Neiman Marcus 2008 Annual Report Download - page 41

Table of Contents
evaluate our ability to service our debt. 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 —
2009 Executive Officer Compensation."
EBITDA and Adjusted EBITDA are not presentations made in accordance with GAAP and our computation of EBITDA and
Adjusted EBITDA may vary from others in our industry. In addition, 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:
• do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
• do not reflect changes in, or cash requirements for, our working capital needs;
• do not reflect our considerable interest expense, or the cash requirements necessary to service interest or principal
payments, on our debt;
• exclude tax payments that represent a reduction in available cash; and
• do not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the
future.
The following table reconciles (loss) earnings from continuing operations as reflected in our consolidated statements of
operations prepared in accordance with GAAP to EBITDA and Adjusted EBITDA:
Fiscal year ended
(dollars in millions)
August 1,
2009
August 2,
2008
July 28,
2007
(Loss) earnings from continuing operations $ (668.0)(1)$ 142.8(2) $ 134.7(3)
Income tax (benefit) expense (220.5) 83.8 82.3
Interest expense, net 235.6 239.8 259.8
Depreciation expense 150.8 148.4 136.5
Amortization of intangible assets and favorable lease
commitments 72.7 72.2 72.3
EBITDA (429.4)(1) 687.0(2) 685.6(3)
EBITDA rate (11.8)% 14.9% 15.6%
Non-cash impairment of long-lived assets 703.2 31.3 11.5
Other income — (32.5)(10.2)
Adjusted EBITDA $ 273.8 $ 685.8 $ 686.9
Adjusted EBITDA rate 7.5%14.9%15.6%
(1) For fiscal year 2009, operating loss and EBITDA include pretax impairment charges related to 1) $329.7 million for the
writedown to fair value of goodwill, 2) $343.2 million for the writedown to fair value of the net carrying value of tradenames
and 3) $30.3 million for the writedown to fair value of the net carrying value of certain long-lived assets.
(2) For fiscal year 2008, operating earnings and EBITDA include 1) $32.5 million of other income related to a pension
curtailment gain as a result of our decision to freeze certain Pension and SERP benefits as of December 31, 2007, offset by 2)
$31.3 million pretax impairment charge related to the writedown to fair value of the Horchow tradename.
(3) For fiscal year 2007, operating earnings and EBITDA include 1) $11.5 million pretax impairment charge related to the
writedown to fair value of the Horchow tradename, offset by 2) $4.2 million of other income we received in connection with
the merger of Wedding Channel.com, in which we held a minority interest, and The Knot and 3) $6.0M of other income
related to aged, non-escheatable gift cards.
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