SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended July 30, 1994
Commission File Number 1-9659
THE NEIMAN MARCUS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-4119509
(State or other jurisdiction of (IRS Employer
incorporation or organization)Identification No.)
27 Boylston Street, Chestnut Hill, Massachusetts 02167
(Address of principal executive offices) (Zip Code)
Registrant's telephone number and area code: 617-232-0760
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each Exchange
on which Registered
Common Stock, $.01 par value New York
Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of October 14, 1994 was
$241,124,218.
There were 37,957,053 shares of Common Stock outstanding as
of October 14, 1994.
_______________________________
Documents Incorporated by Reference
Portions of the Registrant's 1994 Annual Report to
Shareholders are incorporated by reference in Parts I, II and IV
of this Report.
THE NEIMAN MARCUS GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 30, 1994
TABLE OF CONTENTS
PART I Page
No.
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security
Holders 4
PART II
Item 5. Market for the Registrant's Common
Equity and Related Stockholder Matters 4
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 5
Item 8. Financial Statements and Supplementary Data 5
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 5
PART III
Item 10. Directors and Executive Officers
of the Registrant 5
Item 11. Executive Compensation 9
Item 12. Security Ownership of Certain Beneficial
Owners and Management 24
Item 13. Certain Relationships and Related Transactions 26
PART IV
Item 14.
Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 27
Signatures 29
PART I
Item 1. BUSINESS
General
The Neiman Marcus Group, Inc. (together with its operating
divisions and subsidiaries, the "Company") is a Delaware
corporation which commenced operations in August 1987. Harcourt
General, Inc. ("Harcourt General"), a Delaware corporation based
in Chestnut Hill, Massachusetts, owns approximately 65% of the
fully converted equity of the Company; two of its directors and
nearly all of its officers and corporate staff employees occupy
similar positions with the Company. For more information about
the relationship between the Company and Harcourt General, see
Items 12 and 13 below and Notes 5 and 6 to the Company's
Consolidated Financial Statements incorporated herein by
reference. Harcourt General is a public company subject to the
reporting requirements of the Securities Exchange Act of 1934.
For further information about Harcourt General, reference may be
made to the reports filed by Harcourt General from time to time
with the Securities and Exchange Commission.
Description of Operations
Neiman Marcus
Neiman Marcus, based in Dallas, Texas, is a high fashion,
specialty retailer which offers high quality women's and men's
apparel, fashion accessories, precious jewelry, decorative home
accessories, fine china, crystal and silver, and epicurean
products. A relatively small portion of Neiman Marcus' customers
accounts for a significant percentage of its retail sales. In
addition, Neiman Marcus operates a state-of-the-art direct
marketing business, NM Direct, which distributes the catalogues
of Neiman Marcus, Horchow and Pastille.
Neiman Marcus' 27 stores are located in Arizona
(Scottsdale); California (five stores: Beverly Hills, Newport
Beach, Palo Alto, San Diego and San Francisco); Colorado
(Denver); the District of Columbia; Florida (two stores: Fort
Lauderdale and Bal Harbour); Georgia (Atlanta); Illinois (three
stores: Chicago, Northbrook and Oak Brook); Missouri (St. Louis);
Massachusetts (Boston); Minnesota (Minneapolis); Michigan (Troy);
Nevada (Las Vegas); New York (Westchester); Texas (six stores:
three in Dallas, one in Fort Worth and two in Houston); and
Virginia (McLean). The average size of the Neiman Marcus stores
is 142,000 gross square feet, and the stores range in size from
90,000 gross square feet to 269,000 gross square feet. Neiman
Marcus plans to open a new store in Short Hills, New Jersey, in
calendar 1995 and new stores in King of Prussia, Pennsylvania, and
Paramus, New Jersey, in calendar 1996.
Bergdorf Goodman
Bergdorf Goodman is a high fashion, exclusive retailer of
high quality women's and men's apparel, fashion accessories,
precious jewelry, decorative home accessories, fine china,
crystal and silver. It operates two leased stores at Fifth
Avenue and 58th Street in New York City. The original store,
consisting of 250,000 gross square feet, is dedicated to women's
apparel and accessories, home furnishings and gifts. Bergdorf
Goodman Men, which opened in August 1990, consists of 66,000
gross square feet and is dedicated to men's apparel and
accessories. A relatively small portion of Bergdorf Goodman's
customers accounts for a significant percentage of its retail
sales. In addition, Bergdorf Goodman operates an important
direct marketing business. The distribution and fulfillment
operations of the Bergdorf Goodman direct marketing business were
consolidated with those of NM Direct in June 1993.
Contempo Casuals
Contempo Casuals, based in Los Angeles, operates a chain of
retail stores which sells quality fashion apparel and accessories
primarily for young women between the ages of 15 and 21 at
moderate prices. Almost all apparel sold in the Contempo Casuals
stores carries the Contempo Casuals label.
In April 1994, the Company implemented a plan to restructure
the Contempo Casuals division (including its chain of retail stores
operated under the name Pastille) as a result of its continued poor
operating performance. The restructuring included the closing of
40 underperforming Contempo Casuals stores, the closing of the
Hong Kong buying office and the closing of the Pastille chain of
39 stores in 15 states. In June 1994, the Pastille direct
marketing operations were consolidated with NM Direct. For
additional information concerning the restructuring of Contempo
Casuals, see Item 7 below and Note 2 to the Company's
Consolidated Financial Statements incorporated herein by
reference.
The Contempo Casuals chain includes 247 stores in 33 states
and Puerto Rico with an average store size of approximately 4,000
gross square feet. All of the stores are located in leased
facilities, primarily in regional shopping malls.
Competition
The Company's specialty store operations compete with
numerous specialty retail stores and department stores for both
customers and merchandise. The Company believes that the
principal competitive factors for specialty store operations are
customer service, quality of merchandise, merchandise assortment,
store ambience and price. The Company's direct marketing
operations compete with numerous other retail and direct
marketing operations for both customers and merchandise. The
Company believes that the principal competitive factors for its
direct marketing operations are customer service, price,
merchandise quality and assortment and catalogue presentation.
Employees
At July 30, 1994, Neiman Marcus had approximately 11,000
employees, of whom approximately 3,300 were part-time; Bergdorf
Goodman had approximately 1,200 employees, of whom approximately
35 were part-time; and Contempo Casuals had approximately 3,200
employees, of whom approximately 1,750 were part-time. None of
the employees of Neiman Marcus or Contempo Casuals are subject to
collective bargaining agreements. Approximately 12% of the
Bergdorf Goodman employees are subject to collective bargaining
agreements. The Company believes that its relations with its
employees are generally good.
Capital Expenditures; Seasonality; Liquidity
For information on capital expenditures, seasonality,
liquidity and other financial information, reference is made to
the "Management's Discussion and Analysis" section on pages 17
through 20 of the Annual Report to Stockholders for the fiscal
year ended July 30, 1994 (the "1994 Annual Report"), which is
incorporated herein by reference.
Item 2. PROPERTIES
The Company's corporate headquarters are located at Harcourt
General's leased facility in Chestnut Hill, Massachusetts. The
operating headquarters for Neiman Marcus, Bergdorf Goodman and
Contempo Casuals are located in Dallas, New York City and Los
Angeles, respectively.
At July 30, 1994, the square footage used in the Company's
specialty store operations was approximately as follows:
<TABLE>
<CAPTION>
Owned
Subject to
Owned Ground Lease Leased Total
<S> <C> <C> <C> <C>
Stores................. 347,000 1,170,300 3,610,800 5,128,100
Distribution centers
and office facilities.. 627,000 -0- 1,425,100 2,052,100
</TABLE>
Leases for Neiman Marcus stores, including renewal options,
range from 30 to 99 years. Leases for Contempo Casuals stores
are generally for 10 to 15 years, with no renewal options. The
lease on the Bergdorf Goodman main store expires in 2050, and the
lease on the Bergdorf Goodman Men's store expires in 2010, with
two 10-year renewal options. Leases are generally at fixed
rentals, except that certain leases provide for additional
rentals based on sales in excess of predetermined levels. The
Company also owns approximately 50 acres of land in Las Colinas,
Texas where its direct marketing operations and computer facility
are located. For further information on the Company's
properties, see "Leases" in Note 8 of the Notes to the Company's
Consolidated Financial Statements on page 30 of the Annual
Report.
NM Direct and Bergdorf Goodman's direct marketing operations
are located at Neiman Marcus' 520,000 square foot facility in Las
Colinas, Texas.
Item 3. LEGAL PROCEEDINGS
The Company is involved in various suits and claims in the
ordinary course of business. The Company does not believe that
the disposition of any such suits or claims will have a material
adverse effect upon the continuing operations or financial
condition of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The following information contained in the 1994 Annual
Report is incorporated herein by reference:
(i) "Stock Information" and "Shares Outstanding" on page 36
of the Annual Report;
(ii) "Dividends" in Note 10 of the Notes to the Consolidated
Financial Statements on page 33 of the Annual Report;
and
(iii) The fourth and fifth sentences of paragraph (a) of
Note 4 of the Notes to the Consolidated Financial
Statements (relating to restrictions on the Company's
ability to pay dividends) on page 27 of the Annual Report.
Item 6. SELECTED FINANCIAL DATA
The response to this Item is contained in the 1994 Annual
Report under the caption "Selected Financial Data" on page 35 of
the Annual Report and is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The response to this Item is contained in the 1994 Annual
Report under the caption "Management's Discussion and Analysis"
on pages 17 through 20 and is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and supplementary data
referred to in Item 14 are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. Directors
Below are the name, age and principal occupations for the
last five years of each director of the Company.
Class I Directors - Terms expire at 1995 Annual Meeting
Richard A. Smith - 69 Director since 1987
Chairman of the Board of the Company and of Harcourt
General; Chairman of the Board, President and Chief
Executive Officer of GC Companies, Inc. since December
1993; Chief Executive Officer of the Company and of
Harcourt General until November 26, 1991; Director of
Harcourt General, GC Companies, Inc., Liberty Mutual
Insurance Company, Liberty Mutual Fire Insurance
Company, Bank of Boston Corporation and its principal
subsidiary, The First National Bank of Boston. Mr.
Smith is the father of Robert A. Smith, an executive
officer of the Company.
Robert J. Tarr, Jr. - 50 Director since 1987
President, Chief Executive Officer (since November 26,
1991) and Chief Operating Officer of the Company and of
Harcourt General; Director of Harcourt General and GC
Companies, Inc.
Class II Directors - Terms expire at 1996 Annual Meeting
Walter J. Salmon - 63 Director since 1987
Stanley Roth, Sr. Professor of Retailing and Senior
Associate Dean, External Relations, Graduate School of
Business Administration, Harvard University; Director
of Hannaford Bros. Co., The Quaker Oats Company,
Circuit City Stores, Inc., Luby's Cafeterias, Inc.,
Promus Companies, Incorporated and Telxon Corporation.
Matina S. Horner - 55 Director since 1993
Executive Vice President of the Teachers Insurance and
Annuity Association-College Retirement Equities Fund
(TIAA-CREF) and President Emerita of Radcliffe College
since 1989; President of Radcliffe College for 17 years
prior thereto. Director of Boston Edison Company.
Class III Directors - Terms expire at 1997 Annual Meeting
Gary L. Countryman - 55 Director since 1987
Chairman (since April 1991) and Chief Executive Officer
of Liberty Mutual Insurance Company and Liberty Mutual
Fire Insurance Company; President of said companies
through March 1992; Director of Boston Edison Company,
Bank of Boston Corporation and its principal
subsidiary, The First National Bank of Boston.
Jean Head Sisco - 69 Director since 1987
Partner in Sisco Associates, international management
consultants; Director of Textron, Inc., Santa Fe
Pacific Corporation, Sante Fe Pacific Gold Corp.,
Washington Mutual Investors Fund, Chiquita Brands
International, Inc., The American Funds Tax-Exempt Series
I, K-Tron International, Inc. and McArthur/Glen Realty Corp.
B. Executive Officers Who Are Not Directors
Below are the name, age and principal occupations for the
last five years of each executive officer of the Company who is
not also a director of the Company. All such persons have been
elected to serve until the next annual election of officers and
their successors are elected or until their earlier resignation
or removal.
John R. Cook - 53
Senior Vice President and Chief Financial Officer of
the Company and of Harcourt General since September
1992; Senior Vice President - Finance and
Administration and Chief Financial Officer of NACCO
Industries prior thereto.
Stephen C. Elkin - 51
Chairman and Chief Executive Officer of Bergdorf
Goodman since May 1994; President and Chief Operating
Officer of Bergdorf Goodman from December 1990 to May
1994; Vice Chairman and Chief Operating Officer of
Bergdorf Goodman prior thereto.
Bernie Feiwus - 46
President and Chief Executive Officer of NM Direct
since October 1991; Executive Vice President of Neiman
Marcus - Horchow Mail Order Division from March 1991 to
October 1991; Senior Vice President - Sales Promotion
Director of Neiman Marcus prior thereto.
Eric P. Geller - 47
Senior Vice President and General Counsel of the
Company and of Harcourt General since May 1992;
Secretary of the Company since January 1992 and of
Harcourt General since December 1991; Vice President,
Associate General Counsel and Assistant Secretary of
the Company and of Harcourt General prior thereto.
Paul F. Gibbons - 43
Vice President and Treasurer of the Company and of
Harcourt General since August 1992; Vice President and
Treasurer of GC Companies, Inc. since March 1994; Vice
President - Taxation of the Company and of Harcourt
General prior to August 1992.
Dawn Mello - 63
President of Bergdorf Goodman since May 1994 and from
1983 to 1989; Executive Vice President and Creative
Director Worldwide of Guccio Gucci SpA from October
1989 to May 1994.
Stephen C. Richards - 39
Vice President and Controller of the Company and of
Harcourt General since June 1993; Vice President and
Controller of GC Companies, Inc. since January 1994;
Partner, Deloitte & Touche from June 1990 to May 1993;
Senior Manager, Deloitte & Touche prior thereto.
Gerald A. Sampson - 53
President and Chief Operating Officer of Neiman Marcus
Stores since April 1993; Chairman of May Company
California, a division of May Department Stores
Company, from 1991 to January 1993; Chairman of
Kaufmann's, a division of May Department Stores
Company, prior thereto.
Craig B. Sawin - 38
Vice President - Planning and Analysis of the Company
and of Harcourt General since 1990; Director of
Planning and Analysis and Director of Administration of
the Company and of Harcourt General prior thereto.
Robert A. Smith - 35
Group Vice President of the Company since January 1992
and of Harcourt General since December 1991; Vice
President - Corporate Development of the Company from
March 1989 to January 1992; Vice President - Corporate
Development of Harcourt General from December 1988 to
December 1991; Director of Harcourt General. Mr. Smith
is the son of Richard A. Smith, the Chairman of the
Company.
Burton M. Tansky - 56
Chairman and Chief Executive Officer of Neiman Marcus
Stores since May 1994; Chairman and Chief Executive
Officer of Bergdorf Goodman from February 1992 to May
1994; Vice Chairman of Bergdorf Goodman from February
1991 to February 1992; President of Saks Fifth Avenue
prior thereto.
C. Section 16 Reports
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's directors and executive officers
and persons who own more than 10% of the Company's Common Stock
to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission and the
New York Stock Exchange. The Company believes that all filing
requirements applicable to its insiders were complied with during
fiscal 1994.
Item 11. EXECUTIVE COMPENSATION
<TABLE>
Summary Compensation Table(1)
The following table provides information on the compensation
provided by the Company during fiscal 1994, 1993 and 1992 to the
Company's Chief Executive Officer and the five most highly paid
executive officers of the Company during fiscal 1994.
<CAPTION>
Long-Term
Compensation
(2)
Awards
Restricted
Annual Compensation Stock All Other
Name and Fiscal Salary Bonus Awards Options Compensation
Principal Year ($) ($)(3) ($) (4) (#) ($)(5)
Position
<S> <C> <C> <C> <C> <C> <C>
R. Tarr, Jr.(1) 1994 -- -- -- -- --
President and Chief 1993 -- -- -- -- --
Executive Officer 1992 -- -- -- -- --
B. Tansky(6) 1994 $543,750 $122,640 -- 21,500 $ 10,647
Chairman and Chief 1993 $500,000 $150,000 -- 10,000 $ 3,701
Executive Officer of
Neiman Marcus Stores 1992 $450,000 -- -- 15,000 $147,227
G. Sampson(7) 1994 $431,250 $172,500 -- 10,000 $ 6,421
President and Chief
Operating Officer of 1993 $147,115 -- -- -- $ 1,724
Neiman Marcus Stores
1992 -- -- -- -- --
S. Elkin 1994 $391,875 $65,262 -- 10,000 $ 9,650
Chairman and Chief 1993 $355,000 $84,313 -- 10,000 $ 7,283
Executive Officer of
Bergdorf Goodman
1992 $340,000 -- $58,125 -- $ 22,700
B. Feiwus 1994 $275,000 $88,000 -- 7,500 $ 5,883
President and Chief 1993 $245,000 $87,500 -- 5,000 $ 4,679
Executive Officer of
NM Direct 1992 $216,664 $77,000 $23,250 -- $ 11,043
T. Lundgren(8) 1994 $427,693 -- -- 25,000 $ 6,579
Former Chairman and
Chief Executive 1993 $550,000 $247,500 -- 15,000 $ 3,701
Officer of Neiman
Marcus Stores 1992 $465,000 $83,700 $87,188 -- $ 7,227
</TABLE>
(1) Under the Intercompany Services Agreement between the
Company and Harcourt General, Harcourt General provides certain
management, accounting, financial, legal, tax, personnel and
other corporate services to the Company, including the services
of certain senior officers of Harcourt General who are also
senior officers of the Company, in consideration of a fee based
on Harcourt General's direct and indirect costs of providing the
corporate services. The level of services and fees are subject
to the approval of the Special Review Committee of the Board of
Directors of the Company. During fiscal 1994, 1993 and 1992, the
Company paid or accrued approximately $6.9 million, $7.2 million
and $6.4 million, respectively, to Harcourt General for all of
its services under the Intercompany Services Agreement. With the
exception of Mr. Tarr, the senior officers of Harcourt General,
who derive all of their compensation directly from Harcourt
General, are not included in this table. Mr. Tarr is also the
President and Chief Executive Officer of Harcourt General. All
of Mr. Tarr's cash and non-cash compensation is paid by Harcourt
General pursuant to Mr. Tarr's Employment Agreement with Harcourt
General effective November 26, 1991. Of the amounts paid by the
Company to Harcourt General under the Intercompany Services
Agreement for fiscal 1994, 1993 and 1992, approximately $2.3
million, $2.1 million and $1.7 million, respectively, were
attributable to Mr. Tarr's services. These amounts include costs
related to Mr. Tarr's base compensation, bonuses, benefits and
amounts necessary to fund his retirement benefits, all of which
are direct obligations of Harcourt General.
(2) The Company does not have a long-term compensation program
that includes long-term incentive payouts. No stock appreciation
rights were granted to any of the named executive officers during
the years reported in the table.
(3) Bonus payments are reported with respect to the year in
which the related services were performed.
(4) Calculated by multiplying the closing price of the Company's
Common Stock on the New York Stock Exchange on the date of grant
by the number of shares awarded. Twenty percent of an award of
restricted Common Stock are freed from the restrictions on
transfer each year, commencing one year after the date of grant,
provided that the recipient continues to be employed by the
Company on the anniversary date of the grant. Dividends are paid
to holders of restricted stock, who are also entitled to vote
their restricted shares. In the event of termination of
employment for any reason, other than death or permanent
disability, restricted shares are forfeited by the holder and
revert to the Company. At the end of fiscal 1994, the named
executive officers' restricted stock holdings and market values
(based on the New York Stock Exchange closing price of $15.25 for
the Company's Common Stock at fiscal year end) were as follows:
Mr. Elkin - 3,000 shares ($45,750) and Mr. Feiwus - 1,200 shares
($18,300). The closing price of the Company's Common Stock on
the New York Stock Exchange on October 14, 1994 was $14.625.
All of the restricted shares reported in this column were granted
to the executive officers in fiscal 1992. Mr. Lundgren forfeited
his 4,500 shares of restricted stock upon his resignation from
the Company in April 1994.
(5) The items accounted for in this column include the cost to
the Company of matching contributions under (a) the Company's Key
Employee Deferred Compensation Plan or the Savings and Investment
Plan (401(k) Plan) and (b) group life insurance premiums. For
fiscal 1994, such amounts for each of the named executive
officers were, respectively, as follows: Mr. Tansky - $4,875 and
$5,772; Mr. Sampson - $2,110 and $4,311; Mr. Elkin - $3,550 and
$6,100; Mr. Feiwus - $2,310 and $3,573 and Mr. Lundgren -
$2,250 and $4,329. See Note 6 below for information regarding
additional compensation of Mr. Tansky reported in this column.
(6) Mr. Tansky received a $140,000 bonus in fiscal 1992 pursuant
to his employment agreement with the Company, which is included
under "All Other Compensation." Prior to becoming the Chairman
and Chief Executive Officer of Neiman Marcus Stores in May 1994,
Mr. Tansky was the Chairman and Chief Executive Officer of
Bergdorf Goodman. Pursuant to his employment agreement, Mr.
Tansky's fiscal 1994 bonus was determined based on the
performance of Bergdorf Goodman during fiscal 1994.
(7) Mr. Sampson's employment with the Company commenced on April
1, 1993.
(8) Mr. Lundgren resigned from the Company effective April 12,
1994.
11<PAGE>
<TABLE>
Option Grants in Last Fiscal Year(1)
The following table provides information regarding options
granted under the Company's 1987 Stock Incentive Plan during the
fiscal year ended July 30, 1994 to the executive officers named
in the Summary Compensation Table.
<CAPTION>
Individual Grants
% of
Number of Total Potential Realizable
Securities Options Value at Assumed
Underlying Granted to Exercise Annual Rates of Stock
Options Employees or Base Expira- Price Appreciation
Granted in Fiscal Price tion for Option Term (2)
Name (#) (3) Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
R. Tarr, Jr.(4) ---- ---- ---- ---- ----- ----
B. Tansky 21,500 10.04% $14.50 09/18/03 $185,114 $479,423
G. Sampson 10,000 4.67% $14.50 09/18/03 $ 86,099 $222,987
S. Elkin 10,000 4.67% $14.50 09/18/03 $ 86,099 $222,987
B. Feiwus 7,500 3.50% $14.50 09/18/03 $ 64,575 $167,240
T. Lundgren 25,000(5) 11.68% $14.50 --(5) --(5) --(5)
</TABLE>
(1) No stock appreciation rights were granted to any named
executive officer during fiscal 1994.
(2) These potential realizable values are based on assumed rates
of appreciation required by applicable regulations of the
Securities and Exchange Commission.
(3) All option grants are non-qualified stock options having a
term of 10 years and one day. They become exercisable at the
rate of 20% on each of the first five anniversary dates of the
grant.
(4) None of the executive officers of Harcourt General who are
also officers of the Company, including Mr. Tarr, participate in
the Company's 1987 Stock Incentive Plan.
(5) All of these options terminated upon Mr. Lundgren's
resignation from the Company effective April 12, 1994.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table provides information regarding stock
options exercised during fiscal 1994 and the number and value of
stock options held at July 30, 1994 by the executive officers
named in the Summary Compensation Table.
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired July 30, 1994(#) July 30, 1994 ($)
on Exercise Value Exercisable/ Exercisable/
Name (#) Realized($) Unexercisable Unexercisable (1)
<S> <C> <C> <C> <C>
R. Tarr, Jr.(2) -- -- -- --
B. Tansky -- -- 17,000/ $ 23,750/
44,500 66,125
G. Sampson -- -- 0/ $ 0/
10,000 7,500
S. Elkin -- -- 35,516/ $ 21,708/
23,900 41,750
B. Feiwus -- -- 8,311/ $ 6,063/
12,900 20,500
T. Lundgren(3) --(3) $54,000(3) --(3) --(3)
</TABLE>
(1) The value of unexercised in-the-money options is calculated
by multiplying the number of underlying shares by the difference
between the closing price of the Company's Common Stock on the
New York Stock Exchange at fiscal year end ($15.25) and the
option exercise price for those shares. These values have not
been realized. The closing price of the Company's Common Stock
on the New York Stock Exchange on October 14, 1994 was $14.625.
(2) None of the executive officers of Harcourt General who are
also officers of the Company, including Mr. Tarr, participate in
the Company's 1987 Stock Incentive Plan.
(3) Mr. Lundgren resigned from the Company effective April 12,
1994. The Company paid Mr. Lundgren $54,000 with respect to
options held by him to purchase an aggregate of 22,750 shares of
Common Stock of the Company at various exercise prices. The
$54,000 payment was calculated based on the difference between
the closing price of the Company's Common Stock on the New York
Stock Exchange on the date Mr. Lundgren elected to receive this
payment (February 25, 1994) and the option exercise prices. All
unexercisable options held by Mr. Lundgren terminated upon his
resignation from the Company.
