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 29, 1995
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 ]<PAGE>
The aggregate market value of the voting stock held by
non-affiliates of the registrant as of October 20, 1995 was
$309,254,138.
There were 38,008,693 shares of Common Stock outstanding as
of October 20, 1995.
_______________________________
Documents Incorporated by Reference
Portions of the Registrant's 1995 Annual Report to
Shareholders are incorporated by reference in Parts I, II and IV
of this Report.
ii<PAGE>
THE NEIMAN MARCUS GROUP, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JULY 29, 1995
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 10
Item 12.
Security Ownership of Certain Beneficial
Owners and Management 25
Item 13.
Certain Relationships and Related Transactions 28
PART IV
Item 14.
Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 28
Signatures 30<PAGE>
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
Note 1 to the Summary Compensation Table (in Item 11) and Item 12
below, and Notes 5 and 6 to the Consolidated Financial Statements
which are 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.
During fiscal 1995, the Company disposed of its Contempo
Casuals subsidiary. For additional information on this
transaction, reference is made to "Discontinued Operations"
below, and to Note 2 to the Consolidated Financial Statements
which are incorporated herein by reference.
Description of Operations
Neiman Marcus Stores
Neiman Marcus Stores, 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 Stores'
customers accounts for a significant percentage of its retail
sales.
The Company operates 28 Neiman Marcus Stores, 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 Jersey (Short Hills - opened August
1995); New York (Westchester); Texas (six stores: three in
Dallas, one in Fort Worth and two in Houston); and Virginia
(McLean). The average size of these stores is 141,000 gross
square feet, and the stores range in size from 90,000 gross
square feet to 269,000 gross square feet. The Company plans to
open new Neiman Marcus Stores in King of Prussia, Pennsylvania
and Paramus, New Jersey in 1996, and in Honolulu, Hawaii in 1999.<PAGE>
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 has an important direct
marketing business which is operated by NM Direct.
NM Direct
NM Direct operates a state-of-the-art direct marketing
business which distributes its own catalogues as well as those of
Neiman Marcus and Horchow. NM Direct offers a wide array of
apparel, home furnishings and gift items to its domestic and
international mail order customers. 84 NM Direct catalogues were
mailed during fiscal 1995, with an approximate average
circulation of 1.2 million households per catalogue.
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 29, 1995, Neiman Marcus Stores had approximately
10,100 employees, of whom approximately 2,700 were part-time,
Bergdorf Goodman had approximately 1,200 employees, of whom
approximately 35 were part-time, and NM Direct had approximately
1,100 employees, of whom approximately 600 were part-time. None
of the employees of Neiman Marcus Stores or NM Direct are subject
to collective bargaining agreements. Approximately 12% of the Bergdorf
2<PAGE>
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 25
through 27 of the Annual Report to Stockholders for the fiscal
year ended July 29, 1995 (the "1995 Annual Report"), which is
incorporated herein by reference.
Discontinued Operations
On June 30, 1995, the Company sold its Contempo Casuals
subsidiary to The Wet Seal, Inc. ("Wet Seal") for approximately
$1.0 million of Wet Seal common stock and $100,000 in cash.
While a subsidiary of the Company, Contempo Casuals operated a
chain of retail stores which sold moderately priced fashion
apparel and accessories primarily for young women between the
ages of 15 and 21. For additional information on this
transaction, reference is made to Note 2 of the Notes to the
Consolidated Financial Statements on page 33 of the 1995 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 Stores, Bergdorf Goodman
and NM Direct are located in Dallas, New York City, and Irving,
Texas, respectively.
At July 29, 1995, the square footage used in the Company's
operations was approximately as follows:
-----------------------------------------------
Owned
Subject to
Owned Ground Lease Leased Total
-----------------------------------------------
Stores 348,000 1,630,000 2,402,000 4,380,000
Distribution Centers
and Office 585,000 94,000 765,000 1,444,000
Facilities
- -----------------------------------------------------------------
Leases for Neiman Marcus Stores, including renewal options,
range from 30 to 99 years. 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
3<PAGE>
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 Irving, Texas where its NM Direct operations are
located. For further information on the Company's properties,
see "Operating Leases" in Note 10 of the Notes to the
Consolidated Financial Statements on pages 36 and 37 of the 1995
Annual Report, which is incorporated herein by reference.
NM Direct and Bergdorf Goodman's direct marketing operations
are located at the Company's 585,000 square foot facility in
Irving, Texas. The Company plans to open a 464,000 square foot
distribution center for Neiman Marcus Stores in Longview, Texas
in 1996 to replace certain of its existing distribution centers.
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 1995 Annual
Report is incorporated herein by reference:
(i) "Stock Information" and "Shares Outstanding" on page 41
of the 1995 Annual Report; and
(ii) "Dividends" in Note 12 of the Notes to the Consolidated
Financial Statements on page 38 of the 1995 Annual
Report. The Company eliminated the quarterly dividend
payable on its Common Stock following the dividend
which was paid on January 31, 1995.
4<PAGE>
Item 6. SELECTED FINANCIAL DATA
The response to this Item is contained in the 1995 Annual
Report under the caption "Selected Financial Data" on page 40 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 1995 Annual
Report under the caption "Management's Discussion and Analysis"
on pages 25 through 27 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 1998 Annual Meeting
Richard A. Smith - 70 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
5<PAGE>
Company, Liberty Mutual Fire Insurance Company, Liberty
Financial Companies, Inc., Bank of Boston Corporation
and its principal subsidiary, The First National Bank
of Boston. Mr. Smith is the father of Robert A. Smith,
Group Vice President of the Company.
Robert J. Tarr, Jr. - 51 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 - 64 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. and
Harrah s Entertainment, Inc.
Matina S. Horner - 56 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 - 56 Director since 1987
Chairman (since April 1991) and Chief Executive Officer
of Liberty Mutual Insurance Company and Liberty Mutual
Fire Insurance Company; President of those companies
through March 1992; Director of Liberty Financial Companies,
Inc. (Chairman), Director of Boston Edison Company,
Bank of Boston Corporation and its principal
subsidiary, The First National Bank of Boston.
Jean Head Sisco - 70 Director since 1987
Partner in Sisco Associates, international management
consultants; Director of Textron, Inc., Sante Fe
Pacific Gold Corp., Washington Mutual Investors Fund,
Chiquita Brands International, Inc., The American Funds
Tax-Exempt Series I and K-Tron International, Inc.
6<PAGE>
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 - 54
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, Inc. prior thereto.
Stephen C. Elkin - 52
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.
Peter Farwell - 52
Vice President - Corporate Relations of the Company and
of Harcourt General.
Bernie Feiwus - 47
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 - 48
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 - 44
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.
7<PAGE>
Gerald T. Hughes - 38
Vice President - Human Resources of the Company and of
Harcourt General since June 1994; Associate General Counsel
of the Company and of Harcourt General with responsibility
for labor and employment matters from August 1992 to June 1994;
Labor Counsel of the Company and of Harcourt General prior thereto.
Dawn Mello - 64
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.
Michael F. Panutich - 47
Vice President - General Auditor of the Company and of
Harcourt General since June 1993; Vice President -
Accounting of the Company and of Harcourt General prior
thereto.
Stephen C. Richards - 40
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 prior to June 1993.
Gerald A. Sampson - 54
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 - 39
Vice President - Planning and Analysis of the Company
and of Harcourt General.
Robert A. Smith - 36
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.
8<PAGE>
Burton M. Tansky - 57
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 1995.
9<PAGE>
Item 11. EXECUTIVE COMPENSATION
Summary Compensation Table(1)
The following table provides information on the compensation provided by
the Company during fiscal 1995, 1994 and 1993 to the Company's Chief Executive
Officer and the five most highly paid executive officers of the Company during
fiscal 1995.
<TABLE>
Annual Compensation
<CAPTION>
Long-Term Compensation
(2)
-------------------------
Awards
-------------------------
Other Restricted All Other
Name and Fiscal Salary Bonus Annual Stock Awards Options Compensation
Principal Year ($) ($) (3) Compensation ($) (5) (#) ($) (6)
Position ($) (4)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. J. Tarr, 1995 -- -- -- -- -- --
Jr. (1)
President and 1994 -- -- -- -- -- --
Chief
Executive 1993 -- -- -- -- -- --
Officer
B. Tansky 1995 $600,000 $230,640 $160,339 -- 25,000 $14,560
Chairman and
Chief 1994 $543,750 $122,640 -- -- 21,500 $10,647
Executive
Officer of
Neiman Marcus 1993 $500,000 $150,000 -- -- 10,000 $ 3,701
Stores
G. Sampson (7) 1995 $450,000 $150,480 -- $71,875 -- $12,687
President and
Chief 1994 $431,250 $172,500 -- -- 10,000 $ 6,421
Operating
Officer of 1993 $147,115 -- -- -- -- $ 1,724
Neiman Marcus
Stores
S. Elkin 1995 $450,000 $22,500 -- -- 20,000 $15,812
Chairman and
Chief 1994 $391,875 $65,262 -- -- 10,000 $ 9,650
Executive
Officer of
Bergdorf
Goodman 1993 $355,000 $84,313 -- -- 10,000 $ 7,283
D. Mello (8) 1995 $325,000 $50,000 -- -- 15,000 $ 2,418
President of
Bergdorf 1994 $50,416 $28,438 -- -- -- $ 612
Goodman
1993 -- -- -- -- -- --
B. Feiwus 1995 $300,000 -- -- -- 10,000 $ 7,314
President and
Chief 1994 $275,000 $88,000 -- -- 7,500 $ 5,883
Executive
Officer of NM 1993 $245,000 $87,500 -- -- 5,000 $ 4,679
Direct
-----------------------------------------------------------------------------------------------
(1) Under the terms of an Intercompany Services Agreement, 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
10<PAGE>
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 1995, 1994 and 1993, the Company paid or accrued
approximately $6.5 million, $6.9 million and $7.2 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. Of the
amounts paid by the Company to Harcourt General under the
Intercompany Services Agreement for fiscal 1995, 1994 and 1993,
approximately $2.4 million, $2.3 million and $2.1 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) No disclosure regarding items included in this category is
required unless the amount in any year exceeds the lesser of
$50,000 or 10% of the annual salary and bonus for the named
executive officer. Of the $160,339 reported with respect to Mr.
Tansky in this column for fiscal 1995, $140,236 is attributable
to relocation-related reimbursements paid by the Company in
fiscal 1995 in connection with his new position as Chairman and
Chief Executive Officer of Neiman Marcus Stores (Mr. Tansky
previously was Chairman and Chief Executive Officer of Bergdorf
Goodman).
(5) 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. Holders of
restricted stock are 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 holders and revert to the Company. At the end
of fiscal 1995, the named executive officers' restricted stock
holdings and market values (based on the New York Stock Exchange
closing price of $15.375 for the Company's Common Stock at fiscal
year end) were as follows: Mr. Sampson - 5,000 shares ($76,875); Mr.
11<PAGE>
Elkin - 2,000 shares ($30,750) and Mr. Feiwus - 800 Shares
(12,300). The restricted shares held by Mr. Sampson were
granted in fiscal 1995 and the restricted shares held by Messrs.
Elkin and Feiwus were granted in fiscal 1993.
(6) 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 Employee Savings Plan
(401 (k) Plan) and (b) group life insurance premiums. For fiscal
1995, such amounts for each of the named executive officers were,
respectively as follows: Mr. Tansky - $10,840 and $3,720; Mr.
Sampson - $9,339 and $3,348; Mr. Elkin - $7,341 and $8,471; Ms.
Mello - $0 and $2,418; and Mr. Feiwus - $2,625 and $4,689.
(7) Mr. Sampson's employment with the Company commenced in April
1993.
(8) Ms. Mello rejoined the Company in May 1994. As a condition of
employment, Ms. Mello was guaranteed a minimum bonus of $50,000
for fiscal 1995.
</TABLE>
12<PAGE>
<TABLE>
Option Grants in Last Fiscal Year(1)
The following table provides information regarding options granted under the
Company's 1987 Stock Incentive Plan during the fiscal year ended July 29, 1995 to the
executive officers named in the Summary Compensation Table.
<CAPTION>
Individual Grants
---------------------------------------
Potential
% of Realized Value
Number of Total at Assumed
Securities Options Annual Rates of
Underlying Granted to Exercise Stock Price
Options Employees or Base Appreciation
Granted in Fiscal Price Expiration for Option Term (2)
Name (#) (3) Year ($/Sh) Date 5% ($) 10% ($)
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. Tarr, Jr.(4) -- -- -- -- -- --
B. Tansky 25,000 10.96% $14.375 9/20/04 $226,009 $572,751
G. Sampson (5) -- -- -- -- -- --
S. Elkin 20,000 8.77% $14.375 9/20/04 $180,807 $458,201
D. Mello 15,000 6.58% $14.375 9/20/04 $135,605 $343,651
B. Feiwus 10,000 4.39% $14.375 9/20/04 $ 90,404 $229,100
----------------------------------------------------------------------------------------------
(1) No stock appreciation rights were granted to any named
executive officer during fiscal 1995.
