Neiman Marcus, Inc. Reports Fourth Quarter and Fiscal Year Earnings.

DALLAS -- Neiman Marcus, Inc. today reported financial results for the fourth quarter of fiscal year 2007. On October 6, 2005, the Company announced the completion of the acquisition of Neiman Marcus, Inc. by an investor group led by TPG Capital (formerly Texas Pacific Group) and Warburg Pincus LLC. The accompanying condensed consolidated statements of earnings and related information present the Company's results of operations for the period preceding the acquisition (Predecessor) and the period succeeding the acquisition (Successor). The results of operations have been prepared by comparing the results of the Successor for the 52 weeks ended July 28, 2007 to the mathematical combination of the Successor and Predecessor periods in the 52 weeks ended July 29, 2006. The presentation does not comply with generally accepted accounting principles, but the Company believes that it provides a more meaningful method of comparison. For further information related to the Company's financial results, refer to the Company's Form 10-K and other information available from the Securities and Exchange Commission.

This release contains information regarding the Company's adjusted operating earnings and EBITDA, both of which are non-GAAP financial measures (as described in the footnotes to the accompanying condensed consolidated statements of earnings and related information). Neiman Marcus, Inc. believes reporting adjusted operating earnings and EBITDA are a more meaningful representation of the Company's on-going economic performance and therefore uses these metrics internally to evaluate and manage the Company's operations. Adjusted operating earnings exclude the impact of certain items as described below under "Other Items."

For the fourth quarter of fiscal year 2007, the Company reported total revenues of $981.7 million compared to $897.1 million in the prior year. Comparable revenues increased 7.0 percent. Operating earnings for the fourth quarter of fiscal year 2007 were $32.2 million compared to $21.2 million for the fourth quarter of fiscal year 2006. Adjusted operating earnings were $55.8 million in the fourth quarter of fiscal year 2007 compared to $37.8 million in the fourth quarter of fiscal year 2006, an increase of 47.6 percent.

For fiscal year 2007, the Company reported total revenues of $4.4 billion compared to $4.0 billion in the prior year. Comparable revenues increased 6.7 percent. Operating earnings for fiscal year 2007 were $476.8 million compared to $329.0 million for the comparable period a year ago. Adjusted operating earnings for fiscal year 2007 were $550.4 million compared to $446.5 million for the comparable period a year ago, an increase of 23.3 percent.

See the attached schedule of "Other Operating Data" for the reconciliation of adjusted operating earnings and the Company's statements regarding the use of this non-GAAP financial measure.

Other Items

As a result of the acquisition, the Company recorded costs related to the amortization of customer lists and favorable lease commitments in both the fourth quarters of fiscal year 2007 and 2006 of approximately $18.1 million. These amortization costs totaled $72.3 million and $59.6 million for the 52 weeks ended July 28, 2007 and July 29, 2006, respectively. The Company also recorded other net expense of $5.5 million in the fourth quarter of fiscal year 2007 which includes an $11.5 million pretax impairment charge related to the writedown to fair value in the net carrying value of the Horchow tradename, offset by $6.0 million of other income related to aged, non-escheatable gift cards. In addition, the Company recorded other income of approximately $4.2 million in the first quarter of fiscal year 2007 which represents proceeds it received from its investment in an internet retailer. These three items resulted in a net other expense of $1.3 million for fiscal year 2007. The Company also recorded other non-cash items related to various valuation adjustments that resulted in a credit of approximately $1.5 million in the fourth quarter of fiscal year 2006 and charges totaling $34.4 million for the 52 weeks ended July 29, 2006. Also, prior to consummation of the acquisition, the Company recorded in the first quarter of fiscal year 2006 transaction and other costs of approximately $23.5 million.

In December 2006, the Company completed both the purchase of the minority interest and the sale of Kate Spade LLC for pretax net cash proceeds of approximately $62.1 million. Also, the Company sold its majority interest in Gurwitch Products, L.L.C. in July 2006 for pretax net cash proceeds of approximately $40.8 million. The Company's financial statements reflect Kate Spade LLC and Gurwitch Products, L.L.C. as discontinued operations for all periods presented.

A live webcast of the conference call on earnings can be accessed through the Investor Information section of the Neiman Marcus, Inc. website at www.neimanmarcusgroup.com on Wednesday, September 26, 2007 beginning at 10:00 a.m. Central Standard Time. Following the live broadcast, interested parties may replay the webcast by accessing this website. To access financial information that will be presented during the call, please visit the Investor Information section of the Neiman Marcus, Inc. website at www.neimanmarcusgroup.com.

From time to time, the Company may make statements that predict or forecast future events or results, depend on future events for their accuracy or otherwise contain "forward-looking information." These statements are made based on management's expectations and beliefs concerning future events and are not guarantees of future performance.