Directors Compensation
Directors who are not affiliated with the Company or
Harcourt General each receive an annual retainer of $20,000 and a
fee of $1,500 per Board of Directors meeting attended, plus
travel and incidental expenses (an aggregate of $4,134 in fiscal
1994) incurred in attending meetings and carrying out their
duties as directors. They also receive a fee of $500 (the
Chairmen receive $1,000) for each committee meeting attended. If
a director is unable to attend a meeting in person but
participates by telephone, he or she receives one-half of the fee
that would otherwise be payable.
Mr. Countryman receives his director fees on a deferred
basis. The Company maintains an account to record the accrual of
Mr. Countryman's deferred fees and accrued interest, which
accrues at a rate equal to that paid on 90-day certificates of
deposit issued by The First National Bank of Boston from time to
time.
Pension Plans
The Company maintains a funded, qualified pension plan
known as The Neiman Marcus Group, Inc. Retirement Plan (the
"Retirement Plan"). Most non-union employees who have completed
one year of service with 1,000 or more hours participate in the
Retirement Plan, which pays benefits upon retirement or
termination of employment by reason of disability. The
Retirement Plan is a "career-average" plan, under which a
participant earns each year a retirement annuity equal to 1% of
his or her compensation for the year up to the Social Security
wage base and 1.5% of his or her compensation for the year in
excess of such wage base. Benefits under the Retirement Plan
become fully vested after five years of service with the Company.
The Company also maintains a Supplemental Executive
Retirement Plan (the "SERP"). The SERP is an unfunded, non-
qualified plan under which benefits are paid from the Company's
general assets to supplement Retirement Plan benefits and Social
Security. Executive, administrative and professional employees
(other than those employed as salespersons) with an annual base
salary at least equal to a self-adjusting minimum ($99,000 as of
December 31, 1993) are eligible to participate. At normal
retirement age (age 65), a participant with 25 or more years of
service is entitled to payments under the SERP sufficient to
bring his or her combined annual benefit from the Retirement Plan
and SERP, computed as a straight life annuity, up to 50% of the
participant's highest consecutive 60 month average of pensionable
earnings, less 60% of his or her estimated primary Social
Security benefit. If the participant has fewer than 25 years of
service, the combined benefit is proportionately reduced. In
computing the combined benefit, "pensionable earnings" means base
salary, including any salary which may have been deferred.
Benefits under the SERP become fully vested after five years of
service with the Company.
The following table shows the estimated annual pension
benefits payable to employees in various compensation and years
of service categories. The estimated benefits apply to an
employee retiring at age 65 in 1994 who elects to receive his or
her benefit in the form of a straight life annuity. These
benefits include amounts attributable to both the Retirement Plan
and the SERP and are in addition to any retirement benefits that
might be received from Social Security.
<TABLE>
Estimated Annual Retirement Benefits
Under Retirement Plan and SERP(1)
<CAPTION>
Average
Pensionable
Earnings Total Years of Service
25
5 10 15 20 or more
<S> <C> <C> <C> <C> <C>
$200,000........... $20,000 $ 40,000 $ 60,000 $ 80,000 $100,000
300,000........... 30,000 60,000 90,000 120,000 150,000
400,000........... 40,000 80,000 120,000 160,000 200,000
500,000........... 50,000 100,000 150,000 200,000 250,000
600,000........... 60,000 120,000 180,000 240,000 300,000
700,000........... 70,000 140,000 210,000 280,000 350,000
_________________
</TABLE>
(1) The amounts actually payable will be somewhat lower than
the amounts shown above, since the above amounts will be reduced
by 60% of the participant's estimated primary Social Security
benefit.
The following table shows the pensionable earnings and
credited years of service for the executive officers named in the
Summary Compensation Table as of July 30, 1994 and years of
service creditable at age 65. Credited service may not exceed 25
years for purpose of calculating retirement benefits under any of
the Company's retirement plans.
<TABLE>
<CAPTION>
Pensionable Earnings Years of Service
for Year Ended at July at
Name July 30, 1994 30, 1994 Age 65
<S> <C> <C> <C>
R. Tarr, Jr.(1) . . . . . . . . --- -- --
B. Tansky . . . . . . . . . . . $543,750 --(2) 20(2)
G. Sampson(3) . . . . . . . . . 431,250 --(3) 20(3)
S. Elkin . . . . . . . . . . . 391,875 16 25
B. Feiwus . . . . . . . . . . 275,000 14.5 25
T. Lundgren(4) . . . . . . . . 427,693 --(4) --(4)
___________________________
</TABLE>
(1) Mr. Tarr does not participate in the Company's Retirement
Plan or SERP.
(2) Under Mr. Tansky's employment agreement with the Company,
for purposes of determining his retirement benefits under the
SERP, Mr. Tansky will be credited with 5/3 times his years of
service with the Company provided he remains continuously
employed by the Company until his 65th birthday; otherwise, Mr.
Tansky's accrued service at age 65 under the SERP will be
calculated in the normal manner. Mr. Tansky is 56 years old.
(3) For purposes of determining Mr. Sampson's retirement
benefits under the SERP, Mr. Sampson will be credited with 20/13
times his years of service with the Company provided he remains
continuously employed by the Company until his 65th birthday;
otherwise, Mr. Sampson's accrued service at age 65 under the SERP
will be calculated in the normal manner. Mr. Sampson is 53 years
old.
(4) Mr. Lundgren resigned from the Company effective April 12,
1994.
Employment and Severance Agreements
Burton Tansky
In connection with Mr. Tansky's appointment as Chairman and
Chief Executive Officer of Neiman Marcus Stores in May 1994, the
Company and Mr. Tansky entered into a new employment agreement
which provides for Mr. Tansky's employment as Chairman and Chief
Executive Officer of Neiman Marcus Stores through January 31,
1997. Pursuant to the agreement, Mr. Tansky will receive an
annual base salary of $600,000, subject to adjustment by the
Compensation Committee. In the event Mr. Tansky is terminated
without cause within 24 months of a change of control of the
Company, or if within 24 months of such a change of control Mr.
Tansky resigns because he is not permitted to continue in a
position comparable in duties and responsibilities to that which
he held prior to the change of control, Mr. Tansky will be
entitled to receive his then-current base compensation through
July 31, 1998, which amount will be reduced by any amounts earned
by him between August 1, 1997 and July 31, 1998 from other
employment. If the Company terminates Mr. Tansky's employment
during the term of the Employment Agreement for any reason other
than for cause or other than because of his total disability or
death, Mr. Tansky will continue to receive his base compensation
and benefits until January 31, 1997 or for 18 months following
termination, whichever is greater. If the Company determines not
to extend Mr. Tansky's employment beyond January 31, 1997, the
Company will pay to Mr. Tansky his then-current base compensation
through July 31, 1998, which amount will be reduced by any
amounts earned by him between August 1, 1997 and July 31, 1998
from other employment.
Gerald A. Sampson
Pursuant to an agreement between Mr. Sampson and the
Company, effective April 1, 1993, Mr. Sampson is entitled to
receive severance payments in the event the Company terminates
his employment other than for cause or other than due to his
total disability or death prior to March 31, 1995. In such event
he will receive an amount equal to his then-current base salary,
which amount will be paid to him in 12 monthly installments
following such termination but will be reduced by any amounts
received by him from other employment during the payment period.
Stephen C. Elkin
Pursuant to an agreement between Mr. Elkin and Bergdorf
Goodman, effective September 1993, Mr. Elkin is entitled to
receive severance payments in the event his employment with
Bergdorf Goodman is terminated in certain situations. If the
Company terminates Mr. Elkin's employment other than for cause or
other than due to his total disability or death, he will receive
an amount equal to one and one half times his then-current base
salary, which amount will be paid to him in 18 monthly
installments following such termination but will be reduced by
any amounts received by him from other employment during the
period beginning six months following his termination and ending
at the end of the 18 month period. Mr. Elkin will also be
entitled to receive such payments in the event his employment is
terminated without cause within 24 months of a change of control
of either Bergdorf Goodman or the Company, or in the event he
resigns within 24 months of a change of control because he is not
permitted to continue in a position comparable in duties and
responsibilities to that which he held before the change of
control.
Dawn Mello
Pursuant to an agreement between Ms. Mello and Bergdorf
Goodman, effective May 1994, Ms. Mello is entitled to receive
severance payments in the event her employment with Bergdorf
Goodman is terminated in certain situations. If the Company
terminates Ms. Mello's employment other than for cause or other
than due to her total disability or death, she will receive an
amount equal to her then-current annual salary, which amount will
be paid in 12 monthly installments following such termination but
will be reduced by any amounts received by her from other
employment during the period beginning six months following such
termination. Ms. Mello will also be entitled to receive such
payments in the event her employment is terminated without cause
before November 1, 1996 and within 24 months of a change of
control of either Bergdorf Goodman or the Company, or in the
event she resigns before November 1, 1996 and within 24 months of
a change of control because she is not permitted to continue in a
position comparable in duties and responsibilities to that which
she held before the change of control.
Compensation Committee Interlocks and Insider Participation
During fiscal 1994, Richard A. Smith, Chairman of the Board
of Directors of the Company, served on the Boards of Directors of
Liberty Mutual Insurance Company and Liberty Mutual Fire
Insurance Company (collectively, "Liberty Mutual"). Gary L.
Countryman, a director of the Company and the Chairman of the
Company's Compensation Committee, is the Chairman and Chief
Executive Officer of Liberty Mutual. Liberty Mutual underwrites
most of the Company's insurance policies. These insurance
policies contain terms which, in the judgment of management, are
no less favorable than could be obtained from other insurance
companies. During fiscal 1994, the Company paid to Liberty
Mutual an aggregate of $3.3 million in premiums and
administrative fees.
_________________
Notwithstanding anything to the contrary set forth in any of
the Company's previous filings under the Securities Act of 1933
or the Securities Exchange Act of 1934, each as amended, that
might incorporate future filings, including this Form 10-K, in
whole or in part, the following Compensation Committee Report on
Executive Compensation and Stock Performance Graph shall not be
deemed to be incorporated by reference into any such filings, nor
shall such sections of this Report be deemed to be incorporated
into any future filings made by the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934.
Compensation Committee Report on Executive Compensation
The Compensation Committee is composed of Gary L. Countryman
(Chairman), Matina S. Horner, Walter J. Salmon and Jean Head
Sisco. The members of the Compensation Committee are all
independent directors.
The principal responsibility of the Committee is to review
the performance of, and determine the compensation for, the
executive officers of the Company who are not also executive
officers of Harcourt General. The individuals in this group
include Messrs. Tansky, Sampson, Elkin and Feiwus, all of whom
are named executive officers in the Summary Compensation Table,
as well as Dawn Mello, President of Bergdorf Goodman, and Robert
Kelleher, President and Chief Operating Officer of Contempo
Casuals. The compensation of Harcourt General's executive
officers, most of whom are also executive officers of the
Company, is determined by Harcourt General's Compensation
Committee.
Compensation Policies
The principal objectives of the Company's executive
compensation program are to reward competitively its executive
officers in order to attract and retain excellent management and
to provide incentives that will most sharply focus the attention
of those individuals on the goal of increasing the profitability
of the Company and its operating divisions over both the short
and long terms.
Early in each fiscal year, the Committee considers the
recommendations of the Chief Executive Officer, which are
supported by data generated by the Company's Human Resources
Department, for each component of compensation of the Company's
executive officers. The Committee approves those recommendations
with such modifications as it deems appropriate.
The principal components of the Company's compensation
program are:
Base Salary:
This is determined with reference both to salary survey
information from recognized compensation consulting firms
and to each executive officer's level of responsibility,
experience and performance. The salary survey data is used
to establish benchmark amounts for both base salary and
total cash compensation for each executive position.
Comparisons are made to a range of retail companies or to
divisions within such companies, with the principal
selection criteria for comparisons being similar revenues
to the division within the Company. While there are no
hard and fast rules which bind the Committee, the Company
generally sets its salary and total cash compensation
benchmarks (assuming that maximum bonuses are achieved) for
executive officers at the 75th percentile of the comparison
group of companies in order to compete for and retain the
best management talent available. Because the Company
competes for executive talent with a broad range of U.S.
retail companies, the Committee does not limit its
comparison information for compensation purposes to the
three companies included in the peer group in the Stock
Performance Graph.
The Committee reviews in detail the base salary levels for
each of the principal executive officers of the Company.
While the Committee uses the benchmarks as a reference point,
a particular individual's base salary may vary from the
benchmark depending upon his or her salary history,
experience, individual performance and contractual obligations
of the Company.
Annual Incentive Plan:
The determination of annual bonuses is based principally on
the achievement of performance objectives by the operating
division for which the executive is responsible and the
individual executive's own performance. For some executive
officers, a small component of their bonus eligibility depends
on the Company's overall performance.
Shortly after the beginning of each fiscal year, the
Compensation Committee considers the recommendations of the
Chief Executive Officer for the Company's and each division's
performance goals for the current year, the executive officers
who should participate in the annual incentive plan for that
year, and the maximum bonus values attainable by them. The
Committee approves those recommendations with such
modifications as it deems appropriate.
In addition, each of the Company's executive officers prepares
and reaches agreement with the Chief Executive Officer on
individual performance goals which must be achieved in
addition to the performance targets in order for an executive
to receive his or her full bonus. Individual performance
goals typically include achievement of specific tasks.
For fiscal 1994, the plan provided for maximum bonuses ranging
from 35% to 45% of base salary. Eligibility for the
divisional performance component of the bonus was determined
based on a weighting of several factors, the most important of
which was operating earnings before corporate expenses. Other
factors included return on net assets and working capital as a
percentage of sales. Similar factors will be used by the
Committee in determining bonuses for fiscal 1995. The bonuses
actually awarded to the executive officers for fiscal 1994
were determined by an assessment of all of these factors, as
well as certain subjective factors.
Absent extraordinary circumstances, if the financial
performance targets are exceeded, bonus awards are not
increased over the maximum bonus values established by the
Committee. If the performance targets are not met, bonus
awards are generally reduced at the discretion of the
Committee. If the Company and/or the relevant division falls
sufficiently short of its performance target, there is a
presumption that bonuses would not be paid absent special
circumstances. For example, no bonuses were awarded to
executives at Contempo Casuals for fiscal 1994. If corporate
and/or division performance targets are met, but an individual
falls short of his or her performance goals, the individual's
bonus could be reduced or eliminated in the discretion of the
Committee.
The bonus program is intended to put substantial amounts of
total cash compensation at risk with the intent of focusing
the attention of the executives on achieving both the
Company's and their division's performance goals and their
individual goals, thereby contributing to profitability and
building shareholder value.
Stock Incentives:
The Committee's purpose in awarding equity based incentives,
principally in the form of stock options which vest over a
five year period and terminate ten years from the date of
grant, is to achieve as much as possible an identity of
interest between the executives and the long term interest of
the stockholders. The principal factors considered in
determining which executive officers (including the named
executive officers) were awarded equity based compensation in
the 1994 fiscal year, and in determining the types and amounts
of such awards, were salary levels, equity awards granted to
executives at competing retail companies, special
circumstances such as promotions as well as the performance,
experience and level of responsibility of each executive.
Compensation of the Chief Executive Officer
Mr. Tarr is also the Chief Executive Officer of Harcourt
General, which owns approximately 65% of the fully converted
equity of the Company. All of Mr. Tarr's cash and non-cash
compensation is paid directly by Harcourt General to Mr. Tarr
pursuant to an employment agreement between Mr. Tarr and Harcourt
General which was approved by the Harcourt General Compensation
Committee and became effective in November, 1991. Mr. Tarr
receives no compensation directly from the Company. However,
pursuant to the Intercompany Services Agreement between the
Company and Harcourt General, Harcourt General provides certain
management and other corporate services to the Company, including
Mr. Tarr's services as Chief Executive Officer. During fiscal
1994, the Company paid or accrued approximately $6.9 million to
Harcourt General for all of its services under the Intercompany
Services Agreement, of which approximately $2.3 million was
attributable to Mr. Tarr's services. While the Special Review
Committee of the Company reviews each year the appropriateness of
the charges by Harcourt General to the Company under the
Intercompany Services Agreement, neither this Committee nor the
Special Review Committee plays any role in determining the
compensation that Mr. Tarr, or any other executive officer of
Harcourt General, receives from Harcourt General.
Compliance with Internal Revenue Code Section 162(m)
Amendments to Section 162(m) of the Internal Revenue Code
which were enacted in 1993 generally disallow a tax deduction to
public companies for compensation in excess of $1 million per
year paid to each of the executive officers named in the Summary
Compensation Table. The Company does not anticipate that any of
its executive officers will receive cash compensation in excess
of this deductibility limit in fiscal 1995. Under transition
provisions in the regulations under Section 162(m), compensation
resulting from awards under the Company's Incentive Stock Option
Plan is not subject to the deductibility limit at this time. The
Committee will continue to monitor the requirements of Section
162(m) and to determine what actions should be taken by the
Company in order to preserve the tax deduction for executive
compensation to the maximum extent, consistent with the Company's
continuing goals of providing the executives of the Company with
appropriate incentives and rewards for their performance.
COMPENSATION COMMITTEE
Gary L. Countryman, Chairman
Matina S. Horner
Walter J. Salmon
Jean Head Sisco
Stock Performance Graph
The graph below compares the cumulative total shareholder
return on the Common Stock of the Company against the cumulative
total return of the Standard & Poor's 500 Stock Index and a Peer
Index during the five fiscal years ended July 30, 1994. The
graph assumes a $100 investment in the Company's Common Stock and
in each index at July 29, 1989 and that all dividends were
reinvested.
The Company's Peer Index is made up of three companies in
the specialty retail industry: The Limited, Inc., Nordstrom, Inc.
and Tiffany & Co. The common stocks of the companies in the Peer
Index have been weighted annually to reflect relative stock
market capitalization. The comparisons provided in this graph
are not intended to be indicative of possible future performance
of the Company's Common Stock.
[STOCK PERFORMANCE GRAPH
TO BE INSERTED HERE]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Company $100 82.14 84.50 70.70 76.93 81.94
S&P 500
Index $100 103.16 123.39 140.09 152.00 159.18
Peer Index $100 96.27 157.06 113.58 107.63 119.00
</TABLE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information, as of October 14,
1994, with respect to the beneficial ownership of the Common
Stock of the Company by (i) each person known to the Company to
own beneficially more than 5% of the outstanding shares of
Common Stock; (ii) each executive officer named in the Summary
Compensation Table, (iii) each director of the Company; and (iv)
all directors and current executive officers of the Company as a
group. Harcourt General beneficially owns all of the
outstanding shares of the 6% Cumulative Convertible Preferred
Stock, $1.00 par value (the "Preferred Stock"), of the Company.
Number Percent
Name and Address of Shares of Common
of Beneficial Owner Owned(1) Stock
Harcourt General, Inc.(2) 21,440,960 56.5%
27 Boylston Street
Chestnut Hill, MA 02167
Gabelli Funds, Inc.(3) 4,951,700 13.0%
655 Third Avenue
New York, NY 10017
FMR Corp.(4) 3,000,000 7.9%
88 Devonshire Street
Boston, MA 02109
Burton M. Tansky(5) 23,300 *
Gerald A. Sampson(6) 3,000 *
Stephen Elkin(7)(8) 57,759 *
Bernie Feiwus(8)(9) 14,156 *
Terry Lundgren(10) - *
Gary L. Countryman - *
Matina S. Horner - *
Walter J. Salmon 8,942 *
Jean Head Sisco 1,126 *
Richard A. Smith(11) - *
Robert J. Tarr, Jr.(11) - *
All current executive officers
and directors as a group
(17 persons)(12) 108,283 *
_____________________
* Less than 1%.
(1) Unless otherwise indicated in the following footnotes,
each stockholder referred to above has sole voting and investment
power with respect to the shares listed.
(2) Harcourt General's holdings of Common Stock and Preferred
Stock comprise approximately 65% of the fully converted equity
and voting power of the Company. Each share of Preferred Stock
is convertible into 8.99 shares of Common Stock at a price of
$41.70 per share of Common Stock. The closing price of the
Common Stock on the New York Stock Exchange on October 14, 1994
was $14.625 per share.
Richard A. Smith, Chairman of the Board of Directors of
the Company and of Harcourt General, his sister, Nancy L. Marks,
and certain members of their families may be regarded as
controlling persons of Harcourt General, and therefore of the
Company. The shares of Harcourt General Class B Stock and
Harcourt General Common Stock beneficially owned by or for the
benefit of the Smith family constitute approximately 28% of the
aggregate number of outstanding equity securities of Harcourt
General. Each share of Harcourt General voting stock entitles
the holder thereof to one vote on all matters submitted to
Harcourt General's stockholders, except that each share of
Harcourt General Class B Stock (virtually all of which is owned
by the Smith family) entitles the holder thereof to ten votes on
the election of directors at any Harcourt General stockholders'
meeting under certain circumstances. Accordingly, as to any
elections in which the Harcourt General Class B Stock would carry
ten votes per share at a Harcourt General stockholders' meeting,
the Smith family would have approximately 80% of the combined
voting power of the Harcourt General voting securities.
Under the definition of "beneficial ownership" in Rule
13d-3 of the Rules and Regulations promulgated under the
Securities Exchange Act of 1934, as amended, the Smith family and
the members of Harcourt General's Board of Directors may be
deemed to be the beneficial owners of the securities of the
Company beneficially owned by Harcourt General in that they may
be deemed to share with Harcourt General the power to direct the
voting and/or disposition of such securities. However, this
information should not be deemed to constitute an admission that
any such person or group of persons is the beneficial owner of
such securities.
(3) The information reported is based on information provided
to the Company by Gabelli Funds, Inc. in October 1994. The
Gabelli Funds have sole voting power with respect to 4,711,300
shares and sole dispositive power with respect to all of the
shares shown in the table.
(4) The information reported is based on information provided
to the Company by FMR Corp., an affiliate of Fidelity Management
& Research Company, in October 1994. FMR Corp. has no voting
power but has sole dispositive power with respect to all of the
shares shown in the table.
(5) Represents 23,300 shares of Common Stock which are
subject to outstanding options exercisable within 60 days of
October 14, 1994.
(6) Includes 2,000 shares of Common Stock which are subject
to outstanding options exercisable within 60 days of October 14,
1994.
(7) Includes 42,305 shares of Common Stock which are subject
to outstanding options exercisable within 60 days of October 14,
1994.
(8) Includes shares of restricted stock over which the
individual has voting but not dispositive power. For the number
of shares of restricted stock owned, see Note 4 to the Summary
Compensation Table.
(9) Includes 11,711 shares of Common Stock which are subject
to outstanding options exercisable within 60 days of October 14,
1994.
(10) Mr. Lundgren was the Chairman and Chief Executive
Officer of Neiman Marcus Stores until his resignation in April
1994.
(11) The members of the Board of Directors of Harcourt
General, including Messrs. Smith and Tarr, may be deemed to be
the beneficial owners of the securities of the Company owned by
Harcourt General. However, this information should not be deemed
to be an admission that any such person or group is the
beneficial owner of such securities.
(12) Excludes the beneficial ownership of securities of the
Company which may be deemed to be attributed to Messrs. Smith and
Tarr (see Note 11 above). Includes 79,316 shares of Common Stock
which are subject to outstanding options exercisable within 60
days of October 14, 1994.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Principal Stockholder - Intercompany Services
Agreement
See Note 1 to the Summary Compensation Table in Item 11
above.
Transactions with Directors
See "Compensation Committee Interlocks and Insider
Participation" in Item 11 above.
Transactions with Officers
In July 1994, the Company made an interest free bridge loan
in the amount of $240,000 to Mr. Tansky to assist him in
purchasing a new home in the Dallas area in connection with his
new position as Chairman and Chief Executive Officer of Neiman
Marcus Stores. Mr. Tansky repaid the loan in August 1994.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
14(a)(1) Financial Statements
The documents listed below are incorporated by reference to
the Company's 1994 Annual Report to Shareholders and are
incorporated by reference into Item 8 hereof:
Consolidated Balance Sheets at July 30, 1994 and July 31,
1993.
Consolidated Statements of Operations for the fiscal years
ended July 30, 1994, July 31, 1993 and August 1, 1992.
Consolidated Statements of Cash Flows for the fiscal years
ended July 30, 1994, July 31, 1993 and August 1, 1992.
Consolidated Statements of Common Shareholders' Equity for
the fiscal years ended July 30, 1994, July 31, 1993 and August
1, 1992.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
14(a)(2) Consolidated Financial Statement Schedules
The documents and schedules listed below are filed as part of
this Form 10-K:
Page in
Form 10-K
Independent Auditors' Report on Consolidated Financial
Statement Schedules F-1
Schedule II - Accounts Receivable from Related Parties and
Underwriters, Promoters and Employees other
than Related Parties F-2
Schedule V - Property, Plant and Equipment F-3
Schedule VI - Accumulated Depreciation and Amortization of
Property, Plant and Equipment F-4
Schedule VIII - Valuation and Qualifying Accounts and Reserves F-5
Schedule IX - Short-Term Borrowings F-6
Schedule X - Supplementary Income Statement Information F-7
All other schedules for which provision is made in the
applicable regulations of the Securities and Exchange Commission
have been omitted because the information is disclosed in the
Consolidated Financial Statements or because such schedules are
not required or are not applicable.