(2) These potential realizable values are based on assumed rates of
appreciation required by applicable regulations of the
Securities and Exchange Commission.
(3) All option grants are non-qualified stock options having a term
of 10 years and one day. They become exercisable at the rate
of 20% on each of the first five anniversary dates of the
grant.
(4) None of the executive officers of Harcourt General who are also
officers of the Company, including Mr. Tarr, participate in the
Company's 1987 Stock Incentive Plan.
(5) Mr. Sampson received a grant of 5,000 shares of restricted
stock in fiscal 1995. See Note 5 to the Summary Compensation
Table.
</TABLE>
13<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table provides information regarding the number and value of stock
options held at July 29, 1995 by the executive officers named in the Summary
Compensation Table. None of the named executive officers exercised any stock options
or stock appreciation rights during fiscal 1995.
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
July 29, 1995(#) July 29, 1995 ($)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable (1)
<S> <C> <C>
R. Tarr, Jr.(2) -- --
B. Tansky 29,300/57,200 $45,388/77,175
G. Sampson 2,000/ 8,000 $ 1,750/ 7,000
S. Elkin 40,799/36,200 $32,850/51,650
D. Mello 0/15,000 $ 0/15,000
B. Feiwus 11,711/19,500 $12,063/26,375
(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 ($15.375) 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 20, 1995 was $18.75.
(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.
</TABLE>
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 $2,756 in fiscal
1995) incurred in attending meetings and carrying out their
14<PAGE>
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, which accrues interest 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 over age 21 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. 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 ($100,000 as of
July 29, 1995) 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 annual
pensionable earnings, less 60% of his or her estimated annual
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
15<PAGE>
estimated benefits apply to an employee at age 65 in 1995 who elects
to receive his or her benefit in the form of a straight life annuity.
These benefits include amounts attributable to both 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>
$ 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
___________________________
(1) The amounts actually payable will be lower than the amounts shown
above, since the above amounts will be reduced by 60% of the
participant's estimated primary Social Security benefit.
</TABLE>
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 29, 1995 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 29, 1995 29, 1995 Age 65
--------------------------------------------------------------
<S> <C> <C> <C>
R. Tarr, Jr.(1) . . --- ----
B. Tansky . . . . . $600,000 --(2) 20(2)
G. Sampson. . . . . 450,000 --(3) 20(3)
S. Elkin . . . . . 450,000 17 25
D. Mello . . . . . 325,000 14 15
B. Feiwus . . . . 300,000 15.5 25
___________________________
16<PAGE>
(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 under the SERP
will be calculated in the normal manner. Mr. Tansky is 57 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 under the SERP will be calculated in the normal manner. Mr.
Sampson is 54 years old.
</TABLE>
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. 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.
17<PAGE>
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, Ms. Mello 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 and
ending 12 months following such termination. In the event of a
change of control of either Bergdorf Goodman or the Company, and
in the event that prior to November 1, 1996 Ms. Mello resigns
because she is not permitted to continue in a position comparable
in duties and responsibilities to that which she held before such
change of control, Ms. Mello will be entitled to receive such
payments; provided, however, that such payments shall cease on
November 1, 1996.
Bernie Feiwus
Pursuant to an agreement between Mr. Feiwus and NM
Direct, effective October 1995, Mr. Feiwus is entitled to receive
severance payments in the event his employment with NM Direct is
terminated in certain situations. If the Company terminates Mr.
Feiwus employment without cause within 24 months of a change of control
of the Company or of NM Direct, or if within 24 months after such
a change of control Mr. Feiwus resigns his employment because he is not
18<PAGE>
permitted to continue in a position comparable in duties
and responsibilities to that which he held before the
change of control, he will receive an amount equal to one and
one-half of his then-current annual base salary, which amount
will be paid 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 and
ending 18 months following such termination.
Compensation Committee Interlocks and Insider Participation
During fiscal 1995, 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 1995, the Company paid to Liberty
Mutual an aggregate of $2.0 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, Feiwus, and Ms. Mello, all of whom
are named executive officers in the Summary Compensation Table. The
19<PAGE>
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 reviews those recommendations
and then approves them or makes 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. companies, the
Committee does not limit its comparison information for compensation
to the companies included in the peer groups in the Stock
Performance Graph.
20<PAGE>
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,
contractual obligations of the Company, guidelines established
by the Chief Executive Officer with respect to salary increases
for the entire Company and the subjective judgment of the
Committee.
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 reviews those recommendations and then approves
them or makes such modifications as it deems appropriate.
For fiscal 1995, 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 1996.
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.
21<PAGE>
The bonuses actually awarded to the executive officers for
fiscal 1995 were determined by an assessment of all of these
factors, as well as certain subjective factors. The Company
guaranteed Ms. Mello a minimum bonus of $50,000 for fiscal 1995
as a condition of employment.
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 will, in all
probability, be reduced at the discretion of the Committee.
If the Company and/or the relevant division falls sufficiently
short of its performance targets, there is a presumption that
bonuses would not be paid absent special circumstances.
Depending on the individual executive officer, factors
such as the performance of a business unit or
units for which the executive officer is responsible and
achievement of individual performance goals are considered in the
decision to award a bonus. 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 restricted stock which vests over
a five year period and 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 1995 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.
22<PAGE>
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 1995, the Company paid or accrued approximately $6.5
million to Harcourt General for all of its services under the
Intercompany Services Agreement, of which approximately $2.4
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
The Internal Revenue Code (the Code ) generally
disallows 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 1996. Under transition provisions of the Code,
compensation resulting from awards under the Company's 1987 Stock
Incentive Plan is not subject to the deductibility limit at this
time. The Committee will continue to monitor the requirements of
the Code 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
23<PAGE>
Stock Performance Graph
The graph below compares the cumulative total shareholder
return on the Company's Common Stock against the cumulative total
return during the five fiscal years ended July 29, 1995 of: (i)
the Standard & Poor's 500 Index, (ii) a new peer group index,
consisting of two companies in the specialty retail business,
Nordstrom, Inc. and Tiffany & Co., and (iii) a peer group index
previously used by the Company, consisting of Nordstrom, Tiffany
and The Limited, Inc. The new peer group index was determined in
view of the Company's disposition of Contempo Casuals in fiscal
1995. The graph assumes a $100 investment in the Company's
Common Stock and in each index at August 4, 1990 and that all
dividends were reinvested. The common stocks of the companies in
the peer group indices 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.
<TABLE>
Stock Performance Graph
Comparison of Five-Year Cumulative Total Return
The Neiman Marcus Group, Inc., S&P 500 Index, and Peer Index
<CAPTION>
----------------------------------------------------------------
The Neiman Marcus S&P 500 Old Peer New Peer
Group Inc Index Index Index
----------------------------------------------------------------
<S> <C> <C> <C> <C>
04-Aug-90 100 100 100 100
03-Aug-91 102.87 119.63 156.07 151.08
01-Aug-92 86.07 135.83 110.6 95
31-Jul-93 93.66 147.4 106.35 94.3
30-Jul-94 99.76 154.38 119 145.43
29-Jul-95 101.3 193.59 123.83 139.04
----------------------------------------------------------------
</TABLE>
24<PAGE>
<TABLE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of October 20, 1995,
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.
- ------------------------------------------------------------------
<CAPTION>
Number Percent
Name and Address of Shares of Common
of Beneficial Owner Owned(1) Stock
- ------------------------------------------------------------------
<S> <C> <C>
Harcourt General, Inc.(2) 21,440,960 56.5%
27 Boylston Street
Chestnut Hill, MA 02167
Gabelli Funds, Inc.(3) 5,391,800 14.2%
One Corporate Center
Rye, NY 10580
Burton M. Tansky(4) 50,600 *
Gerald A. Sampson(5) 25,000 *
Stephen Elkin(6) 74,029 *
Dawn Mello(7) 6,500 *
Bernie Feiwus(8) 23,284 *
Gary L. Countryman - *
Matina S. Horner - *
Walter J. Salmon 8,942 *
Jean Head Sisco 1,134 *
Richard A. Smith(9) - *
Robert J. Tarr, Jr.(9) - *
All current executive officers
and directors as a group
(20 persons)(10) 189,489 *
_____________________
* Less than 1%.
25<PAGE>
(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 voting power and fully converted equity 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 20, 1995 was $18.75 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 a Schedule 13G dated July 10, 1995
filed with the Securities and Exchange Commission by the Gabelli Funds, Inc. and its
affiliates (collectively, the "Gabelli Affiliates"). The Gabelli Affiliates have
sole voting power with respect to 5,115,900 shares and sole dispositive power with
respect to all of the shares shown in the table.
26
(4) Includes 40,600 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 20, 1995. Also includes 10,000 shares
of restricted stock over which Mr. Tansky has voting but not dispositive power.
(5) Includes 4,000 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 20, 1995. Also includes 4,000 shares
of restricted stock over which Mr. Sampson has voting but not dispositive power.
(6) Includes 50,999 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 20, 1995. Also includes 8,500 shares
of restricted stock over which Mr. Elkin has voting but not dispositive power.
(7) Includes 3,000 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 20, 1995. Also includes 3,500 shares
of restricted stock over which Ms. Mello has voting but not dispositive power.
(8) Includes 16,711 shares of Common Stock which are subject to outstanding
options exercisable within 60 days of October 20, 1995. Also includes 5,400 shares
of restricted stock over which Mr. Feiwus has voting but not dispositive power.
(9) 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.
(10) Excludes the beneficial ownership of securities of the Company which may
be deemed to be attributed to Messrs. Smith and Tarr (see Notes 2 and 9 above).
Includes 115,310 shares of Common Stock which are subject to outstanding options
exercisable within 60 days of October 20, 1995. Also includes 31,400 shares of
restricted stock over which individuals in the group have voting but not dispositive
power.
</TABLE>
27<PAGE>
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 November 1994, Mr. Sampson received a loan from the
Company in the principal amount of $221,258 under its Key
Executive Stock Purchase Loan Plan (the "Loan Plan") to purchase
15,000 shares of the Company's Common Stock in the open market.
The loan is secured by a pledge of the purchased shares and bears
interest at an annual rate of 5%, payable quarterly. Pursuant to
the terms of the Loan Plan, the loan will become due and payable
seven months after Mr. Sampson's employment with the Company
terminates. No other officer of the Company had an outstanding
loan under the Loan Plan in excess of $60,000 during fiscal 1995
or subsequent thereto.
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 1995 Annual Report to Shareholders and
are incorporated by reference into Item 8 hereof:
Consolidated Balance Sheets at July 29, 1995 and
July 30, 1994.
Consolidated Statements of Operations for the fiscal
years ended July 29, 1995, July 30, 1994 and July
31, 1993.
Consolidated Statements of Cash Flows for the fiscal
years ended July 29, 1995, July 30, 1994 and July
31, 1993.
28<PAGE>
Consolidated Statements of Common Shareholders'
Equity for the fiscal years ended July 29, 1995,
July 30, 1994 and July 31, 1993.
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 -
Valuation and Qualifying Accounts and Reserves F-2
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 29, 1995.
29<PAGE>
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 24, 1995
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,
Robert J. Tarr, Jr. Chief Executive October 24, 1995
Officer, Chief
Operating Officer
and Director
Principal Financial
Officer:
/s/John R. Cook Senior Vice October 24, 1995
John R. Cook President and
Chief Financial
Officer
Principal Accounting
Officer:
/s/Stephen C. Richards Vice President October 24, 1995
Stephen C. Richards and Controller
30<PAGE>
Directors Date
/s/Richard A. Smith October 24, 1995
Richard A. Smith
- ----------------------
Gary L. Countryman
/s/Matina S. Horner October 18, 1995
Matina S. Horner
/s/Walter J. Salmon October 19, 1995
Walter J. Salmon
/s/Jean Head Sisco October 15, 1995
Jean Head Sisco
31<PAGE>
EXHIBIT INDEX Page No.
3.1(a) Restated Certificate of Incorporation of the Company,
incorporated herein by reference to the Company's
Annual 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 Annual 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
Annual 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 Annual 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,
incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended
July 30, 1994.
*10.4 Supplemental Executive Retirement Plan, incorporated
herein by reference to the Company's Annual 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, incorporated herein by
reference to the Company's Annual Report on Form 10-K
for the fiscal year ended July 30, 1994.