The Company cautions readers that actual results may differ materially as a result of various factors, some of which are beyond its control, including but not limited to: political or economic conditions; terrorist activities in the United States and elsewhere; disruptions in business at the Company's stores, distribution centers or offices; changes in consumer confidence resulting in a reduction of discretionary spending on goods; changes in demographic or retail environments; changes in consumer preferences or fashion trends; competitive responses to the Company's marketing, merchandising and promotional efforts; changes in the Company's relationships with key customers; delays in the receipt of merchandise; seasonality of the retail business; adverse weather conditions, particularly during peak selling seasons; delays in anticipated store openings or renovations; natural disasters; significant increases in paper, printing and postage costs; litigation that may have an adverse effect on the Company's financial results or reputation; changes in the Company's relationships with designers, vendors and other sources of merchandise; the Company's success in enforcing its intellectual property rights; the effects of incurring a substantial amount of indebtedness under the Company's senior secured credit facilities, senior notes and senior subordinated notes and of complying with the related covenants and conditions; the financial viability of the Company's designers, vendors and other sources of merchandise; the design and implementation of new information systems or enhancement of existing systems; changes in foreign currency exchange rates or inflation rates; impact of funding requirements related to the Company's noncontributory defined benefit pension plan; changes in the Company's relationships with certain of key sales associates; changes in key management personnel; changes in the Company's proprietary credit card arrangement that adversely impact its ability to provide consumer credit; or changes in government or regulatory requirements increasing the Company's cost of operations.

These and other factors that may adversely effect the Company's future performance or financial condition are contained in its Annual Report in Form 10-K and other reports filed with and available from the Securities and Exchange Commission. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events, new information or future circumstances.

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The results of operations have been prepared by comparing the results of the Successor for the fifty-two weeks ended July 28, 2007 to the mathematical combination of the Successor and Predecessor periods in the fifty-two weeks ended July 29, 2006. The presentation does not comply with generally accepted accounting principles, but the Company believes that it provides a more meaningful method of comparison.

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The results of operations have been prepared by comparing the results of the Successor for the fifty-two weeks ended July 28, 2007 to the mathematical combination of the Successor and Predecessor periods in the fifty-two weeks ended July 29, 2006. The presentation does not comply with generally accepted accounting principles, but the Company believes that it provides a more meaningful method of comparison.

Adjusted operating earnings represents operating earnings excluding amortization of customer lists and favorable lease commitments, purchase accounting adjustments, other expense and transaction and other costs.

Neiman Marcus, Inc. believes reporting adjusted operating earnings is a more meaningful representation of the Company's on-going economic performance and therefore uses adjusted reporting internally to evaluate and manage the Company's operations. Neiman Marcus, Inc. has chosen to provide this information to investors to enable them to perform more meaningful comparisons of operating results and as a means to emphasize the results of on-going operations. Adjusted operating earnings is not a recognized term under generally accepted accounting principles (GAAP). Adjusted earnings should be considered in addition to, not as a substitute for, the Company's other measures of financial performance reported in accordance with generally accepted accounting principles. Adjusted operating earnings as presented herein are not necessarily comparable to similarly titled measures.

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The results of operations have been prepared by comparing the results of the Successor for the fifty-two weeks ended July 28, 2007 to the mathematical combination of the Successor and Predecessor periods in the fifty-two weeks ended July 29, 2006.

EBITDA represents earnings from continuing operations excluding income taxes, interest, depreciation and amortization. We present the non-GAAP financial measure EBITDA because we use this measure to monitor and evaluate the performance of our business and believe the presentation of this measure 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. In addition, we use EBITDA as a component of the measurement of incentive compensation.

EBITDA is not a presentation made in accordance with GAAP and this computation may vary from others in the industry. In addition, EBITDA contains some, but not all, adjustments that are taken into account in the calculation of the components of various covenants in the indentures governing the Company's senior secured Asset-Based Revolving Credit Facility, Senior Secured Term Loan Facility, Senior Notes and Senior Subordinated Notes. EBITDA should not be considered as an alternative to operating earnings or net earnings as measures of operating performance or cash flows as measures of liquidity. EBITDA has important limitations as an analytical tool and should not be considered in isolation, or as a substitute for analysis of the Company's results as reported under GAAP. For example, EBITDA does not reflect cash expenditures, or future requirements, for capital expenditures or contractual commitments; does not reflect changes in, or cash requirements, for working capital needs; does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on the Company's debt; excludes tax payments that represent a reduction in cash available; and does not reflect any cash requirements for assets being depreciated and amortized that may have to be replaced in the future.

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