14(a)(3) Exhibits
The exhibits filed as part of this Annual Report are listed
in the Exhibit Index immediately preceding the exhibits. The
Registrant has identified with an asterisk in the Exhibit Index
each management contract and compensation plan filed as an
exhibit to this Form 10-K in response to Item 14(c) of Form 10-K.
14(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended July 30, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THE NEIMAN MARCUS GROUP, INC.
BY: s/Robert J. Tarr, Jr.
Robert J. Tarr, Jr., President,
Chief Executive Officer and
Chief Operating Officer
Dated: October 26, 1994
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the following
capacities and on the dates indicated.
Signature Title Date
Principal Executive
Officer:
s/Robert J. Tarr, Jr. President, Chief Executive October 26, 1994
Robert J. Tarr, Jr. Officer, Chief Operating
Officer and Director
Principal Financial
Officer:
s/John R. Cook Senior Vice President and October 26, 1994
John R. Cook Chief Financial Officer
Principal Accounting
Officer:
s/Stephen C. Richards Vice President and Controller October 26, 1994
Stephen C. Richards
Directors: Date
s/Richard A. Smith October 24, 1994
Richard A. Smith
s/Gary L. Countryman October 27, 1994
Gary L. Countryman
s/Matina S. Horner October 21, 1994
Matina S. Horner
s/Walter J. Salmon October 21, 1994
Walter J. Salmon
s/Jean Head Sisco October 13, 1994
Jean Head Sisco
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
of The Neiman Marcus Group, Inc. and Subsidiaries
We have audited the consolidated financial statements of The Neiman Marcus
Group, Inc. and subsidiaries as of July 30, 1994 and July 31, 1993, and for
each of the three years in the peirod ended July 30, 1994, and have issued
our report thereon dated September 19, 1994; such financial statements and
report are included in your 1994 Annual Report to Stockholders and are
incorporated herein by reference. Our audits also included the financial
statement schedules of The Neiman Marcus Group, Inc. and subsidiaries,
listed in Item 14. These financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set
forth therein.
Deloitte & Touche LLP
Boston, Massachusetts
September 19, 1994
F-1
SCHEDULE II
THE NEIMAN MARCUS GROUP, INC.
ACCOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
THREE YEARS ENDED JULY 30, 1994
(Dollar amounts in thousands)
Column A Column B Column C Column D Column E
<CAPTION>
Balance at Deductions Balance at end of period
beginning Amounts Amounts
Name of Debtor of period Additions collected written off Current Not current
Year ended July 30, 1994
<S> <C> <C> <C> <C> <C> <C>
Bernard Zeichner (A) $37 $0 $37 $0 $0 $0
Burton Tansky (B) 0 240 0 0 240 0
Total $37 $240 $37 $0 $240 $0
Year ended July 31, 1993
Bernard Zeichner (A) $0 $101 $64 $0 $37 $0
Year ended August 1, 1992 $0 $0 $0 $0 $0 $0
</TABLE>
(A) Loan represents notes receivable under The Neiman Marcus Group, Inc. Key
Executive Stock Purchase Loan Plan. Interest payable quarterly at 6%
per annum; the balance was paid in full on August 31, 1993.
(B) Loan represents an interest free bridge loan secured by a mortgage.
The loan was paid in full during August, 1994.
F-2
SCHEDULE V
THE NEIMAN MARCUS GROUP, INC.
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JULY 30, 1994, JULY 31, 1993 AND AUGUST 1, 1992
(Dollar amounts in thousands)
<TABLE>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Balance at Balance at
beginning Retirements Other end
Classification of period Additions or sales (A) changes (B) of period
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 30, 1994
Land, buildings and improvements $383,760 $8,722 ($18,290) $5,064 $379,256
Fixtures and equipment 220,733 23,012 (36,204) 3,162 210,703
Construction in progress 25,343 33,339 0 (8,226) 50,456
Total $629,836 $65,073 ($54,494) $0 $640,415
YEAR ENDED JULY 31, 1993
Land, buildings and improvements $366,468 $6,596 ($12,060) $22,756 $383,760
Fixtures and equipment 263,735 3,849 (86,211) 39,360 220,733
Construction in progress 41,579 45,880 0 (62,116) 25,343
Total $671,782 $56,325 ($98,271) $0 $629,836
YEAR ENDED AUGUST 1, 1992
Land, buildings and improvements $338,229 $9,249 ($13,381) $32,371 $366,468
Fixtures and equipment 300,202 5,524 (86,564) 44,573 263,735
Construction in progress 56,481 62,042 0 (76,944) 41,579
Total $694,912 $76,815 ($99,945) $0 $671,782
</TABLE>
(A) Represents primarily fully depreciated assets and write-downs
associated with the Contempo Causals restructuring in 1994.
(B) Represents asset reclassifications.
Estimated useful lives used by the Company at
July 30, 1994 for computing depreciation
(straight-line method) are as follows:
Classification Years
Buildings and improvements 15 - 30
Fixtures and equipment 3 - 15
Leasehold improvements Lesser of the estimated
useful life of the asset
or the lease term.
F-3
SCHEDULE VI
THE NEIMAN MARCUS GROUP, INC.
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JULY 30, 1994, JULY 31, 1993 AND AUGUST 1, 1992
(Dollar amounts in thousands)
<TABLE>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Balance at Balance at
beginning Retirements Other end
Classification of period Additions or sales (A) changes of period
<CAPTION>
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 30, 1994
Buildings and improvements $121,874 $18,638 ($8,062) $0 $132,450
Fixtures and equipment 91,443 37,947 (32,338) 0 97,052
Total $213,317 $56,585 ($40,400) $0 $229,502
YEAR ENDED JULY 31, 1993
Buildings and improvements $110,111 $19,609 ($7,846) $0 $121,874
Fixtures and equipment 139,428 35,368 (83,353) 0 91,443
Total $249,539 $54,977 ($91,199) $0 $213,317
YEAR ENDED AUGUST 1, 1992
Buildings and improvements $ 95,714 $17,977 ($3,580) $0 $110,111
Fixtures and equipment 200,222 32,690 (93,484) 0 139,428
Total $295,936 $50,667 ($97,064) $0 $249,539
</TABLE>
(A) Represents primarily fully depreciated assets.
F-4
SCHEDULE VIII
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED JULY 30, 1994, JULY 31, 1993 AND AUGUST 1, 1992
(Dollar amounts in thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Charged to Charged to Balance at
beginning costs and other end of
Description of period expenses accounts Deductions (A) period
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 30, 1994
Allowance for doubtful accounts
(deducted from accounts receivable) $9,500 $24,716 $0 $20,516 $13,700
YEAR ENDED JULY 31, 1993
Allowance for doubtful accounts
(deducted from accounts receivable) $3,592 $21,794 $0 $15,886 $ 9,500
YEAR ENDED AUGUST 1, 1992
Allowance for doubtful accounts
(deducted from accounts receivable) $3,290 $13,206 $0 $12,904 $ 3,592
</TABLE>
(A) Write-off of uncollectible accounts net of recoveries.
F-5
SCHEDULE IX
THE NEIMAN MARCUS GROUP, INC.
SHORT-TERM BORROWINGS
YEARS ENDED JULY 30, 1994, JULY 31, 1993 AND AUGUST 1, 1992
(Dollar amounts in thousands)
<TABLE>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
<CAPTION>
Maximum Average Weighted
Weighted amount amount average
Balance at average outstanding outstanding interest Rate
Category of Aggregate end of interest during the during the during the
Short-term Borrowings period rate period (B) period (B) period (C)
YEAR ENDED JULY 30, 1994
<S> <C> <C> <C> <C> <C>
Payable to banks (A) $109,333 4.98% $119,633 $55,808 4.39%
YEAR ENDED JULY 31, 1993
Payable to banks (A) $27,200 3.47% $41,500 $11,500 3.38%
YEAR ENDED AUGUST 1, 1992
Payable to banks (A) $0 0.00% $74,000 $20,333 5.59%
</TABLE>
(A) Interest and principal are payable in full at the due date
(see Note 4 to the Consolidated Financial Statements).
(B) Based on amounts outstanding at month-end.
(C) Based on daily averages.
F-6
SCHEDULE X
<TABLE>
THE NEIMAN MARCUS GROUP, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED JULY 30, 1994, JULY 31, 1993 AND AUGUST 1, 1992
(Dollar amounts in thousands)
COLUMN A COLUMN B
<CAPTION>
Charged to costs and expenses
Year ended Year ended Year ended
July 30, July 31, August 1,
Item 1994 1993 1992
<S> <C> <C> <C>
Advertising $26,489 $26,130 $17,334
Taxes other than payroll
and income $19,705 $21,134 $18,281
</TABLE>
F-7
EXHIBIT INDEX
Page No.
3.1(a) Restated Certificate of Incorporation of the Company,
incorporated herein by reference to the Company's Report
on Form 10-K for the twenty-six week period ended August
1, 1987.
3.1(b) Certificate of Designation and Terms of 9-1/4% Cumulative
Redeemable Preferred Stock, incorporated herein by reference
to the Company's Report on Form 10-K for the fiscal year
ended August 3, 1991.
3.2 By-Laws of the Company, as amended, incorporated herein by
reference to the Company's Annual Report on Form 10-K for
the fiscal year ended August 1, 1992.
*10.1 Intercompany Services Agreement, dated as of July 24,
1987, between Harcourt General and the Company, incorporated
herein by reference to the Company's Report on Form 10-K for
the twenty-six week period ended August 1, 1987.
*10.2 1987 Stock Incentive Plan, incorporated herein by reference
to the Company's Report on Form 10-K for the twenty-six week
period ended August 1, 1987.
*10.3 Key Executive Stock Purchase Loan Plan, as amended.
*10.4 Supplemental Executive Retirement Plan, incorporated
herein by reference to the Company's Report on Form 10-K
for the fiscal year ended July 30, 1988.
*10.5 Employment Agreement between the Company and Burton M.
Tansky dated May 1, 1994.
10.6 Stock Purchase Agreement between the Company and Harcourt
General, dated October 14, 1991 and effective as of August
2, 1991, incorporated herein by reference to the Company's
Report on Form 10-K for the fiscal year ended August 3, 1991.
*10.7 Description of the Company's Executive Life Insurance
Plan, incorporated herein by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended August 1, 1992.
*10.8 Supplementary Executive Medical Plan, incorporated herein by
reference to the Company's Annual Report on Form 10-K for the
fiscal year ended July 31, 1993.
*10.9 Termination Agreement between Bergdorf Goodman, Inc. and
Stephen C. Elkin, effective September 1993, incorporated
herein by reference to the Company's Annual Report on Form
10-K for the fiscal year ended July 31, 1993.
*10.10 Termination Agreement between the Company and Gerald Sampson,
effective April 1, 1993.
*10.11 Termination Agreement between Bergdorf Goodman, Inc. and
Dawn Mello, effective May 1994.
*10.12 Key Employee Deferred Compensation Plan, as amended.
*10.13 Deferred Compensation Agreement between the Company and
Gary L. Countryman, dated August 27, 1987.
11.1 Computation of Average Number of Shares Outstanding Used
in Determining Primary and Fully-Diluted Earnings Per
Share.
13.1 1994 Annual Report to Stockholders (which is not deemed to
be filed except to the extent that portions thereof are
expressly incorporated by reference in this Annual Report
on Form 10-K).
22.1 Subsidiaries of the Company.
24.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
28.1 Dividend Reinvestment and Common Stock Purchase Plan,
incorporated herein by reference to the Company's
Registration Statement on Form S-3 dated September 17,
1990 (File No. 33-36419).
________________
*Exhibits filed pursuant to Item 14(c) of Form 10-K
EXHIBIT 10.3
THE NEIMAN MARCUS GROUP, INC.
KEY EXECUTIVE STOCK PURCHASE LOAN PLAN
(As amended through September 19, 1994)
1. Purpose. The purpose of the Key Executive Stock
Purchase Loan Plan (the "Plan") is to obtain for The Neiman
Marcus Group, Inc. (referred to herein as "NMG" and, together
with its subsidiaries, as the "Company") the benefits of the
additional incentive inherent in the ownership of its securities
by selected key executives who are important to the success and
growth of the business of the Company and to help the Company
obtain and retain the services of such employees.
2. Administration. The Plan shall be administered by a
Committee established by the Board of Directors of NMG,
consisting of at least three directors. The Committee shall have
authority, not inconsistent with the Plan, (a) to determine which
of the key executives of the Company shall be eligible to receive
stock purchase loans ("Loan Participants"), (b) to determine the
time or times when stock purchase loans shall be made and the
amount of each stock purchase loan, (c) to prescribe the forms of
the instruments evidencing stock purchase loans granted under the
Plan and of any other instruments required under the Plan, (d) to
adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings,
and (e) to decide all questions and settle all controversies and
disputes which may arise in connection with the Plan. All
decisions, determinations and interpretations of the Committee
shall be binding on all parties concerned.
3. Participants. The participants in the Plan shall be
such key executives of the Company, whether or not also officers
or directors, as may be selected from time to time by the
Committee in its discretion. Directors who are not employees
shall not be eligible. No stock purchase loan may be made to a
person who is a member of the Committee at the time of grant.
4. Use of Loans; Collateral. Loans made pursuant to the
Plan shall be used by the Loan Participant solely in connection
with the purchase of capital stock of NMG (through exercise of
stock options, open market purchases or private transactions)
during those periods authorized by the Committee and in
accordance with the rules and regulations established by the
Committee for the purchase of stock. All such purchases and all
resales of capital stock of NMG shall be subject to any
applicable requirements of federal and state securities laws. To
the extent permitted by law, the Committee may, as a condition to
granting a loan hereunder, require that the Loan Participant
collateralize the loan by pledging to NMG the securities
purchased with the proceeds of the loan and such other collateral
as may from time to time be required by Regulation G, as issued
by the Board of Governors of the Federal Reserve Board; any such
pledge shall be documented by the execution and delivery of a
Pledge Agreement in such form and containing such provisions, not
inconsistent herewith, as the Committee shall determine. The
Committee may, in its sole discretion, determine to what extent,
if any, withdrawal of collateral may be made by a Loan
Participant.
5. Amount of Loan; Limitations. The amount of any stock
purchase loan granted under the Plan shall not exceed the sum of
(a) the price of the securities purchased with the proceeds of
the loan, (b) brokerage fees and other similar expenses incurred
in connection with such purchase, and (c) in the case of an
exercise of a "non-qualified" stock option (i.e., any stock
option the exercise of which results in taxable income to the
optionee on the date of exercise), that percentage of the
difference between the aggregate fair market value of the
securities purchased on the date of exercise and the aggregate
option exercise price which equals the highest marginal federal
income tax rate prevailing on the date of exercise. A Loan
Participant may elect to borrow less than the foregoing sum, in
the Loan Participant's sole discretion. A Loan Participant shall
be eligible for more than one stock purchase loan.
The Committee shall, subject to the limitations set forth in
the following paragraph, determine the aggregate amount of loans
which may be made to any Loan Participant.
Th aggregate unpaid principal amount of all stock purchase
loans outstanding under the Plan shall not, without the approval
of the Board of Directors of NMG, exceed $3 million at any time.
6. Note. Each loan made hereunder shall be evidenced by a
Promissory Note, in such form and containing such provisions, not
inconsistent herewith, as the Committee shall determine.
7. Interest. Any Note issued hereunder shall bear interest
at a rate to be determined by the Committee.
8. Term of Loan. The unpaid principal amount of any loan
(and any unpaid interest thereon) shall become due and payable
seven months after a Loan Participant shall cease to be an
employee of the Company.
9. Payment of Principal in Cash. The unpaid principal of
a loan of a Loan Participant who ceases to be an employee of the
Company within four years after the date of the loan for any
reason other than (a) involuntary discharge, (b) death or (c)
retirement or disability under the circumstances specified in
Section 10(b)(iii) shall be repayable only in cash or in shares
of NMG whose fair market value (measured as of the close of
business on the day prior to repayment) is equal to the
outstanding principal balance of the loan, or in a combination of
both.
10. Option to Pay Principal in Shares. The unpaid
principal balance of a loan of a Loan Participant who ceases to
be an employee of the Company (a) more than four years after the
date of the loan or (b) at any time during such four-year period
by reason of (i) involuntary discharge, (ii) death or (iii)
retirement or disability under circumstances entitling the Loan
Participant to benefits under a retirement plan or disability
insurance plan for employees of the Company, shall be repayable
at the option of the Loan Participant either in cash or in that
number of shares of securities represented by the outstanding
principal balance of the loan, or in a combination of both. The
phrase "that number of shares of securities represented by the
outstanding principal balance of the loan" under the Plan shall
mean the number of shares of securities purchased with a loan
under the Plan at the time the loan is granted, adjusted to
reflect the "anti-dilution" provisions of Section 13 and
repayments, if any, previously made by the Loan Participant.
11. Leave of Absence. Whether a leave of absence shall
constitute termination of employment for the purpose of any loan
granted hereunder shall be determined in each case by the
Committee in its sole discretion. A Loan Participant who fails
to return to the employ of the Company within 30 days after the
expiration of a leave of absence which was not a termination of
employment in the Committee's judgment shall be deemed, for
purposes of the Plan, to have ceased to be an employee upon the
expiration of such 30 day period.
12. Prepayment. Notwithstanding any other provision of the
Plan, a Loan Participant who has received a loan shall have the
option to repay in cash or in shares of NMG whose fair market
value (measured as of the close of business on the day prior to
repayment) is equal to the outstanding principal balance of the
loan, or in a combination of both, all or any portion of the
outstanding balance of the loan at any time before the loan
becomes due and payable.
13. Changes in Stock. In the event of a stock dividend,
split-up or combination of shares, recapitalization or merger in
which NMG is the surviving corporation, or other similar capital
change or changes, the resulting number and kind of shares of
stock or securities of NMG attributable to "that number of shares
of securities represented by the outstanding principal balance of
the loan" (as such phrase is used in Section l0) under the Plan
shall be appropriately adjusted by the Board of Directors of NMG,
whose determination shall be binding on all persons. In the
event of a consolidation or a merger in which NMG is not the
surviving corporation, or in the event of a complete liquidation
of NMG, the Board of Directors of NMG may make such adjustments
and take such action as it deems appropriate to reflect or
anticipate such merger, consolidation or liquidation.
14. Employment Rights. The adoption of the Plan does not
confer upon any employee of the Company any right to continued
employment with the Company nor does it interfere in any way with
the right of the Company to terminate the employment of any of
its employees at any time.
15. Transferability. The rights of a Loan Participant
under the Plan shall not be transferable except by will or the
laws of descent and distribution.
16. Amendment, Modification and Termination of the Plan.
The Board of Directors of NMG may at any time terminate and may
at any time and from time to time, and in any respect, amend or
modify, the Plan; provided, however, that no such action of the
Board of Directors of NMG shall in any manner affect any loan
theretofore granted under the Plan without the consent of the
Loan Participant.
17. Effective Date. The Plan shall become effective on
August 28, 1987.
Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of the
1st day of May, 1994 by and between The Neiman Marcus Group, Inc.
(the "Company") a Delaware corporation having its principal place
of business in Chestnut Hill, Massachusetts and BURTON TANSKY
("Executive").
I. RECITALS
1.01. The Executive is to be employed as Chairman and Chief
Executive Officer of the Neiman Marcus division of The
Neiman Marcus Group, Inc., from May 1, 1994 for the
remainder of the term of this Employment Agreement.
1.02. To ensure the continued services and association of the
Executive, and to retain the Executive's experience,
skills, ability and knowledge, the Company is willing
to engage the Executive's services upon the terms of
this Employment Agreement and the Executive agrees to
become employed by the Company under the terms of this
Employment Agreement.
II. AGREEMENT
In consideration of the recitals to this Employment
Agreement, the parties mutually covenant and agree as follows:<PAGE>
2.01. POSITION AND REPORTING RESPONSIBILITIES OF EXECUTIVE
As Chairman and Chief Executive Officer of Neiman
Marcus, the Executive will report directly to the Chief
Operating Officer of the Company on all matters
relating to the Executive's performance and duties, and
the performance of Neiman Marcus. The Executive will
devote his full, working time and best efforts to the
performance of his duties.
2.02. TERM OF EMPLOYMENT
Subject to the limitations contained in this Employment
Agreement, the Company will employ the Executive for a
term beginning May 1, 1994 and ending January 31, 1997,
and the Executive agrees to accept such employment.
II. COMPENSATION
3.01. BASE SALARY
For his services hereunder, the Executive will receive
base compensation at the annual rate of $600,000, paid
in such installments as are paid to other, senior
executives of Neiman Marcus. Beginning in August 1995,
and year to year thereafter for the duration of this
Employment Agreement, the Company will review the
Executive's salary. Thereafter, at its yearly meetings
(generally held in October), the Compensation Committee
of The Neiman Marcus Group Board of Directors will
consider annual percentage increases in the Executive's
base salary, retroactive to the preceding August, based
upon such salary reviews.
3.02. STOCK OPTIONS
a. The Executive will be eligible for annual grants of
nonqualified options to purchase shares of the
Company's stock pursuant to the Company's 1987 Stock
Incentive Plan up to the maximum number in accordance
with the following formula:
.6 x annual base salary = number of nonqualified stock options
market value of shares for which Executive is eligible
on the day of award
The actual number granted will be determined by the
Compensation Committee of the Board of Directors of the
Company and will be a function of the Executive's
performance and the Company's achieving agreed upon
performance goals.
3.03. BONUSES
a. For the fiscal year ending July 31, 1994, the Executive
may elect to receive the greater of:
(i) $67,500 - which is based upon $150,000 (i.e., 1/4
of his yearly Neiman Marcus salary) x .45 (his
bonus eligibility rate)
or
(ii) The bonus the Executive would have earned at
Bergdorf Goodman for FY '94 based on his $525,000
base salary and 45% bonus eligibility.
b. For the fiscal years thereafter, the Executive will be
eligible to participate in the Company's Annual
Incentive Plan (Incentive Plan) pursuant to its terms.
The Executive's maximum bonus potential will be .45 x
actual base compensation received during the Company's
fiscal year, with the actual bonus amount based upon
the Executive's performance and the Company's achieving
agreed upon performance goals.
3.04. STOCK PURCHASE LOAN PLAN
The Executive will be eligible to secure loans from The
Neiman Marcus Group, Inc. in aggregate amounts up to
one (1) times his then-base salary for the purchase of
stock under the provisions of The Neiman Marcus Group,
Inc. Stock Purchase Loan Plan.
3.05. AUTOMOBILE
The Executive is eligible for a $1,000/month car
allowance. However, the Company will include as W-2
income the value of the Executive's personal use of the
vehicle or the amount of the car allowance allocated
for personal use, whichever is applicable.
3.06. RELOCATION BENEFITS
In connection with his move from the greater New York
area to the greater Dallas area in order to assume the
position of President and Chief Executive Officer of
Neiman Marcus, the Executive is eligible for the
benefits set forth in the draft Neiman Marcus Group
relocation policy (which he received on or about April
6, 1994) as modified, below.
a. The Company authorizes the Executive to use the Home
Purchase Program, described therein, for his primary
residence.
b. In lieu of the bridge loan arrangements set forth in
the policy, the Company would provide a bridge loan of
up to $600,000, at an annual interest rate of 5%, for
no more than nine (9) months. Payments would be due
quarterly, in arrears. The loan would be secured by a
second mortgage on the Executive's home in the Dallas,
Texas area. The Executive agrees to execute all
documents reasonably related to the bridge loan,
including, but not limited to, mortgage, security
interest, and other documents evidencing the Company's
right to security for and repayment of the loan.
c. In lieu of the settling in allowance described in the
policy, the Company will provide the Executive with a
one-time payment of $60,000 (subject to applicable tax
and payroll deductions) when he closes on a new,
primary residence in the greater-Dallas area.
d. The Company will extend the Executive's eligibility for
temporary living expenses from the 30-day limit in the
policy to 120-days.
e. The Company will approve shipment of two of the
Executive's cars from the greater-New York area to the
greater-Dallas area.
3.07. OTHER COMPANY BENEFITS
The Executive will be entitled to and will receive
other benefits maintained by the Company for executives
of the Company at his level and with comparable
responsibilities, subject to such eligibility
requirements as are applicable generally to such other
executives. The benefits include first class travel,
group health insurance, executive medical, dental and
disability benefits, group life insurance, four weeks
annual paid vacation during each 12 month period of
employment, up to $3,000 annually for financial
planning and tax assistance, and the opportunity to
participate in any deferred compensation, profit
sharing or retirement income plan for the Company's
executives, including The Neiman Marcus Group, Inc.