<PAGE>
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 Annual 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 Bergdorf Goodman, Inc.
and Dawn Mello, effective May 1994, incorporated herein
by reference to the Company's Annual Report on Form
10-K for the fiscal year ended July 30, 1994.
*10.11 Key Employee Deferred Compensation Plan, as amended,
incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended
July 30, 1994.
*10.12 Deferred Compensation Agreement between the Company
and Gary L. Countryman, dated August 27, 1987,
incorporated herein by reference to the Company's
Annual Report on Form 10-K for the fiscal year ended
July 30, 1994.
*10.13 Change of Control Agreement between the Company and
Bernie Feiwus, effective October 1995.
11.1 Computation of Weighted Average Number of Shares
Outstanding Used in Determining Primary and
Fully-Diluted Earnings Per Share.
2<PAGE>
13.1 1995 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).
21.1 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule.
99.1 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.
3<PAGE>
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 29, 1995 and July 30, l994, and for
each of the three years in the period ended July 29, 1995, and have issued our
report thereon dated September 8, l995; such financial statements and report
are included in your l995 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included the financial statement
schedule of The Neiman Marcus Group, Inc. and subsidiaries, listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 8, l995
F-1
<PAGE>
<TABLE>
SCHEDULE II
THE NEIMAN MARCUS GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED JULY 29, 1995, JULY 30, 1994 AND JULY 31, 1995
(in thousands)
- --------------------------------------------------------------------------------------------------
<CAPTION>
Column A Column B Column C Column D Column E
- --------------------------------------------------------------------------------------------------
Balance at Charges to Charged to Balance at
Beginning Costs and Other Deductions End of
Description of Period Expenses Accounts Describe (A) Period
<S> <C> <C> <C> <C> <C>
YEAR ENDED JULY 29, 1995
Allowance for doubtful accounts
(deducted from accounts receivable) $13,700 $27,025 $0 ($34,625)(B) $6,100
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
- -------------------------------------------------------------------------------------------------
(A) Write-off of uncollectible accounts, net of recoveries.
(B) Includes $10.3 million relating to the securitization of the Company's
credit card receivables.
</TABLE>
F-2
<PAGE>
CHANGE OF CONTROL
AGREEMENT
1. This is a Change of Control Agreement between Bernie Feiwus (the
Executive ) and NM Direct (also referred to as the Company ). For the
purposes of this Agreement, the Company includes The Neiman Marcus Group,
Inc.
2. Although the Executive is employed at-will by NM Direct, 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 remain employed at NM Direct, the Company is willing
to enter into this Change of Control Agreement.
3. a. If the Executive s services are terminated without cause
within 24 months following a change of control of NM Direct,
as a change of control is defined in paragraph 4.b., or if
within 24 months after 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 of
control, the Executive will receive a termination package
consisting of an amount equivalent to one and one half times
his then-current, one year, base salary, which amount would
be paid in 18 regular, monthly installments following such
termination.
b. Notwithstanding the payment obligation set forth in 3.a.,
should the Executive be engaged in employment (including
contract employment or self-employment) of any kind, during
the period beginning 6 months after 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 purposes of this Agreement,
a. For cause means, that in the reasonable judgment of the
Company, the Executive:
(1) failed to devote this 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; or
(3) engaged in conduct detrimental to the best interests
of the Company.<PAGE>
b. Change of control means: (i) the sale of all or
substantially all of the assets of NM Direct to an entity
other than Harcourt General, Inc. or an entity wholly owned,
or controlled by the Company or Harcourt General, Inc.; (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 or controlled 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.
5. Payment of the amounts 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 Executive s separation from
employment, including the right to severance pay, attending a change of
control of the Company. However, nothing in this paragraph affects 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.
6. The invalidity of all or any part or provision of any section of
this Change of Control Agreement will not render invalid the remainder of this
Agreement or the remainder of such sections or any other of its provisions.
7. This Change of Control 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
employment due to a change of control. The 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.
8. The Change of Control 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.
NM DIRECT
By: /S/ ROBERT A. SMITH
BERNIE FEIWUS
By: /S/ BERNIE FEIWUS<PAGE>
<TABLE>
EXHIBIT 11.1
THE NEIMAN MARCUS GROUP, INC.
JULY 29, 1995
COMPUTATION OF WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING USED IN DETERMINING
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(in thousands)
<CAPTION>
- ------------------------------------------------------------------------------------------
PRIMARY July 29, 1995 July 30, 1994 July 31, 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Weighted average number of
common shares outstanding 37,958 37,946 37,577
2. Assumed exercise of certain
stock options based on average
market value 25 0 (B) 120
3. Weighted average number of
shares used in primary
per share computations 37,983 37,946 37,697
FULLY DILUTED (A)
1. Weighted average number of
common shares outstanding 37,958 37,946 37,577
2. Assumed exercise of certain
stock options based on higher
of average or closing
market value 34 0 (B) 142
3. Weighted average number of
shares used in fully diluted
per share computations 37,992 37,946 37,719
- -----------------------------------------------------------------------------------------
(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.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains a summary of financial information extracted from the
Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of
Operations and is qualified in its entirety by references to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> JUL-29-1995
<CASH> 13695
<SECURITIES> 0
<RECEIVABLES> 156210
<ALLOWANCES> 6100
<INVENTORY> 359092
<CURRENT-ASSETS> 578409
<PP&E> 628171
<DEPRECIATION> 204588
<TOTAL-ASSETS> 1108437
<CURRENT-LIABILITIES> 374580
<BONDS> 202000
<COMMON> 380
405442
0
<OTHER-SE> 26167
<TOTAL-LIABILITY-AND-EQUITY> 1108437
<SALES> 1888249
<TOTAL-REVENUES> 1888249
<CGS> 1276776
<TOTAL-COSTS> 1738197
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 27025
<INTEREST-EXPENSE> 33958
<INCOME-PRETAX> 116094
<INCOME-TAX> 48759
<INCOME-CONTINUING> 67335
<DISCONTINUED> (11727)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55608
<EPS-PRIMARY> .70
<EPS-DILUTED> .70
</TABLE>
EXHIBIT 23.1
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 8, l995, 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 29, l995. 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 29, l995.
We also consent to the reference to us under the headings "Experts" in such
prospectuses.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 25, l995
<PAGE>
NEIMAN MARCUS STORES * NM DIRECT * BERGDORF GOODMAN AND BERGDORF GOODMAN MEN *
The entities that make up The Neiman Marcus Group are focused exclusively on
the high-end segment of the specialty retailing marketplace, serving affluent
customers from around the world. Neiman Marcus Stores is a world-renowned
franchise with 28 stores nationwide and a long tradition of leadership in high
fashion retailing. NM Direct is a state-of-the-art direct marketing operation
enhancing customer lifestyles with the latest in stylish apparel and home
furnishings. Bergdorf Goodman and Bergdorf Goodman Men are known for elegance
and exclusive designer fashion showcased at their preeminent retail locations
on Fifth Avenue and 58th Street in New York City. With its collection of
valuable brand equities, The Neiman Marcus Group is committed to exceeding
customer expectations by providing the utmost in distinctive merchandise and
unsurpassed service to discerning customers worldwide.
The Neiman Marcus Group
<PAGE>
AT-A-GLANCE The Neiman Marcus Group, Inc.
- --------------------------------------------------------------------------------
<TABLE>
RESULTS FROM CONTINUING OPERATIONS
- ----------------------------------
THE NEIMAN MARCUS GROUP
<CAPTION>
YEARS ENDED AVERAGE
----------------------------------------------------------- COMPOUND
JULY 29, JULY 30, JULY 31, AUGUST 1, AUGUST 3, ANNUAL
(IN MILLIONS EXCEPT FOR PER SHARE AMOUNTS) 1995 1994 1993 1992 1991 GROWTH RATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $1,888.2 $1,789.5 $1,667.8 $1,484.9 $1,407.2 7.6%
Operating earnings 150.1 145.1 123.3 79.3 52.9 29.8%
Earnings (loss) per share applicable to
common shareholders $ 1.01 $ 0.96 $ 1.00 $ (0.05) $ (0.77) n/a
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
1995 REVENUE BREAKDOWN
[PIE CHART]
REVENUE GROWTH*
[BAR GRAPH]
OPERATING MARGIN
[LINE GRAPH]
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
2 AT-A-GLANCE
4 LETTER TO OUR SHAREHOLDERS
7 DESIGNER FEATURE
24 FINANCIAL SECTION
41 SHAREHOLDER INFORMATION
42 DIRECTORS AND OFFICERS
43 MISSION STATEMENT
2
<PAGE>
<TABLE>
STORE LOCATIONS
- ---------------------------------------------------------------------------------------
NEIMAN MARCUS STORES
<CAPTION>
YEAR GROSS
OPERATIONS STORE
LOCATIONS BEGAN SQ. FEET
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Dallas (Downtown) 1907 269,000
Dallas (NorthPark) 1965 218,000
Houston (Galleria) 1969 206,000
Bal Harbour, Florida 1971 94,000
Atlanta 1972 154,000
St. Louis 1974 143,000
Northbrook, Illinois 1976 143,000
Fort Worth 1977 119,000
Washington, D.C. 1977 130,000
Newport Beach, California 1978 124,000
Beverly Hills 1979 170,000
Dallas (Prestonwood) 1979 123,000
Westchester, New York 1980 138,000
Las Vegas 1981 103,000
Oak Brook, Illinois 1981 119,000
San Diego 1981 106,000
Fort Lauderdale 1982 92,000
San Francisco 1982 195,000
Houston (Town & Country) 1983 153,000
Chicago (Michigan Avenue) 1983 188,000
Boston 1984 111,000
Palo Alto, California 1985 120,000
McLean, Virginia 1989 130,000
Denver 1990 90,000
Minneapolis 1991 122,000
Scottsdale, Arizona 1991 116,000
Troy, Michigan 1992 157,000
Short Hills, New Jersey August 1995 137,000
TOTAL 3,970,000
- ---------------------------------------------------------------------------------------
FUTURE NEIMAN MARCUS STORES
- ---------------------------------------------------------------------------------------
King of Prussia, Pennsylvania 1996 145,000
Paramus, New Jersey 1996 148,000
Honolulu, Hawaii 1999 160,000
TOTAL 453,000
- ---------------------------------------------------------------------------------------
BERGDORF GOODMAN
- ---------------------------------------------------------------------------------------
New York City 1901 250,000
New York City (Men) 1990 66,000
TOTAL 316,000
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
REVENUES AND OPERATING EARNINGS
- ----------------------------------------------------------
NEIMAN MARCUS STORES
<CAPTION>
OPERATING
(IN MILLIONS) REVENUES EARNINGS*
- ----------------------------------------------------------
<S> <C> <C>
1995 $1,398.8 $132.3
1994 $1,311.5 $119.8
1993 $1,219.0 $ 98.6
1992 $1,084.8 $ 70.5
1991 $1,028.4 $ 50.5
- ----------------------------------------------------------
<FN>
*prior to corporate expenses
</TABLE>
NEIMAN MARCUS STORES
SALES PER GROSS
SQUARE FOOT
[LINE GRAPH]
<TABLE>
NM DIRECT
<CAPTION>
OPERATING
(IN MILLIONS) REVENUES EARNINGS*
- ----------------------------------------------------------
<S> <C> <C>
1995 $247.9 $13.7
1994 $248.5 $28.4
1993 $229.7 $23.8
1992 $201.0 $14.2
1991 $180.1 $10.0
- ----------------------------------------------------------
<FN>
*prior to corporate expenses
</TABLE>
<TABLE>
BERGDORF GOODMAN
<CAPTION>
OPERATING
(IN MILLIONS) REVENUES EARNINGS*
- ----------------------------------------------------------
<S> <C> <C>
1995 $241.5 $16.6
1994 $229.5 $10.3
1993 $219.1 $12.8
1992 $199.1 $ 7.7
1991 $198.7 $ 3.9
- ----------------------------------------------------------
<FN>
*prior to corporate expenses
</TABLE>
3
<PAGE>
LETTER TO OUR SHAREHOLDERS The Neiman Marcus Group, Inc.
- --------------------------------------------------------------------------------
Fiscal 1995 was a year of considerable
accomplishment for The Neiman Marcus Group. Despite the challenging conditions
that continue to affect our industry, we achieved a record financial
performance. Importantly, we also streamlined our operations to focus
exclusively on the upscale segment of the specialty retailing market. Both
Neiman Marcus Stores and Bergdorf Goodman experienced strong gains in revenues
and operating earnings, more than offsetting depressed results at our NM Direct
mail order business.
