Adjusted Debt
Adjusted Debt to EBITDAR = Earnings before Interest, Income Taxes, Depreciation,
Amortization and Rent (EBITDAR)
Numerator = Adjusted Debt Denominator = EBITDAR
Debt Net Earnings
+ Rent expense x 8 + Income tax expense
+ Off-balance sheet notes + Interest expense, net
= Adjusted Debt + Depreciation and amortization of buildings and
equipment
+ Rent expense
= EBITDAR
We believe that Adjusted Debt to EBITDAR is a useful measure for investors in evaluating our levels of debt for the periods presented, in addition
to being a key measure used by rating agencies. When read in conjunction with our net earnings and debt and compared to debt to net earnings,
it provides investors with a useful tool to evaluate our ability to maintain appropriate levels of debt from period to period. Beginning in 2007, we have
incorporated Adjusted Debt to EBITDAR into our key financial metrics. We believe that our ability to maintain appropriate levels of debt is best
measured by Adjusted Debt to EBITDAR. Our goal is to manage debt levels at approximately 2.0 times Adjusted Debt to EBITDAR. For 2007, our Adjusted
Debt to EBITDAR was 1.8 compared to 1.1 at the end of 2006. The increase was the result of the $988, net of discount, of notes issued in the fourth
quarter of 2007. This measure, however, is not a measure of financial performance under GAAP and should not be considered a substitute for debt to
net earnings, net earnings, or debt as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other
companies. See our Adjusted Debt to EBITDAR reconciliation to GAAP below. The closest GAAP measure is debt to net earnings, which was 3.5 for 2007
and 0.9 for 2006.
20071 20061
Debt $2,497 $631
Add: rent expense x 8 382 381
Add: off-balance sheet notes - 550
Adjusted Debt $2,879 $1,562
Net earnings 715 678
Add: income tax expense 458 428
Add: interest expense, net 74 43
Earnings before interest and income taxes 1,247 1,149
Add: depreciation and amortization of buildings and equipment 269 285
Add: rent expense 48 48
EBITDAR $1,564 $1,482
Debt to Net Earnings 3.5 0.9
Adjusted Debt to EBITDAR 1.8 1.1
1The components of adjusted debt are as of the end of 2007 and 2006, while the components of EBITDAR are for the 12 months ended February 2, 2008 and
February 3, 2007.