Supplemental Executive Retirement Plan (SERP). In
addition, the Executive will be reimbursed for out-of-
pocket expenses reasonably incurred in the performance
of his duties hereunder, upon receipt of appropriate
accounting in accordance with Company policies.
3.08. SERVICE ACCRUAL
Provided the Executive remains continuously employed by
the Company until, or after, his 65th birthday, the
Executive will accrue service under The Neiman Marcus
Group, Inc. SERP at a rate equal to the product of 5/3
multiplied by his years of service (including
fractions of years) with the Company. Thus, under such
circumstances, should the Executive retire at age 65,
he will be credited with 20 years' service for the
purpose of calculating his SERP benefit. However,
should the Executive fail to remain continuously
employed by the Company until, or after, his 65th
birthday, the Executive's accrued service will be
calculated in the normal manner provided in the SERP.
IV. TERMINATION OF EMPLOYMENT
4.01. TERMINATION OF THIS EMPLOYMENT AGREEMENT UPON
DISABILITY OF THE EXECUTIVE
If at the end of any month the Executive then is
and has been for either: (a) eighty percent (80%)
or more of the normal working days during the six
(6) consecutive full calendar months then ending;
or (b) fifty percent (50%) or more of the normal
working days during the twelve (12) consecutive
full calendar months then ending, unable to
perform his duties under this Employment Agreement
in the normal and regular manner, due to mental or
physical disability, then either the Company or
the Executive may terminate this Agreement and its
or his obligations hereunder, upon 30 days' notice
to the other of intent to terminate. Nothing
contained in this paragraph is intended to limit
the Executive's right to any compensation or
benefits to which he is otherwise entitled under
the terms of any company policy, benefit plan, or
by operation of law.
4.02. TERMINATION OF THIS EMPLOYMENT AGREEMENT UPON
DEATH OF THE EXECUTIVE
If the Executive dies, this Employment Agreement
shall be terminated on the last day of the month
of the Executive's death. However, nothing herein
is intended to limit the rights, if any, of the
Executive's heirs, devisees or estate to payments
or benefits in which the Executive has an accrued,
vested interest at the time of his death.
4.03. TERMINATION OF THE EXECUTIVE'S SERVICES FOR CAUSE
The Company may terminate the Executive's
services, for cause, upon written notice
specifying the reason for such termination. All
of the Company's obligations under this Employment
Agreement shall cease upon the Executive's
termination for cause. For the purpose of the
preceding sentence, "cause" shall mean: a breach
of duty by the Executive in the course of his
employment involving fraud, acts of dishonesty,
acts of moral turpitude, repeated insubordination,
failure to devote his full, working time and best
efforts to the performance of his duties, or
conviction of a felony or other criminal offense.
4.04. TERMINATION OF EXECUTIVE'S SERVICES UPON CHANGE OF
CONTROL
a. If the Executive's services are terminated without
cause or good reason within 24 months of a change
of control of Neiman Marcus, as a change of
control is defined below, or if within 24 months
of a change of such control, the Executive resigns
his employment because he is not permitted to
continue in a position comparable in duties and
responsibilities to that which he held before a
change in control, the Executive will receive the
termination package set forth in paragraph 4.05.a.
b. For the purposes of paragraph 4.04.a., change of
control shall mean: (i) the sale of all or
substantially all of the assets of Neiman Marcus
to an entity other than the Company or Harcourt
General, Inc. or an entity wholly owned by the
Company or Harcourt General, Inc.; or (ii) the
sale of all or substantially all of the assets of
the Company to an entity other than Harcourt
General, Inc. or an entity wholly owned by the
Company or Harcourt General, Inc.; or (iii) any
person, entity or group having greater voting
power in the election of Company directors than
Harcourt General, Inc.
4.05. OTHER TERMINATION OF THE EXECUTIVE'S SERVICES
a. If the Company does not intend to extend the
Executive's employment beyond January 31, 1997, it
will so notify him on or before October 31, 1996.
Notwithstanding such notification, the Company
will continue to pay the Executive his then-
current, base compensation until July 31, 1998,
reduced, dollar-for-dollar between August 1, 1997
and July 31, 1998, by the amount of any income the
Executive earns during that period from employment
of any kind (including, but not limited to, self-
employment), in full satisfaction of the Company's
obligations hereunder.
b. If, during the term of this Employment Agreement,
the Company terminates the Executive's services
for any reason[s] other than those set forth in
paragraphs 4.01 and 4.03., above, the Executive
will continue to receive from the Company his base
compensation and existing benefits (but will
not receive any performance or incentive bonuses
or additional stock options), until the expiration
date of this Employment Agreement or for 18 months
(whichever is greater), in full satisfaction of
the Company's obligations hereunder.
4.06. EXTENSION OF THE EXECUTIVE'S EMPLOYMENT
Should the Company wish to continue the
Executive's employment beyond January 31, 1997,
the Company agrees to extend the Executive a good-
faith offer of compensation and benefits on or
before the expiration of this Employment
Agreement.
If, by January 31, 1997, the parties are unable to
agree on the terms and conditions of the
Executive's continued employment, the parties may:
a. continue to discuss such terms and conditions
in the hope of reaching agreement, or
b. terminate discussions and sever the
employment relationship.
Should either party choose to sever the employment
relationship pursuant to the provisions of this
paragraph, then the Company will continue to pay
the Executive his then-current, base compensation
until July 31, 1998, reduced, dollar-for-dollar,
between the date six months from the date the
employment relationship is severed and July 31,
1998, by the amount of any income the Executive
earns during that period from employment of any
kind (including, but not limited to self-
employment), in full satisfaction of the Company's
obligations hereunder.
V. GENERAL PROVISIONS
5.01. ASSIGNABILITY
The Company will have the right to assign all
rights and obligations arising under this
Agreement to one or more of its subsidiaries or
affiliates, whether now existing or hereafter
organized. Despite any such assignment, the
Company will remain bound by any obligations
running from the Company to the Executive under
the terms of this Agreement.
5.02. INTEGRATION
This Employment Agreement contains the entire
agreement between the parties and supersedes all
prior oral and written agreements, understandings
and commitments between the parties. No amendment
to this Employment Agreement may be made except by
a writing signed by both parties.
5.03. SPECIFIC ENFORCEMENT
The Executive is obligated under this Employment
Agreement to render service of a special, unique,
unusual, extraordinary, and intellectual
character, thereby giving this Employment
Agreement peculiar value. Thus, the loss of such
services could not be reasonably or adequately
compensated in damages in an action at law.
Therefore, in addition to other remedies provided
by law, the Company shall have the right during
the term or any renewal term of this Employment
Agreement to obtain injunctive relief against the
performance of services elsewhere by the
Executive. The right to seek injunctive relief
will not extend to efforts of the Executive to
secure employment in connection with the
provisions of paragraph 4.04(a) or 4.05.
5.04. CONFIDENTIAL INFORMATION
The Executive acknowledges and stipulates that in
the performance of duties hereunder, the Company
will disclose to and entrust the Executive with
confidential and proprietary information which the
Executive may not disclose to any third party or
entity either during or after the Executive's
employment by the Company. This paragraph
survives the expiration or termination of this
Agreement.
5.05. SEPARABILITY OF PROVISIONS
If one or more of the covenants or agreements
provided for in this Employment Agreement should
be contrary to law, then any such covenant or
agreement shall be null and void and shall be
deemed separable and divisible from the remaining
covenants or agreements.
5.06. CHOICE OF LAW
This Employment Agreement shall be interpreted and
enforced in accordance with the laws of the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Company has caused this
instrument to be executed on its behalf by a duly authorized
officer and the Executive has executed this instrument, all
as of the first day and year written above.
THE NEIMAN MARCUS GROUP, INC.
By s/Robert J. Tarr, Jr.
Robert J. Tarr, Jr.
s/Burton Tansky
Executive
Exhibit 10.10
TERMINATION AGREEMENT
1. This is a termination agreement between Gerald
Sampson (the "Executive") and The Neiman Marcus Group, Inc.
("NMG" or the "Company").
2. Beginning April 1, 1993, the Executive will be employed
"at-will" as the Company's President/Chief Operating Officer, and
either the Executive or the Company may terminate the Executive's
employment at any time, with or without notice, for any reason.
3. Notwithstanding the at-will relationship and in
consideration of the Executive's accepting the position and
agreeing to relocate to the greater Dallas area within 3 to 6
months of beginning employment, at the latest, the Company is
willing to enter into this Termination Agreement.
4. Between April 1, 1993 and March 31, 1995, while the
Executive is employed at-will, should the Company terminate the
Executive's employment except "for cause" or other than due to
"total disability" or death, the Company agrees to provide the
Executive a termination package consisting of an amount
equivalent to his then-current, one year, base salary, which
amount would be paid in 12 regular, monthly installments
following such termination. Notwithstanding the 12 month salary
obligation set forth above, should the Executive be engaged in
employment (including contract employment or self-employment) of
any kind during that 12 month period following termination other
than for cause, total disability or death, the Company's salary
obligation will be reduced, dollar-for-dollar, by the amount the
Executive earns through such employment.
5. For the purposes of determining the Executive's
eligibility for the termination package set forth in this
Termination Agreement:
a. "For cause" means that, in the judgment of the
Company, the Executive:
(1) failed to devote his full time, loyalty, best
efforts, skills, knowledge and ability to the
performance of his duties;
(2) committed an act of malfeasance or failed to
render services exclusively to the Company;
(3) failed to fulfill his commitment to relocate
to the greater Dallas area; or
(4) engaged in conduct detrimental to the best
interest of the Company.
b. "Total disability" means that, in the judgment of
the Company, the Executive is unable to perform his
duties for: (i) 45 consecutive business days or (ii)
for a total of 90 business days during any nine-month
period.
6. During that period of the Executive's at-will
employment which begins April 1, 1993, and ends March 31, 1995,
payment by the Company of the termination package set forth in
paragraph 4 constitutes full satisfaction of all Company
financial obligations to the Executive (if any) which arise from
or relate in any way to the termination of the Executive's
employment. However, nothing in this paragraph 6 is intended to
affect any earned, vested rights that the Executive may have
under the applicable provisions of: (i) any life insurance
policy or plan (group or otherwise) maintained for the Executive
by the Company or (ii) any other "employee benefit pension plan,"
as defined by Section 3 of ERISA, then in effect and in which the
Executive is participating under the terms of such plan.
7. The invalidity of all or any part or provision of any
section of this Termination Agreement will not render invalid the
remainder of this Termination Agreement or the remainder of such
sections or any other of its provisions.
8. This Termination Agreement contains the entire
agreement and supersedes all prior agreements and understandings,
oral or written, between the parties hereto with respect to the
termination of the Executive's at-will employment and to the
subject matter of the Termination Agreement. The Termination
Agreement may not be changed orally. It may be changed only by
written agreement signed by the party against whom any waiver,
charge, amendment, modification or discharge is sought.
9. This Termination Agreement will be construed as to both
validity and performance and enforced in accordance with the laws
of the State of Texas, without giving effect to the principles of
conflicts of laws thereof.
Neiman Marcus
By: s/Terry J. Lundgren
Its Chief Executive Officer
Gerald Sampson
By: s/Gerald Sampson
Exhibit 10.11
TERMINATION AGREEMENT
1. This is a Termination Agreement between Dawn Mello (the
"Executive") and Bergdorf Goodman, Inc. ("Bergdorf Goodman" or
the "Company"). For the purposes of this Agreement, the
"Company" includes The Neiman Marcus Group, Inc.
2. Although the Executive will be employed "at-will" by
Bergdorf Goodman, the Company values the Executive's services and
wishes to provide some protection should the Executive's services
be terminated under certain circumstances. Therefore, in
recognition of the Executive's value and in consideration of the
Executive's agreeing to accept employment at Bergdorf Goodman,
the Company is willing to enter into this Termination Agreement.
3. a. For so long as the Executive is employed by the
Company or one of its affiliates, should the
Company terminate the Executive's employment other
than "for cause" or other than due to "total
disability" or death, the Executive will receive a
termination package consisting of an amount
equivalent to her then-current, one year, base
salary, which amount would be paid in 12, regular,
monthly installments following such termination.
b. Further, if the Executive's services are
terminated other than for cause or other than due
to total disability or death before November 1,
1996 and within 24 months following a change of
control of Bergdorf Goodman, as a change of
control is defined in paragraph 5, or if before
November 1, 1996 and within 24 months following a
change of such control, the Executive resigns her
employment because she is not permitted to
continue in a position comparable in duties and
responsibilities to that which she held before a
change in control, the Executive will receive the
termination package set forth in paragraph 3.a.
for the 12 months set forth therein, or until
November 1, 1996, whichever is earlier.
c. Notwithstanding the salary obligations set forth
in 3.a. and b., should the Executive be engaged in
employment (including contract employment or self-
employment) of any kind, during the period
beginning 6 months following such termination
other than for cause, total disability, or death,
or 6 months following the covered termination or
resignation following a change of control, the
salary obligation will be reduced, dollar-for-
dollar, by the amount the Executive earns through
such employment.
4. For the purposes of determining the Executive's
eligibility for the termination package set forth in this
Termination Agreement:
a. "For cause" means that, in the judgment of the
Company, the Executive:
(1) failed to devote her full time, loyalty, best
efforts, skills, knowledge and ability to the
performance of her duties;
(2) committed an act of malfeasance or failed to
render services exclusively to the Company;
or
(3) engaged in conduct detrimental to the best
interests of the Company.
b. "Total Disability": If at the end of any month
the Executive then is and has been for either:
(a) eighty percent (80%) or more of the normal
working days during the six (6) consecutive full
calendar months then ending; or (b) fifty percent
(50%) or more of the normal working days during
the twelve (12) consecutive full calendar months
then ending, unable to perform her duties in the
normal and regular manner, due to mental or
physical disability. Nothing contained in this
paragraph is intended to limit the Executive's
right to any compensation or benefits to which she
is otherwise entitled under the terms of any
company policy, benefit plan, or by operation of
law.
5. CHANGE OF CONTROL
For the purposes of paragraph 3, change of control
shall mean: (i) the sale of all or substantially all of the
assets of Bergdorf Goodman, Inc. to an entity other than the
Company or Harcourt General, Inc. or an entity wholly owned by
the Company or Harcourt General, Inc.; or (ii) the sale of all
or substantially all of the assets of the Company to an entity
other than Harcourt General, Inc. or an entity wholly owned by
the Company or Harcourt General, Inc.; or (iii) any person,
entity or group having greater voting power in the election of
Company directors than Harcourt General, Inc.
6. Payment of the termination package set forth in
paragraph 3 constitutes full satisfaction of all financial
obligations of the Company to the Executive (if any) which arise
from or relate in any way to the termination of the Executive's
employment, including the right to severance pay. However,
nothing in this paragraph is intended to affect any earned,
vested rights that the Executive may have under the applicable
provisions of: (i) any life insurance policy or plan (group or
otherwise) maintained for the Executive by the Company or (ii)
any other "employee benefit pension plan", as defined by Section
3 of ERISA, then in effect and in which the Executive is
participating under the terms of such plan.
7. The invalidity of all or any part or provision of any
section of this Termination Agreement will not render invalid the
remainder of this Termination Agreement or the remainder of such
sections or any other of its provisions.
8. This Termination Agreement contains the entire
agreement and supersedes all prior agreements and understandings,
oral or written, between the parties hereto with respect to the
termination of the Executive's at-will employment and to the
subject matter of the Termination Agreement. The Termination
Agreement may not be changed orally. It may be changed only by
written agreement signed by the party against whom any waiver,
charge, amendment, modification or discharge is sought.
9. This Termination Agreement will be construed as to both
validity and performance and enforced in accordance with the laws
of the Commonwealth of Massachusetts, without giving effect to
the principles of conflicts of laws thereof.
BERGDORF GOODMAN, INC.
By: s/Robert J. Tarr, Jr.
Robert J. Tarr, Jr.
The Neiman Marcus Group, Inc.
DAWN MELLO
By: s/Dawn Mello
Exhibit 10.12
THE NEIMAN MARCUS GROUP, INC.
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
(Effective January 1, 1994)
TABLE OF CONTENTS
ARTICLE 1. INTRODUCTION . . . . . . . . . . . . . . . . . . 1
1.1. Purpose of Plan . . . . . . . . . . . . . . . . . 1
1.2. Status of Plan . . . . . . . . . . . . . . . . . . 1
ARTICLE 2. DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
2.1. "Account" . . . . . . . . . . . . . . . . . . . . 1
2.2. "Base Pay" . . . . . . . . . . . . . . . . . . . . 1
2.3. "Bonus" . . . . . . . . . . . . . . . . . . . . . 2
2.4. "Code" . . . . . . . . . . . . . . . . . . . . . . 2
2.5. "Committee" . . . . . . . . . . . . . . . . . . . 2
2.6. "Company" . . . . . . . . . . . . . . . . . . . . 2
2.7. "Compensation" . . . . . . . . . . . . . . . . . . 2
2.8. "Effective Date" . . . . . . . . . . . . . . . . . 2
2.9. "Elective Deferral" . . . . . . . . . . . . . . . 2
2.10. "Eligible Employee" . . . . . . . . . . . . . . . 3
2.11. "ERISA" . . . . . . . . . . . . . . . . . . . . . 3
2.12. "Financial Hardship" . . . . . . . . . . . . . . 3
2.13. "Matching Deferral" . . . . . . . . . . . . . . . 4
2.14. "Participant" . . . . . . . . . . . . . . . . . . 4
2.15. "Plan" . . . . . . . . . . . . . . . . . . . . . 4
2.16. "Plan Year" . . . . . . . . . . . . . . . . . . . 4
2.17. "Retirement" . . . . . . . . . . . . . . . . . . 4
2.18. "Savings Plan" . . . . . . . . . . . . . . . . . 5
2.19. "Year of Service" . . . . . . . . . . . . . . . . 5
ARTICLE 3. PARTICIPATION . . . . . . . . . . . . . . . . . . 5
3.1. Commencement of Participation . . . . . . . . . . 5
3.2. Continued Participation . . . . . . . . . . . . . 5
ARTICLE 4. ELECTIVE AND MATCHING DEFERRALS . . . . . . . . . 5
4.1. Elective Deferrals . . . . . . . . . . . . . . . . 5
4.2. Matching Deferrals . . . . . . . . . . . . . . . . 7
ARTICLE 5. ACCOUNTS; INTEREST . . . . . . . . . . . . . . . 7
5.1. Accounts . . . . . . . . . . . . . . . . . . . . . 7
5.2. Interest . . . . . . . . . . . . . . . . . . . . . 7
5.3. Payments . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 6. PAYMENTS . . . . . . . . . . . . . . . . . . . . 8
6.1. Time and Form of Payment . . . . . . . . . . . . . 8
6.2. Termination of Employment . . . . . . . . . . . . 9
6.3. Death . . . . . . . . . . . . . . . . . . . . . . 9
6.4. Reduction in Shareholders' Equity . . . . . . . . 10
6.5. Change in Control . . . . . . . . . . . . . . . . 10
6.6. Hardship . . . . . . . . . . . . . . . . . . . . . 11
6.7. Changes in Time and Form of Payment . . . . . . . 11
6.8. Payment Dates . . . . . . . . . . . . . . . . . . 12
6.9. Withholding . . . . . . . . . . . . . . . . . . . 12
ARTICLE 7. COMMITTEE . . . . . . . . . . . . . . . . . . . . 12
7.1. Plan Administration and Interpretation . . . . . . 12
7.2. Powers, Duties, Procedures, Etc . . . . . . . . . 13
7.3. Information . . . . . . . . . . . . . . . . . . . 13
7.4. Indemnification of Committee . . . . . . . . . . . 13
ARTICLE 8. AMENDMENT AND TERMINATION . . . . . . . . . . . . 14
8.1. Amendments . . . . . . . . . . . . . . . . . . . . 14
8.2. Termination of Plan . . . . . . . . . . . . . . . 14
8.3. Existing Rights . . . . . . . . . . . . . . . . . 14
ARTICLE 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . 15
9.1. No Funding . . . . . . . . . . . . . . . . . . . . 15
9.2. Nonassignability . . . . . . . . . . . . . . . . . 15
9.3. Limitation of Participants' Rights . . . . . . . . 15
9.4. Participants Bound . . . . . . . . . . . . . . . . 16
9.5. Receipt and Release . . . . . . . . . . . . . . . 16
9.6. Governing Law . . . . . . . . . . . . . . . . . . 16
9.7. Headings and Subheadings . . . . . . . . . . . . . 16<PAGE>
THE NEIMAN MARCUS GROUP, INC.
KEY EMPLOYEE DEFERRED COMPENSATION PLAN
ARTICLE 1. INTRODUCTION
1.1. Purpose of Plan. The Company has adopted this Key
Employee Deferred Compensation Plan, effective January 1, 1994,
to provide a means by which certain employees who are not
eligible to participate in the Savings Plan may elect to defer
receipt of designated percentages of their Compensation.
1.2. Status of Plan. The Plan is intended to be "a plan
which is unfunded and is maintained by an employer primarily for
the purpose of providing deferred compensation for a select group
of management or highly compensated employees" within the meaning
of Sections 201(2) and 301(a)(3) of ERISA, and shall be
interpreted and administered to the extent possible in a manner
consistent with that intent.
ARTICLE 2. DEFINITIONS
Wherever used herein, the following terms have the meanings
set forth below, unless a different meaning is clearly required
by the context:
2.1. "Account" means, for each Participant, the account
established for his or her benefit under Section 5.1.
2.2. "Base Pay" means the base salary payable by the
Company to an employee, including amounts that would have been
payable to the employee as base salary but for an election under
Section 125 of the Code or a deferral election under this Plan.
2.3. "Bonus" means any cash bonus payable by the Company to
an employee, including any portion of such a bonus that would
have been payable to the employee but for an election under
Section 125 of the Code or a deferral election under this Plan.
However, the term "Bonus" shall not include any amount paid under
or in connection with a stock appreciation right or stock option
plan or arrangement.
2.4. "Code" means the Internal Revenue Code of 1986, as
amended from time to time. Reference to any section or
subsection of the Code includes reference to any comparable or
succeeding provisions of any legislation which amends,
supplements or replaces such section or subsection.
2.5. "Committee" means The Neiman Marcus Group, Inc.
Employee Benefits Committee or any successor committee appointed
by the Board of Directors of The Neiman Marcus Group, Inc. or its
delegate.
2.6. "Company" means The Neiman Marcus Group, Inc., a
Delaware corporation, its directly or indirectly wholly owned
subsidiaries, and any successor to all or substantially all of
the Company's assets or business which assumes the obligations of
the Company.
2.7. "Compensation" means Base Pay and any Bonus payable by
the Company to an employee.
2.8. "Effective Date" means January 1, 1994.
2.9. "Elective Deferral" means the portion of Compensation
which is deferred by a Participant under Section 4.1.
2.10. "Eligible Employee" means each employee of the
Company who, on the Effective Date or the first day of any month
thereafter,
(a) has completed at least one Year of Service, or
such shorter period of service as may be specified by the
Chief Executive Officer of The Neiman Marcus Group, Inc. in
such Officer's sole discretion; and
(b) had in effect on August 1 of the preceding
calendar year (or, if later, on the employee's date of hire)
an annual rate of Base Pay of at least $300,000.
An Eligible Employee shall remain an Eligible Employee
notwithstanding any reduction in his or her annual rate of Base
Pay below the applicable minimum under (b) above.
2.11. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time. Reference to any
section or subsection of ERISA includes reference to any
comparable or succeeding provisions of any legislation which
amends, supplements or replaces such section or subsection.
2.12. "Financial Hardship" means an immediate and heavy
financial need resulting from
(a) major medical expenses incurred to obtain, or
necessary to obtain, medical care (described in Section
213(d) of the Code) with respect to the Participant or his
or her spouse or dependent which are not covered by
insurance;
(b) costs directly related to the purchase of a
principal residence of the Participant (excluding mortgage
payments);
(c) the payment of tuition and related educational
fees for the next 12 months of post-secondary education for
the Participant or his or her spouse, children, or
dependents;
(d) payments necessary to prevent the eviction of the
Participant from his or her principal residence or
foreclosure on the mortgage of the Participant's principal
residence; or
(e) any other circumstance that is determined by the
Committee in its sole discretion to constitute a severe
hardship need.
2.13. "Matching Deferral" means a deferral made for the
benefit of a Participant under Section 4.2.
2.14. "Participant" means any individual who participates
in the Plan in accordance with Article 3.
2.15. "Plan" means The Neiman Marcus Group, Inc. Key
Employee Deferred Compensation Plan set forth herein and all
subsequent amendments hereto.
2.16. "Plan Year" means the calendar year.
2.17. "Retirement" means retirement in accordance with the
normal, late, or early retirement provisions of The Neiman Marcus
Group, Inc. Retirement Plan.