Total revenues from continuing operations for The Neiman Marcus Group in 1995
increased 5.5% to $1.89 billion. Operating earnings grew to $150.1 million, a
3.4% increase over 1994's level. Earnings from continuing operations in the
current year were $67.3 million, compared to $65.7 million in the prior year.
After preferred dividends, The Neiman Marcus Group had earnings from continuing
operations applicable to common shareholders of $1.01 per share, compared to
$0.96 per share in 1994.
These financial results do not include results of the Contempo Casuals junior
women's retail chain, which was sold to The Wet Seal, Inc. in June 1995. The
Neiman Marcus Group recorded an after-tax loss from discontinued Contempo
operations of $11.7 million in 1995, or $0.31 per share, compared to an
after-tax loss of $49.8 million, or $1.31 per share, in fiscal 1994. The 1994
loss included a $28.1 million after-tax restructuring charge at Contempo.
With the sale of Contempo Casuals, our remaining operations are clearly focused
on the high-end sector of the specialty retailing industry. Future demographic
trends will reflect the aging of the U.S. population and the movement of a large
group of individuals into their peak earning years, thereby expanding this
sector of the market, which represents the core customer group for Neiman
Marcus and Bergdorf Goodman. We are confident that our specialty retailing
businesses will benefit from these trends, further building upon their
well-established positions in the marketplace.
NEIMAN MARCUS STORES Neiman Marcus Stores maintained its
strong momentum over the past year -- evidence that our operating strategies are
on target. We are continuing efforts to broaden our customer base by expanding
assortments in a number of areas including career apparel and casual sportswear
while still maintaining a very strong commitment to the high-end designer
business. These efforts are supported by an enhanced calendar of in-store
special events and sales promotion activities. Total revenues at Neiman Marcus
Stores grew to $1.40 billion in 1995, a 6.7% increase over revenues of $1.31
billion in 1994, with particularly strong sales of fine apparel, cosmetics,
precious jewelry and accessories. Operating earnings rose 10.4% to $132.3
million from $119.8 million in the prior year, reflecting both higher revenues
and tight expense controls. Operating margins improved to 9.5% from 9.1% in
1994.
NM DIRECT NM Direct's mail order operations had
revenues of $247.9 million in 1995, essentially the same as 1994. A total of 84
catalogues were mailed during the year with an average circulation of 1.2
million households per book. The mail order business was affected by sluggish
demand for apparel throughout fiscal 1995 as well as significant increases in
postage and paper costs that took effect in the spring season. To
4
<PAGE>
minimize the impact of these factors, we reduced page count and circulation
for a number of our catalogues. However, the combined effect of soft revenues
and higher operating expenses caused operating earnings for the full year to
decline to $13.7 million, a substantial decrease from NM Direct's record
operating earnings level of $28.4 million in 1994. While higher paper and
postage expenses will continue in fiscal 1996, we are working to minimize
that impact by modifying catalogue formats and eliminating marginal
merchandise categories from a number of our books in order to reduce page
count. We are also hopeful that improved demand will contribute to a rebound
in NM Direct's performance in 1996.
BERGDORF GOODMAN Bergdorf Goodman had a strong
performance in 1995, with operating earnings growing 61.2% to $16.6 million from
$10.3 million last year. The gain reflects a 5.2% increase in revenues to $241.5
million, with operating margins growing to 6.9% from 4.5% in the prior year.
Merchandise categories that exhibited exceptional strength during the year
include fashion accessories, footwear and decorative home items. Bergdorf
Goodman Men contributed to profits for the first time in fiscal 1995, aided by
particularly strong sales of tailored men's clothing. Revenues at Bergdorf
Goodman Men are now in excess of $40 million, and we expect the store's momentum
to continue as its client base expands further.
As fiscal 1995 drew to a close, we entered a heightened period of expansion for
Neiman Marcus Stores, initiated with the opening of a new Neiman Marcus in The
Mall at Short Hills, New Jersey. That store, which is 137,000 square feet in
size, had a successful opening in mid-August. We are confident that the Short
Hills location will be an important one, given the high concentration of
consumers in the area who appreciate the quality of merchandise and level of
service Neiman Marcus has to offer.
Additional expansion plans over the next several years include the opening of a
new Neiman Marcus store in King of Prussia, Pennsylvania, just outside
Philadelphia. That location is slated to open in the spring of 1996, followed by
a fall 1996 opening of a Neiman Marcus store in Paramus, New Jersey. These new
stores will strengthen our presence in the Northeast considerably, and we look
forward to the growth that will result. Also over the past year, we were
able to finalize plans to build a new Neiman Marcus store at the Ala Moana
Center in Honolulu, Hawaii, which is expected to open in calendar 1999.
Fiscal 1995 marked the completion of remodeling activity at Neiman Marcus
stores in Westchester, New York; Northbrook, Illinois; and NorthPark in
suburban Dallas. We will begin work on a major remodeling program in our
Beverly Hills store during the coming year.
In addition, Neiman Marcus Stores broke ground this year on a new 464,000
square-foot national service and distribution center located in Longview,
Texas. That facility, which will be completed in early 1996, will consolidate
the distribution function currently being handled by several separate
facilities in the Dallas area, resulting in cost savings and improved
efficiencies.
5
<PAGE>
[PICTURE]
[CAPTION: ROBERT J. TARR, JR., PRESIDENT AND CHIEF EXECUTIVE OFFICER (LEFT)
AND RICHARD A. SMITH, CHAIRMAN]
Capital expenditures in 1995 totaled $93.5 million compared to expenditures of
$65.1 million in 1994. As a result of planned building activity, 1996 capital
expenditure requirements for The Neiman Marcus Group should approximate $100
million. The majority of those funds will be devoted to the new stores in King
of Prussia and Paramus, as the bulk of our major renovation activity has been
completed.
The Neiman Marcus Group has $172.0 million of privately placed debt maturing
over the next two years. Also, in fiscal 1998 the Company will be required to
begin redeeming $18.7 million annually of its $374.9 million 6% preferred
stock. To accommodate the Company's operating and financial requirements going
forward, in March of 1995 The Neiman Marcus Group issued $246.0 million of
fixed-rate certificates backed by Neiman Marcus credit card receivables. This
issue served to fund the balance of our planned capital programs, pre-fund the
maturing privately placed debt and provide the Company with cash to ease future
borrowing needs. However, the financing will reduce the finance charge income
earned on our credit card receivables going forward. Our Company is now well
positioned to accomplish its store expansion and remodeling goals while
fulfilling its financial obligations over the next several years.
We expect fiscal 1996 to be a year of ongoing growth for The Neiman Marcus
Group. With our Company now focused exclusively on the upscale segment of the
market, our mandate is clear. We will continue to improve our operations,
develop our physical facilities, refine our merchandising strategies and
strengthen our designer relationships in order to solidify our market position
as the retailer of choice for high-end consumers. We have chosen to highlight
The Neiman Marcus Group's unique position in the upscale retailing market by
featuring a number of prominent designer resources in this year's annual
report. In the pages that follow, those designers share their views on high-end
retailing -- what distinguishes this segment of the market and what it takes to
be successful within it. Given our Company's ongoing commitment to providing
customers with the ultimate in quality and service, we are convinced that the
future will bring continued progress for The Neiman Marcus Group.
Sincerely,
/S/ RICHARD A. SMITH /S/ ROBERT J. TARR, JR.
RICHARD A. SMITH ROBERT J. TARR, JR.
Chairman President and Chief Executive Officer
September 29, 1995
6
<PAGE>
GIORGIO ARMANI
MANOLO BLAHNIK
DONNA KARAN
BARRY KIESELSTEIN-CORD
MIUCCIA PRADA
JIL SANDER
RICHARD TYLER
ERMENEGILDO ZEGNA
From Giorgio Armani, the fashion icon with an undisputed
mastery of innovative yet timeless design, to Ermenegildo Zegna and his
company's reputation for impeccable tailoring and fine style, the individuals
featured on the pages that follow represent some of the leading talents in
fashion design today. We, as retailers, pride ourselves on the strong
relationships that we've developed with these industry leaders and others like
them, who provide us with the merchandise valued by our customers. It is a
working partnership vital to our success.
With the comments that follow, these leading designers
offer their unique viewpoints on what distinguishes high-end specialty
retailing, and we offer our own thoughts on how Neiman Marcus, NM Direct
and Bergdorf Goodman have worked to become the preeminent retailers in this
segment of the market. We extend our sincere thanks to all of those who
participated in this annual report -- not only for sharing their views on the
industry but also for sharing their talents and vision season after season --
the elements that continue to inspire our customers worldwide.
The Neiman Marcus Group
7
<PAGE>
[PICTURE]
GIORGIO ARMANI
8
<PAGE>
MANAGING THE PARADOX OF FASHION
"I WOULD SAY THAT THE FUNDAMENTAL
CHALLENGE FOR A FASHION DESIGNER IS TO MANAGE PARADOX -- TO BE THE SAME BUT
DIFFERENT, TO PROVIDE SECURITY AND A THRILL AT THE SAME TIME, TO USE A FAMILIAR
LANGUAGE TO SAY SOMETHING NEW. FOR THE RETAILER, THE TASK IS NOT SO DIFFERENT.
BUT ADD TO IT -- IN THE CASE OF THAT DISTINCTLY AMERICAN PHENOMENON CALLED THE
LUXURY SPECIALTY STORE -- THE CHALLENGE OF PRESENTING A WHOLE WORLD OF STYLE
AND FASHION, ENCOMPASSING WILDLY DIVERGENT POINTS OF VIEW, WHILE ALWAYS BEING
ITSELF. AS A DESIGNER WITH AN IMPORTANT, OFTEN ANCHORING, PRESENCE IN NEIMAN
MARCUS AND BERGDORF GOODMAN STORES, I TRUST THOSE STORES NOT ONLY TO CONVEY MY
IMAGE, BUT TO ENHANCE IT THROUGH THE TOTAL SHOPPING EXPERIENCE THEY OFFER THEIR
CUSTOMERS."
/S/ GIORGIO ARMANI
Our stores receive nearly $100 million of merchandise from Giorgio Armani
annually. As our largest single resource, the Armani label has a special
meaning for Neiman Marcus and Bergdorf Goodman customers. Our challenge as
retailers is to select, edit and present that merchandise in a way that reflects
Armani's unique style as well as that of our stores. Meeting that challenge
daily are talented merchants who edit and coordinate collections from a variety
of resources that differ from each other but can still work together to create
a distinct statement. We design our stores to offer a convenient shopping
experience with just the right amount of drama and excitement through enticing
displays and special events like trunk shows and designer appearances. Our
customers rely upon us to edit and present the very best in designer
merchandise in a way that allows them to fulfill their own very special needs.
The Neiman Marcus Group
9
<PAGE>
[PICTURE]
MANOLO BLAHNIK
10
<PAGE>
CULTIVATING A REPUTATION FOR EXCELLENCE
"NEIMAN MARCUS AND BERGDORF GOODMAN SELL LUXURY
GOODS BETTER THAN ANYONE ELSE IN THE WORLD; THEY ARE THE FIRST PLACE A WOMAN
GOES TO SEE THE LATEST AND THE BEST IN FASHION MERCHANDISE BECAUSE THEY HAVE
CULTIVATED A REPUTATION FOR EXCELLENCE. TRADITION IS THE REAL POINT OF NEIMAN
MARCUS AND BERGDORF GOODMAN AND ALWAYS HAS BEEN. WHAT DISTINGUISHES A TRULY
EXCEPTIONAL SPECIALTY RETAILER, THOUGH, IS A CONSTANT EFFORT TO CHALLENGE
THEMSELVES AND THEIR DESIGNER RESOURCES TO STRETCH BEYOND, TO IMPROVE UPON WHAT
WAS DONE LAST SEASON, TO EXTEND THE TRADITION. MANOLO BLAHNIK HAS BEEN PART OF
THIS EFFORT AT NEIMAN MARCUS AND BERGDORF GOODMAN FOR MANY YEARS AND IS VERY
PROUD TO BE A PART OF THEIR WORLD."
/S/ MANOLO BLAHNIK
At The Neiman Marcus Group, we believe consistency is the key to success. Like
Manolo Blahnik, our stores have maintained an unwavering commitment to bringing
customers nothing but the very best in merchandise selection and service.
Knowing they will find that consistent level of quality is what entices
customers back into our stores time and again and what ultimately makes a one-
time shopper a loyal customer. Bergdorf Goodman first opened its doors in 1901,
with Neiman Marcus following in 1907 -- both committed to building a reputation
for offering the finest service and merchandise available. In the century that
has followed, neither has rested on that reputation but instead works to exceed
customer expectations year after year.
