Neiman Marcus 2008 Annual Report Download - page 27

Table of Contents
(10) For an explanation of EBITDA and Adjusted EBITDA, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations — Non-GAAP Financial Measure-EBITDA and Adjusted EBITDA."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
EXECUTIVE OVERVIEW
The following discussion and analysis of our financial condition and results of operations should be read together with our
audited consolidated financial statements and related notes. Unless otherwise specified, the meanings of all defined terms in
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are consistent with the meanings
of such terms as defined in the Notes to Consolidated Financial Statements. This discussion contains forward-looking statements.
Please see "Forward-Looking Statements" for a discussion of the risks, uncertainties and assumptions relating to these statements.
Overview
Neiman Marcus, Inc. (the Company), together with our operating segments and subsidiaries, is a high-end specialty retailer.
Our operations include the Specialty Retail stores segment and the Direct Marketing segment. The Specialty Retail stores segment
consists primarily of Neiman Marcus and Bergdorf Goodman stores. The Direct Marketing segment conducts both online and print
catalog operations under the brand names of Neiman Marcus, Bergdorf Goodman and Horchow.
The Company acquired The Neiman Marcus Group, Inc. (NMG) on October 6, 2005 through a merger transaction with
Newton Acquisition Merger Sub, Inc., a wholly-owned subsidiary of Neiman Marcus, Inc. The acquisition was accomplished through
the merger of the Newton Acquisition Merger Sub, Inc. with and into NMG, with NMG being the surviving entity (the Acquisition).
Subsequent to the Acquisition, NMG is a subsidiary of the Company, which is controlled by Newton Holding, LLC (Holding). Both
the Company and Holding were formed by investment funds affiliated with TPG Capital (formerly Texas Pacific Group) and Warburg
Pincus LLC (collectively, the Sponsors). In connection with the Acquisition, NMG incurred significant indebtedness and became
highly leveraged.
Our fiscal year ends on the Saturday closest to July 31. Like many other retailers, we follow a 4-5-4 reporting calendar which
resulted in an extra week in fiscal year 2008 (the 53rd week). All references to fiscal year 2009 relate to the fifty two weeks ended
August 1, 2009; all references to fiscal year 2008 relate to the fifty three weeks ended August 2, 2008 and all references to fiscal year
2007 relate to the fifty two weeks ended July 28, 2007.
Discontinued Operation
In February 1999, NMG acquired a 56% controlling interest in Kate Spade LLC, a designer and marketer of high-end
accessories. In April 2005, the minority investor in Kate Spade LLC exercised the put option with respect to the sale of the full
amount of its 44% stake in such company to NMG. In October 2006, we entered into an agreement to settle the put option whereby we
purchased the interest held by the minority investor for approximately $59.4 million.
In November 2006, we entered into a definitive agreement to sell 100% of the ownership interests in Kate Spade LLC to Liz
Claiborne, Inc. (consisting of both our original 56% interest and the 44% minority interest subsequently purchased by NMG) for
pretax net cash proceeds of approximately $121.5 million. Both the purchase of the minority interest in Kate Spade LLC and the sale
of Kate Spade LLC to Liz Claiborne, Inc. were consummated in December 2006.
The Company's consolidated financial statements, accompanying notes and other information provided in this Annual Report
on Form 10-K reflect Kate Spade LLC as a discontinued operation for all periods presented.
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