2.18. "Savings Plan" means The Neiman Marcus Group, Inc.
Savings and Investment Plan, as amended from time to time.
2.19. "Year of Service" means a twelve month period,
beginning on the date the employee first performs an hour of
service or on any January 1 thereafter, in which the employee is
credited with 1,000 or more hours of service. For this purpose,
an "hour of service" shall have the same meaning as under the
Savings Plan.
ARTICLE 3. PARTICIPATION
3.1. Commencement of Participation. Any Eligible Employee
shall become a Participant on the effective date of an election
to defer Compensation in accordance with Section 4.1.
3.2. Continued Participation. An individual who has become
a Participant in the Plan shall continue to be a Participant so
long as any amount remains credited to his or her Account.
ARTICLE 4. ELECTIVE AND MATCHING DEFERRALS
4.1. Elective Deferrals.
(a) An individual who is an Eligible Employee on any
January 1 may elect to defer a designated whole percentage,
not to exceed 15 percent, of all Base Pay that is payable to
the individual for services to be performed on or after that
date, and all Bonuses payable to the individual for Company
fiscal years ending after that date, by filing an election
with the Committee prior to that January 1. In addition, an
individual may elect before the date he or she becomes an
Eligible Employee, or within 30 days thereafter, to defer a
designated whole percentage, not to exceed 15 percent, of
all Base Pay that is payable to the individual for services
to be performed after such election (or, if later, after the
date he or she becomes an Eligible Employee), and all
Bonuses payable to the individual for Company fiscal years
ending thereafter.
(b) Each election under paragraph (a) shall be made in
writing on a form approved or prescribed by the Committee,
and shall specify the time and form of distribution of the
amounts deferred and of related Matching Deferrals as
provided in Section 6.1. The same deferral percentage shall
apply to each payment of Compensation covered by the
election, and the amount of each such payment that is
deferred hereunder shall be credited to the Participant's
Account as of the date such amount would otherwise have been
paid to the Participant.
(c) A Participant may revoke his or her deferral
election with respect to Base Pay earned on or after the
first day of any pay period, and with respect to Bonuses
payable for fiscal years ending on or after that day, by
giving written notice to the Committee before that day (or
by such earlier date as the Committee may prescribe).
However, except as otherwise provided in Section 6.6, a
Participant may otherwise modify an existing election, or
may make another deferral election, only as of a January 1,
and only with respect to Base Pay earned thereafter, and
Bonuses payable for fiscal years ending thereafter, in
accordance with paragraphs (a) and (b) above.
4.2. Matching Deferrals. As of the last day of each
calendar month, the Company shall credit to each Participant's
Account a Matching Deferral equal to 25% of the Participant's
Elective Deferrals for the month which do not exceed the first
six percent of his or her Compensation payable during the month.
ARTICLE 5. ACCOUNTS; INTEREST
5.1. Accounts. The Committee shall establish an Account
for each Participant reflecting Elective Deferrals and Matching
Deferrals for the Participant's benefit and any adjustments
hereunder. Within 45 days after the end of each calendar
quarter, the Committee shall provide the Participant with a
statement of his or her Account.
5.2. Interest. As of the last day of each calendar
quarter, the Committee shall credit each Participant's Account
with interest on the balance of such Account from time to time
during the calendar quarter at an annual rate equal to the
average prime interest rate published in the Eastern Edition of
The Wall Street Journal on the last business day of the calendar
quarter (or, if two or more such rates are published, the mean of
such rates), increased by two percentage points. In addition,
any payment under Article 6 which is not made on the first day of
a calendar quarter shall be increased by interest on the amount
of such payment, from the end of the preceding calendar quarter,
at the interest rate applicable for the preceding calendar
quarter.
5.3. Payments. Each Participant's Account shall be reduced
by the amount of any payment made to or on behalf of the
Participant under Article 6 (including any interest paid with
respect to such payment) as of the date such payment is made.
ARTICLE 6. PAYMENTS
6.1. Time and Form of Payment. When a Participant elects
to defer Compensation in accordance with Section 4.1, the
Participant shall also elect the time at which the Elective
Deferrals and related Matching Deferrals (including interest
attributable thereto) will be paid or begin to be paid to the
Participant, from among the following options:
(a) 5, 10, 15 or 20 years after the end of the Plan
Year in which the Compensation deferred would otherwise have
been paid;
(b) attainment of age 65; or
(c) retirement.
The Participant shall also elect the form of payment of such
amounts, from among the following options:
(i) a single lump sum payment; or
(ii) annual installments over a period elected by
the Participant up to 10 years, the amount of each
installment to equal the balance of his or her Account
immediately prior to the installment divided by the
number of installments remaining to be paid.
The foregoing elections shall be made on a form approved or
prescribed by the Committee. Each such election shall be
irrevocable with respect to amounts deferred while the election
remains in effect (and with respect to related Matching Deferrals
and interest), except as otherwise provided in Section 6.2, 6.3,
6.4, 6.5, 6.6 or 6.7.
6.2. Termination of Employment. Upon termination of a
Participant's employment with the Company for any reason other
than death or Retirement, the Participant's Account shall be paid
to the Participant in a single lump sum payment as soon as
practicable following the date of such termination.
6.3. Death. If a Participant dies prior to the complete
distribution of his or her Account, the balance of the Account
shall be paid as soon as practicable to the Participant's
designated beneficiary or beneficiaries, in the form elected by
the Participant from among the following options:
(a) a single lump sum payment; or
(b) subject to Section 6.7, annual installments over a
period elected by the Participant up to 10 years, the amount
of each installment to equal the balance of the Account
immediately prior to the installment divided by the number
of installments remaining to be paid.
Any designation of beneficiary and form of payment shall be made
by the Participant in writing on a form approved or prescribed by
the Committee, and may be changed by the Participant at any time.
If there is no such designation or no designated beneficiary
survives the Participant, payment shall be made to the
Participant's surviving spouse or, if none, to his or her issue
per stirpes, in a single lump sum payment. If no spouse or issue
survives the Participant, payment shall be made in a single lump
sum to the Participant's estate.
6.4. Reduction in Shareholders' Equity. If at any time the
shareholders' equity of the Company, as shown on the Company's
consolidated balance sheet reported in its then most recent
annual or quarterly report filed with the U.S. Securities and
Exchange Commission, falls below $100 million, each Participant's
Account shall be paid as soon as practicable to the Participant
(or, if the Participant has died, to his or her beneficiary) in a
single lump sum.
6.5. Change in Control. In the event that the aggregate
direct or indirect beneficial ownership by Harcourt General, Inc.
and any of its affiliates of capital stock of the Company
decreases to less than 20 percent of the combined voting power of
the Company's then outstanding capital stock entitled to vote for
the election of directors of the Company, each Participant's
Account shall, immediately prior to such change in control, be
paid to the Participant (or, if the Participant has died, to his
or her beneficiary) in a lump sum. Notwithstanding the
foregoing, a Participant may elect, at any time prior to date of
the change in control, to have his or her Account distributed
under the Plan without regard to this Section 6.5. "Affiliate"
shall have the meaning ascribed to such term in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act
of 1934, as in effect on January 1, 1994.
6.6. Hardship. If a Participant suffers a Financial
Hardship, the Committee, in its sole discretion, may pay to the
Participant that portion, if any, of his or her Account which the
Committee determines is necessary to satisfy the hardship need,
including any amounts necessary to pay any federal, state or
local income taxes reasonably anticipated to result from the
hardship payment, but only to the extent such need cannot
reasonably be relieved by the liquidation of the Participant's
assets (to the extent that such liquidation would not in itself
cause hardship) or by cessation of Elective Deferrals. A
Participant who has a Financial Hardship may also cease or reduce
future Elective Deferrals with the consent of the Committee. A
Participant requesting a distribution, or a cessation or
reduction of future Elective Deferrals, on account of a Financial
Hardship shall apply in writing in a letter submitted to the
Committee and shall provide such information as the Committee may
require.
6.7. Changes in Time and Form of Payment. The Committee
may, in its sole discretion, at the request of or with the
consent of the Participant, change the time at which any Elective
Deferral or Matching Deferral will be paid or begin to be paid to
the Participant under Section 6.1, or the form of such payment,
or both, provided that (a) no such change may be made less than
24 months prior to the date such Elective Deferral or Matching
Deferral would otherwise have been paid or commenced to be paid,
and (b) the form of payment shall be a form described in clause
(i) or (ii) of Section 6.1.
6.8. Payment Dates. Each payment under Section 6.1, 6.2,
6.3 or 6.7 shall be made on or about the first day of a calendar
quarter.
6.9. Withholding. Each payment otherwise due under the
Plan shall be reduced by withholding taxes and other legally
required deductions.
ARTICLE 7. COMMITTEE
7.1. Plan Administration and Interpretation. The Committee
shall oversee the administration of the Plan. The Committee
shall have complete control and authority to determine the rights
and benefits and all claims, demands and actions arising out of
the provisions of the Plan of any Participant, beneficiary,
deceased Participant, or other person having or claiming to have
any interest under the Plan. The Committee shall have the
exclusive power to interpret the Plan and to decide all matters
under the Plan. Such interpretation and decision shall be final,
conclusive and binding on all Participants and any person
claiming under or through any Participant, in the absence of
clear and convincing evidence that the Committee acted
arbitrarily and capriciously. Any individual serving on the
Committee who is a Participant will not vote or act on any matter
relating solely to himself or herself. When making a
determination or calculation, the Committee shall be entitled to
rely on information furnished by a Participant, a beneficiary, or
the Company. The Committee shall be deemed to be the Plan
administrator with responsibility for complying with any
reporting and disclosure requirements of ERISA.
7.2. Powers, Duties, Procedures, Etc. The Committee shall
have such powers and duties, may adopt such rules and tables, may
act in accordance with such procedures, may appoint such officers
or agents, may delegate such powers and duties, may receive such
reimbursements and compensation, and shall follow such claims and
appeal procedures with respect to the Plan as are permitted or
required under the terms of the Savings Plan.
7.3. Information. To enable the Committee to perform its
functions, the Company shall supply full and timely information
to the Committee on all matters relating to the compensation of
Participants, their employment, retirement, death, termination of
employment, and such other pertinent facts as the Committee may
require.
7.4. Indemnification of Committee. The Company agrees to
indemnify and to defend to the fullest extent permitted by law
any officer or employee who serves as a member of the Committee
(including any such individual who formerly served as a member of
the Committee) against all liabilities, damages, costs and
expenses (including attorneys' fees and amounts paid in
settlement of any claims approved by the Company) occasioned by
any act or omission to act in connection with the Plan, if such
act or omission is in good faith.
ARTICLE 8. AMENDMENT AND TERMINATION
8.1. Amendments. The Neiman Marcus Group, Inc. shall have
the right to amend this Plan from time to time, subject to
Section 8.3, by an instrument in writing which has been executed
by its duly authorized officer.
8.2. Termination of Plan. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be
deemed to constitute a contract between the Company and any
employee or a consideration for, or an inducement or condition of
employment for, the performance of services by any employee. The
Neiman Marcus Group, Inc. reserves the right to terminate this
Plan at any time, subject to Section 8.3, by an instrument in
writing which has been executed by its duly authorized officer.
8.3. Existing Rights. No amendment or termination of the
Plan shall adversely affect the rights of any Participant with
respect to amounts credited to his or her Account that are
attributable to Elective Deferrals or Matching Deferrals credited
prior to the date of such amendment or termination.
ARTICLE 9. MISCELLANEOUS
9.1. No Funding. Nothing in this Plan will be construed to
create a trust or to obligate the Company or any other person to
segregate a fund, purchase an insurance contract, or in any other
way currently to fund the future payment of any benefits
hereunder, nor will anything herein be construed to give any
employee or any other person rights to any specific assets of the
Company or of any other person. Any benefits which become
payable hereunder shall be paid from the general assets of the
Company.
9.2. Nonassignability. None of the benefits, payments,
proceeds or claims of any Participant or beneficiary shall be
subject to any claim of any creditor and, in particular, the same
shall not be subject to attachment or garnishment or other legal
process by any creditor, nor shall any Participant or beneficiary
have any right to alienate, anticipate, commute, pledge, encumber
or assign any of the benefits or payments or proceeds which he
may expect to receive, contingently or otherwise, under this
Plan.
9.3. Limitation of Participants' Rights. Participation in
this Plan shall not give any Eligible Employee the right to be
retained in the employ of the Company or any right or interest in
the Plan other than as herein provided. The Company reserves the
right to dismiss any Eligible Employee without any liability for
any claim against the Company, except to the extent provided
herein.
9.4. Participants Bound. Any action with respect to this
Plan taken by the Committee or the Company or any action
authorized by or taken at the direction of the Committee or the
Company shall be conclusive upon all Participants and any other
persons who claim entitlement to benefits under the Plan.
9.5. Receipt and Release. Any payment to any Participant
or beneficiary in accordance with the provisions of this Plan
shall, to the extent thereof, be in full satisfaction of all
claims against the Company and the Committee under this Plan, and
the Committee may require such Participant or beneficiary, as a
condition precedent to such payment, to execute a receipt and
release to such effect. If any Participant or beneficiary is
determined by the Committee to be incompetent by reason of
physical or mental disability (including minority) to give a
valid receipt and release, the Committee may cause the payment or
payments becoming due to such person to be made to another person
for his or her benefit without responsibility on the part of the
Committee or the Company to follow the application of such funds.
9.6. Governing Law. This Plan shall be construed,
administered, and governed in all respects under and by the laws
of the Commonwealth of Massachusetts. If any provision shall be
held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to
be fully effective.
9.7. Headings and Subheadings. Headings and subheadings in
this Plan are inserted for convenience only and are not to be
considered in the construction of the provisions hereof.
IN WITNESS WHEREOF, The Neiman Marcus Group, Inc. has caused
this Plan to be executed by its duly authorized officer this
______ day of _______________, 1994.
THE NEIMAN MARCUS GROUP, INC.
By: ____________________________
Exhibit 10.13
DEFERRED COMPENSATION AGREEMENT
This is an Agreement made as of the 27th day of August,
1987, by and between The Neiman Marcus Group, Inc. (the
"Company") and Gary L. Countryman (the "Director").
WHEREAS, the Director is a member of the Board of Directors
of the Company and is paid for his attendance at Board meetings
and for other services rendered by him as a director; and
WHEREAS, the parties desire that the Director be paid his
fees on a deferred basis in the manner prescribed by this
Agreement;
NOW THEREFORE, in consideration of the mutual agreements
herein contained, the parties agree as follows:
1. Fees. The Director agrees to accept compensation at
such rates as the Company may, from time to time,
establish for his attendance at meetings and for all
other services of every type and description as he may
render to the Company in his capacity as a member of
its Board of Directors. However, beginning on the
effective date of this Agreement, the Company shall
withhold all such deferred compensation from the
Director and pay the same in accordance with the terms
set forth below.
2. Deferred Compensation Account. The Company shall
establish and maintain an account to record the accrual
of the Director's deferred compensation. To such
account, the following credits and debits shall be
made:
(a) As of the date the Director attends meetings or
renders other services, his account shall be
credited with the appropriate amount of deferred
compensation.
(b) During the period for which the Company maintains
a deferred compensation account for the Director
(or his beneficiary or estate), the Company shall
accrue and credit such account with interest at a
rate equal to that paid on 90-day certificates of
deposit (in denominations of at least $100,000)
issued by The First National Bank of Boston from
time to time.
(c) Payments to the Director, his designated
beneficiary or his estate shall be debited to the
Director's deferred compensation account as of the
date of payment.
3. Payments to the Director. The Company shall pay to the
Director the full amount of his deferred compensation
account, as described in paragraph 2, upon the earliest
to occur of his (a) attainment of age 65, (b) ceasing
to be a Director of the Company for any reason, or (c)
retirement from full-time employment on a permanent
basis.
4. Payments After Death. If the Director shall die before
the deferred compensation account has been paid to him,
then the entire account shall be paid to the
beneficiary designated by the Director in accordance
with this paragraph 4; if no such beneficiary has been
designated, such deferred compensation shall be paid to
the Director's estate. Such designation of Beneficiary
must be in writing, dated, signed by the Director and
acknowledged by him before a notary public, and no
beneficiary designation shall be deemed effective
unless the same has been furnished to the Secretary of
the Company prior to the death of the Director. The
Company may rely in all cases on the genuineness,
accuracy and date of any such beneficiary designation
and shall be fully protected in making payment in
accordance therewith. Any beneficiary designation
filed with the Secretary of the Company prior to the
death of the Director shall be deemed to have revoked
all earlier designations and no beneficiary designation
furnished to the Secretary after the date of a
Director's death shall be deemed effective.
5. Withholding. The Company shall have the right to
reduce all payments to be made hereunder by any amounts
required to be withheld by Federal, State and local law
or regulation.
6. Nature of Director's Rights. The rights of the
Director under this Agreement and those of his estate
or beneficiary shall be solely those of an unsecured
creditor of the Company. In no event shall the Company
be required to hold funds or other assets separate and
apart in respect of or to satisfy its obligations
hereunder, nor shall the Company ever be required or
deemed to be holding funds or assets in trust for the
benefit of the Director or his estate or beneficiary or
be required to hold any such funds or other assets as
security for the performance of its obligations
hereunder.
7. Non-Alienation. Neither the Director nor his
beneficiary or estate shall have the right in any
manner to sell, alienate, transfer, hypothecate,
assign, pledge or encumber any interest in the deferred
compensation account. Any attempt to sell, alienate,
transfer, hypothecate, assign, pledge or encumber the
deferred compensation account shall be void and of no
effect whatever.
8. Revocation. The Director may elect to receive on a
current basis any fees which would otherwise be
deferred and paid under the terms of this Agreement by
notifying the Company to that effect in writing.
However, such election for current payment of fees
shall apply only to fees due for periods after the
effective date of the notice; the payment of fees
theretofore deferred may not be accelerated and shall
become due and payable only in accordance with the
provisions of paragraphs 3 or 4 hereof.
9. Miscellaneous. This Agreement shall inure to the
benefit of and be binding upon the Company, its
successors and assigns, and the Director, his heirs,
administrators, executors, other personal
representatives and any beneficiary he may designate.
No amendments, modifications or additions to this
Agreement shall be binding unless in writing and signed
by the parties. This Agreement shall be governed by
the laws of the Commonwealth of Massachusetts. The
section headings used in this Agreement are included
solely for convenience and shall not effect or be used
in connection with the interpretation of this
Agreement.
IN WITNESS WHEREOF, this Agreement has become effective as
of the date set forth above.
THE NEIMAN MARCUS GROUP, INC.
By s/Gary L. Countryman
Gary L. Countryman
s/Robert J. Tarr, Jr.
EXHIBIT 11.1
THE NEIMAN MARCUS GROUP, INC.
JULY 30, 1994
EXHIBIT TO FORM 10-K
COMPUTATION OF AVERAGE NUMBER OF SHARES OUTSTANDING USED IN DETERMINING
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
<TABLE>
<CAPTION>
PRIMARY July 30, 1994 July 31, 1993 August 1, 1992
<S> <C> <C> <C>
1. Weighted average number of
common shares outstanding 37,945,798 37,577,376 35,551,479
2. Assumed exercise of certain
stock options based on average
market value 0 (B) 119,988 0 (B)
3. Weighted average number of
shares used in primary
per share computations 37,945,798 37,697,364 35,551,479
FULLY DILUTED (A)
1. Weighted average number of
common shares outstanding 37,945,798 37,577,376 35,551,479
2. Assumed exercise of certain
stock options based on higher
of average or closing
market value 0 (B) 141,228 0 (B)
3. Weighted average number of
shares used in fully diluted
per share computations 37,945,798 37,718,604 35,551,479
</TABLE>
(A) The calculation is submitted in accordance with Securities Exchange Act
of 1934 Release No. 9083 although not required by footnote 2 to paragraph
14 of APB Opinion No. 15 because it results in dilution of less than 3%.
(B) Inclusion of assumed exercises of stock options would be anti-dilutive.
EXHIBIT 13.1
THE NEIMAN MARCUS GROUP, INC.
1994 ANNUAL REPORT
<PAGE>
OUR MISSION
Our mission is to be the leading specialty retailer of fine merchandise to
discerning, fashion-conscious customers from around the world. We will strive
to exceed customer expectations for service, quality and value as we build upon
our long-standing tradition of excellence. As we pursue this mission, we are
guided by the following important values. * We will maintain an uncompromising
commitment to quality and the highest levels of customer service in all of our
businesses and endeavors. * We will adhere to the highest levels of integrity
and ethical standards in dealing with all constituencies, including customers,
suppliers and employees. * We will aspire to achieve a leadership position in
every one of our operating businesses. * Our management decisions will
emphasize long-term benefits to the value of our businesses, not short-term
gains. * We will employ capable, motivated people; follow sound management
practices; utilize new technology efficiently; and reinvest earnings and
additional capital as required to grow our businesses and maintain the
corporation's financial health. * We will strive to maximize the potential of
all employees and maintain a professionally challenging work environment. * We
will be socially and environmentally responsible and support worthwhile causes,
especially in those communities in which we operate.
<PAGE>
THE NEIMAN MARCUS GROUP
A collection of distinctive specialty retailers serving discerning
customers with a goal of exceeding their expectations. NEIMAN MARCUS. A
world-renowned franchise with a long tradition of leadership in high fashion
specialty retailing through 27 stores nationwide. NM DIRECT. A state-of-the-art
direct marketing operation offering style and convenience through the pages of
the Neiman Marcus and Horchow specialty catalogues. BERGDORF GOODMAN AND
BERGDORF GOODMAN MEN. Stores known for elegance, sophistication and exclusive
designer fashion at the world's preeminent retail location - Fifth Avenue and
58th Street in New York City. CONTEMPO CASUALS. A group of 247 contemporary
shops offering fashion-forward apparel and accessories to young women across
the country.
TABLE OF CONTENTS
2 Letter to Shareholders 5 At-A-Glance 6 Neiman Marcus Stores 11 NM Direct
12 Bergdorf Goodman 15 Contempo Casuals 16 Financial Section
36 Shareholder Information 37 Directors and Officers
<PAGE>
SHAREHOLDER LETTER
[PHOTO - SEE CAPTION BELOW]
THE NEIMAN MARCUS GROUP REMAINS COMMITTED TO MEETING THE NEEDS OF THE UPSCALE
CUSTOMER
The businesses that comprise The Neiman Marcus Group turned in mixed
performances in fiscal 1994. While we are pleased with the continuing strong
results at Neiman Marcus Stores and NM Direct and are satisfied that lower
earnings in 1994 at Bergdorf Goodman were the result of several unusual
factors, we are very disappointed with the large operating loss at Contempo
Casuals. However, we are optimistic that major restructuring activities at
Contempo, which necessitated a $48.4 million charge in 1994, should result in
improved future performance. This non-recurring factor, along with a positive
outlook for earnings growth at Neiman Marcus, NM Direct and Bergdorf Goodman,
gives us confidence that The Neiman Marcus Group can achieve significant
profit improvement in the years ahead. * Total revenues for The Neiman Marcus
Group in fiscal 1994 were $2.09 billion, a 3.8% increase over fiscal 1993.
Comparable revenues increased 4.4%. Prior to the $48.4 million charge
associated with restructuring activities at Contempo Casuals, operating
earnings were $107.7 million, approximately the same as operating earnings of
$108.8 million in the prior year, despite a significantly larger operating loss
in 1994 at Contempo. Including the restructuring charge, The Neiman Marcus
Group had operating earnings of $59.3 million in 1994. * Net earnings in 1994
were $15.9 million, down from $47.4 million in 1993. After preferred
dividends, the net loss applicable to common shareholders for the year was 35
cents per share, compared to net earnings applicable to common shareholders of
48 cents per share in 1993. The restructuring charge reduced 1994 net earnings
by $28.1 million, or 74 cents per common share.
Robert J. Tarr, Jr., President and Chief Executive Officer (left)
and Richard A. Smith, Chairman
2
<PAGE>
* Clearly, a turnaround at Contempo Casuals is the most serious challenge
facing The Neiman Marcus Group. A lack of new fashion trends, reduced mall
traffic and merchandising miscues have all impacted this business over the
past several years. In 1994, Contempo had an operating loss, prior to the
restructuring charge, of $37.0 million, $9.5 million of which was attributable
to Pastille, a new retail concept Contempo had been testing. In 1993, the
Contempo Division incurred an operating loss of $14.1 million, $10.5 million of
which was attributable to Pastille. Fiscal 1994 revenues at the Contempo
Division declined 13.1% to $303.4 million, with comparable revenues decreasing
12.5%. * A number of steps were taken over the past year to reverse this
deterioration in Contempo's operating performance, including the closing of all
39 Pastille stores and 40 under-performing Contempo stores as well as other
actions designed to reduce ongoing expenses and return the business to
profitability. These actions included the closing of Contempo's Hong Kong
buying office and the elimination of its in-house production department. The
majority of these cost-cutting measures were completed by the end of fiscal
1994. * The losses at Contempo over the past few years have masked a very
strong performance trend at the Neiman Marcus Division. This division - which
includes Neiman Marcus Stores and NM Direct - achieved exceptional results in
1994, with operating earnings rising 21.1% to $148.2 million. This represents
the third consecutive year of earnings improvement in excess of 20% for the
Neiman Marcus Division. Operating margins also improved in 1994 to 9.5% from
8.5% in 1993. Total revenues grew 7.7% to $1.56 billion, with revenues at
Neiman Marcus Stores increasing 7.6% and revenues at NM Direct rising 8.2%.