The Neiman Marcus Group
11
<PAGE>
[PICTURE]
DONNA KARAN
12
<PAGE>
COMMUNICATING WITH THE CUSTOMER
"WITHOUT QUESTION, THE MOST IMPORTANT ISSUE
FACING HIGH-END DESIGNERS AND RETAILERS TODAY IS EXCITING CUSTOMERS, GETTING
THEM INTO THE STORES BY MAKING SHOPPING FUN AGAIN. THAT GOES BACK TO SERVICE
AND COMMUNICATION -- EDUCATING CUSTOMERS ABOUT THE MERCHANDISE AND HOW IT CAN
WORK FOR THEIR LIFESTYLES. I MAKE A POINT OF REACHING OUT TO THE CUSTOMER
DIRECTLY -- THROUGH FILMS, CATALOGUES AND NEWSLETTERS AND BY CONDUCTING IN-STORE
SEMINARS FOR SALES ASSOCIATES TO HELP THEM EDUCATE THE CONSUMER ABOUT MY
PRODUCTS. AND I MEET CUSTOMERS PERSONALLY THROUGH STORE VISITS AND TRUNK SHOWS.
I CAN'T THINK OF ANYTHING MORE IMPORTANT THAN GIVING THE CONSUMER THAT
ONE-ON-ONE ATTENTION."
/S/ DONNA KARAN
At The Neiman Marcus Group, we also believe that communication with our
customers is critical. Each sales associate at Neiman Marcus and Bergdorf
Goodman is trained to develop and nurture their own client base through
frequent direct communication. Sales associates are supported by
state-of-the-art point-of-sale systems that allow them to record and readily
access customer information including designer preferences, sizes, important
dates and upcoming events. In this way, the sales associate and customer
establish a true working relationship, allowing the associate to suggest
products appropriate to the customer's lifestyle. NM Direct establishes
customer panels to gather feedback on products and services and uses that
information to improve its merchandising efforts and customer service
activities. We wholeheartedly agree with Donna Karan -- communication is the
key.
The Neiman Marcus Group
13
<PAGE>
[PICTURE]
BARRY KIESELSTEIN-CORD
14
<PAGE>
RISING ABOVE THE FICKLENESS OF FASHION
"LUXURY DESIGNERS AND MANUFACTURERS MUST
CONTINUALLY RISE ABOVE THE SHORT-LIVED TRENDS TOO OFTEN EVIDENT IN MASS
MARKET FASHION. WE PRODUCE HIGH STYLE -- NOT TRENDY FASHION -- THAT IS
APPRECIATED BY THE UPSCALE CONSUMER. THE WELL-INFORMED CLIENT IS READILY ABLE TO
DIFFERENTIATE BETWEEN THE QUALITIES OF HIGH-END VERSUS MASS MARKET MERCHANDISE."
/S/ BARRY KIESELSTEIN-CORD
Neiman Marcus and Bergdorf Goodman are well positioned as the upscale retailers
of choice among those customers who demand high style and exquisite workmanship
in fashion apparel and accessories produced by innovative designers such as
Barry Kieselstein-Cord. Our stores and mail order operations have made a
significant commitment to designer apparel and accessories and boast the
broadest and deepest selections of classic assortments with a modern edge.
Maintaining that focus and commitment will prove key to our continued success.
The Neiman Marcus Group
15
<PAGE>
[PICTURE]
MIUCCIA PRADA
16
<PAGE>
TRANSMITTING FASHION CONCEPTS
"THE DISTINGUISHING FACTORS IN A DESIGNER
COLLECTION WHICH INVITE A CUSTOMER TO SHOP ARE VERY SUBTLE AND PERSONAL.
IT IS LESS IMPORTANT FOR MYSELF AS A DESIGNER TO FOCUS ON WHAT MIGHT MAKE PRADA
SELL THAN TO TRY AND TRANSMIT A CONCEPT AND 'FEELING' ABOUT FASHION THAT WILL BE
UNDERSTOOD AND APPRECIATED."
/S/ MIUCCIA PRADA
At Neiman Marcus and Bergdorf Goodman we have worked hard to create the ideal
environment which effectively showcases designer merchandise -- to support an
atmosphere that helps convey the 'feeling' that imaginative designers like Mrs.
Prada are promoting with their fashion merchandise. We have invested a
significant amount of capital to upgrade our in-store environment, creating a
comfortable residential-like surrounding. The resulting store interiors are
understated and elegant -- without being overwhelming -- allowing the
designers' distinct and individual messages to stand out, entice and inspire
our customers.
The Neiman Marcus Group
17
<PAGE>
[PICTURE]
JIL SANDER
18
<PAGE>
COMMITTING TO A CONCEPT
"IN BUILDING MY COMPANY AND ESTABLISHING A
CLEAR IDENTITY OVER THE PAST 25 YEARS, I HAVE ALWAYS BEEN DRIVEN BY A SEARCH
FOR QUALITY, PURITY, INNOVATION AND EXCLUSIVITY IN ALL ASPECTS OF THE DESIGN
PROCESS -- FROM FABRIC RESEARCH THOUGH MARKETING AND DISTRIBUTION. I BELIEVE
THAT ONE IS DISTINGUISHED THROUGH A CLARITY OF VISION ABOUT WHO ONE IS AND WHAT
THEY REPRESENT WHICH IS, IN TURN, ULTIMATELY PERCEIVED AND UNDERSTOOD BY THE
CONSUMER."
/S/ JIL SANDER
In the same way that a focused designer like Jil Sander maintains clarity of
vision and continuity of concept to establish an identity in the marketplace, a
retailer must sustain a level of consistency to build a loyal customer
following. In a challenging retail environment, The Neiman Marcus Group has
remained solidly committed to the high-end segment of the retail market. As a
result, customers today clearly identify our stores with upscale designer
merchandise, outstanding quality and unsurpassed customer service. We are
confident that our brand names, Neiman Marcus, NM Direct and Bergdorf Goodman,
represent valuable assets -- brand equities that, like Jil Sander, clearly
stand for something special in the minds of consumers.
The Neiman Marcus Group
19
<PAGE>
[PICTURE]
RICHARD TYLER
20
<PAGE>
BUILDING LONG-TERM RELATIONSHIPS
"DOING MULTIPLE SPECIAL EVENTS AROUND
THE COUNTRY HAS SHOWN US THAT THE NEIMAN MARCUS GROUP HAS THE STRONGEST
RELATIONSHIPS WITH OUR CLIENTS NATIONWIDE. BECAUSE OF THEIR FAMILIARITY WITH
THAT CUSTOMER BASE, THE STORES' EXECUTIVES HAVE BEEN INSTRUMENTAL IN LAUNCHING
AND BUILDING MY COLLECTIONS, ENCOURAGING ME THAT THERE IS A LARGE MARKET OF MEN
AND WOMEN WHO APPRECIATE OUR LEVEL OF QUALITY. TODAY, A DESIGNER'S NAME ALONE
CANNOT SELL CLOTHES -- THE CUSTOMER DEMANDS QUALITY WORKMANSHIP AND GREAT STYLE
AS WELL. THE PEOPLE OF THE NEIMAN MARCUS GROUP ARE WHAT MAKE THE STORES SUCH
GREAT PARTNERS. THEY'RE CLEARLY NOT IN BUSINESS FOR THE SHORT-RUN AND HAVE
PROVEN THEY'RE OUR LONG-TERM PARTNERS."
/S/ RICHARD TYLER
Quality and value have different meanings for different people. For example,
Neiman Marcus and Bergdorf Goodman customers associate value with high quality
product lines that have limited distribution or with designer merchandise that
is exclusive to Neiman Marcus or Bergdorf Goodman. This is where working
partnerships with important designer resources like Richard Tyler become so
critical. Neiman Marcus and Bergdorf Goodman have cultivated a loyal group of
customers with an appreciation for high-end merchandise. With the strength of
an established working partnership, many designers, in turn, respond with
exclusive items and earlier deliveries to satisfy our customers' needs and
exceed their expectations.
The Neiman Marcus Group
21
<PAGE>
[PICTURE]
ERMENEGILDO ZEGNA
22
<PAGE>
EMPHASIZING CUSTOMER SERVICE
"THE SINGULAR FACTOR THAT MOST
DISTINGUISHES A HIGH-END SPECIALTY STORE MUST BE ONE OF SERVICE. A RETAILER MAY
HAVE THE BEST GOODS IN THE WORLD AND THE GREATEST DISPLAYS IN THE WORLD, BUT IF
THE LEVEL OF SERVICE IS NOT ON A PAR WITH THESE OTHER ELEMENTS OF THE MIX, THE
BATTLE TO WIN THE CUSTOMER IS LOST. A HIGH-END SPECIALTY RETAILER MUST MAINTAIN
AN EXTREMELY HIGH LEVEL OF SERVICE SO THAT THE CUSTOMER HAS CONFIDENCE THAT ALL
ASPECTS OF THE SHOPPING EXPERIENCE -- FROM THE PRODUCT ITSELF, TO ITS DISPLAY,
TO THE MANNER IN WHICH THAT PRODUCT IS ULTIMATELY DELIVERED -- REPRESENT THE
UTMOST IN QUALITY."
/S/ ERMENEGILDO ZEGNA
At The Neiman Marcus Group, we have made significant investments in customer
service, including intensified training and increases in the number of sales
associates in our stores. Neiman Marcus ensures that service remains
exceptional through continuous training and ongoing surveys to monitor customer
satisfaction. At Bergdorf Goodman Men, shoppers are greeted at the door by an
associate and personally accompanied throughout the store if they so desire, a
program that has worked exceptionally well. All of our sales associates and
direct marketing representatives are trained to make product knowledge and
customer service their top priority, and their level of dedication runs high.
The Neiman Marcus Group
23
<PAGE>
--------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS
25
CONSOLIDATED STATEMENTS OF OPERATIONS
28
CONSOLIDATED BALANCE SHEETS
29
CONSOLIDATED STATEMENTS OF CASH FLOWS
30
CONSOLIDATED STATEMENTS OF COMMON
SHAREHOLDERS' EQUITY
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
32
INDEPENDENT AUDITORS' REPORT
39
STATEMENT OF MANAGEMENT'S RESPONSIBILITY
FOR FINANCIAL STATEMENTS
39
SELECTED FINANCIAL DATA
40
--------------------------------------------------
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS The Neiman Marcus Group, Inc.
- --------------------------------------------------------------------------------
<TABLE>
OPERATING RESULTS
In June 1995, the Company sold its Contempo Casuals subsidiary to The Wet Seal,
Inc. The Company's consolidated operating results have been restated to reflect
Contempo Casuals as a discontinued operation.
<CAPTION>
Years ended
-----------------------------------------
Revenues JULY 29, July 30, July 31,
(in millions) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Neiman Marcus Stores $1,398.8 $1,311.5 $1,219.0
NM Direct 247.9 248.5 229.7
Bergdorf Goodman 241.5 229.5 219.1
-----------------------------------------
Total $1,888.2 $1,789.5 $1,667.8
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Years ended
-----------------------------------------
Operating earnings JULY 29, July 30, July 31,
(in millions) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Neiman Marcus Stores $132.3 $119.8 $ 98.6
NM Direct 13.7 28.4 23.8
Bergdorf Goodman 16.6 10.3 12.8
Corporate expenses (12.5) (13.4) (11.9)
-----------------------------------------
Total $150.1 $145.1 $123.3
- ------------------------------------------------------------------------
</TABLE>
NEIMAN MARCUS STORES
Operating earnings at Neiman Marcus Stores increased $12.5 million, or 10.4%,
in 1995, and operating margins improved to 9.5% from 9.1% in 1994. Higher
transaction volume and an increase in the average sale amount per transaction
contributed to the improvement in operating earnings.
NM DIRECT
Operating earnings declined $14.7 million in 1995 at NM Direct to $13.7
million. Reduced demand for apparel merchandise along with higher paper and
postage costs caused the lower earnings in the current year.
BERGDORF GOODMAN
Operating earnings at Bergdorf Goodman increased $6.3 million, or 61.2%, in
1995. Operating margins in 1995 improved to 6.9% compared to 4.5% in the
previous year, principally because of an increase in the average sale amount
and higher finance charge income.
OPERATING RESULTS: 1995 VERSUS 1994
Revenues in 1995 increased 5.5% to $1.89 billion from $1.79 billion in 1994.
The increase was a result of increased transaction volume and a higher average
sale amount at both Neiman Marcus Stores and Bergdorf Goodman. Revenues at NM
Direct were essentially flat compared to 1994.
Cost of goods sold increased 5.5% to $1.28 billion in 1995, primarily due to
incremental merchandise sold. As a percentage of revenues, cost of goods sold
was unchanged at 67.6% compared to 1994. Neiman Marcus Stores and Bergdorf
Goodman both experienced improved gross profit through increased transaction
volume and higher average sale amounts, partially offset by higher markdowns.