DISTINCTIVE MERCHANDISE AND UNEQUALLED CUSTOMER SERVICE ARE THE CORNERSTONES
OF OUR STRATEGY
* The improvement at Neiman Marcus Stores is the result of a number of
strategic initiatives implemented over the past few years, including extensive
store remodelings, an increased level of in-store events and advertising
activity, an expansion of assortments in the career and casual merchandise
categories, and an increased emphasis on opening price point merchandise. These
efforts, designed to attract new customers, are expanding the Neiman Marcus
customer base while we continue to provide the same exclusive merchandise and
unsurpassed service to our core clientele. Year-over-year increases in
transaction volume as well as steady growth in average sale amounts indicate
that we are succeeding in this objective. Higher finance charge income due to
a change in the credit card terms offered to Neiman Marcus customers has also
contributed to the division's improved performance. * At NM Direct, an increase
in the number of transactions, an improved operating expense rate and higher
gross margins culminated in significantly higher operating earnings for the
year. * Revenues at Bergdorf Goodman rose 4.7% to $229.5 million in 1994,
with both the original Bergdorf Goodman store and Bergdorf Goodman Men
achieving respectable gains. However, a higher level of markdowns and a charge
for the LIFO inventory accounting method caused operating earnings to decline
to $10.3 million from $12.8 million last year. The elevated markdown level was
due in part to reduced traffic at both stores, reflecting the opening of a
major new competitor
3
<PAGE>
in the fall and poor weather conditions in the winter and early spring.
However, business rebounded toward the end of the year, and we are confident
that Bergdorf's profit margins will improve in 1995. * Future expansion plans
for The Neiman Marcus Group include three new Neiman Marcus stores, the first
of which is scheduled to open in Short Hills, New Jersey in August 1995. This
will be followed by openings of new stores in King of Prussia, Pennsylvania and
Paramus, New Jersey in calendar 1996. * As a result of this new store
construction and continuing renovation work, capital expenditures will increase
in 1995 to about $100 million. Capital expenditures in 1994 totaled $65.1
million, $15 million of which was used to expand NM Direct's telemarketing and
fulfillment facility. * The bulk of our major store renovation program is now
behind us, although ongoing remodeling projects will always be required to
ensure that our stores remain fresh, competitive and efficient. Major
renovations of Neiman Marcus stores were completed during 1994 in San Francisco
and Boston. We will conclude the majority of planned remodeling work in Neiman
Marcus' NorthPark store in Dallas in 1995, along with major projects in
Westchester, New York and Northbrook, just outside Chicago. * Several senior
management changes occurred during the year. In May, Burton Tansky - previously
chairman and chief executive officer of Bergdorf Goodman - became chairman and
chief executive officer of Neiman Marcus Stores. Stephen C. Elkin - formerly
president and chief operating officer at Bergdorf Goodman - was promoted to
chairman and chief executive officer of Bergdorf Goodman. Dawn Mello, who had
been creative director of Guccio Gucci SpA, returned to Bergdorf Goodman as
president, a post she held prior to joining Gucci in 1989. Our operating
management teams hold a strong balance of merchandising, operational and
financial skills necessary to develop and implement the strategies that will
yield continued growth. * Since its formation seven years ago, The Neiman
Marcus Group has invested nearly $500 million in store expansion and renovation
efforts and the building of a strong infrastructure. While our efforts have led
to a very strong rebound at Neiman Marcus Stores and NM Direct, a number of
factors have hampered progress at Bergdorf Goodman and Contempo Casuals. At
Bergdorf Goodman, the men's store, opened in 1990, has taken longer than
anticipated to achieve the volume necessary to reach profitability. At Contempo
Casuals, a general downturn in the junior women's market and unsuccessful
merchandising strategies have hurt profits over the past several years.
However, we are on the way to overcoming these setbacks. Bergdorf Goodman Men
should achieve profitability in 1995, and Contempo's performance is expected
to improve significantly. * We have chosen to feature our operating management
teams in this year's annual report. With the continued efforts of these
executives and all those who work with them, we are confident that The Neiman
Marcus Group is well-positioned to generate a meaningful return on the
significant capital that has been invested over the past seven years.
/s/ RICHARD A. SMITH /s/ ROBERT J. TARR, JR.
Richard A. Smith Robert J. Tarr, Jr.
Chairman President and
Chief Executive Officer
September 30, 1994
4
<PAGE>
<TABLE>
AT-A-GLANCE
<CAPTION>
Operating
Earnings
Revenues (Loss)
- - ----------------------------------------------------------------
<C> <S> <C> <C>
1994 $ 1,559,970,000 $ 148,205,000
1993 $ 1,448,725,000 $ 122,441,000
[NEIMAN-MARCUS 1992 $ 1,285,832,000 $ 84,703,000
LOGO] 1991 $ 1,208,459,000 $ 60,520,000
1990 $ 1,226,420,000 $ 61,064,000
</TABLE>
<TABLE>
<CAPTION>
Stores
Year Gross Year Gross
Operations Store Operations Store
Locations Began Sq. Feet Locations Began Sq. Feet
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dallas (Downtown) 1907 269,000 Oak Brook, Illinois 1981 119,000
Dallas (NorthPark) 1965 218,000 San Diego 1981 106,000
Houston (Galleria) 1969 206,000 Fort Lauderdale 1982 92,000
Bal Harbour, Florida 1971 94,000 San Francisco 1982 195,000
Atlanta 1972 154,000 Houston (Town & Country) 1983 153,000
St. Louis 1974 143,000 Chicago (Michigan Avenue) 1983 188,000
Northbrook, Illinois 1976 143,000 Boston 1984 108,000
Fort Worth 1977 119,000 Palo Alto, California 1985 120,000
Washington, D.C. 1977 130,000 McLean, Virginia 1989 130,000
Newport Beach, California 1978 124,000 Denver 1990 90,000
Beverly Hills 1979 173,000 Minneapolis 1991 122,000
Dallas (Prestonwood) 1979 123,000 Scottsdale, Arizona 1991 115,000
Westchester, New York 1980 137,000 Troy, Michigan 1992 157,000
Las Vegas 1981 104,000 ---------
Total 3,832,000
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<Capton>
Operating
Earnings
Revenues (Loss)
- - ----------------------------------------------------------------
<C> <S> <C> <C>
1994 $ 229,491,000 $ 10,327,000
[BERGDORF 1993 $ 219,100,000 $ 12,785,000
GOODMAN 1992 $ 199,113,000 $ 7,699,000
LOGO] 1991 $ 198,711,000 $ 3,909,000
1990 $ 187,268,000 $ 21,865,000
</TABLE>
<TABLE>
<CAPTION>
Year Gross
Operations Store
Locations Began Sq. Feet
----------------------------------------------------
<S> <C> <C>
New York City 1901 250,000
New York City (Men) 1990 66,000
-------
Total 316,000
</TABLE>
<TABLE>
<Capton>
Operating
Earnings
Revenues (Loss)
- - ----------------------------------------------------------------
<C> <S> <C> <C>
1994 $ 303,445,000 ($ 37,009,000)*
[CONTEMPO 1993 $ 349,089,000 ($ 14,111,000)*
LOGO] 1992 $ 323,409,000 ($ 9,466,000)*
1991 $ 337,630,000 $ 18,668,000*
1990 $ 274,923,000 $ 17,082,000
</TABLE>
<TABLE>
<CAPTION>
Total Gross Total Gross
Number Store Number Store
Locations of Stores Sq. Feet Locations of Stores Sq. Feet
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arizona 5 21,000 Missouri 3 10,000
California 66 269,000 Nevada 4 17,000
Colorado 6 23,000 New Hampshire 1 3,000
Connecticut 7 28,000 New Jersey 10 40,000
Delaware 1 5,000 New Mexico 1 4,000
Florida 24 98,000 New York 14 57,000
Georgia 3 11,000 North Carolina 2 8,000
Hawaii 5 20,000 Ohio 4 16,000
Illinois 16 68,000 Oklahoma 1 4,000
Indiana 1 4,000 Pennsylvania 7 27,000
Kentucky 1 5,000 Puerto Rico 2 6,000
Louisiana 3 11,000 Rhode Island 1 4,000
Maine 1 4,000 Tennessee 1 4,000
Maryland 4 16,000 Texas 17 66,000
Massachusetts 9 34,000 Utah 3 13,000
Michigan 12 47,000 Virginia 3 12,000
Minnesota 6 22,000 Wisconsin 3 13,000
------------------
Total 247 990,000
<FN>
* Includes operating losses of $9.5 million, $10.5 million, $5.9 million and $5.1 million relating to the development
of Pastille in 1994, 1993, 1992 and 1991, respectively. 1994 figures are prior to the $48.4 million restructuring
charge.
</TABLE>
5
<PAGE>
NEIMAN MARCUS STORES
By continuing merchandising and operating initiatives to expand the
customer base while meeting the needs of its core clientele, Neiman Marcus
Stores had another outstanding year in fiscal 1994. Comparable store revenues
grew 7.6%, with the women's designer sportswear and men's apparel categories
leading the improvement. Both the number of transactions and the average sale
amount for the year increased, evidence of a growing clientele and successful
merchandising strategies. * The Neiman Marcus Division, which includes Neiman
Marcus Stores and NM Direct, had revenues of $1.56 billion in 1994, up 7.7% from
the previous year. The division's operating earnings increased 21.1% to $148.2
million in 1994. * The improvement achieved by Neiman Marcus Stores over
MEETING THE NEEDS OF NEW AND EXISTING CUSTOMERS WITH THE ULTIMATE SHOPPING
EXPERIENCE
the past several years is due to a number of factors, including merchandising
modifications, higher finance charge income, increased advertising and
promotional activities, and an extensive store renovation and expansion
program. * The merchandising strategy refinements implemented at Neiman
Marcus Stores over the past two years are designed to attract a new, younger
customer while simultaneously fulfilling a broader range of the wardrobe needs
of Neiman Marcus core customers. These refinements include an expansion of
assortments offered at the Neiman Marcus opening price points as well as a
stronger presence in the career and casual merchandise categories. Inventory
levels in these categories have increased, and the merchandise is now more
prominently featured within the stores. For example, over the past year, NM
Workshop boutiques were installed in a number of Neiman Marcus stores to
specifically address the wardrobing needs of the career customer.
* Importantly, these
6
<PAGE>
modifications have been implemented without abandoning the commitment to high
end, upscale merchandise that is the Neiman Marcus trademark. Within a
difficult retail environment when many competitors have reduced their
commitment to designer merchandise, Neiman Marcus Stores remains strongly
positioned as the leading national retailer of upscale apparel for men and
women. * Merchandising efforts have been supported by an increased calendar of
in-store events, including trunk shows and personal appearances by major
designers -- important marketing tools for Neiman Marcus Stores. * A 12-page
advertising insert in Vogue proved to be another successful marketing vehicle
for Neiman Marcus Stores. Customer response was extremely positive, and similar
inserts are planned in 1995 with such leading magazines as Harper's Bazaar, W
and Vogue. * Neiman Marcus Stores continued its successful designer catalogue
ALWAYS THE DESTINATION FOR THE FINEST IN EXCLUSIVE FASHION, QUALITY AND
CUSTOMER SERVICE
mailings, this year producing exclusive catalogues in partnership with Donna
Karan, Calvin Klein and Giorgio Armani that featured merchandise available only
at Neiman Marcus and Bergdorf Goodman. Response rates were very strong,
illustrating the consumer appeal of exclusive merchandise and the importance of
maintaining strong relationships with major resources. * Remodeling work was
completed in 1994 at the Neiman Marcus stores in Boston and San Francisco. In
1995, stores in Westchester, New York; NorthPark in Dallas; and Northbrook,
outside Chicago, will be undergoing renovation. * Construction has begun on a
new Neiman Marcus store in Short Hills, New Jersey, which is scheduled to open
in August 1995. New stores are also planned in King of Prussia, Pennsylvania
near Philadelphia and Paramus, New Jersey, with both openings scheduled for
1996.
7
<PAGE>
[PHOTO]
Neiman Marcus Stores: (left page) Tom Stangle, Senior Vice President, Stores *
Steve Harding, Senior Vice President, Chief Financial Officer * Craig Innes,
Senior Vice President, Human Resources * Leonard Utz, Senior Vice President,
Stores * Tom Lehnen, Senior Vice President, Properties & New Store
Development * Gerald A. Sampson, President and Chief Operating Officer
<PAGE>
[PHOTO]
(right page) Janet Gurwitch, Executive Vice President, Women's Merchandising *
Burton M. Tansky, Chairman and Chief Executive Officer * Sharen Turney,
Senior Vice President, General Merchandise Manager * Robert Ackerman, Senior
Vice President, General Merchandise Manager, Butch Mullins, Senior Vice
President, General Merchandise Manager * Ann Stordahl, Senior Vice President,
General Merchandise Manager * Joe Feczko, Senior Vice President, Creative
Services
<PAGE>
[PHOTO]
NM Direct: Larry Jenkins, Senior Vice President -- Finance and Operations
* Jessica Weiland, Vice President, Marketing & Circulation, B.D. Feiwus,
President and Chief Executive Officer * Pat Morgan-McEvoy, Senior Vice
President/General Merchandise Manager * Jo Marie Lilly, Vice President,
Advertising & Creative Services
<PAGE>
NM DIRECT
Providing customers with a unique array of apparel, home furnishings and
gift items within the convenience of the home, NM Direct continued its strong
performance in 1994. Catalogues are distributed in a variety of formats, with
titles including NM by Mail, The Horchow Collection, Horchow Home, Trifles,
Grand Finale and Pastille, which has demonstrated potential for success as a
mail order brand. * Approximately 90 catalogues were mailed during the year with
an average circulation of 1.2 million households per book. Strong revenue
growth, along with cost containment efforts, yielded a significant increase in
operating earnings for NM Direct in 1994. * As part of an effort to explore new
avenues of distribution, NM Direct is participating in Catalog 1, an electronic
BUILDING THE CORE BUSINESS WITH INNOVATIVE MERCHANDISING, EXPLORING NEW
DIRECTIONS FOR GROWTH
retailing joint venture of Time Warner and Spiegel, to test home shopping
distribution of merchandise currently featured in the Horchow, Pastille and
Trifles catalogues. * NM Direct is also considering international opportunities
and completed several major mailings this past year to prospective customers in
the Mexico City area to test the potential of the Mexican market. * NM Direct's
telemarketing and fulfillment facility in Las Colinas, Texas underwent a major
250,000 square-foot expansion and related automated system upgrade over the
past year. Completed this summer at a cost of approximately $15 million, this
expansion increased capacity by more than 50% and solidifies NM Direct's
position as one of the country's most technologically advanced direct marketing
operations. * A small increase in catalogue circulation and page count is
planned for fiscal 1995, as NM Direct continues to build its core business
while experimenting with new growth opportunities.
11
<PAGE>
BERGDORF GOODMAN
As arbiters of fashion and customer service standards, Bergdorf Goodman
and Bergdorf Goodman Men are unsurpassed. The stores maintain their premier
positions by providing distinctive, exclusive merchandise to a discerning
clientele in an elegant, service-oriented atmosphere. * Operating results at
Bergdorf Goodman in 1994 were affected by difficult winter weather conditions in
the New York City area as well as the short-term impact of the opening of a
major competitor several blocks from Bergdorf's Fifth Avenue location. These two
factors temporarily restricted store traffic during several important months,
leading to increased markdowns and reduced gross margins. As a result, operating
earnings for the year were $10.3 million, down from $12.8 million in 1993.
Revenues at Bergdorf Goodman rose 4.7% to $229.5 million in 1994, with both the
original store and Bergdorf Goodman Men achieving gains. Importantly, the
number of transactions rose in both stores, evidence of an expanding customer
base, with particular strength in women's sportswear and coats and men's
clothing. * Bergdorf Goodman Men had a modest loss in fiscal 1994 on revenues of
approximately $40 million. That loss has narrowed each year since
EXCEEDING CUSTOMER EXPECTATIONS WITH EXQUISITE DESIGNER MERCHANDISE AND
UNSURPASSED SERVICE
the store's opening in 1990. With the continuation of its current volume growth
trend, Bergdorf Goodman Men should become profitable in 1995. * Renovation
efforts over the past several years have revitalized the original Bergdorf
Goodman store, allocating space to more profitable merchandise categories and
developing sophisticated boutiques to better showcase distinctive designer
merchandise. Ongoing remodeling activity includes the renovation of 7,500
square feet on the store's sixth floor. Work on that floor - which will be
coined "The Sixth Sense" - will conclude in the spring of 1995. The updated
space will showcase designer sportswear, coats, dresses and eveningwear as well
as merchandise specifically geared toward the career customer. * Bergdorf
Goodman and Bergdorf Goodman Men will continue their successful advertising
programs and implement expanded special events schedules in 1995 to attract new
customers and increase volume. * Bergdorf Goodman's mail order operation
remains an important sales and marketing vehicle, with approximately 15
catalogues distributed annually.
12
<PAGE>
[PHOTO]
Bergdorf Goodman: Marita O'Dea Glodt, Senior Vice President, Human Resources
* Joseph M. Boitano, Senior Vice President, General Merchandise Manager * Dawn
Mello, President * Stephen C. Elkin, Chairman and Chief Executive Officer *
Vicki Haupt, Senior Vice President, General Merchandise Manager * Carl Barbato,
Senior Vice President, Store Manager
<PAGE>
[PHOTO]
Contempo Casuals: Robert Kelleher, President and Chief Operating Officer
* Melanie Cox, Vice President, General Merchandise Manager
<PAGE>
CONTEMPO CASUALS
Continued weakness at the Contempo Casuals Division over the past
several years necessitated a $48.4 million charge in 1994 to cover restructuring
activities designed to return Contempo to profitability. * Comparable revenues
at the Contempo Casuals stores decreased 12.5% in fiscal 1994, the third
consecutive year of comparable store sales declines. Total revenues were $303.4
million, down 13.1% from 1993. The Contempo Division had an operating loss,
prior to the $48.4 million restructuring charge, of $37.0 million in 1994,
compared to an operating loss of $14.1 million in 1993. These results include
operating losses, prior to the restructuring charge, of $9.5 million in 1994 and
$10.5 million in 1993 attributable to Pastille, the retail concept which
Contempo had been testing. * Contempo's operating loss for the year was
exacerbated by lower gross margins due to increased markdown activity -
particularly in the fourth quarter - to purge inventories and position the
business for better results in 1995. * Restructuring activities completed by
FILLING THE WARDROBE NEEDS OF YOUNG, ACTIVE CUSTOMERS WITH THE VERY LATEST IN
TREND-SETTING FASHION
year-end include the closing of 40 under-performing Contempo stores as well as
the shutdown of the 39-store Pastille retail business. A number of other steps
were taken to reduce ongoing operating expenses, including the closure of
Contempo's Hong Kong buying office and the elimination of its in-house
production department. Efforts to further reduce operating expenses will
continue in fiscal 1995. * In addition, Contempo will implement a more focused
merchandising approach emphasizing better assortment planning and inventory
management. An everyday fair pricing policy has been instituted to improve
regular price sales and generate higher gross margins. * Capital spending at
Contempo in 1995 will be limited to modest expenditures designed to enhance
the stores' image, increase operating efficiencies and augment customer
service efforts. * The restructuring activities, combined with new
merchandising strategies, should help Contempo improve its operating
performance in 1995.
15
<PAGE>
TABLE OF CONTENTS
17 Management's Discussion and Analysis 21 Consolidated Statements of
Operations 22 Consolidated Balance Sheets 24 Consolidated Statements of Cash
Flows 25 Consolidated Statements of Common Shareholders' Equity
26 Notes to Consolidated Financial Statements 34 Independent Auditors' Report
34 Statement of Management's Responsibility for Financial Statements
35 Selected Financial Data
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Neiman Marcus Group, Inc.
<TABLE>
OPERATING RESULTS
The following summarizes the Company's revenues and operating earnings by
business segment:
<CAPTION>
Years ended
-----------------------------------
Revenues July 30, July 31, August 1,
(In millions) 1994 1993 1992
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Neiman Marcus Division $ 1,560.0 $ 1,448.7 $ 1,285.8
Bergdorf Goodman 229.5 219.1 199.1
Contempo Casuals(1) 303.4 349.1 323.4
-----------------------------------
Total $ 2,092.9 $ 2,016.9 $ 1,808.3
============================================================================
</TABLE>
<TABLE>
<CAPTION>
Years ended
---------------------------------
Operating Earnings (Loss) July 30, July 31, August 1,
(in millions) 1994 1993 1992
- - -----------------------------------------------------------------------------
<S> <C> <C> <C>
Neiman Marcus Division $148.2 $ 122.4 $ 84.7
Bergdorf Goodman 10.3 12.8 7.7
Contempo Casuals(2) (37.0) (14.1) (9.5)
Contempo Casuals Restructuring (48.4) - -
Corporate expenses (13.8) (12.3) (13.5)
---------------------------------
Total $ 59.3 $ 108.8 $ 69.4
============================================================================
<FN>
(1) Includes Pastille revenues of $26.4 million in 1994, $29.7 million in 1993
and $6.9 million in 1992.
(2) Includes Pastille operating losses of $9.5 million before the
restructuring charge in 1994, $10.5 million in 1993 and $5.9 million in
1992.
</TABLE>
Neiman Marcus Division
Operating earnings of the Neiman Marcus Division, which includes Neiman
Marcus Stores and NM Direct, increased $25.8 million, or 21.1%, in 1994, and
operating margins improved to 9.5% compared to 8.5% in 1993. Higher trans-
action volume, an increase in the average selling price and higher finance
charge income at both Neiman Marcus Stores and NM Direct contributed to the
increase in operating earnings.
Bergdorf Goodman
Operating earnings at Bergdorf Goodman declined $2.5 million, or 19.2%, in
1994. Operating margins declined to 4.5% in 1994 from 5.8% in 1993,
principally due to the effect of lower gross margin rates from the impact of
the LIFO accounting method and increased markdowns. Revenues at Bergdorf
Goodman increased 4.7% over 1993, with both the original Bergdorf Goodman
store and Bergdorf Goodman Men contributing to the improvement.
Contempo Casuals
A 13.1% revenue decline at the Contempo Casuals Division was attributable to
store closings coupled with comparable store revenue declines of 12.5%, both of
which negatively impacted operating performance. Higher markdowns contributed to
gross margin decline and continued to be the most significant contributor to the
weak operating performance of Contempo Casuals. In April 1994, the Company
announced a restructuring of the Contempo Casuals Division and recorded a
$48.4 million pre-tax restructuring charge related to the Company's decision to
close 40 under-performing Contempo stores and all of the Pastille stores, a
retail concept which Contempo had been testing. Pastille incurred a $9.5
million operating loss in 1994 prior to the restructuring charge.
OPERATING RESULTS: 1994 VERSUS 1993
Revenues in fiscal 1994 increased 3.8% to $2.09 billion from $2.02 billion in
fiscal 1993, benefiting from comparable revenue increases at the Neiman Marcus
Division and Bergdorf Goodman, partially offset by revenue decreases at Contempo
Casuals.
Cost of goods sold was $1.47 billion in 1994, a 4.9% increase over 1993,
primarily due to an increase in merchandise sold. As a percentage of revenues,
cost of goods sold increased to 70.0% in 1994 from 69.2% in 1993.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Neiman Marcus Group, Inc.
Neiman Marcus Stores achieved improved gross margins through higher regular
price sell-throughs and increased transaction volume. The overall decline in
gross margins was primarily attributable to the decrease in margins at
Contempo Casuals and Pastille due to higher markdowns. The LIFO method of
accounting had the effect of decreasing gross margins by $2.4 million in 1994
and increasing gross margins by $3.7 million in 1993.
The $48.4 million pre-tax restructuring charge is the result of an evaluation
of the operating performance of the Contempo Casuals Division. Based upon
this evaluation, the Company decided to close 40 under-performing Contempo
Casuals retail stores and all of the Pastille retail stores. The
restructuring charge for Contempo Casuals and Pastille includes the following
components:
<TABLE>
<CAPTION>
(in millions) Contempo Pastille Total
- - -----------------------------------------------------------------------
<S> <C> <C> <C>
Lease termination costs $ 10.7 $ 10.0 $ 20.7
Write-down of fixed assets 6.2 6.6 12.8
Inventory liquidation costs 2.2 4.7 6.9
Fabric inventory liquidation 2.6 1.3 3.9
Other expenses 1.4 2.7 4.1
---------------------------------
Total restructuring charge $ 23.1 $ 25.3 $ 48.4
=======================================================================
</TABLE>
Other expenses are primarily costs associated with closing the foreign buying
office and employee severance payments. The Company does not anticipate
additional charges related to this restructuring and does not currently
contemplate any future restructuring charges. Substantially all of the savings
which are expected to result from the restructuring are attributable to the
elimination of the losses generated by the closed stores. The amount of fiscal
1994 losses attributable to the closed stores was approximately $4.5 million
for Contempo Casuals and $8.3 million for Pastille. In addition, the Company
anticipates other cost savings due to the streamlining of foreign buying,
product development and other business processes. As of August 12, 1994, all of
the Contempo Casuals and Pastille stores provided for in the restructuring
charge were closed. As of July 30, 1994, the Company had made $7.0 million of
cash payments for lease terminations; all final cash payments for lease
terminations are expected to occur by October 29, 1994.
Selling, general and administrative expenses increased 1.3% in 1994 to $505.7
million from $499.2 million in 1993. This increase was a result of increases
in volume-related selling expenses and higher sales promotion expenses. As a
percentage of revenues, selling, general and administrative expenses improved
to 24.2% from 24.8% in 1993.
Corporate expenses increased 12.3% in 1994 compared to 1993 due to higher
professional service fees associated with corporate activities in 1994.
Interest expense increased 7.7% in 1994, reflecting higher interest rates on
borrowings and a higher level of average outstanding debt between periods.
The Company's effective income tax rate remained unchanged at 42% in 1994.
During the year, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), "Accounting for Income Taxes." The effects of
adopting SFAS 109 were not material to the Company's consolidated financial
position or results of operations.
OPERATING RESULTS: 1993 VERSUS 1992
Revenues in fiscal 1993 increased 11.5% to $2.02 billion from $1.81 billion
in fiscal 1992, benefiting from a new Neiman Marcus store in Troy, Michigan;
52 weeks of revenues from the Neiman Marcus store in Scottsdale, Arizona in
1993 versus 42 weeks in 1992; 10 additional Contempo Casuals stores; and 31
incremental Pastille stores. Comparable revenues increased 6.6%.
Cost of goods sold was $1.40 billion in 1993, a 9.3% increase over 1992, pri-
marily due to incremental merchandise sold. As a percentage of revenues, cost
of goods sold improved to 69.2% in 1993 from 70.7% in 1992. The gross margin
improvement reflects higher regular price sell-throughs, increased transaction
volume and a slightly higher percentage markup on purchases. The LIFO method
of accounting for inventories had the impact of increasing gross margins by
$3.7 million in 1993 compared with decreasing gross margins by $4.7 million
in 1992.
18
<PAGE>
Selling, general and administrative expenses increased 11.5% in 1993 to $499.2
million from $447.8 million in 1992. This increase was the result of an
increase in volume-related selling expenses and higher sales promotion
expenses, offset by higher finance charge income. As a percentage of revenues,
selling, general and administrative expenses were 24.8% in both years.
Corporate expenses decreased 9.0% in 1993 compared to 1992 due to lower
professional service fees associated with corporate activities in 1993.
Interest expense decreased 8.7%, reflecting lower interest rates on
borrowings partially offset by increased interest expense on a higher level
of average outstanding debt during 1993.
Other income principally reflects a gain from the reduction in the level of
the Company's estimated liabilities due to the settlement of various disputes
with Carter Hawley Hale Stores, Inc., now Broadway Stores, Inc.
The Company's effective income tax rate was 42.0% in 1993 and 41.0% in 1992.
The higher rate in 1993 reflects changes in the federal tax law.
In fiscal 1993, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," which mandates a change in accounting for employee
postretirement healthcare benefits, resulting in an after-tax charge to
earnings of $11.2 million, or $0.30 per share.
REVIEW OF FINANCIAL CONDITION
Operating activities provided net cash of $33.6 million in 1994, used net cash
of $9.3 million in 1993, and provided net cash of $60.3 million in 1992. In
1994, the increase in cash provided by operating activities was primarily the
result of a decline in cash used to fund significant increases in accounts
receivable in fiscal 1993 along with lower inventory requirements at Contempo
Casuals. In mid-fiscal 1993, the Company modified the credit terms offered to
Neiman Marcus cardholders, extending the period of time over which balances
could be paid. This change, which caused significant increases in accounts
receivable, together with higher inventory levels required by increased
transaction volume and new stores, resulted in a decrease in cash flows from
operating activities in 1993. Working capital at the end of fiscal 1994 and
1993 was $365.5 million and $382.0 million, respectively. In 1994,
approximately $98.0 million of revolving credit debt, which comes due in 1995,
was reclassified to current liabilities, contributing to the decrease in
working capital. Offsetting the increase in current maturities of long-term
liabilities is an increase of $52.7 million in accounts receivable. The Company
believes that it has good banking relationships and expects to negotiate new
revolving credit facilities and other long-term financing arrangements.
Cash used by the Company's investing activities consists principally of
capital expenditures for store renovations, new store construction and
expansion of the NM Direct distribution facility. Capital expenditures were
$65.1 million in 1994, $56.3 million in 1993 and $73.9 million in 1992.
Additional store renovation and expansion plans include the opening of three
new Neiman Marcus stores, all of which are expected to be opened by the end
of the 1996 calendar year as well as the renovation of three Neiman Marcus
stores in 1995. Capital expenditures for the Company are currently estimated
at $100.0 million in 1995.
Cash provided by the Company's financing activities in 1994 consisted
primarily of borrowings under the Company's committed credit facilities.
Through the Dividend Reinvestment and Stock Purchase Plan (the Plan), $16.5
million and $32.3 million of new equity was issued primarily from dividends
reinvested by Harcourt General in fiscal 1993 and 1992, respectively. On
January 31, 1993, Harcourt General ceased its participation in the Plan.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The Neiman Marcus Group, Inc.
The Company declared quarterly dividends on its Common Stock of $0.05 per
share totaling $7.6 million in 1994, $7.5 million in 1993 and $7.1 million in
1992. In addition, the Company paid dividends on its Preferred Stocks of
$27.1 million in 1994, 1993 and 1992.
During the period from August 1987 through July 1994, the Company invested
$489.0 million in its store renovation and expansion program and in 1989
purchased the Horchow mail order business for $108.0 million. In connection
with these activities, the Company's long-term and short-term debt increased
from $90.7 million in 1987 to $485.7 million in 1994. At September 1, 1994, the
Company had available approximately $144.0 million of committed credit facil
ities, the majority of which expires in March 1995. Until that time, the
Company believes that its credit facilities will be sufficient to fund its
capital and working capital requirements. The Company believes its
relationships with banks and other credit sources are good and that it has
the ability to replace the existing revolving credit facilities and obtain
other additional long-term financing during this period. The Company believes
its current and future debt capacity will be sufficient to fund its planned
capital growth as well as operating and dividend requirements.
SEASONALITY
The Company's business is seasonal in nature, with the second quarter (which
includes the holiday selling season) accounting for approximately 30% of the
Company's revenues and a majority of its net earnings. Inventories typically
increase in the first quarter.
IMPACT OF INFLATION
The Company's financial statements are prepared on an historical cost basis
under generally accepted accounting principles. The Company values
approximately 83% of its inventories using the last-in-first-out (LIFO)
method. Thus, the cost of merchandise sold approximates current cost.
Depreciation and amortization expense is believed to approximate current cost
because the Company continues to open new stores and refurbish existing
stores.
The Company has adjusted selling prices to maintain certain profit levels and
will continue to do so as competitive conditions permit. In general,
management believes that the impact of inflation or of changing prices is not
material to the results of operations.
NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," which is effective for fiscal years beginning after December 15,
1993. The Company does not expect that its planned adoption of this standard
in fiscal 1995 will have a material impact on its consolidated financial
position or results of operations.
20
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
The Neiman Marcus Group, Inc.
<CAPTION>
Years Ended
---------------------------------------------------------
July 30, July 31, August 1,
(in thousands except for per share data) 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 2,092,906 $ 2,016,914 $ 1,808,354
Cost of goods sold including buying and occupancy costs 1,465,656 1,396,603 1,277,642
Selling, general and administrative expenses 505,727 499,202 447,776
Corporate expenses 13,786 12,273 13,491
Restructuring of Contempo Casuals 48,401 - -
---------------------------------------------------------
Operating earnings 59,336 108,836 69,445
Interest expense (31,878) (29,589) (32,408)
Other income - 21,741 -
---------------------------------------------------------
Earnings before income taxes and cumulative effect
of accounting change 27,458 100,988 37,037
Income taxes 11,532 42,415 15,185
---------------------------------------------------------
Earnings before cumulative effect of accounting change 15,926 58,573 21,852
Cumulative effect of change in accounting for
postretirement healthcare benefits, net - (11,199) -
---------------------------------------------------------
Net earnings 15,926 47,374 21,852
Dividends and accretion on redeemable preferred stocks (29,080) (29,068) (29,197)
---------------------------------------------------------
Net earnings (loss) applicable to common shareholders ($13,154) $18,306 ($7,345)
=========================================================
Amounts per share applicable to common shareholders:
Earnings (loss) before cumulative effect of
accounting change ($ .35) $ .78 ($ .21)
Cumulative effect of accounting change, net - (.30) -
---------------------------------------------------------
Net earnings (loss) ($ .35) $ .48 ($ .21)
=======================================================================================================================
<FN>
See Notes to consolidated financial statements.
</TABLE>
21
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
The Neiman Marcus Group, Inc.
<CAPTION>
July 30, July 31,
(dollar amounts in thousands) 1994 1993
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $ 16,600 $ 20,204
Accounts receivable-trade, less allowance
for doubtful accounts of $13,700 and $9,500 362,236 309,572
Merchandise inventories 345,145 362,567
Deferred income taxes 24,317 16,918
Other current assets 51,741 38,537
--------------------------------
Total current assets $ 800,039 $ 747,798
--------------------------------
Property and equipment
Land, buildings and improvements 379,256 383,760
Fixtures and equipment 210,703 220,733
Construction in progress 50,456 25,343
--------------------------------
640,415 629,836
Less accumulated depreciation and amortization 229,502 213,317
--------------------------------
Property and equipment, net 410,913 416,519
--------------------------------
Other assets 112,176 114,257
--------------------------------
$1,323,128 $1,278,574
=========================================================================================================
<FN>
See Notes to consolidated financial statements.
</TABLE>
22
<TABLE>
<CAPTION>
July 30, July 31,
1994 1993
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current maturities of long-term liabilities $116,619 $ 45,877
Accounts payable 164,281 171,348
Accrued liabilities 153,625 148,533
---------------------------------
Total current liabilities 434,525 365,758
---------------------------------
Long-term liabilities
Notes and debentures 368,667 377,000
Other long-term liabilities 74,982 72,448
---------------------------------
Total long-term liabilities 443,649 449,448
---------------------------------
Deferred income taxes 37,768 37,500
Commitments and contingencies - -
Redeemable preferred stocks
(redemption value $424,923) 403,470 401,510
Common stock
Common Stock - $.01 par value
Authorized - 100,000,000 shares
Issued and outstanding - 37,951,227 and 37,938,388 shares 380 379
Additional paid-in capital 82,254 82,154
Accumulated deficit (78,918) (58,175)
---------------------------------
$ 1,323,128 $ 1,278,574
=====================================================================================================================
</TABLE>
23
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Neiman Marcus Group, Inc.
<CAPTION>
Years Ended
---------------------------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 15,926 $ 47,374 $ 21,852
Adjustments to reconcile net earnings to net cash
provided (used) by operating activities:
Charge for cumulative effect of accounting change, net - 11,199 -
Depreciation and amortization 60,832 59,227 56,042
Deferred income taxes (7,131) 4,743 (1,005)
Other income - (20,755) -
Other 14,379 3,181 (1,994)
Changes in current assets and liabilities:
Accounts receivable (52,664) (87,657) (14,902)
Merchandise inventories 17,422 (55,467) (23,278)
Accounts payable and accrued liabilities (1,975) 38,617 25,133
---------------------------------------------
Other (13,203) (9,758) (1,550)
---------------------------------------------
Net cash provided (used) by operating activities 33,586 (9,296) 60,298
Cash flows used by investing activities
Additions to property and equipment (65,074) (56,325) (73,933)
---------------------------------------------
Cash flows from financing activities
Debt transactions:
Borrowings and issuance of debt 73,800 77,200 85,000
Repayment of debt (11,307) (646) (60,049)
Equity transactions:
Common stock issued 458 16,484 32,279
Common stock repurchased (358) - (619)
Dividends paid (34,709) (34,633) (34,191)
---------------------------------------------
Net cash provided by financing activities 27,884 58,405 22,420
---------------------------------------------
Cash and equivalents
Increase (decrease) during the year (3,604) (7,216) 8,785
Beginning balance 20,204 27,420 18,635
---------------------------------------------
Ending balance $ 16,600 $ 20,204 $ 27,420
=============================================
Supplemental schedule of cash flow information
Cash paid during the year for:
Interest $ 31,504 $ 28,514 $ 28,900
Income taxes $ 34,258 $ 26,796 $ 11,169
=================================================================================================================
<FN>
See Notes to consolidated financial statements.
</TABLE>
24
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
The Neiman Marcus Group, Inc.
<CAPTION>
Common Stocks Additional
------------------------- Paid-in Accumulated
(in thousands) Shares Amount Capital Deficit
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance - August 3, 1991 34,503 $345 $33,891 ($54,540)
Net earnings - - - 21,852
Accretion of redeemable preferred stock - - - (2,089)
Common dividends - - - (7,083)
Preferred dividends - - - (27,108)
Shares issued under Dividend Reinvestment Plan 2,327 23 30,952 -
Other equity transactions 42 1 837 -
---------------------------------------------------------------------
Balance - August 1, 1992 36,872 369 65,680 (68,968)
Net earnings - - - 47,374
Accretion of redeemable preferred stock - - - (1,948)
Common dividends - - - (7,513)
Preferred dividends - - - (27,120)
Shares issued under Dividend Reinvestment Plan 1,036 10 15,659 -
Other equity transactions 30 - 815 -
---------------------------------------------------------------------
Balance - July 31, 1993 37,938 379 82,154 (58,175)
Net earnings - - - 15,926
Accretion of redeemable preferred stock - - - (1,960)
Common dividends - - - (7,589)
Preferred dividends - - - (27,120)
Other equity transactions 13 1 100 -
---------------------------------------------------------------------
Balance - July 30, 1994 37,951 $ 380 $ 82,254 ($78,918)
======================================================================================================================
<FN>
See Notes to consolidated financial statements.
</TABLE>
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Reporting
The Company operates three specialty retailing businesses, Neiman Marcus,
Bergdorf Goodman and Contempo Casuals. The consolidated financial statements
include the accounts of all of the Company's wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been eliminated. The
Company's fiscal year ends on the Saturday closest to July 31.
Cash and Equivalents
Cash and equivalents consists of cash and highly liquid investments with
maturities of three months or less from the date of purchase.
Merchandise Inventories
Inventories are stated at the lower of cost or market. Approximately 83% of
the Company's inventories are valued using the retail method on the last-in,
first-out (LIFO) basis. The remaining inventories are valued using the retail
or cost method on the first-in, first-out (FIFO) basis. While the Company
believes that the LIFO method provides a better matching of costs and
revenues, some specialty retailers use the FIFO method and, accordingly, the
Company has provided the following data for comparison purposes as if the
Company were utilizing the FIFO methodology.
If the FIFO method of inventory valuation had been used to value all
inventories, merchandise inventories would have been $24.6 million and
$22.2 million higher than reported at July 30, 1994 and July 31, 1993,
respectively. The LIFO valuation method had the effect of decreasing net
earnings by $1.4 million, or $.04 per common share, in 1994, increasing net
earnings by $2.2 million, or $.06 per common share, in 1993, and decreasing
net earnings by $2.8 million, or $.08 per common share, in 1992.
Depreciation and Amortization
Depreciation and amortization are provided on a straight-line basis over the
shorter of the estimated useful lives of the related assets or the lease
term.
When property and equipment are retired or have been fully depreciated, the
cost and the related accumulated depreciation are eliminated from the
respective accounts. Gains or losses arising from the dispositions are
reported as income or expense.
Intangibles are amortized on a straight-line basis over their estimated
useful lives, not exceeding 40 years. Amortization expense was $4.2 million
in 1994, $4.1 million in 1993 and $5.4 million in 1992.
Income Taxes
Effective August 1, 1993, income taxes are calculated in accordance with
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting
for Income Taxes." SFAS 109 requires the asset and liability method of
accounting for income taxes. Prior to August 1, 1993, the Company accounted
for income taxes in accordance with Accounting Principles Board Opinion 11.
The effects of adopting SFAS 109 were not material to the Company's
continuing operations or financial position.
Receivables and Finance Charge Income
The Company's credit operations generate finance charge income, which is
recognized as income when earned and is recorded as a reduction of selling,
general and administrative expenses. Finance charge income amounted to $54.3
million in 1994, $36.3 million in 1993 and $28.3 million in 1992.
Concentration of credit risk with respect to trade receivables is limited due
to the large number of customers to whom the Company extends credit. Ongoing
credit evaluation of customers' financial position is performed, and collateral
is not required as a condition of extending credit. The Company maintains
reserves for potential credit losses.
Earnings (Loss) Per Common and Common Share Equivalent
Earnings (loss) per share information reflects the earnings and losses of the
Company applicable to common shareholders. The dividend and accretion
requirements of the redeemable preferred stocks are deducted from the net
earnings of the Company to arrive at net earnings (loss) applicable to common
shareholders.
Earnings (loss) per common share is based upon the weighted average number of
common and, when dilutive, common share equivalents outstanding during the
year. Weighted average shares outstanding amounted to 37.9 million in 1994,
37.6 million in 1993 and 35.6 million in 1992.
Preopening Expenses
Costs associated with the opening of new stores are expensed as incurred.
26
<PAGE>
Changes in Presentation
Certain prior year amounts have been reclassified to conform to the current
year presentation.
2. RESTRUCTURING OF CONTEMPO CASUALS
In April 1994, the Company recorded a pre-tax charge of $48.4 million related
to the decision to close 40 under-performing Contempo Casuals retail stores
and all of the Pastille retail stores. This charge includes an estimate for
lease termination costs, the write-down of fixed assets, inventory
liquidation costs and other related expenses. At July 30, 1994, $14.4 million
related to this charge is reflected in accrued liabilities.
<TABLE>
3. OTHER ASSETS
<CAPTION>
July 30, July 31,
(in thousands) 1994 1993
- - -----------------------------------------------------------------------
<S> <C> <C>
Trademarks $ 73,000 $ 73,000
Goodwill 30,874 30,874
Other assets 32,341 32,156
----------------------
136,215 136,030
Accumulated amortization (24,039) (21,773)
----------------------
$112,176 $114,257
=======================================================================
</TABLE>
<TABLE>
4. LONG-TERM LIABILITIES
<CAPTION>
Interest July 30, July 31,
(in thousands) Rate 1994 1993
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Revolving credit agreement (a) Variable $306,000 $232,200
Senior notes (b) Various 172,000 182,000
Capital lease obligations (c) 7.63-10.25% 7,672 8,099
Other long-term liabilities (d) Various 74,596 73,026
--------------------------------
Total long-term liabilities 560,268 495,325
Less current maturities (116,619) (45,877)
--------------------------------
Total $443,649 $449,448
=============================================================================
<FN>
(a) The Company has a revolving credit agreement with nine banks, pursuant to
which the Company may borrow up to $300.0 million, of which $100.0 million
expires during fiscal 1995, $175.0 million expires during fiscal 1996, and
$25.0 million may be terminated on not less than three years' notice. The
Company may terminate this agreement at any time. The rate of interest payable
(4.8% at July 30, 1994) varies according to one of four pricing options
selected by the Company. The revolving credit agreement contains, among other
restrictions, provisions limiting the issuance of additional debt, the amount
and type of investments, and the payment of dividends. At July 30, 1994, the
amount available for dividend payments was $1 21.5 million. Borrowings under
this agreement were $295.0 million and $205.0 million at July 30, 1994 and July
31, 1993, respectively.
</TABLE>
The Company also has revolving credit agreements with four banks, pursuant to
which the Company may borrow up to $25.0 million from each bank. In addition,
early in fiscal 1995, the Company entered into new revolving agreements with
two banks for $25.0 million each. All six of these credit agreements expire
on March 31, 1995 and contain covenants similar to those in the revolving
credit agreement described in the preceding paragraph. Borrowings under these
agreements were $11.0 million and $17.2 million at July 30, 1994 and July 31,
1993, respectively.
In addition to its revolving credit agreements, the Company borrows from
other banks on an uncommitted basis. Such borrowings are included in notes
payable and current maturities of long-term liabilities and amounted to $10.0
million at July 31, 1993.
<TABLE>
(b) Senior notes consist of:
<CAPTION>
Principal Amount
Interest rate Due (in thousands)
- - ------------------------------------------------------------------------------------
<S> <C> <C>
9.89% May 1996 $ 40,000
9.59% August 1996 $ 52,000
9.24% December 1996 $ 40,000
Variable December 1996 $ 40,000
- - ------------------------------------------------------------------------------------
</TABLE>
The notes have no sinking fund requirements. All fixed-rate senior notes may be
redeemed at any time at a premium plus accrued interest. The variable
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
rate note bears interest at LIBOR plus 0.7% (4.83% at July 30, 1994) and is
adjusted semi-annually.
(c) The amount of assets under capital leases included in property and
equipment net of amortization was $4.4 million at July 30, 1994 and $4.8
million at July 31, 1993. The minimum payment obligations arising from the
above leases are $1.1 million for each of the next five years (fiscal 1995
through 1999) and $6.2 million thereafter. These leases mature in 2004 and
2005.
(d) Other long-term liabilities consist primarily of the present value of
certain employee benefit obligations assumed by the Company, postretirement
healthcare benefits and a provision for certain scheduled rent increases. The
present value of the employee benefit obligations assumed by the Company is
increasing on an average of 10% annually. The expense related to the accretion
of these obligations was $1.6 m illion in 1994, $1.9 million in 1993 and $4.2
million in 1992.
The aggregate maturities of all long-term liabilities and capital lease
obligations are $116.6 million in 1995, $217.9 million in 1996, $138.4
million in 1997, $6.4 million in 1998, $6.5 million in 1999 and $74.5 million
thereafter.
5. REDEEMABLE PREFERRED STOCKS
The Company's authorized and outstanding preferred stocks consist of 1,000,000
shares of 6% Cumulative Convertible Preferred Stock (6% Preferred Stock) and
500,000 shares of 91/4% Cumulative Redeemable Preferred Stock (91/4% Preferred
Stock), all of which are owned by Harcourt General, Inc. (Harcourt General).
The 6% Preferred Stock is entitled to receive cumulative dividends at an
annual rate of 6% of its $374.9 million stated value; is entitled to a class
vote on certain matters; is convertible on a per share basis into
approximately 8.99 shares of Common Stock subject to certain antidilution
adjustments; and, upon liquidation of the Company, is entitled to receive a
liquidation distribution equal to its stated value, together with any accrued
and unpaid dividends, before any distribution to any junior class of stock.
The conversion price of the 6% Preferred Stock at July 30, 1994 was
approximately $41.70 per share of Common Stock; the market value of the
Company's Common Stock on July 30, 1994 was $15.25. The 6% Preferred Stock
may be redeemed by the Company at a premium over its stated value under
certain conditions through September 1997. Beginning in September 1997 (when
a sinking fund for this purpose commences), the Company is required to redeem
annually not less than 5% of the 6% Preferred Stock at a redemption value of
$374.92 per share plus accrued dividends. The difference between the
redemption value and the carrying value is being accreted over 30 years.
The 91/4% Preferred Stock has a stated value of $100 per share; is not
redeemable until July 31, 1998 except under certain limited circumstances;
and must be redeemed in full in July 2001. The Company may be required to
purchase the 9G% Preferred Stock at its stated value plus accrued dividends
if a change in control of the Company occurs. The 9G% Preferred Stock is
senior to the Common Stock of the Company with respect to dividends and the
distribution of assets upon liquidation or dissolution of the Company. If
dividends payable on the 91/4% Preferred Stock are in arrears for six full
quarters or any mandatory redemption is in arrears, the holders of the 91/4%
Preferred Stock, voting together as one class with other series of the
Company's preferred stock, shall be entitled to elect two members of the
Company's Board of Directors. The terms of the 91/4% Preferred Stock also
contain restrictions regarding the consolidation or merger of the Company and
sales of assets.
6. SHAREHOLDERS' EQUITY
Ownership by and Relationship with Harcourt General
Harcourt General owns 21.4 million shares of Common Stock and all of the
outstanding Redeemable Preferred Stocks. The shares presently owned by
Harcourt General represent approximately 65% of the voting power and
fully-converted equity of the Company.