The improvements at Neiman Marcus Stores and Bergdorf Goodman were offset by
lower gross profit at NM Direct, primarily as a result of lower retail markups
and higher markdowns. Due to deflation in the Company's LIFO index in 1995, the
Company recognized a credit of $10.4 million, which had the effect of improving
gross profit. In 1994, the impact of the LIFO method of accounting reduced
gross profit by $2.4 million.
Selling, general and administrative expenses increased 6.7% in 1995 to $449.0
million. The increase was a result of both higher sales volume and higher sales
promotion expenses. As a percentage of revenues, selling, general and
administrative expenses were 23.8% in 1995 compared to 23.5% in 1994. The
securitization of the Company's credit card receivables, which was completed in
March 1995, had the effect of reducing finance charge income by $7.1 million in
1995.
Corporate expenses decreased 7.1% in 1995 to $12.5 million compared to 1994.
The decrease was primarily due to lower Harcourt General management fees and
lower professional fees.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS The Neiman Marcus Group, Inc.
- --------------------------------------------------------------------------
Interest expense increased 6.5% in 1995 to $34.0 million, reflecting higher
interest rates on bank borrowings and higher average outstanding borrowings
during the first half of 1995.
The Company's effective income tax rate was unchanged at 42% in 1995.
The loss from discontinued operations of $11.7 million in 1995 included $1.9
million of after-tax Contempo Casuals operating losses and an after-tax loss on
disposal of $9.9 million. In 1994, the after-tax loss from discontinued
Contempo Casuals operations was $49.8 million, which included an after-tax
restructuring charge of $28.1 million.
OPERATING RESULTS: 1994 VERSUS 1993
Revenues for the year ended July 30, 1994 increased 7.3% to $1.79 billion from
$1.67 billion in 1993. The increase resulted from comparable store increases at
both Neiman Marcus Stores and Bergdorf Goodman as well as higher revenues at NM
Direct.
Cost of goods sold increased 8.0% to $1.21 billion in 1994, primarily due to
incremental merchandise sold. As a percentage of revenues, cost of goods sold
increased slightly to 67.6% in 1994 from 67.2% in 1993, primarily due to higher
markdowns. The LIFO method of accounting had the effect of decreasing gross
profit by $2.4 million in 1994 and increasing gross profit by $3.7 million in
1993.
Selling, general and administrative expenses increased 2.1% in 1994 to $420.7
million. The increase was a result of volume-related selling expenses and
higher sales promotion expenses. As a percentage of revenues, selling, general
and administrative expenses improved to 23.5% from 24.7% in 1993.
Corporate expenses increased 12.7% 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
bank borrowings and a higher level of average outstanding debt between
periods.
The Company's effective income tax rate was 42% in both 1994 and 1993.
The after-tax loss from discontinued Contempo Casuals operations in 1994 of
$49.8 million included $28.1 million of after-tax restructuring charges. The
after-tax loss from discontinued Contempo Casuals operations in 1993 was $8.4
million.
In fiscal 1993, the Company adopted Statement of Financial Accounting Standards
No. 106, "Accounting for Postretirement Health Care Benefits" (SFAS 106), which
mandated a change in accounting for employee postretirement health care
benefits. The adoption of SFAS 106 resulted in an after-tax charge to
earnings of $11.2 million, or $0.30 per share.
REVIEW OF FINANCIAL CONDITION
In 1995, the Company generated sufficient cash flow from operating activities to
fund a substantial portion of its capital growth, operating working capital and
dividend requirements. Operating activities provided net cash of $105.7 million
in 1995 compared to $33.6 million in 1994. The current year increase in cash
provided by operations was primarily due to higher earnings and increases in
accounts payable and accrued expenses, partially offset by higher inventory
levels.
The Company's investing activities consist principally of capital expenditures
for store renovations and construction of new stores. Capital expenditures were
$93.5 million in 1995 and $65.1 million in 1994.
In 1995, the Company's capital expenditures included major renovations at three
existing stores, continued construction of three new stores, expansion of its
mail order facility, and commencement of construction on a national
distribution center. In August 1995, the Company opened its Short Hills, New
Jersey store and expects to open stores in King of Prussia, Pennsylvania in the
spring of 1996 and Paramus, New Jersey in the fall of 1996.
Capital expenditures are currently estimated to approximate $100.0 million in
fiscal 1996.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS The Neiman Marcus Group, Inc.
- -------------------------------------------------------------------------
The Company's financing activities during the year included incremental
borrowings of approximately $17.1 million on the Company's revolving credit
facilities, the securitization of $246.0 million of its credit card receivables
and the payment of $30.9 million of dividends.
In March 1995, the Company sold all of its Neiman Marcus credit card
receivables through a subsidiary to a trust in exchange for certificates
representing undivided interests in such receivables. Certificates representing
an undivided interest in $246.0 million of those receivables were sold to third
parties in a public offering of $225.0 million of 7.60% Class A certificates
and $21.0 million of 7.75% Class B certificates. The Company used all of the
proceeds of this offering to pay down existing debt. The Company's subsidiary
will retain the remaining undivided interest in the receivables not represented
by the Class A and Class B certificates. A portion of that interest is
subordinated to the Class A and Class B certificates. The Company will continue
to service all receivables for the trust.
Beginning with the third quarter of fiscal 1995, the Company eliminated its
quarterly cash dividend on its Common Stock (previously $.05 per share per
quarter). Elimination of this dividend will conserve approximately $7.6 million
of cash annually.
In April 1995, the Company replaced its $300 million revolving credit facility
and its six $25 million revolving credit facilities with a five-year, $500
million revolving credit facility. At July 29, 1995, the Company had $430
million available under this new agreement.
The Company believes that internally generated funds along with amounts
available under the revolving credit facility will be sufficient to fund its
planned capital growth, operating working capital, preferred dividend
requirements and the payment of $172.0 million of privately placed debt that
will be maturing over the next two years.
SEASONALITY
The Company's business is seasonal in nature. The second quarter, which
includes the holiday season, has historically accounted 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 a historical cost basis under
generally accepted accounting principles. The Company values substantially
all of its inventory using the last-in-first-out (LIFO) cost flow assumption
Thus, the cost of merchandise sold approximates current cost.
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 the impact of inflation or of changing prices does not have a material
effect on the Company's results of operations.
RECENT ACCOUNTING PRONOUNCEMENT
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting Impairment of Long-Lived
Assets" (SFAS 121), which is effective for fiscal years beginning after December
31, 1995. SFAS 121 addresses the accounting for potential impairment of long-
lived assets. The effect of implementing SFAS 121 is not expected to be
material to the Company's financial position or results of operations.
27
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS The Neiman Marcus Group, Inc.
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended
-----------------------------------------------
JULY 29, July 30, July 31,
(in thousands except for per share data) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $1,888,249 $1,789,461 $1,667,825
Cost of goods sold including buying and occupancy costs 1,276,776 1,210,262 1,120,561
Selling, general and administrative expenses 448,956 420,667 412,044
Corporate expenses 12,465 13,411 11,898
-----------------------------------------------
Operating earnings 150,052 145,121 123,322
Interest expense (33,958) (31,878) (29,589)
Other income - - 21,741
-----------------------------------------------
Earnings from continuing operations before income taxes
and accounting change 116,094 113,243 115,474
Income taxes 48,759 47,562 48,499
-----------------------------------------------
Earnings from continuing operations before accounting change 67,335 65,681 66,975
Discontinued operations, net of taxes:
Loss from operations (1,854) (49,755) (8,402)
Loss on disposal (9,873) - -
-----------------------------------------------
Loss from discontinued operations (11,727) (49,755) (8,402)
-----------------------------------------------
Earnings before accounting change 55,608 15,926 58,573
Change in accounting for postretirement health care
benefits, net - - (11,199)
Net earnings 55,608 15,926 47,374
Dividends and accretion on redeemable preferred stocks (29,092) (29,080) (29,068)
-----------------------------------------------
Net earnings (loss) applicable to common shareholders $ 26,516 $ (13,154) $ 18,306
-----------------------------------------------
Amounts per share applicable to common shareholders:
Earnings from continuing operations before
accounting change $ 1.01 $ .96 $ 1.00
Loss from discontinued operations (.31) (1.31) (.22)
Accounting change - - (.30)
-----------------------------------------------
Net earnings (loss) $ .70 $ (.35) $ .48
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS The Neiman Marcus Group, Inc.
- ---------------------------------------------------------------------------------------------------
<CAPTION>
JULY 29, July 30,
(dollar amounts in thousands) 1995 1994
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
CURRENT ASSETS
Cash and equivalents $ 13,695 $ 16,600
Accounts receivable, less allowance
for doubtful accounts of $6,100 and $13,700 150,110 362,236
Merchandise inventories 359,092 345,145
Deferred income taxes 17,102 24,317
Other current assets 38,410 51,741
---------------------------------
TOTAL CURRENT ASSETS 578,409 800,039
---------------------------------
PROPERTY AND EQUIPMENT
Land, buildings and improvements 342,551 379,256
Fixtures and equipment 200,664 210,703
Construction in progress 84,956 50,456
---------------------------------
628,171 640,415
Less accumulated depreciation and amortization 204,588 229,502
---------------------------------
PROPERTY AND EQUIPMENT, NET 423,583 410,913
---------------------------------
OTHER ASSETS 106,445 112,176
---------------------------------
$1,108,437 $1,323,128
=================================
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Notes payable and current maturities of long-term liabilities $ 51,859 $ 116,619
Accounts payable 170,672 164,281
Accrued liabilities 152,049 153,625
---------------------------------
TOTAL CURRENT LIABILITIES 374,580 434,525
---------------------------------
LONG-TERM LIABILITIES
Notes and debentures 202,000 368,667
Other long-term liabilities 69,056 74,982
---------------------------------
TOTAL LONG-TERM LIABILITIES 271,056 443,649
---------------------------------
DEFERRED INCOME TAXES 30,812 37,768
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCKS
(redemption value $424,923) 405,442 403,470
COMMON STOCK
Common stock - $.01 par value
Authorized - 100,000,000 shares
Issued and outstanding - 37,959,646 and 37,951,227 shares 380 380
ADDITIONAL PAID-IN CAPITAL 82,366 82,254
Accumulated deficit (56,199) (78,918)
---------------------------------
$1,108,437 $1,323,128
- ---------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
29
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS The Neiman Marcus Group, Inc.
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Years ended
-----------------------------------------------
JULY 29, July 30, July 31,
(in thousands) 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 55,608 $ 15,926 $ 47,374
Adjustments to reconcile net earnings to net cash provided (used)
by operating activities:
Cumulative effect of accounting change - - 11,199
Depreciation and amortization 48,397 60,832 59,227
Deferred income taxes 259 (7,131) 4,743
Change in net assets of discontinued operation 8,317 - -
Other income - - (20,755)
Other (3,479) 14,379 3,181
Changes in current assets and liabilities:
Accounts receivable (34,584) (52,664) (87,657)
Merchandise inventories (38,709) 17,422 (55,467)
Accounts payable and accrued liabilities 63,005 (1,975) 38,617
Other 6,846 (13,203) (9,758)
-----------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 105,660 33,586 (9,296)
-----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (93,514) (65,074) (56,325)
-----------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of debt 17,065 73,800 77,200
Repayment of debt (247,276) (11,307) (646)
Proceeds from receivables securitization 245,965 - -
Common stock issued 112 100 16,484
Dividends paid (30,917) (34,709) (34,633)
-----------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (15,051) 27,884 58,405
-----------------------------------------------
CASH AND EQUIVALENTS
Decrease during the year (2,905) (3,604) (7,216)
Beginning balance 16,600 20,204 27,420
-----------------------------------------------
Ending balance $ 13,695 $ 16,600 $ 20,204
-----------------------------------------------
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 36,112 $ 31,504 $ 28,514
-----------------------------------------------
Income taxes $ 17,614 $ 34,258 $ 26,796
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
30
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY The Neiman Marcus Group, Inc.
- -------------------------------------------------------------------------
<CAPTION>
Common Stock Additional
----------------- Paid-in Accumulated
(in thousands) Shares Amount Capital Deficit
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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)
Net earnings - - - 55,608
Accretion of redeemable preferred stock - - - (1,972)
Common dividends - - - (3,797)
Preferred dividends - - - (27,120)
Other equity transactions 9 - 112 -
----------------------------------------------------------
BALANCE - JULY 29, 1995 37,960 $380 $82,366 $(56,199)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- ---------------------------------------------------------------------------
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF REPORTING
The Company's specialty retailing businesses include Neiman Marcus, NM Direct
and Bergdorf Goodman. 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.
The consolidated financial statements have been restated to reflect Contempo
Casuals as a discontinued operation.
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. Substantially all of the
Company's inventories are valued using the retail method on the last-in,
first-out (LIFO) 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 comparative purposes.
If the FIFO method of inventory valuation had been used to value all
inventories, merchandise inventories would have been $14.2 million and
$24.6 million higher than reported at July 29, 1995 and July 30, 1994,
respectively. The LIFO valuation method had the effect of increasing net
earnings by $6.0 million in 1995, decreasing net earnings by $1.4 million in
1994 and increasing net earnings by $2.2 million in 1993.
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.
Buildings and improvements are depreciated over 15 to 30 years while fixtures
and equipment are depreciated over 2 to 15 years.
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 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 $3.7 million in 1995,
$3.8 million in 1994 and $3.7 million in 1993.
INCOME TAXES
Beginning in fiscal 1994, income taxes are calculated in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109). SFAS 109 requires the asset and liability method of
accounting for income taxes. Prior to fiscal 1994, the Company accounted for
income taxes in accordance with Accounting Principles Board Opinion No. 11. The
effects of adopting SFAS 109 were not material to the Company's results of
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 $55.9
million in 1995, $54.3 million in 1994 and $36.3 million in 1993. The
securitization of the Company's credit card receivables, which closed in March
1995, had the effect of reducing finance charge income by $7.1 million in 1995.
Finance charge income in future periods will also be reduced (See Note 11).
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 EQUIVALENT SHARE
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 earnings
from continuing operations 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 equivalent shares outstanding during the
year. Weighted average shares outstanding amounted to 38.0 million in 1995,
37.9 million in 1994 and 37.6 million in 1993.
PREOPENING EXPENSES
Costs associated with the opening of new stores are expensed as incurred.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- ----------------------------------------------------------------------------
NOTE 2
DISCONTINUED OPERATIONS
On June 30, 1995, the Company sold its Contempo Casuals subsidiary to The Wet
Seal, Inc. (Wet Seal) for $1.0 million of Wet Seal Class A common stock and
$100,000 in cash. Contempo operates a chain of retail stores which sells
moderately priced fashion apparel and accessories primarily for young women
between the ages of 15 and 21.
The losses from discontinued operations recorded for the fiscal years ended
1995, 1994 and 1993 are net of applicable income tax benefits of $1.3 million,
$36.0 million and $6.1 million, respectively. The loss on disposal in 1995 of
$9.9 million is net of $7.1 million of applicable income tax benefits.
Revenues related to the discontinued Contempo Casuals operations were $207.2
million in 1995, $303.4 million in 1994 and $349.1 million in 1993.
<TABLE>
NOTE 3
OTHER ASSETS
Other assets consisted of the following:
<CAPTION>
JULY 29, July 30,
(in thousands) 1995 1994
- ----------------------------------------------------------
<S> <C> <C>
Trademarks $ 73,000 $ 73,000
Goodwill 22,729 30,874
Other 35,805 32,341
------------------------------
131,534 136,215
Accumulated amortization (25,089) (24,039)
------------------------------
$106,445 $112,176
- ----------------------------------------------------------
</TABLE>
<TABLE>
NOTE 4
LONG-TERM LIABILITIES
Long-term liabilities consisted of the following:
<CAPTION>
Interest July 29, July 30,
(in thousands) Rate 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Revolving credit agreement (a) Variable $ 70,000 $ 306,000
Senior notes (b) Various 172,000 172,000
Capital lease obligations (c) 7.63 - 10.25% 7,206 7,672
Other long-term liabilities (d) Various 73,709 74,596
------------------------------------------
Total long-term liabilities 322,915 560,268
Less current maturities (51,859) (116,619)
------------------------------------------
$271,056 $ 443,649
- --------------------------------------------------------------------------
<FN>
(a) In April 1995, the Company replaced its $300 million revolving credit
facility and its six $25 million revolving credit facilities with a five-year
$500 million revolving credit facility. The Company may terminate this
agreement at any time on three business days' notice. The rate of interest
payable (6.2% at July 29, 1995) varies according to one of four pricing options
selected by the Company. The agreement contains, among other restrictions,
provisions limiting the issuance of additional debt, the amount and type of
investments and the payment of dividends.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
(b) Senior notes consisted of the following:
<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 rate note
bears interest at LIBOR plus 0.7% (6.6% at July 29, 1995) and is adjusted
semi-annually.
(c) The amount of assets under capital leases included in property and
equipment net of amortization was $4.0 million at July 29, 1995 and $4.4
million at July 30, 1994.
(d) Other long-term liabilities consisted primarily of certain employee
benefit obligations, postretirement health care benefits and a liability for
certain scheduled rent increases.
The aggregate maturities of all long-term liabilities and capital lease
obligations are $51.9 million in 1996, $135.9 million in 1997, $4.0 million in
1998, $3.7 million in 1999, $73.7 million in 2000 and $53.7 million thereafter.
NOTE 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 9 1/4% Cumulative Redeemable Preferred Stock (9 1/4% Preferred
Stock), all of which are owned by Harcourt General, Inc. (Harcourt General).
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- -----------------------------------------------------------------------------
The 6% Preferred Stock is entitled to receive cumulative dividends at an
annual rate of 6% on its $374.9 million stated value, to a class vote on
certain matters, to convert on a per share basis into approximately 8.99 shares
of Common Stock subject to certain antidilution adjustments and, upon
liquidation of the Company, 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 29, 1995 was approximately $41.70 per share of Common
Stock acquired upon such conversion; the market value of NMG Common Stock on
July 29, 1995 was $15.38. 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 any accrued
dividends. The difference between the redemption value and the carrying value
is being accreted over a thirty-year period.
The 9 1/4% 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 by July 2001. The Company may be required to purchase
the 9 1/4% Preferred Stock at its stated value plus accrued dividends if a
change in control of the Company occurs. The 9 1/4% 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 9 1/4% Preferred Stock are in arrears for six full quarters or any
mandatory redemption is in arrears, the holders of the 9 1/4% Preferred Stock,
voting together as one class with other series of the Company's preferred
stock, shall be entitled to elect two members to the Company's Board of
Directors. The terms of the 9 1/4% Preferred Stock also contain restrictions
regarding the consolidation or merger of the Company and the sale of assets.
NOTE 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 unaffiliated with Harcourt
General. This agreement may be terminated by either party on 180 days' notice.
Charges to the Company under this agreement were $6.5 million in 1995, $6.9
million in 1994 and $7.2 million in 1993.
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, 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 29, 1995 were granted at prices (not less than 100%
of the fair market value on the date of the grant) ranging from $11.63 to
$19.27 per share and expire between 1995 and 2004. There were 108 employees
with options outstanding at July 29, 1995. The weighted average exercise price
for all outstanding options at July 29, 1995 was $14.47. At July 29, 1995,
there were 306,720 shares of Common Stock available for grants under the plan.
<TABLE>
Option activity was as follows:
<CAPTION>
Years ended
-----------------------------------------
JULY 29, July 30, July 31,
1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding -
beginning of year 666,348 684,136 573,360
Granted 228,050 214,100 179,350
Exercised (15,114) (54,116) (14,937)
Canceled (94,420) (177,772) (53,637)
-----------------------------------------
Options outstanding - end of year 784,864 666,348 684,136
-----------------------------------------
Exercisable options - end of year 356,064 294,800 332,296
- ---------------------------------------------------------------------------
</TABLE>
34
<PAGE>
<TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- ------------------------------------------------------------------------------
NOTE 7
INCOME TAXES
Income tax expense was as follows:
<CAPTION>
Years ended
------------------------------------
JULY 29, July 30, July 31,
(in thousands) 1995 1994 1993
- -----------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $39,965 $37,800 $35,799
State 9,136 8,736 7,662
------------------------------------
49,101 46,536 43,461
------------------------------------
Deferred:
Federal 668 1,835 3,905
State (1,010) (809) 1,133
------------------------------------
(342) 1,026 5,038
------------------------------------
Income tax expense $48,759 $47,562 $48,499
- -----------------------------------------------------------
</TABLE>
The Company's effective income tax rate was 42% in 1995, 1994 and 1993. The
difference between the statutory federal tax rate and the effective tax rate is
primarily due to state income taxes.
<TABLE>
Significant components of the Company's net deferred income tax liability
stated on a gross basis were as follows:
<CAPTION>
JULY 29, July 30,
(in thousands) 1995 1994
- -------------------------------------------------------------------------
<S> <C> <C>
Gross deferred income tax assets:
Financial accruals and reserves $ 22,297 $ 29,088
Employee benefits 22,471 22,712
Deferred lease payments 3,735 6,349
Other 7,216 6,938
-------------------------------
Total deferred tax assets 55,719 65,087
-------------------------------
Gross deferred income tax liabilities:
Excess tax depreciation (57,257) (65,782)
Pension accrual (5,933) (6,324)
Other items previously
deducted on tax return (6,239) (6,432)
-------------------------------
Total deferred tax liabilities (69,429) (78,538)
-------------------------------
Net deferred tax liability $(13,710) $(13,451)
- -------------------------------------------------------------------------
</TABLE>
NOTE 8
PENSION PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all full-time employees. The Company also sponsors an unfunded
supplemental executive retirement plan which provides certain employees
additional pension benefits. Benefits under these plans are based on the
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 were as follows:
<CAPTION>
Years ended
------------------------------
JULY 29, July 30, July 31,
(in thousands) 1995 1994 1993
- -----------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,800 $ 4,800 $ 4,400
Interest cost on projected
benefit obligation 7,900 7,200 6,600
Actual return on assets (7,500) (2,700) (6,700)
Net amortization and deferral 1,200 (3,000) 2,200
------------------------------
Net pension expense $ 7,400 $ 6,300 $ 6,500
- -----------------------------------------------------------
</TABLE>
<TABLE>
The accounting assumptions used in the computation of pension expense were as
follows:
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.5%
Long-term rate of return
on plan assets 9.0% 9.0% 9.0%
Rate of increases in future
compensation levels 5.0% 5.0% 6.0%
- ------------------------------------------------------------
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- --------------------------------------------------------------------------------
<TABLE>
The plans' funded status and amounts recognized in the consolidated balance
sheets were as follows:
<CAPTION>
July 29, 1995 July 30,1994
Funded Unfunded Funded Unfunded
(in thousands) Plan Plan Plan Plan
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Vested benefit obligation $61,600 $ 11,400 $68,500 $ 12,100
--------------------------------------------------------
Accumulated benefit obligation $71,200 $ 13,400 $70,600 $ 13,400
--------------------------------------------------------
Projected benefit obligation $91,700 $ 23,100 $85,900 $ 20,200
Pension plan assets at fair value 91,300 - 77,600 -
--------------------------------------------------------
Underfunded projected obligation (400) (23,100) (8,300) (20,200)
Net amortization and deferral 12,600 2,600 19,300 2,800
Unrecognized net obligation at transition and unrecognized
prior service cost 2,200 3,900 4,300 2,800
--------------------------------------------------------
Pension asset (liability) recognized in the balance sheets $14,400 $(16,600) $15,300 $(14,600)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9
POSTRETIREMENT HEALTH CARE BENEFITS
Retirees and active employees hired prior to March 1, 1989 are eligible for
certain limited postretirement health care 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, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
(SFAS 106). This statement requires accrual of postretirement health care
benefits during the years in which an employee provides services. The Company
paid postretirement health care benefit claims of $1.4 million during 1995 and
$1.8 million during 1994.
The actuarial present value of accumulated postretirement health care benefit
obligations and the amounts recognized in the consolidated balance sheets were
as follows:
<TABLE>
<CAPTION>
Years ended
------------------------------
JULY 29, July 30,
(in thousands) 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Retirees $11,364 $11,986
Fully eligible active plan participants 1,470 1,550
Other active plan participants 3,943 4,158
Unrecognized net gain 2,350 1,929
------------------------------
Total $19,127 $19,623
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
The periodic postretirement health care benefit cost was as follows:
<CAPTION>
Years ended
-----------------------------
JULY 29, July 30,
(in thousands) 1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Net periodic cost:
Service cost $ 300 $ 286
Interest cost on accumulated
benefit obligation 1,249 1,288
-----------------------------
Total $1,549 $1,574
- ---------------------------------------------------------------
</TABLE>
The assumed health care cost trend rate used in measuring the accumulated
postretirement health care benefit obligation was 16% in 1994 and 15% in 1995,
gradually declining to 5% by the year 2006. Measurement of the accumulated
postretirement health care benefit obligation was based on an assumed 7.5%
discount rate in both 1995 and 1994. An increase of 1% in the health care cost
trend rate would increase the accumulated postretirement health care benefit
obligation as of July 29, 1995 by $2.3 million. The effect of this change on
the annual net periodic postretirement health care benefit cost would be an
increase of approximately $242,000.