The Company and Harcourt General are parties to an agreement pursuant to
which Harcourt General provides certain management, accounting, financial,
legal, tax and other corporate services to the Company. The fees for these
services are based on Harcourt General's costs and are subject to the
approval of a committee of directors of the Company who are not affiliated
with Harcourt General. This agreement may be terminated by either party on 180
days' notice. Charges to the Company were $6.9 million in 1994, $7.2 million
in 1993 and $6.4 million in 1992.
28
<PAGE>
The Company's Chairman of the Board; President and Chief Executive Officer;
Senior Vice President and Chief Financial Officer; and Senior Vice President
and General Counsel, as well as certain other officers of the Company, serve
in similar capacities with Harcourt General. The first two named officers
also serve as directors of both companies.
Common Stock
Common Stock is entitled to dividends as declared by the Board of Directors,
and each share carries one vote.
Holders of Common Stock have no cumulative voting, conversion, redemption or
preemptive rights.
Common Stock Incentive Plan
The Company has established a common stock incentive plan allowing for the
granting of stock options, stock appreciation rights and stock-based awards.
The aggregate number of shares of Common Stock that may be issued pursuant to
the plan is 1.3 million shares.
Options outstanding at July 30, 1994 were granted at prices (not less than 100
% of the fair market value on the date of the grant) varying from $11.63 to
$19.27 per share and expire between 1995 and 2003. There were 110 employees
with options outstanding at July 30, 1994. The weighted average exercise
price for all outstanding shares at July 30, 1994 was $14.47.
At July 30, 1994, there were 456,850 shares of Common Stock available under
the plan for grants.
<TABLE>
Option activity was as follows:
<CAPTION>
Years ended
------------------------------
July 30, July 31, August 1,
Common Shares 1994 1993 1992
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding -
beginning of year 684,136 573,360 621,623
Granted 214,100 179,350 91,950
Exercised (54,116) (14,937) (23,566)
Canceled (177,772) (53,637) (116,647)
------------------------------
Options outstanding - end of year 666,348 684,136 573,360
==============================
Exercisable options - end of year 294,800 332,296 260,750
=========================================================================
</TABLE>
7. INCOME TAXES
<TABLE>
Income tax expense was as follows:
<CAPTION>
Years ended
--------------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - --------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $13,138 $ 24,107 $ 13,705
State 5,525 5,783 2,485
--------------------------------
18,663 29,890 16,190
--------------------------------
Deferred
Federal (5,787) 10,308 (1,120)
State (1,344) 2,217 115
--------------------------------
(7,131) 12,525 (1,005)
--------------------------------
Income tax expense $11,532 $ 42,415 $ 15,185
==========================================================================
</TABLE>
The Company's effective income tax rate was 42% in 1994 and 1993, and 41% in
1992. The difference between the statutory federal tax rate and the effective
tax rate is due primarily to state income taxes.
<TABLE>
Significant components of the Company's net deferred income tax liability
stated on a gross basis at July 30, 1994 are as follows:
<CAPTION>
(in thousands)
- - ----------------------------------------------------------------------------
<S> <C>
Gross deferred income tax assets:
Financial accruals and reserves $ 29,088
Employee benefits 22,712
Deferred lease payments 6,349
Other 6,938
-----------
Total deferred tax assets 65,087
Gross deferred income tax liabilities:
Excess of tax over financial depreciation (65,782)
Pension accrual (6,324)
Other assets previously deducted on tax return (6,432)
-----------
Total deferred tax liabilities (78,538)
-----------
Net deferred tax liabilities ($13,451)
============================================================================
</TABLE>
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
<TABLE>
Deferred income tax expense (benefit) for fiscal years 1993 and 1992 consists of:
<CAPTION>
Years ended
-------------------
July 31, August 1,
(in thousands) 1993 1992
- - -------------------------------------------------------------------------
<S> <C> <C>
Excess of tax over financial depreciation $ 5,128 $ 2,244
Settlements 8,604 (704)
Other employee benefits (921) (975)
Other (286) (1,570)
------------------
Deferred income tax expense (benefit) 12,525 (1,005)
Change in accounting for postretirement
healthcare benefits (7,782) -
------------------
Net change in deferred taxes $ 4,743 ($ 1,005)
========================================================================
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
<TABLE>
Leases
The Company's operations are conducted primarily in leased properties which
include retail stores, distribution centers and other facilities.
Substantially all leases are for periods of up to 30 years with renewal
options at agreed-upon amounts, except that certain leases provide for
additional rent based on revenues in excess of predetermined levels.
Rent expense under operating leases was as follows:
<CAPTION>
Years ended
--------------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - ------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $60,200 $61,300 $ 56,500
Rent based on revenues 9,400 8,200 7,300
-------------------------------
Total rent expense $69,600 $69,500 $ 63,800
========================================================================
</TABLE>
Future minimum lease payments under operating leases are as follows: 1995,
$55.2 million; 1996, $53.2 million; 1997, $50.9 million; 1998, $47.3 million;
1999, $43.8 million; all years thereafter, $1.1 billion.
Pension Plans
The Company has a non-contributory defined benefit pension plan covering
substantially all full-time employees. The Company also sponsors an unfunded
supplemental executive retirement plan which provides certain employees with
additional pension benefits. Benefits under the plans are based on an
employee's years of service and compensation prior to retirement. The
Company's general funding policy is to contribute amounts that are deductible
for federal income tax purposes. Pension plan assets consist primarily of
equity and fixed income securities.
<TABLE>
Components of net pension expense are as follows:
<CAPTION>
Years ended
-----------------------------
July 30, July 31, August 1,
(in thousands) 1994 1993 1992
- - -------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the period $4,800 $ 4,400 $ 3,800
Interest cost on projected benefit
obligation 7,200 6,600 5,900
Actual return on assets (2,700) (6,700) (8,400)
Net amortization and deferral (3,000) 2,200 4,400
-----------------------------
Net pension expense $6,300 $ 6,500 $ 5,700
=========================================================================
</TABLE>
The accounting assumptions used include a discount rate of 7.5% in 1994 (8.5%
in 1993 and 1992); an expected long-term rate of return on assets of 9.0% in
1994 and 1993 (10.0% in 1992); and a projected rate of compensation increases
of 5.0% in 1994 (6.0% in 1993 and 1992).
30
<PAGE>
<TABLE>
The plans' funded status and amounts recognized in the consolidated balance
sheets were as follows:
<CAPTION>
July 30, 1994 July 31, 1993
--------------------------------------------------------
Funded Unfunded Funded Unfunded
(in thousands) Plan Plan Plan Plan
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vested benefit obligation $ 68,500 $12,100 $ 57,500 $ 9,900
========================================================
Accumulated benefit obligation $ 70,600 $13,400 $ 59,100 $11,000
========================================================
Projected benefit obligation $ 85,900 $20,200 $ 71,400 $16,600
Pension plan assets at fair value 77,600 - 72,400 -
--------------------------------------------------------
Overfunded (underfunded) projected obligation (8,300) (20,200) 1,000 (16,600)
Net amortization and deferral 19,300 2,800 7,900 1,200
Unrecognized net obligation at transition and
unrecognized prior service cost 4,300 2,800 4,700 3,200
--------------------------------------------------------
Pension asset (liability) recognized in the balance sheets $ 15,300 ($14,600) $ 13,600 ($12,200)
=====================================================================================================================
</TABLE>
Postretirement Healthcare Benefits
The Company provides healthcare benefits for retired employees which are
funded as claims are incurred. Retirees and active employees hired prior to
March 1, 1989 are eligible for these benefits if they have met certain
service and minimum age requirements. Beginning in fiscal 1993, the Company
adopted the provisions of Statement of Financial Accounting Standards No. 106
(SFAS 106), "Employers' Accounting for Postretirement Benefits Other Than
Pensions." This statement requires accrual of these postretirement healthcare
benefits during the years in which an employee provides services. The
cumulative effect of adopting this change on August 2, 1992 resulted in a
charge of $11.2 million, or $0.30 per share, which is net of a tax benefit of
$7.8 million. Prior to August 2, 1992, the expense for these benefits was
recognized as actual claims were incurred. The Company paid postretirement
healthcare benefit claims of $1.8 million during 1994 and $1.2 million during
1993.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Neiman Marcus Group, Inc.
<TABLE>
The actuarial present value of accumulated postretirement healthcare benefit obligations
and the amounts recognized in the consolidated balance sheets were as follows:
<CAPTION>
Years ended
----------------------
July 30, July 31,
(in thousands) 1994 1993
- - ---------------------------------------------------------------------------
<S> <C> <C>
Retirees $11,986 $11,988
Fully eligible active plan participants 1,550 2,088
Other active plan participants 4,158 5,997
Unrecognized net gain 1,929 -
---------------------
Total $ 19,623 $20,073
===========================================================================
</TABLE>
<TABLE>
The periodic postretirement healthcare benefit cost was as follows:
<CAPTION>
Years ended
------------------
July 30, July 31,
(in thousands) 1994 1993
- - ----------------------------------------------------------------------------
<S> <C> <C>
Net periodic cost:
Service cost $ 286 $ 397
Interest cost on accumulated postretirement
healthcare benefit obligation 1,288 1,576
-----------------
Total $ 1,574 $ 1,973
============================================================================
</TABLE>
The assumed healthcare cost trend rate used in measuring the accumulated
postretirement healthcare benefit obligation was 16% in 1994 and 18% in 1993,
gradually declining to 5% by the year 2006. Measurement of the accumulated
postretirement healthcare benefit obligation was based on an assumed 7.5%
discount rate in 1994 and 8.5% in 1993. An increase of 1% in the healthcare
cost trend rate would increase the accumulated postretirement healthcare
benefit obligation as of July 30, 1994 by $2.4 million. The effect of this
change on the annual net periodic postretirement healthcare benefit cost would
be an increase of $246,000.
Litigation
When the Company was formed as part of the restructuring of Carter Hawley Hale
Stores, Inc. (CHH), now Broadway Stores, Inc., in August 1987, it entered into
a variety of agreements with CHH, including agreements concerning the
allocation of CHH taxes and the guaranty of certain CHH employee benefits. The
Company and CHH negotiated a settlement of all disputes between them, which
became effective in October 1992. In connection with that settlement, the
Company paid CHH $7.7 million and was discharged as guarantor of certain CHH
employee benefits. In light of this settlement, the Company reevaluated its
liabilities to CHH and recognized a gain during the first quarter of 1993 of
$20.8 million. This gain is recorded as other income in the consolidated
statements of operations.
The Company is involved in various other suits and claims in the ordinary
course of business. Management does not believe that the disposition of any
such suits and claims will have a material adverse effect upon the continuing
operations of the Company.
Letters of Credit
The Company had approximately $38.7 million of outstanding irrevocable
letters of credit relating to purchase commitments at July 30, 1994.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments is estimated as the
amounts reported in the consolidated financial statements, except as
discussed below.
Interest Rate Swap
During September 1991, the Company entered into an interest rate swap agreement
having a notional principal amount of $50.0 million that effectively fixes the
interest rate on variable rate debt at 8.94%. The amount to be paid or received
is accrued as interest rates change and is recognized over the life of the
agreement. The interest rate swap matures in September 1996. The fair value of
the interest rate swap is the amount at which it could be settled, based on
estimates obtained from dealers. The estimated unrealized pre-tax loss on the
interest rate swap was approximately $2.8 million at July 30, 1994, $6.6
million at July 31, 1993 and $5.2 million at August 1, 1992. This amount
changes during the life of the swap as a function of maturity, interest rates
and the credit standing of the parties to the swap agreement. The incremental
pre-tax interest expense incurred due to the interest rate swap agreement was
$2.3 million in 1994, $2.4 million in 1993 and $1.3 million in 1992.
32
<PAGE>
<TABLE>
10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<CAPTION>
Year ended July 30, 1994
-----------------------------------------------------------------
First Second Third Fourth
(in millions except for per share data) Quarter Quarter Quarter Quarter Total
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 507.6 $ 650.7 $ 472.7 $ 461.9 $ 2,092.9
=================================================================
Gross profit $ 165.1 $ 191.8 $ 146.3 $ 124.1 $ 627.3
=================================================================
Net earnings (loss) $ 15.2 $ 21.5 ($ 18.8) ($ 2.0) $ 15.9
Preferred dividends and accretion (7.3) (7.3) (7.3) (7.2) (29.1)
-----------------------------------------------------------------
Net earnings (loss) applicable to common shareholders $ 7.9 $ 14.2 ($ 26.1) ($9.2) ($ 13.2)
Amount per share applicable to common shareholders:
Net earnings (loss) $ .21 $ .37 ($ .69) ($ .24) ($ .35)
=================================================================
Dividends $ .05 $ .05 $ .05 $ .05 $ .20
=================================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended July 31, 1993
-----------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 479.0 $617.2 $456.5 $464.2 $2,016.9
=================================================================
Gross profit $ 157.6 $179.7 $145.0 $138.0 $ 620.3
=================================================================
Earnings before cumulative effect of accounting change $ 27.3 $ 17.6 $ 11.1 $ 2.6 $ 58.6
Cumulative effect of accounting change, net (11.2) - - - (11.2)
Preferred dividends and accretion (7.3) (7.3) (7.3) (7.2) (29.1)
-----------------------------------------------------------------
Net earnings (loss) applicable to common shareholders $ 8.8 $ 10.3 $ 3.8 ($ 4.6) $ 18.3
=================================================================
Amounts per share applicable to common shareholders:
Earnings (loss) before cumulative effect of
accounting change $ .54 $ .27 $ .10 ($ .12) $ .78
Cumulative effect of accounting change, net (.30) - - - (.30)
-----------------------------------------------------------------
Net earnings (loss) $ .24 $ .27 $ .10 ($ .12) $ .48
=================================================================
Dividends $ .05 $ .05 $ .05 $ .05 $ .20
===================================================================================================================================
In the fourth quarter, the effect of the LIFO method of accounting for inventories increased net earnings by $3.1 million in
1994 and $6.5 million in 1993.
</TABLE>
33
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
The Neiman Marcus Group, Inc.
Chestnut Hill, Massachusetts
We have audited the accompanying consolidated balance sheets of The Neiman
Marcus Group, Inc. and subsidiaries as of July 30, 1994 and July 31, 1993 and
the related consolidated statements of operations, common shareholders'
equity and cash flows for each of the three years in the period ended July 30,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
Neiman Marcus Group, Inc. and subsidiaries as of July 30, 1994 and July 31,
1993 and the results of their operations and their cash flows for each of the
three years in the period ended July 30, 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, the Company
adopted the provisions of Statement of Financial Accounting Standards No 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," in
fiscal year 1993.
Deloitte & Touche LLP
Boston, Massachusetts
September 19, 1994
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
The management of The Neiman Marcus Group, Inc. and its subsidiaries is
responsible for the integrity and objectivity of the financial and operating
information contained in this Annual Report, including the consolidated
financial statements covered by the Independent Auditors' Report. These
statements were prepared in conformity with generally accepted accounting
principles and include amounts that are based on the best estimates and
judgments of management.
The Company maintains a system of internal controls which provides management
with reasonable assurance that transactions are recorded and executed in
accordance with its authorizations, that assets are properly safeguarded and
accounted for, and that records are maintained so as to permit preparation of
financial statements in accordance with generally accepted accounting
principles. This system includes written policies and procedures, an
organizational structure that segregates duties, financial reviews and a
comprehensive program of periodic audits by the internal auditors. The
Company also has instituted policies and guidelines which require employees
to maintain a high level of ethical standards.
In addition, the Audit Committee of the Board of Directors, consisting solely
of outside directors, meets periodically with management, the internal
auditors and the independent auditors to review internal accounting controls,
audit results and accounting principles and practices, and annually
recommends to the Board of Directors the selection of independent auditors.
John R. Cook Stephen C. Richards
Senior Vice President and Vice President and
Chief Financial Officer Controller
34
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA (UNAUDITED)
The Neiman Marcus Group, Inc.
<CAPTION>
Years ended
---------------------------------------------------------------
July 30, July 31, August 1, August 3, August 4,
(in millions except for per share data) 1994 1993 1992 1991 1990
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Results:
Revenues $ 2,092.9 $ 2,016.9 $1,808.4 $1,744.8 $ 1,688.6
==============================================================
Earnings before cumulative effect of accounting change 15.9 58.6 21.9 9.3 28.2
Cumulative effect of accounting change, net (1) - (11.2) - - -
--------------------------------------------------------------
Net earnings $ 15.9 $ 47.4 $ 21.9 $ 9.3 $ 28.2
==============================================================
Net earnings (loss) applicable to common shareholders ($ 13.2) $ 18.3 ($ 7.3) ($ 15.1) $ 3.8
notes to consolidated financial statements ==============================================================
The Neiman Marcus Group, Inc.
Amounts per share applicable to common shareholders:
Earnings (loss) before cumulative effect of
accounting change ($ .35) $ .78 ($ .21) ($ .45) $ .12
Cumulative effect of accounting change, net - (.30) - - -
--------------------------------------------------------------
Net earnings (loss) ($ .35) $ .48 ($ .21) ($ .45) $ .12
==============================================================
Common dividends $ .20 $ .20 $ .20 $ .20 $ .20
==============================================================
Financial Position:
Total assets $ 1,323.1 $ 1,278.6 $1,141.4 $1,072.2 $ 1,026.9
Long-term liabilities $ 443.6 $ 449.4 $ 414.2 $ 382.4 $ 351.1
Redeemable Preferred Stocks $ 403.5 $ 401.5 $ 399.6 $ 397.6 $ 345.7
- - --------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The cumulative effect of accounting change reflects the change in accounting for postretirement healthcare benefits.
</TABLE>
35
<PAGE>
SHAREHOLDER INFORMATON
The Neiman Marcus Group, Inc.
Requests for general information or published financial information should be
made in writing to the Corporate Relations Department, The Neiman Marcus
Group, Inc., Post Office Box 9187, Chestnut Hill, MA 02167-9187,
(617) 232-0760.
Dividend Policy
The Board of Directors has established a policy of paying cash dividends. The
current rate is $0.05 per common share per quarter payable in January, April,
July and October.
Dividend Reinvestment and Common Stock Purchase Plan
The Plan provides stockholders with a convenient way to purchase common shares
by reinvesting their dividends and/or by investing additional cash amounts. The
Company will absorb any brokerage and agency fees for stock purchased in
connection with the Plan. For further information, please write to: The Neiman
Marcus Group, c/o The First National Bank of Boston, The Neiman Marcus Group
Dividend Reinvestment Plan, Post Office Box 1681, Boston, MA 02105-1681.
Transfer Agent and Registrar
The First National Bank of Boston
Shareholder Services Division
Post Office Box 644, Mail Stop 45-01-05
Boston, MA 02102-0644
(800) 442-2001
Form 10-K
The Company's Form 10-K as filed with the Securities and Exchange Commission
is available upon written request to the Corporate Relations Department of
the Company.
Annual Meeting
The Annual Meeting of Stockholders will be held on Friday, January 20, 1995
at 10:00 a.m. at the Company's corporate headquarters, 27 Boylston Street,
Chestnut Hill, Massachusetts.
<TABLE>
Stock Information
The Neiman Marcus Group's Common Stock is traded on the New York Stock
Exchange under the symbol NMG. The following table indicates the quarterly
price range of the Common Stock for the past two fiscal years.
<CAPTION>
1994 1993
---------------------------------------
Quarter High Low High Low
- - -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First $ 16.63 $ 13.88 $ 14.13 $ 11.13
Second $ 19.25 $ 15.75 $ 19.75 $ 12.75
Third $ 17.38 $ 15.00 $ 19.50 $ 14.38
Fourth $ 16.63 $ 14.75 $ 16.88 $ 13.88
- - -------------------------------------------------------------------------
</TABLE>
Shares Outstanding
The Neiman Marcus Group has 37.9 million common shares outstanding. Harcourt
General, Inc. owns approximately 56.5% of NMG's outstanding common equity and
100% of the Company's redeemable preferred stocks. The Neiman Marcus Group
had 12,988 common shareholders of record at July 30, 1994.
Corporate Address
The Neiman Marcus Group, Inc.
27 Boylston Street
Post Office Box 9187
Chestnut Hill, MA 02167-9187
(617) 232-0760
The Neiman Marcus Group is an Equal Opportunity Employer.
36
<PAGE>
<TABLE>
DIRECTORS AND OFFICERS
The Neiman Marcus Group, Inc.
<CAPTION>
DIRECTORS EXECUTIVE OFFICERS STAFF OFFICERS
<S> <C> <C>
Richard A. Smith (1, 2) Richard A. Smith Peter Farwell
Chairman of the Board Chairman of the Board Vice President -
Corporate Relations
Gary L. Countryman (1, 2, 3, 4, 5) Robert J. Tarr, Jr.
President and Chief Executive Officer President, Chief Executive Officer Paul F. Gibbons
Liberty Mutual Insurance Company and Chief Operating Officer Vice President an
Treasurer
Matina Horner, Ph. D. (2, 3, 4, 5) John R. Cook
Executive Vice President Senior Vice President and Gerald T. Hughes
Teachers Insurance and Annuity Association- Chief Financial Officer Vice President -
College Retirement Equities Fund Human Resources
Eric P. Geller
Walter J. Salmon (2, 3, 4, 5) Senior Vice President, Michael F. Panutich
Roth Professor of Retailing General Counsel and Secretary Vice President -
Graduate School of Business General Auditor
Harvard University Robert A. Smith
Group Vice President Stephen C. Richards
Jean Head Sisco (2, 3, 4, 5) Vice President and
Partner OPERATING OFFICERS Controller
Sisco Associates
NEIMAN MARCUS Craig B. Sawin
Robert J. Tarr, Jr. (1, 2) Vice President -
President, Chief Executive Officer Burton M. Tansky Planning and Analysis
and Chief Operating Officer Chairman and
Chief Executive Officer
Gerald A. Sampson
President and
Chief Operating Officer
NM DIRECT
B.D. Feiwus
President and
Chief Executive Officer
BERGDORF GOODMAN
Stephen C. Elkin
Chairman and
Chief Executive Officer
Dawn Mello
President
CONTEMPO CASUALS
Robert S. Kelleher
President and
Chief Operating Officer
(1) Executive Committee
(2) Nominating Committee
(3) Audit Committee
(4) Compensation Committee
(5) Special Review Committee
All Executive and Staff Officers hold similar
positions at Harcourt General, Inc.
Richard A. Smith, Robert J. Tarr, Jr.,
and Robert A. Smith are Directors of
Harcourt General, Inc.
Design: Belk Mignogna Associates, Ltd. New York
<PAGE>
The Neiman Marcus Group, Inc.
27 Boylston Street
Chestnut Hill, MA 02167
</TABLE>
EXHIBIT 22.1
NMG SUBSIDIARIES
Neiman Marcus Holdings, Inc.
Bergdorf Goodman, Inc.
Bergdorf Graphics, Inc.
Broadcasters, Inc.
C.C. Group Limited (50%)
Contempo Casuals
Last Call, Inc.
NM Direct de Mexico, S.A. de C. V. (50%)
Pastille, Inc.
Pastille By Mail, Inc.
Exhibit 24.1
INDEPENDENT AUDITORS' CONSENT
We hereby consent to the incorporation by reference in the prospectuses
constituting part of the Registration Statements on Form S-3 (No. 33-36419)
and Form S-8 (No. 33-35299) of The Neiman Marcus Group, Inc. of our
reports dated September 19, 1994, appearing in and incorporated by reference
in the Annual Report to Shareholders on Form 10-K of The Neiman Marcus Group,
Inc. for the fiscal year ended July 30, 1994. We also consent to the
incorporation by reference into the foregoing Prospectuses of our Independent
Auditors' Report which appears on Page F-1 of the Form 10-K for the fiscal
year ended July 30, 1994.
We also consent to the reference to us under the headings "Experts" in
such prospectuses.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 28, 1994<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains a summary of financial information extracted from the
Consolidated Balance Sheet and Consolidated Statement of Operations and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-30-1994
<PERIOD-END> JUL-30-1994
<CASH> 16,600
<SECURITIES> 0
<RECEIVABLES> 375,936
<ALLOWANCES> 13,700
<INVENTORY> 345,145
<CURRENT-ASSETS> 800,039
<PP&E> 640,415
<DEPRECIATION> 229,502
<TOTAL-ASSETS> 1,323,128
<CURRENT-LIABILITIES> 434,525
<BONDS> 368,667
<COMMON> 380
0
403,470
<OTHER-SE> 3,336
<TOTAL-LIABILITY-AND-EQUITY> 1,323,128
<SALES> 2,092,906
<TOTAL-REVENUES> 2,092,906
<CGS> 1,465,656
<TOTAL-COSTS> 2,033,570
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 24,716
<INTEREST-EXPENSE> 31,878
<INCOME-PRETAX> 27,458
<INCOME-TAX> 11,532
<INCOME-CONTINUING> 15,926
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,926
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