NOTE 10
COMMITMENTS AND CONTINGENCIES
OPERATING 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 thirty years with renewal options at fixed
rentals, except that certain leases provide for additional rent based on
revenues in excess of predetermined levels.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- -------------------------------------------------------------------------------
<TABLE>
Rent expense under operating leases was as follows:
<CAPTION>
Years ended
-------------------------------------
JULY 29, July 30, July 31,
(in thousands) 1995 1994 1993
- -------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $29,300 $28,600 $29,100
Rent based on revenues 8,400 9,100 7,900
-------------------------------------
Total rent expense $37,700 $37,700 $37,000
- -------------------------------------------------------------
</TABLE>
Future minimum lease payments, excluding renewal options, under operating
leases are as follows: 1996 - $30.0 million; 1997 - $28.5 million; 1998 - $27.8
million; 1999 - $26.9 million; 2000 - $26.3 million; and all years thereafter -
$536.9 million.
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. The Company and CHH negotiated a settlement
of certain disputes between them, which became effective in October 1992.
In connection with the 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 re-evaluated its liabilities to CHH and recognized a
gain during the first quarter of 1993 of $20.8 million on settlement of these
liabilities. This gain is recorded as other income in the 1993 consolidated
statement 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 $3.0 million of outstanding irrevocable letters
of credit relating to purchase commitments at July 29, 1995.
NOTE 11
FINANCIAL INSTRUMENTS
SECURITIZATION OF CREDIT CARD RECEIVABLES
On March 15, 1995, the Company sold all of its Neiman Marcus credit card
receivables through a subsidiary to a trust in exchange for five-year
certificates representing undivided interests in such receivables. Certificates
representing an undivided interest in $246.0 million of those receivables were
sold to third parties in a public offering of $225.0 million of 7.60% Class A
certificates and $21.0 million of 7.75% Class B certificates. The Company used
the proceeds from this offering to pay down existing debt. The Company's
subsidiary will retain the remaining undivided interest in the receivables
not represented by the Class A and Class B certificates. A portion of that
interest is subordinated to the Class A and Class B certificates. The Company
will continue to service all receivables for the trust.
In anticipation of the securitization, the Company entered into several forward
interest rate lock agreements. The agreements allowed the Company to establish a
weighted average effective rate of approximately 8.0% on the certificates issued
as part of the securitization. On March 15, 1995, the Company paid $5.4 million
to settle all of its interest rate lock agreements.
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 fixed the
interest rate on $50.0 million of the Company's 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
$1.5 million at July 29, 1995, $2.8 million at July 30, 1994 and $6.6 million
at July 31, 1993. 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 $1.0 million in 1995, $2.3 million in 1994 and
$2.4 million in 1993.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- -----------------------------------------------------------------------------
<TABLE>
NOTE 12
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<CAPTION>
YEAR ENDED JULY 29, 1995
-------------------------------------------------------------
FIRST SECOND THIRD FOURTH
(in millions except for per share data) QUARTER QUARTER QUARTER QUARTER TOTAL
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $462.3 $589.5 $415.7 $420.7 $1,888.2
-------------------------------------------------------------
Gross profit $165.0 $184.2 $135.3 $127.0 $ 611.5
-------------------------------------------------------------
Earnings from continuing operations $ 21.6 $ 25.0 $ 11.1 $ 9.6 $ 67.3
Earnings (loss) from discontinued operations (1.8) 1.5 (11.4) - (11.7)
-------------------------------------------------------------
Net earnings (loss) 19.8 26.5 (.3) 9.6 55.6
Preferred dividends and accretion (7.3) (7.3) (7.3) (7.2) (29.1)
-------------------------------------------------------------
Net earnings (loss) applicable to common shareholders $ 12.5 $ 19.2 $ (7.6) $ 2.4 $ 26.5
-------------------------------------------------------------
Amounts per share applicable to common shareholders:
Continuing operations $ .38 $ .47 $ .10 $ .06 $ 1.01
Discontinued operations $ (.05) $ .04 $ (.30) $ - $ (.31)
-------------------------------------------------------------
Net earnings (loss) $ .33 $ .51 $ (.20) $ .06 $ .70
-------------------------------------------------------------
Dividends $ .05 $ .05 $ - $ - $ .10
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended July 30, 1994
---------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $429.9 $557.8 $399.7 $402.0 $1,789.5
---------------------------------------------------------
Gross profit $153.6 $175.3 $132.2 $118.1 $ 579.2
---------------------------------------------------------
Earnings from continuing operations $ 21.4 $ 25.4 $ 13.2 $ 5.7 $ 65.7
Earnings (loss) from discontinued operations (6.2) (3.9) (32.0) (7.7) (49.8)
---------------------------------------------------------
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)
---------------------------------------------------------
Amounts per share applicable to common shareholders:
Continuing operations $ .37 $ .47 $ .15 $ (.04) $ .96
Discontinued operations $ (.16) $ (.10) $ (.84) $ (.20) $ (1.31)
---------------------------------------------------------
Net earnings (loss) $ .21 $ .37 $ (.69) $ (.24) $ (.35)
---------------------------------------------------------
Dividends $ .05 $ .05 $ .05 $ .05 $ .20
- ----------------------------------------------------------------------------------------------------------------------
<FN>
In the fourth quarter, the effect of the LIFO method of accounting for
inventories increased net earnings by $10.9 million in 1995 and by
$3.1 million in 1994.
</TABLE>
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Neiman Marcus Group, Inc.
- -----------------------------------------------------------------------------
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 29, 1995 and July 30, 1994 and
the related consolidated statements of operations, common shareholders' equity
and cash flows for each of the three years in the period ended July 29, 1995.
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 29, 1995 and July 30, 1994 and the
results of their operations and their cash flows for each of the three years in
the period ended July 29, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
SEPTEMBER 8, 1995
STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENT
The management of the Neiman Marcus, Group, Inc. and it 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 Auditor's 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 soley
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
39
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA (UNAUDITED) The Neiman Marcus Group, Inc.
- -------------------------------------------------------------------------
<CAPTION>
Years Ended
- -------------------------------------------------------------------------------------------------
July 29, July 30, July 31, August 1, August 3,
(in millions except for per 1995 1994 1993 1992 1991
share data)
- -------------------------------------------------------------------------------------------------
OPERATING RESULTS:
<S> <C> <C> <C> <C> <C>
Revenues $1,888.2 $1,789.5 $1,667.8 $1,484.9 $1,407.2
-------------------------------------------------------------
Earnings (loss) from continuing
operations before accounting change 67.3 65.7 67.0 27.7 (1.5)
Earnings (loss) from discontinued
operations (11.7) (49.8) (8.4) (5.8) (10.8)
-------------------------------------------------------------
Earnings before accounting change 55.6 15.9 58.6 21.9 9.3
Cumulative effect of accounting
change (a) -- -- (11.2) -- --
-------------------------------------------------------------
Net earnings 55.6 15.9 47.4 21.9 9.3
-------------------------------------------------------------
Net earnings (loss) applicable to
common shareholders 26.5 (13.2) 18.3 (7.3) (15.1)
-------------------------------------------------------------
Amounts per share applicable to
common shareholders
Continuing Operations $ 1.01 $ .96 $ 1.00 $ (.05) $ (.77)
Discontinued Operations (.31) (1.31) (.22) (.16) .32
Accounting Change -- -- (.30) -- --
--------------------------------------------------------------
Net earnings (loss) $ .70 $ (.35) $ .48 $ (.21) $ (.45)
--------------------------------------------------------------
Common dividends $ .10 $ .20 $ .20 $ .20 $ .20
--------------------------------------------------------------
Financial Position:
Total Assets $1,108.4 $1,323.1 $1,278.6 $1,141.4 $1,072.2
Long-term liabilities $ 271.1 $ 443.6 $ 449.4 $ 414.2 $ 382.4
Redeemable preferred Stocks $ 405.4 $ 403.5 $ 401.5 $ 399.6 $ 397.6
- ---------------------------------------------------------------------------------------------------
The selected financial data should be read in conjunction with the consolidated financial
statements contained elsewhere in this report.
(a) The cumulative effect of accounting change reflects the change in accounting for postretirement
health care benefits, net of applicable income taxes.
</TABLE>
40
<PAGE>
SHAREHOLDER INFORMATION 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.
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)730-4001
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 19, 1996
at 10:00 a.m. at the Company's corporate headquarters, 27 Boylston Street,
Chestnut Hill, Massachusetts.
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.
<TABLE>
- -----------------------------------------------------------------
<CAPTION>
1995 1994
- -----------------------------------------------------------------
Quarter High Low High Low
-----------------------------------
<S> <C> <C> <C> <C>
First $15.50 $13.50 $16.63 $13.88
Second $15.00 $13.00 $19.25 $15.75
Third $15.50 $13.00 $17.38 $15.00
Fourth $15.88 $13.25 $16.63 $14.75
- -----------------------------------------------------------------
</TABLE>
Shares Outstanding
The Neiman Marcus Group has 38.0 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
12,686 common shareholders of record at July 29, 1995.
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.
41
<PAGE>
DIRECTORS AND OFFICERS The Neiman Marcus Group, Inc.
- --------------------------------------------------------------------------------
DIRECTORS
RICHARD A. SMITH (1, 2)
Chairman of the Board
GARY L. COUNTRYMAN (1, 2, 3, 4, 5)
Chairman and
Chief Executive Officer
Liberty Mutual Insurance Company
MATINA HORNER, PH.D. (2, 3, 4, 5)
Executive Vice President
Teachers Insurance and Annuity Association-
College Retirement
Equities Fund
WALTER J. SALMON (2, 3, 4, 5)
Roth Professor of Retailing
Graduate School of Business
Harvard University
JEAN HEAD SISCO (2, 3, 4, 5)
Partner
Sisco Associates
ROBERT J. TARR, JR. (1, 2)
President,
Chief Executive Officer
and Chief Operating Officer
EXECUTIVE OFFICERS
RICHARD A. SMITH
Chairman of the Board
ROBERT J. TARR, JR.
President,
Chief Executive Officer
and Chief Operating Officer
JOHN R. COOK
Senior Vice President and
Chief Financial Officer
ERIC P. GELLER
Senior Vice President,
General Counsel and Secretary
ROBERT A. SMITH
Group Vice President
OPERATING OFFICERS
NEIMAN MARCUS
BURTON M. TANSKY
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
STAFF OFFICERS
PETER FARWELL
Vice President -
Corporate Relations
PAUL F. GIBBONS
Vice President and
Treasurer
GERALD T. HUGHES
Vice President -
Human Resources
MICHAEL F. PANUTICH
Vice President -
General Auditor
STEPHEN C. RICHARDS
Vice President and
Controller
CRAIG B. SAWIN
Vice President -
Planning and Analysis
(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.
Portrait of Barry Kieselstein-Cord (page 14), courtesy of Oberto Gili
DESIGN: BELK MIGNOGNA ASSOCIATES, NEW YORK
42
<PAGE>
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
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.
<TABLE>
Exhibit 21.1
THE NEIMAN MARCUS GROUP, INC.
SUBSIDIARIES
<CAPTION>
---------------------------------------------------------------------------------------------------------------
JURISDICTION
OF
NAME OF SUBSIDIARY INCORPORATION STOCKHOLDER
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bergdorf Goodman, Inc. New York Neiman Marcus Holdings, Inc.
Bergdorf Graphics, Inc. New York Bergdorf Goodman, Inc.
Broadcasters, Inc. Texas Neiman Marcus Holdings, Inc.
C.C. Group Limited Hong Kong The Neiman Marcus Group, Inc. (50%)
Ermine Trading Corporation (50%)
Ermine Trading Corporation California The Neiman Marcus Group, Inc.
Last Call, Inc. New Jersey The Neiman Marcus Group, Inc.
Neiman Marcus Funding Corporation Delaware The Neiman Marcus Group, Inc.
Neiman Marcus Holiday Express, Inc. Delaware The Neiman Marcus Group, Inc.
Neiman Marcus Holdings, Inc. California The Neiman Marcus Group, Inc.
NM Direct de Mexico, S.A. de C.V. Mexico The Neiman Marcus Group, Inc. (99%)
Neiman Marcus Holdings, Inc. (1%)
Pastille, Inc. Delaware The Neiman Marcus Group, Inc.
Pastille By Mail, Inc. Delaware The Neiman Marcus Group, Inc.
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
